Evidence of meeting #40 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 honey.
A recording is available from Parliament.
12:15 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Thank you, Mr. Chairman.
I thank both witnesses for being here today.
Mr. Loo, I wanted to address a few questions to you. Judging by your testimony, it seems to me that the service you received from the Canadian embassy and consulates in terms of assisting you with market development or business assistance in Japan was, to put it charitably, below expectations. Would you agree with that?
12:15 p.m.
As an Individual
Certainly the first phone call I made to the embassy in Tokyo was unhelpful, and probably more than that, even discouraging. The consul and the people who are working in the field in the small offices have been excellent. They have been really good to work with. As for the embassy itself, I've been there probably four times, and I must say that I never came away with a warm feeling.
12:15 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
For the second call, I believe your words were that it was just as confusing, but more polite.
12:15 p.m.
As an Individual
Yes, much more polite. He was confused, too, because he wasn't used to just a farmer phoning up wanting to sell something on a blank sheet of paper—I wanted to find out what the market wanted and grow it. I've been growing stuff for years and waiting for the phone to ring, so now I want the phone to ring first.
The staff in Charlottetown at the agriculture office have been great, the federal guys, and certainly the regional people in Japan have been great. The embassy.... It's just that I think I'm too small for them to feel that they can work with me.
12:20 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Well, I wanted to commend you on your initiative, your diligence, and your entrepreneurial spirit. I think that really speaks well of you. I'm glad you succeeded. I think there might be a lesson here for us—to bolster our assistance to Canadian businesses of all types.
Sir, I'd like to say that you're not too small. You're exactly the kind of person that we want developing business in other jurisdictions.
I want to turn to Mr. Nantais. Is it fair to say that your organization does not favour a free trade deal or an economic cooperation agreement with Japan at this time?
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
Well, it's fair to the extent that, for all the reasons I've mentioned, it would be very difficult to proceed on that basis.
12:20 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
If we did sign one, has your organization done any kind of rough projections as to what effect that would have on domestic production of Canadian vehicles and jobs in this country?
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
We have done some work—limited work, I might add—in terms of what it would mean as a cost advantage, for instance, on vehicles imported from Japan. It would be in the range of roughly $1,300 per vehicle. And that, particularly in the small market segment, would be something that would really be very difficult to compete with.
When you look at the trade numbers as they presently exist, roughly 200,000 vehicles now come into Canada from Japan each year, and that's with the 6.1% tariff. So we would suggest that the tariff is not an impediment to bringing vehicles into Canada.
On top of that, the two Japanese makers who produce in Canada actually produce numbers such that the percentages are essentially...what they build in Canada, they sell in Canada or North America. That's primarily the reason why they came here.
For the moment, that's kind of where we're at on that particular issue.
12:20 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
What I'm trying to get a handle on is that if you're concerned about this deal, it must be because you think there will be negative effects on your members. I'm trying to get a handle on what specifically you think would be those negative effects with respect to your industry.
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
Of course any vehicles that are sold from elsewhere are vehicles that are displaced sales, if you will, for the domestic industry. That includes the other manufacturers that build here as well.
From that standpoint, there's potential negative impact. As I said, the Canadian market is already the most open market in the world. While there may be other sectors that take a very offensive approach to this, we're suggesting that the same opportunities may not exist, and may actually be detrimental to our industry here. When we have lost sales, then that potentially could actually impact the assembly of vehicles in Canada and the number of vehicles we actually produce, which would have a longer-term impact in terms of employment.
12:20 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Okay.
I met yesterday with some representatives from General Motors in Canada. They mentioned two specific non-tariff barriers. If I have them right, one was the preferential handling process, PHP, and the second one was something called TDS—I'm sorry, I didn't get that acronym.
Do you share their perspective that these are non-tariff barriers?
12:20 p.m.
NDP
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
I have a brief description with me, which I can leave with you, if you like.
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
There is full agreement that those represent non-tariff barriers to trade. Those acronyms relate to the different programs for certifying vehicles. They become, depending on which way you look at it, either progressively more stringent or progressively less stringent and flexible.
Nonetheless, those are certification regimes that represent a unique requirement for Japan, and therefore represent a non-tariff barrier. There is absolute agreement on that, yes.
12:20 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
If the 6.1% tariff currently in place on Japanese-produced vehicles is removed, do you see any possibility that this will result in greater production of vehicles in Japan to be exported here?
12:20 p.m.
President, Canadian Vehicle Manufacturers' Association
Japan is in an interesting state—the industry is in an interesting state—as we speak. Right now their overall market is trending downward. They have a considerable amount of overcapacity, and therefore the government feels, I think, compelled to continue with its slate of policies and the policy environment that it has developed in a manner that is trying to retain that production there.
I don't think the removal of the tariff is going to result in any new production from Japan—or elsewhere, for that matter—into Canada. I think the companies that are here are producing some significant volumes. I think they will continue, however, to import a good number of vehicles that perhaps they feel aren't...that they'd rather have in production in Japan as opposed to here.
So I don't see a movement back to Japan, but I do see a continuation of trying to preserve what they have and keep importing or exporting vehicles, as the case may be, to elsewhere, given the overcapacity situation that does exist.
12:25 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Just quickly, Mr. Nantais, I want to ask about R and D support for your industry. Are there any policies the federal government could adopt that would help your industry to be more competitive? I'm thinking more of supporting R and D or any other kinds of policies that you would find helpful for your members.
12:25 p.m.
President, Canadian Vehicle Manufacturers' Association
Absolutely there are. The Government of Canada made some very difficult decisions through the recessionary period that were very beneficial to Canada's auto industry, not just the two companies that received support but generally speaking overall.
There were times where there were investments.... The automotive innovation fund, for instance, was an investment fund to help attract new investment into Canada. That's something we need to continue. We need to replenish that program or create a new program, because the reality is that every economy out there generally has or wants an automotive industry, and they go to great lengths to expand it with a policy regime or new investment incentives to make sure it happens.
Mexico has done a tremendous job. The State of Tennessee has done a tremendous job, where there's one-window access to all government programs. They clear out all the red tape, but they also put a broad range of incentives on the table. If we want to compete with those jurisdictions, we need to have some programs that are at least comparable, that keep us in a position that the decision-makers, wherever they may be—Detroit, Stuttgart, or Japan—see this as a viable place to either create new investment or expand what we have.
We have 18 new investment decisions coming. Six of those have to be over the next three years, so the decision time for new investment is now. There is a great number of things that both the federal government and the Province of Ontario can do—because most of that industry resides in Ontario—in a coordinated fashion that could contribute to a very positive business case for new investment.
12:25 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
Thank you, Mr. Chairman.
Welcome to our witnesses.
I'm sharing my time with Mr. Holder so I'll try to be fairly brief here. But I do want to say to Mr. Loo, welcome. It was an interesting discussion and it's great to see Wayne finally bring us an interesting witness. It really is. You have to give him a little twist every once in awhile. When we started talking about the translation, we usually have to translate for Wayne and sometimes for myself, from the east coast, but I think you were okay.
You found a market niche. That's really what happened here. You developed that market niche yourself. I appreciate some of the difficulties you say you've incurred, but I do have to say, in defence of embassy staff and our trade commissioners, that I have found these folks to be some of the best people in the world to deal with. They're extremely helpful 99.9% of the time, though I'm sure there can be some hitches in that.
But what I'm seeing from your success story is that you found your market, you realized Japan has some unique requirements and you met those, specifically pesticide and GMO testing. If you have to do it in Japan, it's the cost of doing business, so you have to work that into your profit margins and you found a way to do it.
Is it more than phytosanitary restrictions, or are there some other regulatory issues there?
12:25 p.m.
As an Individual
No. I don't want to be too hard on the embassy staff. The individuals and certainly the trade officers scattered around Japan have been great. It's only that it was discouraging at first.
The biggest issue was that we did get caught one time with a residue. It was allowable but it was something we didn't know about—it was simply a seed treatment on the canola—and it showed up the next year in the seed. We had to explain that one, but we could and we carried on.
Some of the issues I found were issues around the way business is done in Japan. It is very different from the way business is done here, and you have an awful lot of information going back and forth all the time, flow charts, all that kind of stuff. It was a pretty steep learning curve for me, and it was quite a job convincing all the other farmers to keep all the proper paperwork and all that stuff that goes along with it.
I'm not sure. I can't blame government for this one. It's really hard to get farmers together for meetings. It's really hard to get people in to try to.... Certainly most of the farmers in P.E.I. that I'm dealing with, before we started this, had no idea of the kinds of things you have to do to take a product directly to market, particularly in Japan.
I was in Dubai a couple of years ago. I was invited over there to try to sell some potatoes. In the process, the guy found out we were selling jam in Japan, and he said that if we could sell it in Japan he was interested in buying it there too, because they use that as being such a tough and picky market as far as labelling and all that sort of stuff goes.
What I do and have done in the past, when I don't know who to contact, is to phone one of my people who work at the Department of Agriculture to get him or her to track down who I should be talking to, because it is a bit hard to track down who you need to talk with sometimes to find out about importing, what the tariff might be on something we're trying to bring in. And if there are tariffs, we have to find out what's shipping out and how to have all the proper paperwork done.
It's working. As I say, at the trade shows and so on, sometimes the really big companies have staff and knowledge that the little fellows don't have. We don't necessarily know the proper way to do it.
