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Trade deal means more duty-free cars

Do your duty: The revived Trans-Pacific Partnership should mean cheaper cars from Canada and Mexico.

Canada and Mexico set to join tariff-free vehicle exports to Australia

24 Jan 2018

HOLDEN, Ford and Audi will be among the automotive beneficiaries from a new Trans-Pacific Partnership trade deal that will eliminate Australian tariffs on new vehicles imported from Canada and Mexico.

The agreement is expected to be signed by 11 Pacific Rim countries – including Australia – on March 8 in Chile after Canadian prime minister Justin Trudeau announced at the World Economic Forum in Davos, Switzerland, overnight that Canada had a change of heart and would now join the pact.

The revived agreement includes motor vehicles, meaning Australia’s 5.0 per cent import tariff on vehicles will not apply to cars and trucks imported from signatory countries when the agreement comes into force.

Because Australia already has a bilateral free-trade deal with Japan, the main automotive manufacturing counties that will join the growing list of tariff-free vehicle exporters to Australia under the new agreement are Canada and Mexico.

Holden’s new Mexican-built Equinox medium SUV will one of the winners from the tariff cut, along with Audi’s Q5 medium luxury SUV that is also produced in Mexico.

Ford Australia also stands to gain when it begins imports of its Canadian-built Endura large SUV late this year.

Called Edge in other markets, the Endura is seen as a partial replacement for the Australian-made Territory that went out of production in October 2016.

Fiat Chrysler Automobiles (FCA) Australia's Chrysler 300 also comes from Canada, although in small numbers.

Such a tariff cut potentially means a price cut of between $1000 and $2000 in Australia, according to the Australian Automobile Association (AAA).

News of the Trans Pacific Partnership revival was confirmed by Australian trade minister Steve Ciabo, who was also at Davos for the summit.

The announcement was welcomed by Australia’s peak motor industry body, the Federal Chamber of Automotive Industries (FCAI), whose chief executive Tony Weber told GoAuto that the elimination of the tariff on cars imported from Canada and Mexico was another step in the right direction to making motor vehicles more affordable in Australia.

He said consumers would benefit by being able to afford cars with the latest safety and environmental technologies for safer, cleaner driving.

“I would hope that this move provides the impetus for the removal of all remaining tariffs,” he said.

The three biggest vehicle exporters to Australia – Japan, Thailand and South Korean – are already covered by free-trade agreements, meaning more than three-quarters of vehicle sold in Australia are already duty free.

China, Malaysia and the United States – the latter pulled out of the Trans-Pacific deal when Donald Trump became US president – also have existing free-trade deals with Australia.

Europe, Britain, South Africa and Argentina are the motor manufacturing centres most disadvantaged by the tariff regime that was originally introduced to protect the now-defunct car mass-manufacturing industry.

Last year, Europe supplied more than 150,000 vehicles sold in Australia, while Britain built 35,441 vehicles for this market.

By far the biggest European exporter was Germany, with 91,132 cars made in that country being registered in Australia.

Mercedes-Benz and BMW are impacted by tariffs on vehicles from Europe and South Africa, while Volkswagen cops duty on cars from Europe and Argentina.

Ultimately, the Australia government hopes to forge trade agreements with the European Union and Britain.

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