Thank you, Mr. Chairman.
It is always a pleasure to appear before you to share our views.
It is a pleasure to be here today to present on the Canada-Japan trade partnership.
If you looked at our testimony over the past five years or so, you would see that the industry has gone through some fairly significant economic challenges. If you looked at our numbers five years ago, they would have looked significantly more optimistic than they are today. But I would like to remind all members that despite the bad news about the industry over the past five years or so, the industry still employs directly 240,000 Canadians from coast to coast. It's a more than $54-billion-a-year industry. We are the economic lifeblood of over 200 communities from coast to coast. I know that many members around this table are very familiar with that, as a number of you have constituencies in which our industry is a significant economic player. For that reason, many of you are very familiar with the economic challenges the industry has faced over the past five years or so.
I'm not here today to say that everything is looking entirely rosy, but we are certainly seeing some very encouraging signs out there in the marketplace that the industry is going to be rebounding.
We've been before this committee on a number of the other trade bills or trade agreements that either are being negotiated or have been negotiated. You've heard the story: One of the most important parts of this industry's strategy going forward, as we sort of emerge from this economic downturn, is to continue to diversify and expand our markets beyond Canada.
Right now, of the $56 billion worth that we produce, over half is exported outside of Canada. The lion's share, of course, goes to the U.S., as would make some sense, given the geographic proximity and the ease and the relationship. But increasingly we've been able to diversify away from that marketplace and send more of our product in particular to Asia, which is now the second most important market for the industry. It's in that context that Japan presents a very significant opportunity for the industry going forward.
Somewhat different from other Asian marketplaces, Japan has been a significant client of ours for well over 40 years. They're a wood-building culture, so they have a tradition of building with wood. For that reason it's not surprising to see the numbers that we do have in terms of our shipments to Japan. There is about a $12-billion market overall in Japan in terms of what they import from abroad from the forest products sector.
About $1.4 billion worth of our products go to Japan. The bulk of that, around $935 million worth, is in lumber. So we're shipping lumber there.
One of the interesting things about the lumber that we do ship there is that it's a premium grade lumber. It's called J-grade or Japan-grade lumber. To make an agricultural analogy, it's like taking the beef tenderloin and shipping only that. It's the best part of the tree, the straightest part with the fewest knots. They love it, and they pay a premium for it. From that standpoint, it's a very important marketplace.
We also send a fairly significant amount of pulp there. Of the $1.4 billion, the remaining $500 million or so is in the form of pulp.
In terms of other building products, we're not as successful there, and we would like to be more successful. I think that's why this deal presents a very important opportunity.
All of our products, except for the pulp, face a tariff of anywhere between zero and 7.5%. That same tariff is faced by most of our competitors. Our biggest competitors in the lumber market are found in the U.S. and the Scandinavian countries. So a deal of this nature, which will bring us down to zero on those product lines, is extremely important, because it obviously makes us far more competitive vis-à-vis our main competition from other parts of the world. It will also probably make some of our products, like the particle boards, veneers, and plywoods, more competitive against those of the other competitors that are coming from cheaper producers in places like Indonesia, once we get rid of those tariffs.
Obviously the other part of this is that it presents a fairly strategic play in the Trans-Pacific Partnership negotiations that are ongoing. We certainly support the fact that we're trying to get to that table, but in the event that we're not successful, having this as a bilateral, certainly from a strategic standpoint, puts some pressure on those who are trying to prevent us from getting to the TPP table.
On a final note, one of the reasons we are so successful in Japan is that we have had ongoing government support. Certainly the government has been very helpful in growing the marketplace and supporting not only rebuilding following a disaster like the tsunami, but also rebuilding their economy, as well as helping us share expertise in wood building. We're very grateful for the government support on that front.
On all that, this represents a very important opportunity for the industry. We look forward to growing our market share there as a result of this deal.
I look forward to answering any questions that you may have going forward.
Thank you very much.
Mr. Chair, honourable members, I'd like to thank you for this opportunity to speak to you regarding a Canada-Japan bilateral trade agreement.
My name is Bob Kirke. I'm the executive director of the Canadian Apparel Federation. Our association is made up of several hundred firms throughout the apparel industry. Members of our association import and export apparel throughout the world. They make it in Canada and abroad. We also count as our members industry suppliers and vertical retailers.
I recently had the pleasure to appear before the committee on Bill . I'm happy you were able to report to the House regarding the Canada-Jordan Free Trade Agreement, and I'm happy to speak to you today about a very different agreement, with a much different trading partner.
Before I address the merits of free trade with Japan, perhaps I could provide a little background on the specific rules of origin that apply to apparel in our bilateral trade agreements. I'd like to outline how we view these rules and mention a few of our industry's international trade priorities.
Before the Canada-U.S. Free Trade Agreement, Canadian exports of apparel were minimal. After the FTA we grew as an industry almost exclusively on the basis of exports to the United States. Canadian apparel manufacturers prospered under the Canada-U.S. FTA and NAFTA, and we became far more market oriented within the North American marketplace.
Once import quotas on imports from lower-cost countries were fully removed at the end of 2004, many companies reoriented their production to take advantage of trade liberalization, both for the domestic market and the U.S. In basic terms that meant moving production to other regions of the world, particularly Asia.
We have had and we continue to have good success under NAFTA, but I want to underline for you that the success has come despite the product specific rules of origin, and not because of them. For that reason I would like to mention a few things about the standard apparel rule of origin that Canada has incorporated into many of its bilateral agreements—pretty much everything since NAFTA.
Under the Canada-U.S. FTA, we had a specific rule of origin established for Canadian manufactured garments. To qualify for free trade they had to be manufactured in Canada from fabric produced in ether Canada or the United States. This is what's called a fabric forward rule of origin.
NAFTA, which came into force 18 years ago now, imposed a significantly more stringent rule. Under NAFTA, for apparel to qualify for free trade, the yarn had to be produced in North America, the fabric had to be manufactured within North America, and the garment had to be cut and sown in one of the NAFTA countries. This is a yarn-forward rule of origin.
The challenge created by the rule of origin is that it establishes the unlikely scenario where the origin of a garment, similar to what I'm wearing now, and its tariff treatment are determined by the origin of the yarns woven into the fabrics, which are then designed and cut and sown and made into a garment. Since NAFTA, virtually every free trade agreement Canada has negotiated has been based on these rules of origin.
For the record, the Canadian apparel industry never supported this rule of origin, for apparel in NAFTA or any other agreement. These rules are cumbersome and serve as a barrier to trade. I would be happy to give the committee numerous examples of how this complicates trade.
With respect to Japan, our message to the committee and the government regarding any agreement with Japan is very simple: we support this initiative. The Japanese market is challenging, but it has great potential for all our industry. But free trade with Japan should be undertaken with the most straightforward rule of origin for our products.
The Canadian government has recently implemented agreements with less burdensome rules, for example, the FTA between Canada and the European Free Trade Association, EFTA, which was implemented in 2009. Under the Canada-EFTA accord, there's a simple rule of origin for apparel. To qualify for free trade, apparel need only be cut and sown in the territory of one of the parties to qualify for free trade. There's no restriction on the raw material origin.
These are precisely the type of rules our industry needs when we are trading with another developed country such as Japan. For both Canada and Japan, their mainly domestic production of apparel is focused on niche markets, the higher value-added goods. There is potential to grow this trade between the two countries, but only if we adopt simple rules of origin.
We would also add that we urge the government to proceed on a bilateral basis with Japan, and not wait for the Trans-Pacific Partnership deal to be negotiated or for us to be able to join. Those are both up in the air, I would suspect, if for no other reason than that the American government, we believe, is looking essentially for NAFTA rules of origin for apparel under the Trans-Pacific Partnership.
This brings us to a few other priorities in international trade, which echo some of our comments about Japan and will also give you a little more background. First, we encourage the government to establish what we call commercially viable bilateral trade agreements. We need to ensure that agreements offer reasonable opportunities for companies both in Canada and our trading partners. Extraordinarily complex rules of origin and other regulations defeat this purpose.
Our second priority is that we should be improving existing agreements. We should be looking to review and improve existing FTAs and other trade arrangements, and in particular to move from a yarn-forward rule of origin, which we have negotiated for the last 18 years, to a fabric forward rule wherever possible.
Our third point is very basic: don't forget the United States. I would never come before this committee without saying that. Even now, our exports to Japan per year are basically equivalent to about three days of exports to the United States. So please remember that the regulatory barriers between Canada and the U.S. remain the most important issue.
I guess the last point I would say is that we are committed, and we hope the government remains committed, to a rules-based trading system. As I mentioned, the Canadian apparel industry shifted a lot of its production from domestic manufacturing to other producing countries. We make it here; we make it in Asia; we buy foreign fabric; we bring it here. It's a very complicated mix. The best expression of this was formulated by Export Development Canada, which calls this process “integrative trade”. The World Trade Organization calls this "made in the world". It's very indicative of our industry.
In reality, Canadian firms design and manage the production of literally billions of dollars in apparel, which is assembled in other countries, such as China, for sale in third markets. For this to operate we need strong multilateral trade rules, and it is in Canada's interest to support such a trading system.
Those are my remarks. I'd be happy to answer any questions the committee has.
If I take your question and move back toward that raw log, how can we move up the value chain in some respects?
I think the one challenge with Japan is that it is a mature marketplace in the sense that they know how to build with wood, they know they're using the best kinds of wood we have. Beyond the premium grade, J-grade lumber, that we're sending there and some of the panels, if we can get more of the panels going there, the structural types of lumbers, the Parallams and those types of engineered woods, I think it would be hugely helpful.
That part of the industry is growing considerably, and certainly in British Columbia it's a big play. As they're already building with wood, as they build larger structures with wood, those types of materials become more important.
The other part of the question, even though you didn't ask it directly, if you might allow me to answer it, is the regional aspect to this. You're correct in pointing out that this represents a very important opportunity for B.C. producers. There is no doubt about it. This is probably where the bulk of that product is going to come from: British Columbia.
I think the important part of that, though, is that this is a global pie, and when production leaves to go there, there is only so much of it. So if B.C. starts to ship a greater percentage of its overall production to Japan, that's going to open up market space elsewhere. While it does directly benefit the B.C. producers, the east coast producers are going to benefit because the B.C. guys are going to leave the U.S. marketplace or the European marketplace, and that will allow the east coast guys to move in.
While it does have that direct benefit, there is a broader reach to this deal as well.
Two things are happening in the U.S. market. They've stopped building houses. That's the biggest problem for us. The problem when they stop building houses hits you on the wood side, because that's what they build the houses out of. But that's also usually the first indicator of a downturn in their economy more broadly. When that happens, what you tend to see is that they advertise less, and that impacts our paper side. A newspaper is essentially always the same size, from a news standpoint. It only grows in size when people start to advertise more. So that part of the market gets hit. You get a double whack from that.
We know that the U.S. market is going to come back. We've seen a slight uptick in their building. They have significant inventory to get rid of, but they will start to build homes again. Will they reach the $1.5 million levels again? Probably not, but even if they get up to $1 million or $1.1 million, that will be massively helpful. It would represent about a $400,000 or $500,000 increase over what we're at now.
That said, I think one of the important strategies for the industry is to diversify away from its dependence on the U.S. market. If you become very dependent on one particular marketplace, as we have over our history—we've traditionally sent about 70% of our products there—we're very vulnerable to whatever happens in their economy. So we're very encouraged by the aggressive trade agenda being pursued right now, because it's opening up all sorts of new markets.
We're also re-establishing ourselves in existing markets, such as Japan, where we have been for a long time. Equally, when you look at India, China, and all those very important marketplaces where we hope to grow, we can get ourselves away from our dependence on the U.S. marketplace and its vagaries.
NAFTA was created when there were high or restrictive import quotas against countries like India and China. There was a goal, especially voiced by the U.S. textile industry, that they wanted to have the entire garment from North American raw materials.
The fact of the matter is that with liberalized trade, you recognize that there are certain places in the world that can product textiles and apparel very well, and they are not all in North America, despite a number of incentives here, which you've mentioned. I think the most heavily subsidized product in the world is U.S. cotton.
Despite all of that, North American industry is not competitive in all categories of textiles and apparel. Essentially what you're doing is you're forcing the use of U.S. yarn. To trade freely between Canada and the U.S., you have to use U.S. yarn. Well, there's no yarn production left in Canada, and the stuff in the United States is highly commoditized. So it's just a few different items, and nothing fancy or appealing to the consumer.
As long as you want to all dress in burlap, you're doing well. That's really the result of that trade policy.
Voices: Oh, oh!
Hon. Wayne Easter: That suited the chair.
Mr. Bob Kirke: The reason I want to mention this is that we've used that as the template for our trade agreements with every other country we've signed an FTA with. In the first instance, we went to Costa Rica and said, “NAFTA rules: done”. Colombia, Peru.... We don't make fabric here. They don't make fabric. Yet we're requiring this onerous rule of origin.
Yes. Look, with a country like Japan, you go to single transformation—cut and sew the garment, and then trade it. With some of the other developing countries, you might want to do a fabric-forward, because they will have a fabric capacity. India has tons of fabric capacity. They have no problem meeting that rule. That's what we'll say when we come before you on that agreement. But for god's sake, don't do NAFTA.
As an illustration, NAFTA has been in 18 years. We went up and down. We were exporting $3 billion of apparel at the height, and it's closer to $1 billion now. When U.S. customs comes to verify a NAFTA certificate of origin today, they disqualify 90% of them in textiles and apparel for a very simple reason. No one figures out where the yarn is from. They don't have a paper trail or anything like that.
The U.S. customs can walk in and ask you, where you did you buy the fabric? Oh, I bought it from him. Okay, so where did he get it from? From this mill: go there. So they go and ask the mill, where is the yarn from? I got it from here. Then can you show us the invoice for that yarn? And this could be a small producer in Toronto who's been asked to meet that kind of scrutiny regarding a piece of denim.
It's unworkable. It's unworkable in the U.S., it's unworkable in trade agreements, and it's unworkable, frankly, within the LDC tariff, which is another plank of our trade policy.
So without belabouring it: don't do it.
Welcome back to our witnesses. Both of you have appeared before this committee a number of times, and there's always good discussion.
You had some very informative points, Mr. Kirke, on the apparel business. When we look at agreements, sometimes the obvious is missed. I'm always a little bit shocked, how that happens, but obviously it does.
I want to start off with a couple of questions on forestry. It's an industry that's very much in my background. I'm very familiar with it in the east coast of Canada.
Your point's well taken on having one customer. I've mentioned it many times at this committee. Eastern Canadian mills used to depend very much on Europe as a marketplace. We got shut out of Europe for phytosanitary reasons, so $900-million worth of wood that came out of Nova Scotia alone to Europe suddenly turned south. By far the Americans are taking that portion, that billion dollars' worth of wood products coming out of Nova Scotia, and Europe is getting a few hundred thousand. We have an advantageous position, of course, because we don't fall under countervail. We do fall under anti-dumping, when it happens, but it's helpful to us.
I would take a moment to congratulate you and your industry on helping out after the tsunami. Good for you. That's what neighbours do for neighbours. That's nice to see.
The fact that we do have a mature marketplace in Japan, the fact that we do have a culture that's traditionally built with wood, as we do in North America, particularly in Canada, should help us to move this forward. I would ask, however, what role modern forestry practices, certification in particular, has played in bringing that product into Japan.
You play the cards you're dealt sometimes. We didn't ask in 2003 for the Canadian government to eliminate duties on least developed countries. In fact we came to this committee and to those in the Senate and said, don't do that. But they did. You have to think about what was prevailing in 2003: We had high and quite restrictive import quotas on many countries, and we had at that time an 18% duty on those garments.
So it was done pretty much overnight. I'm the guy who got the call from a DG in Industry who literally said that everything was going ahead on December 22, 2002, and that effective nine days later the duties were going to zero and there would be no quotas.
So my first comment is that government policy directs the industry. All of our major retail customers in Canada were following just as closely as we were, and so they would say to their suppliers, “Well, it's done. Go to Bangladesh. We have a factory for you. Go do the product there”.
That's certainly not what I would consider reasonable industrial policy, but that's exactly what happened in 2003. And yes, we are well aware that there are different sets of circumstances there, and again, the companies that remain in Canada don't directly compete with that product. That's gone forever. They produce better goods at higher prices.
I would also say that those companies are aware of what's going on there and they are trying to deal with that. Bangladesh has recently had some very serious problems and we're working with the Retail Council of Canada, the National Retail Federation in the States, and various industry associations in Europe to try to bring more standards to that.
Thank you very much, Mr. Chairman.
Good afternoon. Thank you for the opportunity to speak to you in support of this important initiative to broaden and deepen our bilateral relationship.
As mentioned, I'm the executive director of the Japan Automobile Manufacturers Association of Canada, or JAMA Canada. We have eight members comprised of the Canadian subsidiaries of Japanese automakers, including Hino Trucks, Honda, Mazda, Mitsubishi, Nissan, Subaru, Suzuki, and Toyota.
Let me say at the outset that we are firmly supporting a comprehensive EPA between our two countries—just as we have supported trade liberalization over the past 28 years—for the economic benefits, jobs, and new opportunities for both Canadian and Japanese businesses.
The history of our organization is a history of liberalized trade. Let me give you a quick snapshot of the impact that trade liberalization has had on our sector in Canada and, in the process, suggest how other sectors could also benefit from the opportunities arising with freer trade.
While JAMA Canada was established in 1984 to promote greater understanding on trade and economic issues, Japanese automakers first came to Canada in the 1960s. Back then, the markets in North America and Japan were very different, and some early business initiatives were not always successful.
It took time and effort to understand the Canadian market, the Canadian way of doing business, and particularly the needs and wants of the Canadian consumer. Our members have spent many years on this and have made the necessary investment to understand the market, investing in infrastructure and building dealerships, investing in research, and building assembly plants to respond to the needs of the market. Our members understand that this is what it takes to be successful in Canada and in Japan—or in any other market, for that matter.
The first oil crisis of 1973 opened a new door as consumers in Canada saw small, fuel-efficient Japanese cars in a new and favourable light. After the second oil crisis in the late 1970s, Japanese automakers reached a critical level of sales to support a solid business case for local production in North America, providing the opportunity to be closer to their customers.
The case for Canada may not have been as easy due to its relatively small market, but the FTA in 1987 and the NAFTA in 1994 were critical in assuring access to the much larger U.S. market, which allowed the development of a deeper level of integration within North America. Today, only Japanese automakers have joined their U.S. competitors to make light-duty vehicles in Canada; moreover, the only medium-duty trucks made in Canada currently are Japanese.
Not only did investment to produce the most popular vehicles locally create thousands of jobs at assembly plants—and in fact, over the first quarter of 2012, plants in Canada built over 247,000 vehicles, almost 40% of total Canadian production—but over time those assembly plants generated even more jobs and new business opportunities in the supply base. The steady growth of production in Canada has also opened up new opportunities for Canadian suppliers to join global supply networks.
Like the Canadian auto industry overall, the Japanese auto industry in Canada punches above its weight. Every year since 1993 Canada has been a net exporter of Japanese brand vehicles, which contributes significantly to Canada's trade balance. Last year we exported over three times as many vehicles as were imported from Japan.
Without liberalized trade we would not have been able to build over 11 million vehicles in Canada since the mid-1980s. While many people are aware that Japanese automakers are building vehicles in Canada—particularly if you live in Alliston, Cambridge, or Woodstock—they may not be aware that over 50 Japanese parts-related plants have been established—and not just to supply Japanese OEMs, and not just in Canada.
Employment at our Canadian vehicle plants is close to 11,000 team members and associates, while employment among the 57 parts and related suppliers is in excess of 15,000 currently. While many of these parts plants are clustered in Ontario, there are some large Japanese parts operations in Quebec and British Columbia.
Local production in North America also meant that the need for imports would be reduced and reliance on local suppliers would be increased, particularly with the assured access provided by the FTA and NAFTA. Currently, two out of three vehicles that our members sell in Canada are built in North America. Moreover, for two members with extensive manufacturing in Canada, between 50% and 75% of their sales are Canadian-built vehicles.
Among other things, we believe that our presence in Canada has made the industry more competitive, has opened up opportunities to join global supply chains, and has introduced new, advanced technologies for safer, more fuel-efficient, and lower-emitting vehicles.
An EPA would add further impetus to opening up new business, building on more than two decades of industrial cooperation and investment in Canada that has generated technology transfer and Canadian auto parts investment in Japan from leading suppliers such as Linamar, Magna International, ABC Group, and the Woodbridge Group.
Altogether the Japanese auto industry supports over 67,000 Canadian employees in importing, exporting, manufacturing, distribution, sales, and service. The importance of the extensive dealer network among all our members throughout Canada should also be recognized as they are the first-line contact with customers. With over 1,250 dealerships across Canada, they employ over 39,000 Canadians in the sales and service of Japanese brand vehicles.
Despite recent global recession and last year’s earthquake and tsunami in Japan and floods in Thailand, which meant production and sales were curtailed by shortages and supply chain issues, which also hit us in Canada, there were no layoffs of full-time staff at any Japanese vehicle plant in Canada or the US. In fact, rather than being laid off, employees were redeployed for training and process improvements. As well, many employees went into the community and worked with local organizations, offering their capabilities and enthusiasm to community groups and agencies. Highly skilled and well educated dedicated employees are a critical part of maintaining a competitive and vibrant industry.
In summary, JAMA Canada supports liberalized trade with any country that has a level playing field and that can ensure that actual and potential foreign investors are treated equally and fairly. We support this Canada-Japan EPA as an opportunity for expanding trade, investment, jobs, and advanced technology among various sectors including automotive, particularly for those looking to diversify beyond traditional markets in NAFTA.
Both Canada and Japan are trading nations and have a long history of supporting multilateral trade liberalization as the preferred route to lower barriers to trade. With the Doha Round on the back burner, many countries have shifted focus to bilateral and regional trade deals.
In this context, neither Canada nor Japan can afford to be left behind. Japan remains the third-largest economy after the U.S. and China. As Japan is Canada’s fifth-largest trading partner, an EPA would boost prospects for Canada and Canadian companies to pursue broader strategies and strategic initiatives in Asia.
I thank you for your attention. I would be happy to take any questions.
Good afternoon, and thank you for having CAFTA back to the committee.
I'm Kathleen Sullivan and I run CAFTA, which is an organization made up of Canadian farmer or producers groups, processors, and exporters. Our mandate is to pursue high-quality trade agreements on behalf of Canada's agriculture and food sector. My members alone produce about 80% of all of the food and agriculture products that are exported out of Canada. That's about $32 billion that's represented around my board table.
We are very happy to be here to comment on the Canada-Japan economic partnership agreement launched earlier this year. In fact I and about ten of my agriculture colleagues, my members, were pleased to be invited by Minister Ritz to join him in Japan when the launched the trade deal. We were able to hold a number of round tables with our Japanese buyers. I was also fortunate enough to participate with the Prime Minister in a round table with Japanese industry.
Every year Canada exports $40 billion in agriculture and food products from this country. Half of everything we grow across the country leaves to find its way to other shores. That includes half our beef production, but it goes all the way to 85% or 90% of our canola production. Without export markets, the size, the structure, the shape of not just our agriculture community but also our rural communities would be drastically impacted.
For us, Japan is very much a priority market. Japan is heavily dependent on food imports, it has the lowest rate of food self-sufficiency among G-8 countries, and it boasts a large agrifood trade deficit. Last year alone we exported almost $4 billion in products to Japan. That's about 10% of everything we export. It makes Japan, for us, our second-largest export market after the United States.
Today Japan is the largest predictable market for Canadian canola seed, the second-largest market for our malt and for our pork, the third-largest market for our wheat, and the fourth-largest market for Canadian beef.
Although agriculture is just 1.5% of Japan's GDP, Japan's agriculture sector is highly subsidized, and it's heavily protected through tariffs and border measures. Tariffs on agriculture products are as high as 50%—on beef, for example—and much higher on sugar and sugar-containing products.
Given the importance of the Japanese market for Canada, it's imperative that any trade deal we sign with that country have a very strong agriculture package. The protection that Japan affords its agriculture and food sectors has long been viewed by us as an impediment to meaningful trade negotiations with that country, but about a year and a half ago Japan launched its basic policy on comprehensive economic partnerships. It really spoke to the importance of Japan taking a look at export markets and making the necessary domestic reforms that would allow it to support meaningful trade deals. That encourages us that in fact trade negotiations with Japan could be quite fruitful.
CAFTA also encourages the Canadian government and Japan to pursue a very, very broad trade deal. It can't just be focused on tariffs, as was talked about in the previous panel. Certainly for agriculture, half of the problems we face around the world are non-tariff barriers. Those will have to play a really critical part in any trade deal.
Finally, I'd just like to quickly reference the Trans-Pacific Partnership. I don't think you can talk about a trade deal with Japan any more without putting it in the context of the TPP.
Of course the launch of the Canada-Japan EPA coincides with the applications of Canada, Mexico, and Japan to join the Trans-Pacific Partnership, which is a regional Pacific Rim trade deal currently comprised of nine countries, including the United States.
We believe Canada should make TPP membership a priority, and the government is working very hard on that. The TPP offers significant opportunities for us not just on a market access standpoint but to be able to deal with non-tariff barriers and certainly growth opportunities if you move beyond the current nine-member configuration.
What's really critical to know about the Trans-Pacific Partnership, though, is that if Japan is in that group, Canada must be at that table. We already have a situation, as I think you all know, in Korea, where both the U.S. and the EU got into Korea ahead of us. We're now at risk of losing that billion-dollar market to our major competitors. We cannot afford the risk that Japan would join the TPP and Canada be left out.
So while we're very interested in joining the Trans-Pacific Partnership, our even stronger message to you is that we have to join in sequence with the Japanese.
With that, I would just like to say that our TPP interest does not detract at all from our interest in the Japanese market. It is a major marketplace for us. It's an incredibly stable marketplace for us. We have a very long and healthy relationship with our Japanese buyers that we want to continue to grow.
With that, I'd be happy to take any questions you have.
I certainly will try. I'm not an expert on the Japanese market, but Japan, as you may know, is a small car market. About 88% of the vehicles have engines that are under 2 litres. In that particular segment, according to the JAMA Tokyo document I have here, two U.S. automakers have models that compete in that particular segment, whereas European automakers have about 81 models.
Not only is Japan a small car market, but about a third of the market is mini-vehicles. This seems to be a unique segment for Japan. It's a very small vehicle with a very small engine, so even the smart vehicle, which might qualify in terms of its size, doesn't because of the engine.
Also, of course, the consumer market in Japan differs from that in North America because a lot of Japanese consumers don't use their vehicles to drive to work. I have friends in Japan who have vehicles and who only use them to go to the golf course on the weekend. Certainly if you're in the major urban areas, you're going to be using public transit to get to work. Very few people are driving, so I think people look at their vehicles differently. They're very brand conscious. I think that's why European automakers do well in the particular segments they do: because European brands are highly valued.
I'm not sure about exactly how Japanese consumers view American brands. When the Detroit companies participated in the Tokyo motor show, typically they exhibited a Corvette, a Hummer, a Lincoln, or a Cadillac. These are premium exotic vehicles in terms of what sells in Japan.
It's a difficult market because there are eight domestic Japanese companies making vehicles in Japan.