Mr. Chairman, committee members, on behalf of the 16 members of the AIAMC, thank you for the opportunity to appear before the committee today. My name is David Adams, and I'm the president of the Association of International Automobile Manufacturers of Canada.
My intent would be to highlight how our three recommendations feed into the four primary areas highlighted by the committee, to be addressed by stakeholders. Specifically, the committee was interested in hearing recommendations with respect to how to achieve a sustained economic recovery in Canada, how to create quality sustainable jobs, how to ensure relatively low rates of taxation, and how to achieve a balanced budget.
Before I do that, allow me to give you just a few highlights that suggest that, much like other sectors, the auto industry is essentially treading water. Through the end of the third quarter, vehicle sales in Canada were ahead marginally, being 1.5% better than last year, at 1.22 million. Vehicle production in Canada has gone in the opposite direction, being down marginally 1.1%, to 1.56 million.
With the economic and political challenges of the United States, along with the daily news about the increasingly challenging sovereign debt crisis in Europe, it is not surprising that the Conference Board of Canada reports that consumer confidence has dropped 17.5 points from its high point this year in February to 71.8 in October. This is the lowest level of consumer confidence since right in the middle of the recession in May 2009.
Low levels of consumer confidence do not bode well for major purchases, especially discretionary major purchases, which new vehicles often are. While in relatively better economic shape, Canada is not immune to the spillover effects of negative economic events elsewhere, and this has prompted the Governor of the Bank of Canada to lower Canada's GDP growth expectations for both this year and next year. This has also moved the finance minister to recently announce that he is flexible with respect to considering additional stimulus measures, if required.
In that vein, and to address the issues of achieving sustained economic recovery in Canada, as well as ensuring relatively low levels of taxation, our first recommendation is to unilaterally reduce Canada's 6.1% tariff on imported light-duty vehicles down to the 2.5% level of that of our major trading partner, which addresses both issues. A tariff is essentially a tax, which the consumer ultimately pays. Imposing a tariff on imported vehicles at a level that is two and a half times greater than that of the United States is without any justification, and is at odds with the integrated nature of the automotive industry overall in North America and with the increasing trend to harmonize vehicle safety and emissions standards with the United States.
The Canadian Council of Chief Executives has also called for bilateral harmonization of external tariffs, as has the Japan Automobile Manufacturers Association. Further, I believe my colleagues at the Retail Council of Canada have been active in seeking tariff elimination on a myriad of products, in part to stimulate consumer demand and in part to address the price discrepancy of similar goods in Canada and the United States. Many of the advanced technology vehicles being developed for sale in North America to meet stringent new greenhouse gas emissions standards will have to be imported, and a higher Canadian tariff limits access and impacts affordability.
Does it really make sense for one level of government to be offering rebates on certain advanced technology vehicles of $8,500 while another level of government imposes a higher level of tariff that would make a $40,000 vehicle cost almost $1,450 more in Canada than in the U.S.?
With respect to our second recommendation, which is to eliminate the $100 excise tax on air conditioning, this tax has been around since the 1970s, when air conditioning was considered a luxury. This is no longer the case, and virtually all vehicles are equipped with air conditioning. This is a pure tax grab.
Finally, the Canadian Automotive Repair and Service Council, which involves all sectors of the automotive industry, was at the forefront of the development of sector councils in the late 1980s, when it was apparent that vehicle technology was drastically changing the skill set of automotive technicians from a mechanical skill set to more of an electronic and diagnostic skill set. We support the strategic and operational review the government is undertaking to ensure value for money. However, with over a hundred new technologies being introduced on vehicles to address stringent greenhouse gas regulations, we are now at another technological fork in the road where skills identification and training have never been more important.