Evidence of meeting #36 for International Trade in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Andrew Casey  Vice-President, Public Affairs and International Trade, Forest Products Association of Canada
  • Bob Kirke  Executive Director, Canadian Apparel Federation
  • David Worts  Executive Director, Japan Automobile Manufacturers Association of Canada
  • Kathleen Sullivan  Executive Director, Canadian Agri-Food Trade Alliance

12:30 p.m.

Executive Director, Canadian Agri-Food Trade Alliance

Kathleen Sullivan

CAFTA doesn't take a position on the rail service review, partly because it's a domestic issue and also because not all of my members' products would be transported by rail primarily. Certainly, as you know, a lot of our members, particularly on the grain side, would have significant concerns about rail service in Canada. As we are opening up more markets in Asia, those concerns are likely to grow rather than fade away. There's not much I can say on the review itself because we don't engage ourselves in that, but certainly rail service is a concern on the grain and oil seeds side.

12:30 p.m.

Liberal

Wayne Easter Malpeque, PE

You talked about the TPP and about how it should certainly be given priority. It isn't a sure thing, as I understand it, that Japan will be a part of that package necessarily. Does that change the position any?

12:30 p.m.

Executive Director, Canadian Agri-Food Trade Alliance

Kathleen Sullivan

It doesn't really. There are some additional export opportunities within the family of current TPP countries, albeit they're probably not hugely significant. Vietnam might be a good opportunity for some growth, but a lot of the TPP countries compete with us as it is.

From an agriculture standpoint, I think the real value of joining the TPP is the possibility of future growth if other countries are added in. But to me the real opportunity here is the possibility of being part of what I would call a regional supply chain. You have a group of countries dealing with SPS issues, minimum residue level issues, and rules of origin on a regional basis. That's really where, from an agriculture standpoint, you start to see some real advantages.

Really, half the problem for agriculture when it comes to trade is non-tariff barriers. Now, to the extent we deal with them, some are through the WTO or other international bodies, but a lot are on a bilateral basis, and you get a patchwork approach. If you can get an organization like the TPP that maybe then grows into a broader APEC initiative that starts to look at issues such as low-level presence of genetically modified material, for example—and you can do that on a regional basis—you can then really start to get to that rules-based trading system you were talking about with the earlier panel. I think, from an agriculture standpoint, there's a huge possibility here.

12:30 p.m.

Conservative

The Chair Rob Merrifield

Time is up, but I want to thank you for the questions.

We'll move to Mr. Shory, and Mr. Dechert.

Mr. Easter, I'll help you with the rail freight service review.

12:30 p.m.

Conservative

Devinder Shory Calgary Northeast, AB

Thank you, Mr. Chair. I'll be splitting my time with Mr. Dechert.

Thank you, witnesses, for being here.

Mr. Worts, you mentioned that there have not been any layoffs in the plants in North America. How many plants and workers are there in Canada presently?

12:30 p.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

In the vehicle plants there are about 11,000, and there are about 15,000 in over 50 auto-related operations in Canada. Therefore, there are about 26,000 on the manufacturing side.

12:30 p.m.

Conservative

Devinder Shory Calgary Northeast, AB

If this agreement were implemented, do you think the elimination of tariffs would help you to expand your business, expand your manufacturing plants here, which would obviously create more jobs in Canada?

12:30 p.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

As I mentioned earlier, the 6.1% tariff in terms of the costs that the Japanese automakers are facing is not that significant in terms of their production. It's more on the market side that we're looking at the impact of the 6.1% tariff.

In a sense, there are two industries in Canada; it's kind of bifurcated. The production side is largely export based. Even our operations in Canada would not be the size they are without access to the larger U.S. market. While we keep a lot more of the production here in Canada because we build small vehicles that Canadians prefer, the U.S. market is still a critical part of that.

During the recession when the U.S. market took a big dive, the production side was the biggest side of the industry that was hurt in Canada. It wasn't so much the market, but that the production plants were seriously affected by that. Then with the tsunami and other disasters last year, our production was down about 50%, I think, through a number of months before the supply chain started to get repaired.

We're supporting the trade deal for the benefits that would come obviously from lower tariffs, but we think there are also opportunities for many other sectors that we think would be beneficial for both countries.

12:35 p.m.

Conservative

Devinder Shory Calgary Northeast, AB

It was suggested earlier that North American companies, for some reason, are not successful in Japan's market.

The elimination of tariffs, once the agreement with Japan was signed and implemented, I believe would open the market, or it would work as a gateway to some other Asian countries. Would that not give an opportunity to these manufacturers, if they work toward that, to have a platform to get into other markets as well?

12:35 p.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

Absolutely.

There are no tariffs into the Japanese automobile market, either on the vehicle side or the parts side. We have seen some Canadian investment in Japan to connect with Japanese, either major suppliers or OEMs, not just for business in Japan, but for business in other global markets.

To the extent that we re-engage with Japan, I think will have synergies that will impact the industry as well.

12:35 p.m.

Conservative

The Chair Rob Merrifield

Thank you.

Mr. Dechert.

12:35 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Thank you, Mr. Chair.

Thank you very much, Ms. Sullivan, and Mr. Worts, for sharing your important information with us today.

Mr. Worts, I come from Mississauga, which is where the headquarters of a couple of Japanese auto manufacturers in Canada are located. A lot of the auto parts that are used in those plants are manufactured in the Mississauga area and the greater Toronto area. It's a very important part of our economy.

You mentioned in your opening remarks that Japan is a challenging market for domestic Canadian and U.S. auto manufacturers, and that Canada and U.S. manufacturers do best in the larger engine vehicle markets.

I was wondering if you could tell us what the Japanese consumer is looking for in autos. How could Canadian and U.S. domestic auto manufacturers better access the Japanese consumer market for autos?

12:35 p.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

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.

12:40 p.m.

Conservative

The Chair Rob Merrifield

Thank you very much for that answer.

We'll go now to Madame Papillon.

The floor is yours.

May 10th, 2012 / 12:40 p.m.

NDP

Annick Papillon Québec, QC

First off, Ms. Sullivan, I would like to thank you for being here.

I would like to know whether you did any research on the impact of this agreement in Japan or in Canada.