Thank you, Mr. Chairman, and I thank everyone for this opportunity to appear before you today.
In the previous panel you heard the other side of the auto industry, if you will. The CVMA, on the other hand, is a national association, a leading association that represents light- and heavy-duty manufacturers, including Chrysler, Ford, General Motors, and International Truck and Engine Corp. Together, these companies account for over 70% of all domestic vehicle production, 55% of vehicle sales, and in total they support 150,000 Canadian workers and retirees throughout their entire operations.
On the surface, Canada's auto industry looks to be in fairly good shape, especially when one reads news reports about near record levels of new vehicle sales across the country and the significant recent automotive investments in Canada, including those from our member companies. However, under this thin facade is a much different reality. Today we are witnessing what I would call a perfect storm, demarcated by several threats, and one that will make for a wild ride as we go forward.
The rapid acceleration of the Canadian dollar has been one of the largest hits, no doubt. However, this is just one of the many impacts on our industry in Canada that include most recently what I call deep impact regulations, such as the new requirements on fuel economy, unique and inconsistent Canadian regulations, record levels of auto imports from offshore, outdated trade infrastructure, and border backlogs, just to name a few.
In the not too distant past, Canada had a competitive advantage within North America to help attract investment, one being a lower Canadian dollar compared to the U.S. dollar and another being the often repeated labour and health care advantage. However, recent contract negotiations in the United States between our members' parent companies and the UAW have changed part of this dynamic as a result of health care trusts being established to reduce some of that burden, while the rapid acceleration of the Canadian dollar has had a dramatic change on the other.
The rise in the dollar impacts Canadian assembly in several ways. Generally, all inputs into production are calculated in U.S. dollars to create a baseline for comparison of costs between assembly plants in various jurisdictions. The cost of all local inputs increased significantly with the rapid rise of the dollar. These impacts have wide-range inputs, including labour rates, employee benefits, corporate taxes, parts and services, and sourcing, etc.
In light of these realities, I'm here before you today to present an opportunity for Canada to develop and implement an automotive strategy that will help our sector deal with the rapid rise of the Canadian dollar, and the other impacts and, create a position for Canada to be a competitive location of choice for automotive investment.
First is ensuring that we have a globally competitive investment fund and corporate tax regime. The second critical element is supporting auto industry efforts and environmental sustainability. Canada really needs to introduce national vehicle standards, and in particular fuel economy standards, that are in line with the dominant North American standard. Recently in Canada several provinces have publicly stated their desire to adopt their own standards or California standards. These are what I call deep impact standards that have a tremendous impact on our industry.
The third element is creating a smart, efficient, and cooperative regulatory regime with Canada and with our major trading partners.
Expanding critical trade infrastructure and simplifying border processes is the fourth major element of the auto investment strategy. Simply put, it is 27,000 times more difficult and costly from a customs perspective to get 4,500 North American built vehicles into our market than it is to import those vehicles from offshore. This is because, during production of those vehicles in North America, parts and components can cross the border six or seven times, each time with the necessary paperwork and security checks, while imported vehicles simply clear customs by the boatload or 4,500 units at a time.
The last but not least important element of an automotive investment plan for Canada is opening foreign markets through free and fair trade agreements. Canada's auto industry, and Canada, as a result, has benefited greatly from free and fair trade, especially with our NAFTA partners. However, implementing trade agreements that create unbalanced, one-way trade in vehicles without reciprocal access would undermine all other aspects of an automotive investment strategy if they were implemented.
Canada is currently negotiating a free trade agreement with South Korea that would result in continued one-way trade in automobiles and no broader economic benefits for Canadians. In most cases, products can be built anywhere within corporate global enterprise and sold in markets around the world. If Canadian manufacturers simply cannot access foreign markets, then production mandates will be placed in other jurisdictions.
In summary, I cannot stress enough the difficult situation our member companies in the OEM parts sector are now facing within Canada. The rapid rise in the Canadian dollar is just the latest strike against our industry in which 570,000 Canadians are directly and indirectly employed.
We urge the government to immediately develop and implement an automotive strategy to help restore a competitive advantage to investing in Canada's critical automotive industry.
Thank you, Mr. Chairman.