Good afternoon everyone. Welcome.
I am sorry for the problems we had on Tuesday. It was nothing that we caused. Something caused a big gas leak, and I think good judgment was used to see that we would not have a meeting in the midst of a gas leak. We were looking forward to that meeting with Minister Freeland, of course, but it didn't happen. However, we have been assured that she will meet with us before the end of June. They're working on dates for her coming back to speak with us.
I welcome the witnesses here today. Thank you for coming. As you know, our committee is very active. We have just finished our huge study on CETA. We have also travelled across Canada on the TPP, and our report was tabled. We're also in the midst of a steel study. Right now, because of the various circumstances that face us on the North American side, our committee is doing a study on our relationships with our other trading partners in NAFTA going forward.
Our committee just returned a couple of weeks ago. We travelled to the western United States. It was a very well received trip. We went to Washington State and visited Boeing and Amazon. We were in California and Colorado. It was really good to start it that way. Our committee is planning on doing this in some eastern states also. We're going to Detroit, Michigan; and Chicago; and will finish up in Washington, D.C.
It was very good to get out to these other areas to meet other representatives, because many times we focus only on Washington. Of course, that is the centre of all activity, but it's very good to get to these other outlying areas. This month we are mostly going to have witnesses come forward to explain their take on our future relationship with those countries.
We try to keep it tight. We have quite a few witnesses, so if you could keep it to five minutes or less, we would appreciate it, so we can have lots of time for later dialogue with our MPs.
Today our witnesses are from the Business Council of Canada, the Canadian/American Border Trade Alliance, the Canadian American Business Council, and the Canadian Vehicle Manufacturers' Association. Welcome.
Without further ado, we'll start with the Canadian Business Council of Canada. You have the floor. Go ahead.
Thank you, Chair and committee members. Thank you for the invitation to take part in your consultations on bilateral and trilateral trade in North America.
The Business Council of Canada represents chief executives and entrepreneurs in more than 150 leading Canadian companies in all sectors and regions of the country. Our member companies employ 1.7 million citizens, account for more than half the value of the Toronto Stock Exchange, contribute the largest share of federal corporate taxes, and are responsible for most of Canada's exports, corporate philanthropy, and private sector investments in research and development.
The prospect of a new round of NAFTA negotiations presents both a risk and an opportunity for Canada. Our country's economic health depends heavily on the ease with which goods, people, and investment move back and forth across the Canada–U.S. border. In the words of Stephen Schwarzman, chairman of President Donald Trump's strategic and policy forum, “the U.S. and Canada [trade relationship] is really very much in balance and is a model for the way that trade relations should be.”
I'd like to organize my thoughts under three key principles.
Our first principle for the Canada-U.S. relationship, and the NAFTA negotiations in particular, is to do no harm. Canada must protect the framework of rights, benefits, and privileges that our companies and citizens currently enjoy under NAFTA. It's also imperative that any agreement be based upon reciprocal access and treatment.
There's speculation that U.S. negotiators will attempt to rewrite NAFTA's rules of origin for goods. While it's unclear what they want in this regard, the unintended consequences could be quite dire. We support the modernization of outdated NAFTA tracing systems. We support the application of dispute settlement provisions. We do not support country specific rules of origin.
With respect to dispute settlement, the TPP offers a useful model for improving NAFTA in this regard. However, disputes related to NAFTA provisions must not be decided by domestic courts. This was a deal breaker for NAFTA in the original negotiations, and it should remain our position today. While doing no harm is our first principle, achieving only this would be a missed opportunity.
Our second principle is to modernize NAFTA and its predecessor, the Canada-U.S. Free Trade Agreement. They were negotiated in a different era. Opportunities to build upon NAFTA exist in many areas, including intellectual property, e-commerce, state-owned enterprises, competition, sanitary and phytosanitary measures, telecom, customs, labour, environment, procurement, and regulatory co-operation. Again, TPP offers a helpful template in many of these areas.
Labour mobility and customs procedures are two areas, in particular, where NAFTA is clearly outdated. For example, the list of eligible positions that was negotiated under NAFTA almost a quarter of a century ago didn't contemplate today's digital economy. Similarly, in today's world it's incredible that some of our customs procedures are paper based.
Modernizing NAFTA to reflect current business practices and to anticipate future needs would benefit all parties to the treaty.
Together, the Canada-U.S. Free Trade Agreement and NAFTA lay the groundwork for a mutually beneficial energy relationship, and this is an opportune moment to strengthen that.
The Trump administration's approval of the long delayed Keystone XL pipeline is a reminder that our governments have work to do to streamline the permitting process for cross-border energy infrastructure. In renewing NAFTA, we should strive to improve energy security, promote greater co-operation on technology, and expand access to a low-carbon energy solution. Doing so would significantly bolster the competitive opportunities of North America.
Our final principle is that we should go further. Infrastructure and government procurement are important areas in which Canada and the United States should work together. Each country has pressing domestic demands and limited public resources. A U.S.-Canada infrastructure pact could generate a common template for structuring P3 projects, including a recommitment to the principle of non-discrimination against U.S. content in Canada and discrimination against Canadian content in U.S. products. To the extent possible, such a pact could extend to state and provincial governments.
Regulatory co-operation is also an area where progress could mean substantive savings for Canadian and U.S. consumers. We recommend that the two governments establish, as a permanent entity, the existing regulatory co-operation council or a version thereof. This council should work closely with industry to ensure that the council has a mandate of harmonization. The approach should be to harmonize regulations, except in cases where authorities convincingly demonstrate that doing so poses a risk to health and safety. The Business Council of Canada stands ready to work with the government and with committee members to support the coming negotiations.
With that I conclude my remarks. Thank you for the opportunity.
Thank you, Mr. Chairman, and thank you, honourable members of the committee.
I'm Dan Ujczo, an international trade and customs attorney with the law firm Dickinson Wright PLLC. I'm appearing on behalf of the Canadian/American Border Trade Alliance.
As many of you know, Can/Am BTA is an organization of the leading infrastructure operators and logistics providers in the major U.S. and Canadian companies that move goods and services across the Canada-U.S. border. Can/Am BTA will be celebrating its silver jubilee next week here in Ottawa. Jim Phillips, its long-standing founder and CEO, sends his best regards in a typical Jim fashion. He looks forward to seeing you next week at his conference.
By way of background, Dickinson Wright is a law firm that was founded in Detroit in the 1870s. It has since expanded to 17 offices located throughout the United States and Canada, and our offices here in Ontario date back nearly to Confederation. We are a bi-national law firm. We represent many of the leading Canada-U.S. companies, and we do so on the ground in the U.S. Midwest, Southeast, and Southwest. Issues having to do with Canada-U.S. trade and the North American trading corridors are vital to our operations.
I'll just build on the chairman's opening comment. We are members and supporters of most of the Canada-U.S. business groups, including many of those seated here today. We founded in 2015 the U.S.-Canada S.A.G.E. initiative to coordinate, for the first time, the efforts of all the Canada-U.S. business groups including those sitting here. We came together in beautiful Columbus, Ohio, my home town and the political battleground of Ohio. It's also the home state of LeBron James. We came together for the first-ever U.S.-Canada summit, from which the parties issued the first statement of general principles governing the Canada-U.S. relationship, the Columbus Statement. We have been meeting on a regular basis ever since.
In the coming days, we will launch a NAFTA renovation initiative that will serve as a clearing house of information and intelligence on NAFTA. We will be having a monthly web-based town hall in which the U.S. administration and Congress have agreed to participate. We would like to invite members of this committee, and representatives throughout the Government of Canada, to participate as well.
Last, but not least, prior to the launch of the formal negotiations in the fall, we will be holding a cross-continent advocacy blitz regarding NAFTA. U.S. and Canadian companies will be going throughout the United States and meeting in key congressional districts to produce common communications and messaging. We believe that if all politics is local and all trade is personal, the next 6 to 12 months will require the largest on-the-ground advocacy campaign in local districts that we have seen in several decades.
My overarching theme today is that we cannot let this once-in-a-generation chance to modernize Canada-U.S. and North American relations pass without taking significant steps. I am mindful of the political realities on the ground in the United States. I live and work in the U.S. Midwest. Where I grew up in beautiful Youngstown, Ohio, two things were true. First, although I had heard there was such a thing as a Republican, I had never met one. Second, when I was working in a steel mill, NAFTA wasn't a four-letter word, though it was usually preceded or followed by one. The truth is that NAFTA is nearly a fatally damaged brand. Attempting to tweak the status quo will not work. Voters in places like Ohio and Michigan in the mid-term elections will run to the extremes of either party, creating more political and business uncertainty.
Additionally, I've been engaged in Canada-U.S. relations on the ground for nearly two decades in the U.S. government, the Canadian government, and the private sector. I can tell you that I don't expect we will see another opportunity like this in our lifetime. In the U.S., we have shiny-ball syndrome, so when the attention is on an issue it's time to act.
Last, but not least, we can't assume that the status quo will continue. The U.S. is doing much more on trade than with NAFTA alone, including something called particular market-scenario situations, where the U.S. is looking at China and its proxies and going after those with trade enforcement measures. Now is the time to stitch together preferential access.
In that vein, I offer a three-point strategy, all surrounding the letter E.
First, we need to show that the Canada-U.S. trading relationship is the example of what a 21st century trading agreement looks like. We applaud the successful visit with President Trump, and we've hosted a number of the ministers and Team Canada. We have stretched across political parties and levels of government to come into the United States. Now is the time for the next set of messengers and messages. There are at least five consultation periods going on, on various trade issues. It's time to get the Canadian views and U.S.-Canadian companies to participate in this effort and give real-world examples of these issues.
We also support one of the lessons, which is that we need to embed—the second E—the progress we've made on issues like border management. We learned over the decade of border thickening that if the border doesn't work, NAFTA doesn't matter. Can/Am BTA and a number of folks, including those sitting on this panel, did a lot of work on the border, in admittedly a more hostile and inward-looking United States following 9/11. The best thing Canada can do at this point is to pass pre-clearance legislation and also embed the regulatory cooperation council. We believe that is the next phase of international trade. To the extent that Canada and the United States can establish that and make it work—and we're probably the only two countries of our size in the world that can make that work—it will give us a competitive advantage vis-à-vis the rest of the world.
With that, I'll yield my time. Thank you.
Good afternoon, everyone.
I am very pleased to be here with you today.
Mr. Chairman, members of the committee, thank you very much for the invitation to appear before you on behalf of the members of the Canadian American Business Council.
We didn't coordinate it, but this is a perfect tee up to what I'm about to suggest to you today. It's certainly an interesting time to be focused on Canada-U.S. policy matters, more broadly on the common ground and uncommon friendship that we have long shared, a hallmark of an enduring, affectionate, productive relationship between Canada and the United States. Mr. Chairman, I'm delighted to know that you're travelling the country with the committee and getting outside of the swamp where I live. I'm a swamp dweller, if you will, and I'm glad that you're seeing the real America and taking the story of our integrated economy to the United States. That's very important to do.
For those of you who are not completely familiar with the Canadian American Business Council, please allow me just a moment to describe our organization, and then I'll go into our specific policy recommendations for you to consider.
We are 30 years old, a non-profit, non-partisan, issues-oriented organization dedicated to delving into the issues that affect businesses and citizens in Canada and the United States. Our aim is to maximize competitiveness for companies large and small on both sides of the border as we face challenges in the global economy. Our members are key business leaders and stakeholders, who range from entrepreneurs and small businesses to some of the biggest brand names on the planet. Collectively, CABC members employ about two million people and have annual revenues of close to $1.5 trillion. All four witnesses here share some common members, and then we have some unique members.
For the past three decades the CABC has nurtured, cultivated, and celebrated a uniquely close Canada-U.S. relationship, bringing our message to critical stakeholders on both sides of the border, Capitol Hill, Parliament Hill, and beyond. Notwithstanding the periodic strains in our trade and commercial relationships, there remain countless areas of goodwill and co-operation between our two countries that we'd both be wise to capitalize upon. One is staring us right in the face at the moment. It was alluded to, and I'm going to go into it more deeply. Despite recent tensions over dairy and softwood lumber in the North American Free Trade Agreement, President Trump's executive order of February 24 of this year, entitled “Enforcing the Regulatory Reform Agenda”, is aimed at streamlining federal regulations. That executive order directed U.S. agencies to create task forces to identify regulations that eliminate jobs, are outdated or are too costly. That's not all it does. It also provides a perfect opening to accelerate and enhance a long-standing bilateral project known as the Canada-U.S. Regulatory Cooperation Council, which is also working to streamline regulations on both sides of the border.
Bilateral regulatory co-operation may not be as enthralling as Russian spies or border walls, but it is critical to businesses on both sides of the border. Regulatory harmonization will also have a direct impact on your constituents, all of whom are consumers and some of whom own businesses that spend far too much money every single year dealing with red tape that is the result of regulatory disharmony. For a president who's eager for some wins, this is a golden opportunity for Canada, and it has a win-win potential for both governments.
In the sectors of agribusiness, energy products, medical devices, medicines, and especially consumer products, there are an array of conflicting regulations that make it difficult to do business on both sides of the 49th parallel. In some cases those regulations even impede a consumer's ability to buy the goods that they want to buy or obtain the medications that they want or need if they are suffering from certain illnesses or conditions. Some cosmetic products in the United States, for example, aren't available in Canada. Some medications that are sold over the counter in the United States are still prescription-only in Canada, and vice versa, causing headaches for companies trying to market their products in both countries. There are also differing recall mechanisms for medical devices on either side of the border, and imposing regulations, for example, on a drug that helps people with Parkinson's syndrome, and the list goes on and on.
Meat producers in both countries deal with an antiquated, old headache involving the requirement that an actual veterinarian certificate be manually placed on a certain outward-facing spot in every case of exported or imported meat, even though the information is more easily available via other methods. It's an example of a costly and dubious regulatory requirement that also prevents producers from fully embracing automation, such as high-tech shipping methods. There are plenty of redundant and expensive regulations just like it on both sides of the border.
Why not leverage President Trump's interest in cutting red tape and creating regulatory harmony for the benefit of the bilateral economy? This doesn't have to wait for NAFTA renegotiation or WTO trade actions. It is something that is ready to go right now, today. Canadian and American officials have been working together on this since 2011, as many members of this committee know well. As the great Canadian Gary Doer would say, it's time to “put the puck in the net”. The CABC has also been on the front lines of this issue working hard to ensure that the concerns and suggestions about regulatory harmony, from stakeholders on both sides of the border, are being heard.
In the midst of fears about President Trump's NAFTA intentions, now is the time to work even harder on the Canada-U.S. relationship and to focus on the issues that are not contentious. Regulatory harmony is a critical piece in that strategy, and success there could well ease tensions everywhere.
Now is not the time to cave—like the Toronto Maple Leafs did to the Washington Capitals earlier. Now is the time to focus on the positive and keep our eye on the prize. Remember, as always, that every long-term relationship has its chilly periods. The trick is looking for the bright spots—and here we believe that regulatory harmony could be one—and the shared goals and common ground that ensure the Canada-U.S. relationship remains as vital and robust as always.
With that, thank you for having us today, and because it is today, I have to end with “May the 4th be with you”.
Thank you very much, Mr. Chairman.
Good afternoon, honourable members. It is indeed a pleasure to be back, and I'm very grateful for the opportunity to appear before you again today.
As you know, I'm here and pleased to represent our member companies, Fiat Chrysler, Ford, and General Motors, who are among the largest multi-national companies in the world. Together they're responsible for approximately 60% of all annual production in Canada and for roughly a century of high-value paying jobs in Canada. The sector accounts for 140,000 direct jobs and about 500,000 direct and indirect jobs right across the country. In 2016, vehicles were in fact the top Canadian export, valued at $64 billion, 95% of which were exported to the United States.
Recently, all three CVMA member companies have collectively announced billions of dollars of new investment in Canada. Additionally, they have made exciting investment announcements in innovative research and engineering related to artificial intelligence and connected and autonomous vehicles, right here in Canada. They're contributing to the future landscape of our industry, if you will. This will harness our highly skilled workforce and capitalize on our world-class research and development capacities.
Let me turn to NAFTA and the reason it has been so important to our industry and the economies of its three participating countries.
Since the Auto Pact of 1965, Canada's auto industry and its supply chains have become deeply integrated with those of the United States and, over time, of Mexico. We build vehicles seamlessly on both sides of the border, and the resulting deep integration has led to a more competitive auto industry and greater consumer choice of vehicles that are more affordable.
The NAFTA, which followed, has been the foundation for a strong, globally competitive trading bloc. The geographic proximity of the three NAFTA partners facilitates the multi-billion dollar parts sector and the just-in-time supply chains critical to our vehicle assembly plants in operation. It also creates inherent transportation and supply chain logistical cost advantages.
Autos account for 20% of total NAFTA trade; that is, about $230 billion. Since Canadian vehicles assembled have slightly higher content, in terms of parts and materials, from U.S. than from Canadian sources, any disruption of the integrated supply chain will impact U.S. auto companies and suppliers' jobs as much as, if not more than, our own.
Much has changed in the global and North American market since NAFTA was first negotiated. The CVMA believes there is an opportunity to modernize NAFTA, which brings into sharp focus the need to ensure that Canada capitalizes on opportunities and also protects what is essential to the long-term health and global competitiveness of the auto industry and the economy overall.
In the auto sector, NAFTA duty-free access and the associated 62.5% minimum content requirement is really the highest of possibly any trade agreement in the world that I know of. It promotes the free trade and flow of vehicles and parts across the borders of the three NAFTA partners. Any changes to the duty-free access and content rules will disrupt the highly integrated supply chains and reduce the massive benefits, undermining the global competitiveness of that integrated automotive industry we talk about.
The CVMA recommends leveraging the existing deep integration of the auto sector to drive additional economic growth for Canada. This may be accomplished by the following means.
Free trade agreement rules of origin must fully consider our strong historical and ongoing reliance on deeply integrated supply chains. This will continue, going forward, as companies rely on existing manufacturing footprints and sources of inputs.
Strong and enforceable currency manipulation disciplines should be added. While the U.S., Canada, and Mexico have not manipulated their currencies, the inclusion of strong and enforcement currency manipulation disciplines in NAFTA would set an important precedent and establish a platform for collaboration, in distinction to other countries that use currency manipulation to benefit their economies and protect their domestic industries.
We've heard several of the panels today talk about regulatory co-operation. This is absolutely critical as we move forward.
Alignment of and recognition of vehicle technical and safety standards ensures that Canadian consumers have access to the safest, cleanest cars in the world at the most competitive prices. Vehicles assembled in one jurisdiction need to be available for export and sale in another without regulatory constraint. Recognition of vehicle safety and technical standards will need to be an accepted component of any trade agreements to support global competitiveness in any trade agreement Canada chooses to pursue moving forward.
Streamlining customs procedures by reducing the unnecessarily burdensome and redundant reporting requirements in Canada that others have spoken about would increase border efficiency, make exports more competitive, enhance border security, and facilitate the legitimate trade that NAFTA seeks to achieve.
Finally, the CVMA recommends that border infrastructure be improved. Improving ports and border crossing facilities will help prevent inefficiencies and bottlenecks, and improve the competitiveness of Canadian exports.
In closing, the CVMA encourages the Canadian government to work with its U.S. counterparts to ensure that any changes with regard to auto trade rules help all partners grow economic activity, create more jobs, and avoid any further regulatory complexity. More regulation will only hurt employment and employment mobility, as well as increase costs for consumers.
Getting a modernized NAFTA right will have implications for future trade agreements, such as the TPP, without the continued participation perhaps of the United States, and a potential trade agreement with China. We want a focus on continued strong integration with our partners in NAFTA to support Canada's competitiveness at the global level.
Mr. Chair, I will conclude on that point, and I would certainly be pleased to answer any questions that members may have. Thank you.
Thank you, everyone, for those presentations.
The committee might see a group of students come in here. As you know, this is the most exciting committee, and I heard they might be dropping by, so be on your best behaviour and we'll be doing all right.
Without further ado, we'll start the dialogue with the MPs. We have the Conservatives up first for five minutes.
Mr. Van Kesteren, go ahead, sir.
Thank you all for being here. Welcome to our American friends. It's good to see you again. It's the first time I think we've met Daniel, but I appreciated your testimony earlier.
I want to go first to Mark, then I'm going to skip over to you quickly, Daniel, because I have a question.
Mark, I was listening to some of the things you were saying, and you're spot on. I remember, having been on the industry and finance committees, we had you many times before and you've always given us great direction as to where we should be going—on harmonization, the lessening of red tape, lower taxes, the thinning of the border, and the investments. We've made a number of investments in the centres of excellence in Ford Motors, and of course, the bailout in 2009 proved to be a great thing to do. We need to have those Detroit three strong again, and they're moving in the right direction.
Daniel, you mentioned the thickening of the border. One of the things we recognized as a Conservative government when we were in power was that we had to make the busiest crossing in the world flow more easily; hence, the Gordie Howe bridge, which no one thought would ever happen, is becoming a reality. But I'm concerned about the American side. I wonder if you could tell the committee if you're seeing any problems starting to crop up to get that task completed as far as the obligation on the American side is concerned.
Thank you for the question.
It seems as if the Gordie Howe bridge—“the bridge” as we call it in Detroit-Windsor, both in my days of working in the Canadian government and then coming back to the dark side of private law practice—is just a never-ending issue, but it is moving forward. There's no question about that. Certainly on the U.S. side, and in particular Governor Snyder of Michigan and his team, are committed to moving the project forward.
But there are the standard issues that we face on the U.S. side whenever there is a development of that size and scope: local issues of zoning, acquisition of property, those types of issues. I think those who are on record as supporting it have not wavered. There continues to be public support. All facts on the ground indicate that, and they're moving forward.
The current owner of the Ambassador Bridge certainly is moving forward with his objectives as well. That's part of what a free market is all about in some cases. The view on the ground is that things are moving as originally planned. I think there has been a little delay on some of the RFQs. It's a complicated project. I do a great deal of P3 work. We do a lot in our firm on municipal financing and P3s, and it's a very tricky project. There's no question about it.
That corridor itself is very tricky, just in terms of the geography and other types of issues. Again, from an on the ground perspective, I think everything is moving according to plan.
Mr. Chairman, if I might jump in for a moment on the politics of border policy, it's important to remember that the President and this Congress were elected on a “build the wall” chant that continues at every rally and every turn. I agree completely that it's enormously important for our border to work well for legitimate commerce and to be secure against threats.
I would just caution on the use of vocabulary. I've been saying this for many years, and apparently to no avail. When Canadians say “border thickening” to each other, people understand that's a bad thing. To American ears and to an administration that's trying to physically build a wall on a border, the border is the last line of defence. I agree that it needs to be efficient, but I think it would be useful, just from the point of view of vocabulary, to think about a smarter, more secure border, one that's more efficient, and not thick versus thin. A thin border sounds like an insecure border to American ears.
The politics of advocating for that, even if that's not what you're suggesting.... You're not suggesting that there be a less secure border, but quite the contrary. Anyway, it's the thick-thin words that I take issue with, but nothing else.
The border issue is exactly as Maryscott says. Language, how we say it, does make a difference. Smart, efficient, productive borders are things that we pursue in our discussions with the U.S.
There is still room.... I mean, we talked about the regulatory cooperation council. The other half of that piece was the Beyond the Border initiative. The Beyond the Border initiative is equally important. Not only should we be talking about efficient and smart borders, but we also need to talk about what comes with that.
Certainly in our industry, where we move not just parts and components across the border every single day as many as six or seven times, but we also move people, labour mobility is key. We will bring in, for instance, some experts to do emergency work on a line. If we have a line that's shut down, that's $1.5 million an hour in lost revenues. Sometimes they can't get across because they don't have a letter saying what their university credentials were in simple terms.
Nothing could be worse than that. The lists of the jobs that qualify for that movement back and forth across the border under NAFTA needs to be updated. It needs to be updated in any case. We also need to update the procedures around that to make it more flexible and timely, because the two-week turnaround time for an approval is unacceptable in our industry.
That is indeed it. We're very much aware of CETA and something that we supported. Why? Because when it was negotiated, it recognized the integration of our industry. It set down placeholders, if you will, for the accumulation of content that goes into our vehicles vis-à-vis NAFTA.
That was also premised on the U.S.-EU proceeding with an agreement—which is not the case at the moment, or at least it's in hiatus—but it recognized the integration of our industry and put down placeholders, and said we will put down quotas until such time as we are able to formally include that in a U.S.-EU agreement.
That allows us to still build vehicles and send them to the EU—in limited numbers, of course. How we allocate those numbers and the methodologies that go behind establishing those numbers must be flexible. They must respond to market conditions and so forth. But it recognized the integration of our industry. It recognized essentially the integration, in a broader sense, with NAFTA, and that is what's so critical.
That's one thing that from a Canadian perspective we've not done very well so far. We're always out there, particularly in a bilateral. We've got to get the deal on the bilateral basis, when in fact we should be looking at any new agreement through the lens of what it means economically for our country. What does it mean for our jobs? What does it mean for the products we produce? It should not be at the expense of what we build or the jobs we have here, but in a way that promotes them and expands or increases the levels of employment and investment in this country.
Thank you, Mr. Chair. Thank you so much to all of you for being here today and presenting. My riding is Essex, down on the border in southwestern Ontario, and I think those of us who represent border ridings in Canada feel more keenly the response to what's being said in the U.S. Certainly, there has been some strong language recently that really has impacted our particular region.
Of course, we have a lot of challenges at the border—you've identified some of those—that need to be fixed and repaired before we have the new bridge crossing. We need to address these issues at our border, because I can tell you that every week I have people contacting me in my riding. They have issues with labour mobility going across that border. They have issues bringing goods across that border. They lose goods. I have fish plants that sometimes cannot get their goods across into the U.S. We understand how integrated that chain is. Twenty-three years on from NAFTA, we feel that very strongly.
My question really is around the executive order on Buy American and Hire American. We responded very viscerally to this in our region, as most Canadians did. I'd like to ask Mark what this means for these very integrated chains in auto, and I'd like to ask the rest of you, too, what you think Canada's response should be.
Mark, when those chains are so deeply integrated, if a policy like this becomes implemented in the States, how will that impact the auto sector here in Canada?
I had the opportunity to testify before the foreign affairs committee this morning and wanted to provide different testimony, so I have focused on regulatory issues. A lot of the border arguments and NAFTA arguments are in the earlier testimony, and I would refer you to those.
We talked about Buy American rules in particular. What the Canadian American Business Council feels is that when you look at Buy American rules, they should be “Buy American-Canadian” rules. In other words, if you were to consider Canada “domestic” for the purposes of U.S. procurement, that would solve a lot of things. That would solve Buy American rules. That would solve country of origin. It would solve border adjustability. It would really help.
There is a model for this, and the model is actually in the defence industry. Since the 1950s, Canada and the United States have had the defence industrial production agreement, in which it is required that Canadian defence suppliers be treated exactly the same as U.S. suppliers to the Pentagon. Our thought is to take a page from the defence sector and apply it across all sectors.
Just in case my friend Dan doesn't get a chance to speak, his shorthand for this is that when you say “Buy American”, you capitalize the C, so that it's “Buy AmeriCanadian”—if I can just steal your recap there, Dan. That's what we're advocating very strongly. We think it would solve a world of problems. We would recommend that to you.
Thanks to all of you for your excellent and very informative presentations.
I want to start with an example of a smart, efficient, and friendly border. I represent the riding of New Brunswick Southwest. We have five international border crossings. The friendly example is that we have mutual aid with our American friends. In the case of structural fires, there is pre-clearance for the emergency vehicles to cross the border to attend to the fires, and vice versa. The challenge usually is that when the firefighters are returning to their own country they've forgotten their identification.
My first question is for Mr. Ujczo. You mentioned public consultation. We spent all or quite a bit of last year, 2016, working on public consultation regarding the TPP. I'm wondering if you could explain a bit of your process, but I'll give you the context for it.
As we look at NAFTA, what we often hear is the rhetoric on the news about how damaging and bad it is. When you're listening to the comments through these consultations, I'm wondering how scholars and policy-makers will separate NAFTA's direct effects on trade and investment from other factors, including rapid improvements in technology; expanded trade with other countries, such as China; unrelated domestic developments in America, Canada, and Mexico; and, other variables such as economic growth, inflation, and currency fluctuations and manipulations. There's a big question for you.
That's a great question. Starting with the latter point on what the other reasons are for the workforce issues that we have in the United States, particularly in our market in the U.S. Midwest, it's not a shortage of jobs. If you talk to any company, we have jobs. We simply don't have anybody who can do them. In the tool and die and marks industry, I go back to my days working in a steel mill and I wish I had trained to be a welder, because you can't find a welder these days in those areas.
However, NAFTA has become the bogeyman for all issues with trade. I think most people don't even know that it doesn't involve China, to be quite candid with you. That said, I've maybe been in politics a little too long. I don't tell the voters that what they believe to be their problem isn't their problem. There is just an ingrained spirit that NAFTA is bad for them. At the same time, that doesn't necessarily mean Canada. All of us around this room know that.
I think what's very important in the consultation period is to come up with examples. It would have been far more of a crisis if on day one Donald Trump had withdrawn from the TPP and torn up the NAFTA. Instead, we have seen over the last three months or so—100 days and change—that there is a very programmatic consultation process looking for facts, and now is the time to put the facts on the table. This is an administration driven by anecdotal evidence at the top. We keep hearing about the Chinese steel that goes to Japan that becomes an exhaust pipe through Mexico. That's one example that I think, frankly, somebody heard in a meeting and has shared. Examples like a hamburger a couple of days ago in Washington, and using other types of stories, such as the automobile that crosses the border, are the types of examples that we need to get out on the ground into the regions, talking about those, to show how integrated our trading relationship is.
That's absolutely right.
The border adjustment tax idea is being hotly considered. The comprehensive tax reform was the Congress's answer to NAFTA repeal. When the President was campaigning on tearing up NAFTA, the Congress's answer was, “You wouldn't have to do that if you did tax reform. You'd make us more competitive by incentivizing exports, by disincentivizing imports, by border adjustability, by lowering the corporate tax rate, by repatriating funds made abroad.”
The good news, if you will, for people like us who are not fans of the border adjustment tax is that there is a deep division in the United States in the business community. There is a well-formed coalition that's for it, and there are a lot of us who are strongly against it.
There's going to be a long debate. We haven't had tax reform in the United States since 1985, so it's going to take a while to get through this. Border adjustment in particular is quite controversial, and I think we need to continue making it controversial so that people will know the impact, like the statistics that you mentioned in the Maritimes and New England. That's true right across our country in terms of our dependence on Canada.
Thank you, Mr. Chairman.
Thank you everybody for being here today.
Mr. Nantais, I want to start with you, in part because of the importance of the auto sector to my part of the world. I'm from Newmarket—Aurora and, of course, Magna International is headquartered there. It's one of our biggest employers.
The auto industry in North America has been integrated for over 50 years now, starting with the Auto Pact in 1965, then the Canada–United States Free Trade Agreement, and now into NAFTA.
Do you see this NAFTA 2.0, or whatever comes out of any negotiations, as being part of that continuum of improving the agreement between Canada and the U.S.—in this case Canada, the U.S. and Mexico—to continue to help the auto industry flourish in North America?
Oh, it's yours. I should have known you were the smarter one.
To follow up, Dan, you talked about the timeliness of this. When you are taking on something this massive, of course, timing is everything, especially with the United States always being in an election cycle. You said that the mid-terms in Ohio could really be a turning point, a real problem for us. It's also one of the 35 states whose number one trading partner is Canada. There are allies there, too.
You are absolutely right. It's how we market this, how we draw people out, and how we build that bulwark. We did this very successfully with country-of-origin labelling by identifying people on the ground and making it a ground war, not an administrative war. I think that's the key in this.
There are so many other things that work into this, too. The geopolitics of it has been talked about. China is sitting out there watching all of this. They are trying to negotiate with the U.S. They are trying to negotiate with us. Of course, they're trying to go faster with us because we're smaller. At the end of the day, there will be a huge miss if we don't get this right, because China is sitting there ready to pick up anything that falls off the table and then build from there.
How do we make sure that the new NAFTA—NAFTA 2.0, or AmeriCan, whatever you want to call it, is proactive? There are all kinds of provisions in there to take someone to task when there is a grievance. That's reactive. How do we build in a proactive side so that, before you get to the grievance side, you can sit down and say, “This is going to come up. How do we address it?” How do we constantly modernize, refurbish, and keep this deal vibrant? How do we work at the speed of business?
The United States and Canada have been working together on regulatory harmony since 2011. President Obama and Prime Minister Harper at the time announced this regulatory co-operation effort. It is now supported by and President Trump. It's a really good idea. We've been talking about it.
In terms of your particular question, there have been 35 different sectoral working groups in which officials in these various agencies, from Canada and from the United States, have been meeting pretty regularly, including with stakeholders to figure out where there are areas of just a slight difference, where's basically the same level of safety, but just a slightly different way it's tested.
The recommendations that we make on food safety, veterinary products, and medical devices would simply mutually align. If something is deemed safe in Canada, it's been inspected in Canada, and it's good enough for Canadians, the Americans would say, “That's good enough for our consumers too”, and vice versa. It's an immediate mutual recognition, which would be the first step.
The end goal is something that both of us mentioned. We call it a negative list; you called it a positive list. That's where you take the list of everything, all things, and say, “Everything regulated in the future must be harmonized, unless we set it aside and it's not.” In other words, instead of going line by line through every single medical device, food product, and manufacturing supply chain, and trying to figure out how to work it out, it's all got to be harmonized or mutually aligned, unless it's so contentious, or for whatever reason, you've got to set it aside as a negative list notion.
Dan said he wouldn't bring up regulatory cooperation on a first date.
Voices: Oh, oh!
Ms. Maryscott Greenwood: That's why we never dated, because I think it's super hot, and the reason I do is that it would save billions of dollars over time. It would help so much small businesses, mom and pops, right up to big businesses.
I would complement the automotive industry. When we started with regulatory co-operation in 2011, any sector could have raised its hand and said, “We're ready, try us first”, and a lot of the sectors sat back and said, “Well, we're not really sure what this is, we'll just watch”, and the automotive sector said, “We want to be in the front of the line, as we've got some examples, and we'll give you case studies whether it's seatbelts, airbags, crash testing, you name it”, and that's one of the reasons, because they're—
If I may start, some of the Canadian plants are the most productive, high-quality plants in the world. That has come about as a result of things like regulatory efficiencies and regulatory harmonization as one of the elements. Regulatory complexity is another. We have a long way to go on this.
When we get into regulatory complexity as it affects manufacturing, that is primarily a provincial jurisdiction. A province adds complexity and costs to your doing business. It has an impact, not just on your ability to bring new investment to Canada, but it could also have an impact on your productivity. That's something that we really have to be mindful of. It's something that you have to think about in conjunction with all of the things we've talked about here.
Federal-provincial co-operation is another key thing. Not only do we need north-south regulatory co-operation; we need east-west co-operation as well. That's also critically important. That even includes going down to the level of weights and dimensions of the transport trucks moving across our provincial borders as well as north-south. It's very complicated, but it's something that is also ripe for assessment and improvement.
Then when it comes to NAFTA, let's face it, we have negotiating partners. We have opponents, if you will, trying to get the best deal for their respective countries. That's something that we have to be mindful of. I think Canada thus far, as its approached NAFTA, has done the right thing. Canadian officials haven't overreacted to some of the hyperbole. They haven't gone out there and lost their cool. They've gone about it an very methodical way. I think that's the right way, and we're fully behind them on that.
Canadians are nervous, and rightly so. People around the world are nervous. There are a lot of Americans, I might say, who are perplexed, perhaps.
To the particular question of how the softwood lumber dispute impacts NAFTA, it is negative. It has been considered on a completely separate track forever, as has dairy.
Now, we have the U.S. Secretary of Commerce, Wilbur Ross, saying last week that everything impacts everything. What that means is that the U.S. is coming up with its big list of things all at once, its complaints and all of that, as well as the things that it's willing to negotiate on.
Canada, for its part, ought to put together its list of what it wants, what its complaints are, and what it will negotiate. It's going to be “everything in” and let's see how it all comes out. If it could be negotiated separately, that would be terrific.
One thing about the Trump administration is that it is nothing if not unpredictable. He is willing to change his mind, so the facts could really change. However, at the moment, everything is in. Everything is on the table. It's time to get going on it and just negotiate.
I would agree wholeheartedly with your comment. I think we became complacent as opposed to content. We've done that in North America as well. If you talk to any of the original NAFTA negotiators, and people who ran around the Hill, they will all say that they went home after it passed through Congress. They had their toast of champagne and went home and kind of forgot about it. We just thought it was going to go on in perpetuity.
This step is exactly what we were saying earlier, which is that trade statistics are not going to do it. The number of jobs that are created, those are the baselines, but we need the real-world stories about people and processes, the level of integration, and getting that message out. The swamp is important in D.C. as it is here on Parliament Hill, but as I said earlier, all trade is personal. We have to get out in those districts, in key congressional districts, and share these stories of how integrated we are.
There is a favourable audience in the U.S. All polling suggests that the U.S. overwhelmingly supports Canada-U.S. trade. It's just when softwood and dairy and other issues pop up, it's like, “We didn't realize they were doing that”. Then you see this reaction. That's why it's very important in my view—and I'll turn it over to Maryscott—to get the positive message out of what we want to get out of NAFTA on digital technology, the workforce, and shared procurement, etc.