Good morning, Mr. Chair and members of the committee.
Thank you for inviting me here to speak on behalf of Canada's 90,000 manufacturers and exporters, and our association's 2,500 direct members, to discuss Canada's relationship with the United States.
CME is Canada's largest industry and trade association, with offices in every province, and is the chair of the Canadian Manufacturing Coalition, which represents roughly 55 sectoral manufacturing associations. More than 85% of our members are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Manufacturing is the single largest business sector in Canada. In 2016, manufacturing sales surpassed $600 billion for the third consecutive year, directly accounting for 11% of Canada's total economic output, while directly employing over 1.7 million Canadians in highly productive, value-added, high-paying jobs. With the base in the NAFTA region, manufacturers are also directly responsible for the majority of Canada's exports. In 2015 and 2016, manufactured goods reached nearly $350 billion in exports, an all-time high, accounting for almost 70% of all Canadian exports. Nearly 75% of those exports go directly to the United States.
Much of this trade is due to the deep integration of manufacturing operations across the NAFTA region, and in particular between Canada and the United States. This integration has created a unique relationship for our countries globally. We do not simply trade goods with each other—we build things together, innovate together, and compete with the world together.
Canada's relationship with the U.S., in most ways, is a model upon which all relationships, especially trade relationships, can be judged. It has helped increase the standard of living of all participants. It has strengthened industry by combining the talents and expertise of both markets, creating bigger markets at home and strengthening our combined competitiveness globally. No other relationship that Canada has can compare to the historical, current, or future importance of this one for our economy and our citizens.
Securing and expanding this relationship must remain the single most important priority for Canada in dealing with the new administration. While there are many uncertainties in this regard moving forward—not the least of which are potential border taxes, increased protectionism such as Buy American, and NAFTA renegotiation—we also believe that there is great opportunity for Canada and for Canadian industry, if it is efficiently handled.
Since the signing of NAFTA nearly 25 years ago, the business world has changed dramatically. NAFTA itself created much more competitive and global industries and spawned almost unimaginable levels of integration and flows of people, services, and goods across our borders. China rose from almost nothing to an industrial powerhouse competing for customers, investment, and market share against Canadian and U.S. companies. New technologies have emerged that have reshaped the way we live and work. Almost none of this was contemplated when NAFTA was signed.
These changing realities are why CME has been working constructively with the federal government for years on avenues to improve that framework. Efforts like the border action plans of the 2000s and the Regulatory Cooperation Council and the Beyond the Border agreements of the 2010s were aimed directly at improving our common manufacturing platform, because modernization of the trade relationship between Canada and the U.S. was not an option.
Now that opening the agreement is a political reality, we should look for ways to cement improvements that support the economic base of NAFTA. To help prioritize this, the CME is surveying its members to identify priorities for modernization and improvement of the Canada-U.S. relationship. While our survey is ongoing, I am pleased to share with you an overview of the responses as they currently stand.
As a starting point, the overwhelming priority for Canadian industry is to maintain market access and uninterrupted supply chains with the U.S. While companies want improvements, they are also very concerned about a renegotiation that may lead to worse economic outcome through more restrictions, barriers, and protectionism on imports and exports of people, goods, and services.
On specific measures for improvement in the relationship, the priorities mainly stem from the deep level of integration and the volume and value of the trade. Improved customs processes to speed up border transactions and eliminating uncertainty through reduced red tape for both people and goods rank as the top priority. Following that, companies are looking to maintain effective dispute resolution processes, improve regulatory co-operation and alignment, and take much stronger coordinated trade action on the dumping of goods from other markets.
Many of these priorities are already included in the existing Canada-European Union economic and trade agreement framework and were being negotiated as part of the TPP. We believe they could create a framework for modernization of our trade relationship with the U.S.
At the same time, the relationship between Canada and the United States is fundamentally different from those represented by other trade agreements. We believe that if Canada can come to an agreement on these priority areas with other, largely new trading partners, we should be looking to go beyond the commitments with our NAFTA partners, and especially the U.S.—for example, expanding the RCC to implement a mutual recognition agreement on regulations or strengthened perimeter coordination of trade rules, such as illegal dumping.
In summary and conclusion, our economic relationship with the U.S. is paramount, and we must work aggressively to strengthen and grow integration while there is an opportunity. We don't simply trade goods with the U.S., but rather we build goods together and compete with the world together. And while there are significant uncertainties and concerns, we believe that with the right approach our integrated economies can be strengthened and increase global competitiveness to drive job creation and economic growth at home.
Thank you again for inviting me here today. I look forward to the discussion.