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Canada to record largest auto trade deficit in history

Canada will record the largest automotive trade deficit in its history this year, according to a report from the Canadian Auto Workers union, which is urging Ottawa to reconsider the direction of its economic and trade policy.

In a report released Monday, CAW economist Jim Stanford said the deficit _ where more vehicles and parts are leaving the country than coming in _ is expected to be around $8 billion for 2007, the largest single-year drop to date.

``Not only is Canada's automotive trade performance now the worst-ever; it is still deteriorating at a record rate,'' Stanford said in the report titled ``Canada's Deteriorating Automotive Trade Performance.''

The report, which uses Statistics Canada data reported on an Industry Canada website, predicts a year-end surplus in finished vehicle trade of under $14 billion, offset by a deficit in parts of close to $22 billion.

The previous largest automotive trade deficit was $3 billion incurred in 1979, Stanford said, adding that was during the height of the post-OPEC surge in sales of small imported vehicles after gasoline prices soared in the wake of record world oil prices after the Iranian revolution.

The report said 1999 was the best year for Canada's auto sector, with a trade surplus of almost $15 billion.

``Instead of being a net supplier of high-quality automotive products to the global economy, Canada is now a major net importer of automotive products,'' Stanford said.

``This trade deficit inevitably translates into a loss of jobs in domestic automotive production (since fewer jobs are supported by exports, and more jobs are displaced by imports).''

The CAW report is part of the union's campaign to lobby the federal government for more aggressive auto trade policy, in the hopes of getting more Canadian-made vehicles and parts into Asian and European markets by breaking down trade barriers in those parts of the world. The union is pressing Ottawa to demand more auto trade concessions in its general trade talks with South Korea, which resume in Ottawa this week.

The study also comes as the Big Three North American carmakers _ General Motors, Ford and Chrysler _ continue to lose market share to their Japanese and Korean rivals and pare thousands of additional jobs to streamline production in Canada and the United States. General Motors recently announced the end of a third assembly line operation at its main plant in Oshawa, cutting 1,200 jobs, adding to thousands of jobs cut in the last two years by Ford and Chrysler.

At the same time, however, Toyota and Honda are adding jobs and production in Ontario as they increase their sales in North America and expand plants in central and southwestern Ontario.

In the CAW report, Stanford noted that loss of jobs has battered the Canadian industry, with more than 10,000 auto assembly jobs lost since 1999, and more than 10,000 auto parts jobs eliminated since 2001.

Stanford said nearly 90 per cent of the deficit is due to five large bilateral deficits with Japan, Mexico, Germany, Korea and China.

While Canada's automotive trade deficit with Japan is the largest, exceeding $6 billion, the most unbalanced relationship is with Korea. The report says Canada buys 183 times as much automotive value as it sells in Korea.

Canada's automotive trade deficit with China, due mostly to imports of auto parts, will reach almost $1 billion this year.

As a result, the CAW is calling on the federal government to stop trade negotiations with Korea.

``Future trade talks must be integrated with a broader strategy to support auto and other high-value Canadian industries, and must feature focused measures to ensure that our automotive imports are matched by equivalent automotive exports,'' Stanford said, adding that the next round of negotiations begin in Ottawa on Tuesday.

``This is the wrong time for our own government to expose this still-crucial export industry to even more damage from low-cost, one-sided imports.''

The report cites Industry Canada studies indicating that a Canada-Korea trade agreement will spur an increase in Canadian vehicle imports from Korea by 18,000-33,000 units per year.

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