Order, MPs. It's good to see you. It's very nice to see everybody getting along so well after question period.
An hon. member: We do get along.
The Chair: To our panellists via video, thank you for joining us today. This is a continuation of the study we are doing on future opportunities with our trading partners Mexico and the United States.
We have already had quite a few presenters come forward to us, and not only stakeholders in Canada, because we've also visited the western states of the United States. Next week we are going to Detroit, Michigan, and then Chicago, Illinois. We'll finish up next week in Washington for a couple of days. We also have plans to go to the midwestern states and our trading partner Mexico in the fall.
We have a very ambitious agenda. It's very important right now, and we're very honoured that you people have come to join us today to do your presentations. My understanding is that we have with us Honda and Toyota.
Mr. Worts, you are kind of the head guy there. The floor is yours. Use whatever time you need. The quicker the better, because then we can have a dialogue with you and continue our afternoon.
Go ahead, sir.
Thank you very much, Mr. Chairman, for the opportunity to address the Standing Committee on International Trade on the proposed reopening of NAFTA.
I am David Worts, executive director of JAMA Canada. Joining me today on the video conference is Hanif Nori from Honda Canada, Stephen Beatty from Toyota Canada, and Scott MacKenzie from Toyota Motor Manufacturing Canada.
JAMA Canada represents the Canadian subsidiaries of Japanese automakers. These include Hino Motors Canada, Honda Canada, Mazda Canada, Mitsubishi Motor Sales of Canada, Nissan Canada, Subaru Canada, Toyota Canada, and Toyota Motor Manufacturing Canada. A variety of light-duty vehicles, engines, and medium-duty trucks are currently being built in Canada by Hino Motors Canada, Honda Canada, and Toyota Motor Manufacturing Canada.
Let me first outline our recommendations for updating NAFTA. JAMA Canada strongly supports the continuation of NAFTA as a trilateral trade agreement, recognizing that three out of every four Japanese-brand sales in Canada are vehicles built in Canada, the U.S., and Mexico. Moreover, the success of NAFTA for the auto industry stems from a single set of rules established through uniform regulations. This has allowed automakers to develop highly integrated supply chains in production facilities across the region, allowing increasing levels of trade in both vehicles and parts to the benefit of all NAFTA countries.
The current NAFTA automotive rules of origin should be retained. To be effective, rules of origin in modern trade agreements should be clear, simple, predictable, flexible, and easily administered. It is also important to recognize that NAFTA automotive rules of origin have the highest regional content thresholds and do not include any country-specific sourcing.
Improvements to modernize NAFTA in the 21st century include the following: update and expand the list of job opportunities for temporary entry of business persons; update customs and trade facilitation provisions, recognizing the integrated nature of the global supply chains in North America and around the world; update border infrastructure with mechanisms to address bottlenecks; create additional framework agreements within NAFTA, including for automated vehicles, data flows, cybersecurity, or other measures that facilitate e-commerce; and increase regulatory co-operation with the flexibility to align with, or have mutual recognition of, such major international standards as UNECE and U.S. FMVSS. Finally, as a general rule we strongly recommend not including any provisions in trade agreements that signatories don't want to use, or have used against them.
JAMA Canada supports such liberalized trade as NAFTA for delivering mutual benefits to trade partners that enhance competitiveness for both automakers and parts suppliers and encourage adoption of advanced technologies to provide safe and sustainable mobility for consumers that meet their transportation needs and provide reliable long-term employment for skilled and highly qualified Canadians. The auto industry in Canada is built on a foundation of open trade, and continues to be highly trade-dependent and deeply integrated in North America.
Looking at the NAFTA region as a whole, Japanese automakers have made significant long-term commitments to localization under the principle of “build where we sell”. Japanese automakers have established a high-quality manufacturing and R and D presence in North America based on the NAFTA framework. The NAFTA framework has made North America a highly integrated and globally competitive region for automotive manufacturing and trade. JAMA and JAMA Canada hope for a framework that will continue to support and strengthen the competitiveness of the North American auto industry.
Let me summarize the impact and benefits that have arisen in Canada from liberalized trade and illustrate the “build where we sell” principle. Since 1965, 15.8 million Japanese-brand vehicles have been sold in Canada. Since 1986, 17.4 million Japanese-brand vehicles have been built in Canada. In the mid-1980s, virtually 100% of our sales were vehicles made in Japan. In 2016, 76% of Japanese-brand vehicles sold in Canada were locally built in North America. About 29% were built in Canada, 36% were built in the U.S., and 11% were built in Mexico.
When the Canada-U.S. FTA came into force in 1989, Japanese-brand light-vehicle production in Canada was a little more than 100,000 units annually. In 1999, five years after NAFTA was implemented, output had climbed to about 500,000 units annually. In 2016, production had doubled to over one million units for the first time.
Needless to say, the investment in growth of production in Canada would not have happened without open access to the much larger U.S. market through preferential trade agreements like the Canada-U.S. FTA and NAFTA. Currently, as a result, over 77,000 direct and indirect jobs have been created in Canada, including jobs in sales, service, distribution, manufacture, and export and import of vehicles and parts.
Let me conclude by saying that while our success in Canada has been based on a foundation of liberalized trade in North America, Canada must also pursue other opportunities to be actively connected to the increasingly interdependent global economy. With the CETA recently completed and the Canada-Korea FTA fully implemented, we look forward to Canada securing a free trade agreement with Japan, whether bilaterally or multilaterally, in the near future.
Thank you. We all look forward to any questions the committee may have.
If I may answer, one of the things we look at the regulatory cooperation initiative under way to look at existing regulations and how they line up. That's one activity, and I think it's a valid one, but it probably isn't the more significant piece of this puzzle.
As we're moving forward, technology is moving very rapidly, particularly in areas like connected vehicle technology and automated vehicles. In that space, certainly, the Toyota point of view would be that there is an opportunity in the context of NAFTA to try to set up a framework agreement so that we create a common set of rules here in North America. That has a couple of benefits. One is that vehicles travel back and forth across borders in North America, but number two, by setting a common set of standards for the North American marketplace, you're going to get vehicles at the lowest possible cost to consumers in ways that make them the most easily manufacturable vehicles here in the region as well.
Both from an industry and a consumer standpoint, I think that putting in that type of framework agreement would be a valuable addition.
Thank you very much, Mr. Chair.
Gentlemen, what you have just been discussing is very interesting, as were the questions my colleague Mr. Hoback asked.
You spoke about new technologies. Regarding self-driving cars, you may know that there is a test track in Blainville, Quebec, just north of my riding. This is where most tests will take place.
Since you represent a Japanese car manufacturer, I would like to know what you think we should take into consideration. You seemed to advise us to consider the possibility of adopting the same standards for the new technologies.
Thank you. That's impressive. From the two of you together, a million cars a year are coming out of Canada. That's pretty good.
That wraps up our time, folks. Thank you for coming and for the presentation. We're going to work hard to continue this great trade relationship with the other countries and, hopefully, expand it. We'll be sending you a copy of our report as we wrap it up.
We're going to suspend now and go in camera. We're only going to be a few minutes, folks, because we have seven items on future business on the agenda.
Thanks again, folks.
[Proceedings continue in camera]