Good afternoon, everyone. Welcome to cold Ottawa. I welcome the witnesses that we have here today. As you know, our committee is doing a study on the priorities of Canadian stakeholders having an interest in bilateral and trilateral trade within North America. Of course, we're talking about our two present trading partners in NAFTA, the United States and Mexico.
Our committee started this study a couple of months ago. We've already visited the western United States. We were in the states of Washington, California, and Colorado. In a couple of weeks, we're going to be travelling through the Midwest and down, then finishing up in Washington.
As many of you know here, it's a big trading bloc we have with our North American counterparts. We want to see it continue to grow and expand because it's good for jobs, not only in Canada, but in the United States and Mexico.
I think we have five witnesses here on deck. If this is your first time as a witness to a committee, we would like you to do your submissions within five minutes. Keep in mind not to go too quickly because the translators have to translate it. Then we'll open up the dialogue with members of Parliament.
Again, thank you for coming. We'll start off right away. By video conference, we have Sandra Marsden, president of the Canadian Sugar Institute.
Go ahead, Sandra.
I appreciate the opportunity to appear before the committee today as you consider priorities for the North American trading relationship.
I'd like to speak to the critical importance of NAFTA to maintain and grow export opportunities supporting the growth in Canadian investment and jobs in the sugar and further processing food sectors.
The institute represents Canadian refined sugar producers on nutrition and international trade affairs. We have three cane sugar refineries—in Vancouver, Toronto, and Montreal—and a sugar-beet processing plant in Taber, Alberta. Also, there are two further processing facilities in Ontario that produce products such as iced tea mixes, sweetened cocoa mixes, and so on.
The Canadian sugar industry is an integral part of Canada's food-processing value chain. Our industry depends on food processors for 80% of sugar sales, and food processors in turn depend on Canada's local supply of high-quality, competitively priced refined sugar. Canada's sugar is an input to about 30% of food processing. This includes a wide range of products such as confectionery, mixes and doughs, cereals, baked goods, jams, and so on. In fact, major sugar-using processors account for approximately $18 billion in revenues, $6 billion in exports, and 62,000 Canadian jobs.
The reason that access to Canadian sugar supports food processing in Canada is that the economics of our industry is driven by world market forces. Unlike the United States, Canada's sugar market does not benefit from price supports and high tariffs and quota restrictions. Canada's operations are globally efficient and competitive but are underutilized, given the U.S. and globally restrictive trade policies. Canadian sugar and processed foods depend on export markets. The U.S. is by far the most important market, representing 93% of sugar-containing food product exports. In fact, about 40% of Canada's refined sugar is exported in food products to the United States. Any disruption to this trade and the supply chain makes our industry and our food-processing customers vulnerable. We know this because we've suffered from a long history of U.S. trade actions that have narrowed our trade opportunities. The combined impact of U.S. actions starting in 1994 has resulted in a loss of about 165,000 tonnes of sugar production, representing about 13% of our production.
For the past 20 years, Canada's refined sugar access to the United States has been limited to a small, 10,300-tonne quota for beet sugar, representing less than 0.1% of the U.S. 11-million tonne market. The only opportunity to increase those exports is under emergency shortages.
Sugar-containing products having more than 10% sugar are also restricted by fixed and inflexible quotas. Key restrictions include zero volume or small volume quotas, reclassification of freely traded products into quotas, restrictive rules of origin, as well as end-use restrictions that do not allow any further processing in the United States.
While Canada continues to face these quota restrictions, Mexico's access to the United States was liberalized under NAFTA. As a result, quota limitations are having a more significant negative impact on Canada than in the past, given Mexico's duty-free access for these products to the United States. For example, one impact of this trade imbalance has been the shift of some Canadian confectionery production out of Canada, and the sourcing of intermediate inputs from Mexico. These developments have had a significant negative impact on Canada's overall net trade in processed foods.
Two-way trade in sugar-containing food products with the United States amounted to $10.5 billion in 2016. While Canada maintained a trade surplus of $950 million, this is well below the peak of $1.2 billion over a decade ago. Canada has a trade deficit with Mexico in these products, which worsened to $155 million in 2016. This is extremely important to our industry because this trade loss has resulted in declining capacity utilization, which creates higher input costs for our food-processing customers.
We see the renegotiation or the likely renegotiation of NAFTA as a critical opportunity to modernize trade in sugar and sugar-containing products, to improve capacity utilization and efficiencies in Canada's sugar sector, and as a critical factor supporting the future of food processing in Canada. Canada is the logical supplier of high-quality sugar and sugar-containing products along the Canada-U.S. border, and has an established track record of exporting in a commercially meaningful and responsible, fairly traded manner.
An improved trade balance within NAFTA will help restore value chains where Canadian sugar provides a competitive advantage for the production of intermediate and finished food products. Ultimately, this will help counter the decline in Canada's net trade in processed foods, and enhance investment and jobs in this important manufacturing sector.
Thank you for the opportunity to be part of your study on North American trade relations.
The Canadian Centre for Policy Alternatives is an independent, non-partisan research institute with over three decades of experience analyzing Canadian trade and investment treaties.
The Trump administration is demanding a new framework for North American trade. Despite an imminent NAFTA renegotiation, the specific goals the U.S. will pursue are still unclear. One belief that seems to unite the nationalist and globalist factions in the new administration is that by throwing its weight around, the U.S. can force big concessions from Canada and Mexico. While this is a difficult situation, Canada is not defenceless.
The Canada-U.S. trading relationship is balanced and mutually beneficial, which many Americans recognize. It is helpful to reinforce that message, as our governments have been doing. Yet the anxiety about trade and globalization that Donald Trump exploited to win the White House runs deep and goes beyond his core supporters. Canada's negotiating positions need to reflect that reality. When President Trump talks about favouring trade deals that support American workers, he provides such an opening.
There are many ways to provide a better deal for workers in all three countries. Canada could call President Trump's bluff by championing a fairer distribution of the benefits of trade. An obvious first step is to include strong, fully enforceable labour standards in any deal. Mexican workers, whose real wages have languished under NAFTA and are rarely free to join independent unions, would be the primary beneficiaries, but rising wages and improved working conditions in Mexico and many southern U.S. states would also benefit workers in the rest of North America.
The Trump administration also wants to strengthen NAFTA's rules of origin. Although there is plenty of scope for abuse, higher North American content rules could benefit North American manufacturing workers by discouraging the use of high levels of offshore content.
Canada has had a negative experience under NAFTA's investor-state dispute settlement system and should not hesitate to push to eliminate it. We are the most sued party, and this trend is getting worse. Bad rulings such as in the recent Bilcon case have a chilling effect on legitimate public policy, such as rigorous environmental assessments. Meanwhile, the U.S. has never lost a case.
The Trump administration intends to bolster Buy American purchasing policies that could side-swipe Canadian suppliers. Canada's standard response, to seek an exemption or waiver, has fallen short before and will likely fare worse today. It's time to consider a new approach.
Canada could instead offer reciprocal buy North American policies for new public infrastructure spending. If this is rebuffed, Canada should maximize national economic spinoffs on its own planned public investments through buy Canadian policies.
There are lines that Canada should not cross. With U.S. industries teeing up a long list of trade remedy challenges against Canadian products, Canada can hardly give in to U.S. demands to eliminate or weaken NAFTA's chapter 19 binational review process. If anything, from a Canadian perspective it needs to be strengthened. Nor can Canada afford to give in to President Trump's scapegoating of Canadian dairy farmers. Without supply management, our dairy farmers would be put in the same predicament as their U.S. counterparts, who suffer from the effects of overproduction and farm gate prices that fall below production costs.
Commerce Secretary Wilbur Ross recently said that Canada has adopted an anti-patent position, particularly in pharmaceuticals. This is both false and worrisome. Fully aligning our system of patent protection for medicines with the U.S. model would be very expensive for Canadian consumers and harmful to our health care system.
To close, in general, Canada's immediate priority should be maintaining its tariff-free access to the U.S. market, but it is not too early to be thinking about the end game and potential exit strategies. Reverting to WTO-bound tariff rates would be disruptive, but not catastrophic.
If the Trump administration were to make good on its threat to terminate NAFTA, Canadian exporters could face an additional $3.5 billion to $5 billion U.S. in duties. If an “America first” NAFTA is worse than the multilateral alternative, Canada should naturally choose the latter.
NAFTA renegotiation will be difficult and unpredictable. Canada needs to be prepared to stand up to any bullying, and to consider its options if U.S. negotiating demands become too unreasonable, costly, or harmful to Canadian interests.
Thank you very much, Mr. Chair.
Good afternoon, members of the committee.
Thank you for inviting CME here to speak on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss Canada's trade with our NAFTA partners. NAFTA is the most critical trade relationship that exists for Canadian industry, and we are here today to show our support for the government's efforts to maintain that relationship and to find ways to modernize and strengthen it, where possible.
Canadian Manufacturers & Exporters is Canada's largest industry and trade association, with offices across the country. It is the chair of the Canadian Manufacturing Coalition, which represents 55 sectoral manufacturing associations. More than 85% of our members are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Manufacturing is the single largest business sector in Canada and across the NAFTA region. In Canada, manufacturing sales surpassed $600 billion in 2016 for the third consecutive year, directly accounting for 11% of Canada's total economic output, while employing over 1.7 million Canadians directly in highly productive, value-added, high-paying jobs.
With the base in the NAFTA region, manufacturers are also directly responsible for most of Canada's exports. In 2015 and 2016, manufactured goods exports reached nearly $350 billion each year, an all-time record high, and accounted for almost 70% of total Canadian exports, with nearly 80% of these exports going to our NAFTA partners.
Much of this trade is due to the deep integration of manufacturing operations across the NAFTA region, and in particular between Canada and the U.S. This integration has created a unique relationship for our countries globally. We do not simply trade goods with each other; we build things together, we innovate together, and we compete with the world together.
NAFTA, in most ways, is a model for which all trade agreements should be judged. It has helped increase the standard of living of all participants. It has strengthened industry by combining the talents and expertise of each market, creating bigger markets at home and strengthening our combined competitiveness globally. No other trade agreement that Canada has can compare with the historical, current, or future importance for our economy and our citizens.
At the same time, it does not mean that the agreement should not or could not be improved. Over the nearly 25 years since it was negotiated and came into force, the world around us has changed remarkably. Things that we take for granted today were barely even on our collective radars at the time. The Internet and e-commerce, smart phones, and connected devices are just a few of the technologies that have changed the way we live and work.
The world around us and our global competitors have also changed. China, for example, had a GDP of only about $440 million in 1993. Today it is a $12-trillion economy.
The world of manufacturing has also changed. No longer is it simply about taking raw materials and turning them into a consumer product. Today the lines between manufacturing, technology, and services have blurred, and companies are focused on creating solutions for the lowest cost with the greatest customer value.
CME has worked constructively with the federal government for years on avenues to improve and strengthen the existing NAFTA framework to reflect these changing realities. Efforts such as the border action plans of the 2000s, and the Regulatory Cooperation Council and the beyond the border agreements of the 2010s were aimed directly at improving the NAFTA manufacturing platform without opening up the agreement, because that was seen as politically impossible.
Now, opening the agreement is a political reality, and we should look for ways to cement improvements that support the economic base of NAFTA. To help prioritize, CME is surveying our members to identify priorities for NAFTA modernization and improvement. While our survey is still ongoing, I can give you an overview of the responses as they currently stand.
As a starting point, and most primarily, the overwhelming priority is for Canada to maintain market access across the NAFTA region. While companies want improvement, they are also very concerned about renegotiation that leads to worse economic outcomes through more restrictions, barriers, protectionism on imports and exports of people, goods, or services.
On specific measures for improvement, the priorities mainly stem from the deep level of integration and the volume and value of the trade. Improved customs processes to speed border transactions and eliminating uncertainty through reduced red tape for both people and goods rank as top priorities. Following that, companies are looking to maintain effective dispute settlement processes, improved regulatory co-operation and alignment, and coordinated action on dumping of goods from other markets, and trade policy more generally.
Many of these priorities have already been included in the existing Canada-Europe comprehensive free trade agreement, as well as having been negotiated in the TPP; and we believe they could create a framework for a modernized NAFTA.
At the same time, the relationship between Canada, the U.S., and Mexico is fundamentally different from those represented in those other trade agreements. We believe that if Canada can come to an agreement on these priority areas with other largely new trading partners, we should be looking to go beyond these commitments with our NAFTA partners.
As mentioned earlier, we don't simply trade goods with them, but rather we build goods together by leveraging the 25-year-old NAFTA platform. This negotiation should be the time to create a new phase of NAFTA, and cement in place and go beyond, where possible, the direction started under the recent RCC and beyond the border agreements, where Canada, the U.S., and possibly Mexico, are regulating security on the perimeter together, and restrictions on the internal economy are limited as much as possible.
Thank you again for inviting us to participate in your study. I look forward to questions and discussion.
Thank you for the opportunity to provide Ford of Canada's views on the renegotiation of the North American Free Trade Agreement.
The Ford Motor Company is a global automotive and mobility company with about 202,000 employees in 62 plants worldwide. As Canada's longest-established automaker, Ford has employed thousands of Canadians since 1904 in high-quality advanced manufacturing jobs that have helped to build and sustain Canada's middle class. Today in Canada, Ford employs over 8,300 men and women in three vehicle assembly and engine manufacturing plants, three R and D centres, and two parts and distribution centres. Ford's network of 428 dealers supports more than 19,000 employees and communities across Canada. In addition, Ford purchases over $5 billion annually from Canadian parts suppliers to support both our Canadian and global footprint.
Since 2000, Ford has invested over $12 billion in our Canadian operations, including $700 million in Oakville, to produce vehicles in Canada for global markets like China, South America, and now Europe. Last year, in 2016, Ford exported over 18,000 Oakville-built Edges to Europe, including right-hand drive and diesel versions.
Earlier this year, we were proud to announce an additional investment of $1.2 billion to secure a new engine program for our Windsor operations, and to create Ford's first-ever Canadian product development centre, the connectivity and innovation centre, here in Ottawa, in fact, with 300 software and hardware engineers pursuing R and D in connected vehicle technologies.
Needless to say, Canada is a very important market for Ford, and we are proud that Ford has been the number one brand in Canada for eight years.
Trade is fundamental to our business. Each year, on a global basis, Ford exports over 40% of the vehicles that we build worldwide. In Canada, trade policy is even more fundamental to the success of our operations, since 100% of the engines and 90% of the vehicles that Ford builds in Canada are exported.
In the last decade, Ford has increasingly diversified our exports from Canada to countries outside North America. Last year, in fact—
Last year, 16% of Ford's Canadian vehicle production was exported outside of NAFTA. That said, the U.S. market and NAFTA remain the single biggest and most important market for Canadian-produced vehicles and engines. All of Ford's Canadian engine production and 74% of Ford's Canadian vehicle production is exported to the U.S. and Mexico.
Ford has been and continues to be a very strong supporter of the North American Free Trade Agreement. In fact, it was the auto sector and the 1965 Canada-U.S. Auto Pact that became the basis for the Canada-U.S. Free Trade Agreement and then for the North American Free Trade Agreement.
NAFTA has created one of the most highly integrated and competitive automotive sectors in the world, including one of the most competitive and efficient global supply chains. Canada is a small vehicle market by global standards and Canada's integration into the larger NAFTA region has created economies of scale that have allowed Canada and the NAFTA region to competitively produce vehicles for export to other regions around the world. While Ford continues to support NAFTA, we recognize that as 25-year-old agreement there are opportunities to modernize the agreement.
That is why Ford is working with all three NAFTA governments to ensure the modernization of NAFTA preserves and enhances the globally competitive integration of the North American auto industry while also incorporating important advances to create a modern 21st century agreement that sets the standard that all future trade agreements should be measured by.
Specifically, Ford recommends modernizing NAFTA by adding strong and enforceable currency manipulation disciplines and by achieving acceptance of U.S. automotive safety standards across the region. In addition, Ford also supports modernizing NAFTA by streamlining customs procedures to make business more efficient, and by adopting high standard labour and environmental provisions and improving border infrastructure.
While continuing to support trade within the region, the modernization of NAFTA should also encourage trade diversification outside of the region by ensuring that North American vehicles can compete in global markets around the world. This is why it's critically important to ensure that both currency manipulation and an acceptance of U.S. vehicle standards are included in the modernization. These two issues are the most significant non-tariff barriers that vehicles produced in Canada or in North America face in global markets.
To date, Canada's auto sector and Canadians have benefited from Canada's unfettered access to the U.S. auto market as a result of NAFTA. When Canada concludes CETA, Canada's auto sector will be positioned with duty-free access to North America and to the EU as well, two of the largest and most important vehicle markets in the world.
Looking forward, Ford will continue to support Canada's efforts to establish new free trade agreements with countries like India and Brazil. These markets offer additional opportunities to increase Canadian vehicle exports.
Ford will also continue to speak out against markets that remain closed to Canadian vehicle exports, markets like South Korea and Japan. Closed markets can only be opened by achieving the right terms in trade agreements that eliminate all barriers, including currency manipulation.
Throughout our history, Ford of Canada has played an active and constructive role in articulating the trade policy issues that need to be addressed in trade agreements in order to support Canada's auto sector. We look forward to continuing to play this role as we talk about modernizing NAFTA.
Thank you, Mr. Chair, and the members of the committee, for this chance to add a few words to those of my friends, Caroline and Mathew, and my colleagues as well, on behalf of General Motors Canada.
As a quick reminder, GM Canada has world-class assembly plants in St. Catharines, Ingersoll, and Oshawa, Ontario, where we make engines, transmissions, cars, crossovers and, soon, trucks. Our business directly employs about 10,000 people in Canada and we generate many thousands of related jobs in our supply chain, in customer care, and in dealerships coast to coast.
Most recently, we have increased our R and D and our engineering work in Canada for key future automotive technologies to a total of about 1,000 engineering positions who are working in areas like active safety and autonomous vehicle development software, and we're doing that in Oshawa, Markham, Kitchener, Waterloo, Toronto, and Kapuskasing.
NAFTA, of course, is the framework that enables GM and the broader North American automotive industry to be the manufacturing engine of our economy. NAFTA's automotive chapter sets out the trade rules for the deeply integrated and highly efficient auto supply chain between Canada, the United States, and Mexico. That's a unique aspect of our industry that really must be understood and protected in these negotiations.
My advice to the committee, put simply, is that we can and should modernize NAFTA in a way that strengthens our competitiveness as a global trading bloc and at the same time we must take extreme care to “do no harm” to the integrated NAFTA auto supply chain, which is extraordinarily beneficial and important to Canada's economy.
NAFTA enables automotive parts, materials, and finished vehicles to cross our borders duty free and just in time for the benefit of our customers. Famously, auto parts and materials of our tier one and tier two customers may cross borders six or seven times as they are built up into components, ready for final assembly.
At GM Canada we export a little more than 90% of the vehicles that we make, primarily en route to dealers and customers all across the United States, which, of course, is a market 10 times the size of ours. At the same time, we import almost 90% of the vehicles that our dealers sell to Canadians. Our auto trade with the U.S. is balanced, it's duty free, and it's very beneficial to our economy and for consumers.
While our vehicle trade is balanced, Canada imports significantly more auto parts and materials from the United States than we're able to source locally or elsewhere. This trade in auto parts benefits both Canada and the United States. It contributes to Canada's competitiveness, while supporting U.S. manufacturing jobs, especially in the Great Lakes states.
Canada is the number one customer for the U.S. and much of that business is in auto parts, so it's a good thing to remind our U.S. colleagues. Oshawa, for example, receives about 80 trucks a day that go across the border and about 50% or more of our suppliers' individuals parts come from the United States.
In this complex and mutually beneficial trading relationship, there are some things we must take care to maintain and protect and there are some things that we believe can be modernized and improved. Under the category of “do no harm”, we must set out to reduce, not add, red tape. A lot of bureaucracy is still required in tracing auto parts as they move across borders in NAFTA today. We would prefer to see tracing eliminated.
NAFTA's rules of origin for qualified duty-free automotive trade within North America are already the highest of any U.S. agreement. These should not be increased if we are to maintain our global competitive stance. And we cannot just look inward in considering NAFTA. Canada, the U.S., and Mexico together are a competitive bloc in the global auto business. We must enhance, not compromise, that competitiveness.
Under the category of modernization, GM Canada supports the recommendations recently put forward by the American Automotive Policy Council, AAPC, and those include that we should build upon the progress made through the RCC and others to align our vehicle technical standards within NAFTA, while insisting that countries outside NAFTA recognize and accept our technical standards.
North American product is globally competitive, but we must insist that others tear down their non-tariff barriers to our exports. If we want to continue enjoying the economic benefits of our North American auto sector, the global auto trade cannot be a one-way street into our market.
Modernizing also means continuing to improve our border infrastructure as we are doing with the Gordie Howe bridge in Windsor and continuing to streamline our customs procedures for goods and for people.
The AAPC has also called for adding enforceable currency manipulation disciplines that Caroline mentioned, so that countries outside of NAFTA do not take advantage of our market by artificially reducing their currencies.
To sum up, we build things together. In this deeply integrated North American auto sector, GM is at the forefront of Canadian jobs, exports, and innovation. There's a great deal at stake as we open NAFTA negotiations. We should start by ensuring we do no harm to our integrated supply chain, and then we can modernize our auto trade in NAFTA by cutting red tape, aligning on standards, improving the movement of goods and people across borders, and by strengthening our global competitiveness as a global trading bloc.
Thank you, Mr. Chairman, and thank you, members of the committee. It was great to see you in Seattle.
PNWER is a unique organization that was formed in statute by Alaska, Washington, Oregon, Idaho, Montana and then B.C., Alberta, Saskatchewan, Northwest Territories, and Yukon. It's 28 years old. We have 22 different working groups in all of the key industry sectors in the region. As I like to say, our economic watersheds flow north and south out there.
We have focused on NAFTA, and looked at the benefits of NAFTA for 20 years. This is a very interesting time. I have to applaud you for a team Canada approach. That's the right approach by working on consistent messaging.
In November we set up a NAFTA modernization task force. We've been working with the international trade offices of all the states and provinces, as well as private sector representatives in looking at what this well-developed region on the northern border in the U.S. could say to both Ottawa and D.C. in terms of NAFTA.
In this process of meeting regularly since January, we've developed a pretty in-depth survey that we've sent out to 10,000 of our members, and are encouraging other organizations to use as well to bring back some data. This is the first time in the U.S.—and I'm an American—we've used the TPA 2015 Act, which really states once this 90-day period begins, Congress, the Speaker, and the President of the Senate will select special congressional advisory committees in the Senate and the House.
We're focusing on who would we want on those congressional advisory committees. They are formed out of the ways and means in the House and the finance committee in the Senate. We're meeting with our congressional champions, and letting them know that we are preparing data and analysis. We really want to have an opportunity to present that to these committees once they're formed.
It's very important for Canada. You've been great at developing data on how foreign direct investment from Canada is impacting specific states, but we need to hone that down to specific congressional districts, because our system is not like yours. We have a fiefdom of 535 kings out there, and it's all about their district.
I'm very encouraged, meeting with John Manley's group, the Business Council of Canada, because they're taking a specific targeted approach to 80 congressional districts, and trying to really look at how many jobs in these districts are related to Canadian investment or partnerships.
We have to get Americans talking to their congressmen; not in Washington, D.C., that never works. You've been to Washington, you get 10 minutes if you're lucky. We need town hall meetings and letters to the editor from simple people saying, “Hey, my job is really on the line here. Don't screw up. The relationship with Canada is really important.”
The congressional research service is very well-respected in Congress. It just came out with its report on NAFTA. I sent it to your committee, but maybe not in time. This went to every congressman, and I was so dismayed. It is six weeks old, but the report says:
|| The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP
This is what stuff is going out there. We have to overcome that with real people telling real stories about why this is important. Anyway, it's worth reviewing this report because they have a lot of credibility. I mean, it's not the full story.
I think the targeted data is really important. Skirmishes around the edges of NAFTA, the dairy.... that's less than a half of a percent of our trade. I worry that this is a process that could take 24 to 36 months depending on all of this. These are not easy things.
I want to get the big picture out as to why this is important to all three countries and try not to get lost in the peripherals. We'll always have irritants, but we always work through them, and we have mechanisms to do that.
I think we need to work on consistent messaging and really have people work together with strategic partnerships. It's a great opportunity for us to engage our strategic partnerships across North America.
I will say that we need to emphasize our collaborative manufacturing platforms, as has been mentioned by all the folks here at the table. We can and should modernize, but do no harm, and really get the message out from an American perspective. We don't know where the administration is going exactly. Anyway, my organizations are making a lot of inroads into the administration in every way we can think of to be a vehicle to really let them know how important this relationship is and not to screw it up.
First of all, Chair, I want to highlight that there are a couple of guests in the room here. We have Mike Cuffe. He's a state legislator from Montana who's part of PNWER, and Larry Doke, an MLA from Saskatchewan.
Mike is someone who is stopping the spread of zebra mussels west, working across the border to make sure that we don't see that infestation move into the western U.S. or western Canada, and there's an example of how we work together and how we get good results.
Mike, thank you for your work on that.
I noticed there are surveys in the works. Mathew, you said you have a survey, and Matt, did you say you had a survey? Can we get you to table those surveys when they're completed? I think they would be helpful for this committee to look at. I'm kind of curious about what your members are going to be saying.
Thank you, all, for your presentations.
I am going to take a launch off Mr. Hoback's questions.
In terms of not talking about countries in division but countries in partnership, we know that certainly we have similarities, with the United States in particular, but we also have differences, and I think that we need to be cognizant of that as well.
The last day and a half I've been attending the Can/Am Trade Border Alliance conference. It's a great testament to all the work that has been done between Canada and the U.S. on forging greater alliances and deepening the integration chain between our two countries. The Can/Am BTA is 25 years old, just like NAFTA.
My first question is for Mr. Wilson.
With NAFTA being 25 years old, we have a North American integrated supply chain. Where are the opportunities for greater integration, not isolation policies, in terms of the North American supply chain, which we have done so well on for the last number of years?
Generally speaking, they are pretty much in every sector. We heard from the auto folks here that there are still growth opportunities there. When we survey our members, generally, about where the growth opportunities are for them, they always look at the U.S. as the primary market.
Most Canadian companies still don't export. In fact, the vast majority, some 90%, don't export out of Canada, so there is still a huge opportunity, especially for small and mid-size companies, to export and grow in those areas.
Among the specific sectors, automotive is the biggest integrated platform. There are always going to be new opportunities, and that will continue as long as it maintains the footprint, especially if we can do the things that David and Caroline were talking about here in terms of growing North America as a global platform. Instead of looking at ourselves as just a regional bloc to trade among ourselves, we can really leverage it for global platforms. There is a huge opportunity for global growth for Canadian companies.
Another sector that I would primarily look at would be agrifood. We export almost no food out of Canada. Whether it's for manufacturing or whether it's finished goods, we still export very little of what's actually produced here. At CME, when we're looking at new market opportunities, we see that agrifood is the one sector that we perform very poorly on internationally, and we see a real opportunity in the U.S. and beyond.
This has been going on for years, decades in fact, and it's long overdue. In fact, Canada's lack of investment in its own technology in the government is part of the reason it has taken so long. Certainly, the industry sector as a whole, the people doing the trading have long supported this. Companies like GM and Ford long ago eliminated their own paper-based processes and are using almost all electronic tracking. They're also on a system called customs self assessment, which eliminates pretty much all border reporting. It is a fantastic program.
The question I have—and certainly Matt would know about this—goes back to the border accords of the 2000s, beyond the border, and things like that. The idea of those was to eliminate border processing, not just to make it electronic.
What's the point in tracking this stuff? We're not shipping stuff to unknown entities. We're shipping stuff between Ford in Ontario and Ford in Michigan, or GM here and GM in Mexico. We know who they're coming from and who they're going to. What's the value of it at all?
We understand security and everything else, and the need to do that stuff, but to me, that is what it always comes back to. If we do a proper job on the perimeter, and we're securing the perimeter the way we're supposed to, then report everything after the fact. The border, frankly, is just a nuisance for most people and companies.
I guess what we're hoping for, through this NAFTA renegotiation, is that we go further than we have in the past and that we get the opportunity to cement some of the things that have occurred. Just saying “Well, let's make it electronic” doesn't eliminate the burden. We need to start eliminating burdens, not just make them electronic.
Currently under NAFTA, the required regional rule of origin is the highest of any agreement that the United States has signed. We would not want to add additional red tape and requirements at a national level or the like. We would like to continue to build on the effectiveness of NAFTA.
To the points you raised about investment, I think it's important we keep in mind that NAFTA's the framework under which we trade. Every day I fight for investment to come here to Canada. We do that together with Unifor together with our municipalities, and we do it with the people around the table.
If I look back over the last 10 years, Canada has done more to help us to build an investment base here by aligning our standards with the United States and by improving our border crossings than I could have imagined 10 years ago.
I look at the last short period of time, and I see some advancement in the auto innovation fund that was long needed and made a huge difference.
These are all things that are really important for us to continue to win investments, but that's what we do every day.
One of the things I mentioned is we purchase more parts from the United States than in Canada. We would prefer to buy our parts in Canada. Why? Because we have to buy American parts with these little Canadian dollars so it's much more expensive. It's a concern to us that we've seen a lot of the parts business moving south.
A flip side in this discussion is it's good to remind our colleagues in the United States that every time we make a purchase of those U.S. parts, a job is involved in that as well, and many American jobs are related to this trade relationship in producing vehicles on both sides of the border.
It's in our mutual interest to build on this. Can we improve upon it? Absolutely. Should we look at labour and environmental agreements within the agreement? Absolutely.
I want to thank the manufacturers and the associations that support the manufacturers for all the jobs you have created, the risks you have taken. I feel it has been a partnership not only in terms of business but also with the government. We were there with the bailout when you needed the investment, and we came out more fruitfully on the other side so that has been very important.
Canadians have seen that and have understood the partnership and the friendship we have in people to people. We have families, tourism, etc. But the public opinion polls have looked at sentiments of how Canadians perceive the United States, and they are at their lowest levels to date, and these have been tracked since 1982.
They were saying it's partly because of all the negativity and everything we're hearing around trade and isolationism, etc., and looking again to open back up.
We've just signed and passed through Parliament what we feel is the most progressive trade agreement in Canada's history, and that is CETA, which we've done with the European Union.
I don't know how immersed you are in that agreement, but as we look to this tweaking or modernization or whatever with NAFTA, have you seen aspects of CETA that you would like to see in any kind of changes to NAFTA? I'll open that up to Mr. Sinclair.
That's a great question. There are a couple of specific areas. On procurement, and I'll pick up on Mr. Sinclair's point, this has been one of the biggest struggles for a lot of integrated industries, to be able to sell into government procurement markets in Canada and the U.S., and now even trying to get the extension of those into the private sector. We saw with the Keystone XL, for example, where they tried to extend it into that and may succeed, but I doubt they will.
Certainly, CME has been a long time advocate for some type of buy North America model that recognizes the integration in procurement. If the focus is China, let's make the focus China, because that's what we keep being told it is. I don't know if that's true or not, but that's what we keep hearing. Let's not make Canada the focus in these things.
There are other areas we mentioned. Border simplification has to be looked at. This is the number one issue, whether it's infrastructure or whether it's just the red tape and regulation. We need to do something. We need to look at what Europe did, frankly. European countries went to the common market in part to combat the strength of the U.S., in order to create their own economic sphere that could compete economically with the U.S. NAFTA was in part a response to that, yet we've never moved the rules beyond what it originally was set up for 25 or even 30 years ago, and in some places with the auto sector, even longer.
We need to be looking at the rules that govern trade to eliminate as much of that red tape as possible. These are serious asks that we need to be going to the U.S. with, that will benefit Canadians and their industries at the same time, but we shouldn't be afraid to make those demands, to make it better, to make it stronger for our economies.
Thank you all for being here. It's always great to hear from you.
I don't really know where to go, but I think I want to follow on what you're saying, David. As you know, we took a trip to the west coast, where it became painfully obvious just how important technology was. If you think back to the 20th century, to the Carnegies, the Chryslers, the Fords, these were people who produced goods. Today's billionaires produce that. There really is no good....And Mr. Morrison, you mentioned that we have to get the Chinese.... Listen, we set them up. If we really want to be honest, we took our manufacturers over there and introduced them to the Chinese. They had a fifty-fifty deal—I think it was 49-51—and that's where our manufacturing went. We just sold our manufacturing, quite frankly. I want to touch on this.
Take Tesla, for instance. I forget what they get subsidized, but it's thousands of dollars, $15,000 for an electric car. This is what you're competing with as Ford Motor, as General Motors, as Chrysler, and as manufacturers, too. We're competing in a world that's changing rapidly. The only thing I see that we can do is to offer manufacturers...because there's no reason for Ford or Chrysler or General Motors to stay in Canada, other than if it makes economic sense. It's not because they think we're wonderful, and this is a Canadian.... It's not a Canadian company.
How do you see that challenge in your day-to-day operations where you're competing with investment that goes to stuff that really produces nothing, and trying to maintain your growth in the new world we're living in? Can you comment on that?
I can start off on that, because it's a great question, and if I put on my hat.... I'm the past chair of the Canadian Chamber of Commerce, and one of the areas we've looked at quite intently is intellectual property.
As you say, right now the world's economy is based on intangible goods. Most of the world's wealth today is generated by intangible goods. They cross borders electronically, and the value of those goods comes from the inventiveness and creativity that we have. We have no shortage of that inventiveness and creativity here in Canada.
I had the great honour to work at BlackBerry for a number of years, where we took a new technology and changed the world for a period of time. You get disrupted, and things change. We have to understand that we can't look strictly backwards, in the rear-view mirror, in terms of the type of industry we have. We need to be competitive in new areas. We have incredible strengths coast to coast in Canada in these areas, and I think we're starting to harness them. That is a valid area to think about in NAFTA and it's a valid area to think about as a point of public policy in Canada, to make sure we're properly leveraging it so that not only could little Canadian companies get bought by multinationals, but they would also grow up and become strong domestic champions.
I'll just finish by saying that in setting up all the technology we have here in Canada, we really believe.... One of the reasons we're here is to share intellectual property and co-develop intellectual property with Canadian companies, because they're that good. That's an opportunity too, because frankly we're a massive customer, and if you sell 10 million widgets to us, that's pretty good.
I'd like to make a brief comment.
Mr. Morrison, you alluded to members of Congress and senators as being 535 people with their own fiefdoms. It's not that different from what it is for us as members of Parliament here. At the end of the day, we have to represent the interests of our constituents.
I can tell you that in my riding thousands of jobs rely on NAFTA. In fact, thousands of jobs rely on the auto sector. Magna International is in my riding, and I know that there are about 7,000 direct jobs just from that employer, so we as well are all quite aware of who the job producers are in our ridings. It's important for all elected officials.
Because of that, I have the pleasure of being on our party's auto caucus. With that segue, I'll introduce John Oliver, the chair of our auto caucus. He's sitting in on this committee today. He's also the member of Parliament for Oakville, so he's obviously quite familiar with the automotive world. I'll give the rest of my time to Mr. Oliver.
Thanks very much, Kyle.
Thank you, Chair, for letting me attend the meeting.
Thank you very much for the excellent presentations. There were really good thoughts around modernizing and NAFTA.
We're focusing right now on NAFTA, and Canadians are seized with this negotiation that is coming up, but before NAFTA, there's another big change coming. It's about the competitiveness of Canadian firms.
With the corporate tax changes planned in the U.S., particularly for U.S. subsidiaries that are based in Canada, Caroline and David, do you see any risk to your competitiveness here coming out of those corporate tax changes? I think it's important for the committee to understand that.
It's complicated. The devil's in the detail, of course, but I think the TPP approach is something to look back at. We obtained a modest outcome. Of course, we won't see that, but it did address a number of the issues that I talked about. We have quota limitations that have not kept pace with the growth of the U.S. market. For example, they are very small in the case of beet sugar and also in the case of a number of food products.
Regarding rules of origin, Canada can't export products that contain, say, sweetened cocoa powder that has cane sugar under quota, because it doesn't meet their rule of origin due to the sugar. So there are competitive inputs that we can't supply or that our customers can't supply to their United States multinational location.
End-use restrictions are something we experienced in CETA. Canada negotiated some new access under CETA. We don't face those end-use restrictions, or we won't, when CETA is implemented.
For example, a Canadian producer of frozen pies can't send a pie to the United States and have it baked in-store. It's considered further processing. There are some really outdated restrictions that were based on concerns three decades ago, which just don't have a place.
There are a number of things we can achieve to the benefit of all trading partners.
Here's a stat that I find interesting. When the Ambassador Bridge was first built Canada-U.S. trade was almost non-existent. Canada's total exports at the time the Ambassador Bridge was built were about equivalent to one week's worth of auto trade today.
If you put that in perspective we’re still shipping over that bridge, which was meant for global trade at the time, and what we ship today in a week just in one sector is the equivalent of what was shipped in a year then. At the Ambassador Bridge, two sectors make up about 95% of it, agriculture and automotive, so the infrastructure in Canada—and this goes back to RCC and beyond the border and beyond that—is woefully inadequate to deal with it. And we're not just talking about the Ambassador Bridge, which you're familiar with obviously, just one corridor.
I cross a lot, for example, personally going down through the Niagara way. The Peace Bridge has three lanes. It's backed up all the time, never mind a long weekend when everyone else is going. The trucks are backed up with them. The Blue Water is the only bridge we've really seen an expansion on at least in the Great Lakes area and recently. We need more trade infrastructure.
To the world too, we have very limited access whether it's east or west. Whether it's trucks and cars or whether it's even energy supply, we can't get our stuff to the world. We've really lacked in our investment in trade infrastructure for decades. This isn't a recent thing. This is a decades-old problem.
The Canadian taxpayer, that's a good one.
I don't know what the right number is, $2 billion, $5 billion, $10 billion, I don't know. My comment was more to the fact that we let this stuff drift for decades and we never paid attention to it.
Certainly in the auto sector, they were screaming for new crossings in southern Ontario. I know in tourism, in places in the east and west, they were screaming for it for years and nothing was done. It's something that was unfortunate that happened. I do think that over the last decade or 15 years there has been a renewed intention on it, certainly in the Windsor corridor, in southern Ontario, now out west and the Pacific northwest of the U.S. There has been more investment that has gone in.
Let's wait and see when those investments actually come into play, like the Ambassador Bridge replacement or doubling with the new Gordie Howe bridge, for example. We don't know what the impact of that is really going to be until it's actually operational. I can tell you, even the extension of the 401 has made a huge improvement going into Windsor. It's beautiful and very efficient. It has helped a lot, I know, moving trucks through.
Let's see what the infrastructure does, but let's not fall asleep at the switch again for a couple of generations. Let's make sure we stay on top of it. I guess that's the big message.