Thank you, Mr. Chairman, for the opportunity to address the committee. I am pleased to be here providing our comments concerning issues under consideration by your committee.
My name is Eve Grenier. I am president of the Apparel Manufacturers Institute of Quebec and I'm also vice-president of the Canadian Apparel Federation.
This morning I am representing Mr. Lifson, president of the Canadian Apparel Federation, as he has been held back in Montreal for medical reasons. I can assure you that he would have loved to be here this morning.
On the personal side, I am responsible for the management of our family business. We have been making ladies undergarments in the Montreal area for four generations, since before Confederation. We have about 200 employees and two plants. Right now, we are not importing any finished products. Our activities are totally integrated from design to manufacturing to delivery.
With me is Bob Kirke, Executive Director of our Federation. If you have very specific questions to ask, he will help me answer them.
The Canadian Apparel Federation represents over 600 Canadian companies involved in the manufacture of apparel in Canada. The Canadian Apparel Federation is made up of provincial associations. We have one association per province. Of course, the largest of these is the Apparel Manufacturers Institute of Quebec, of which I'm president.
I will integrate my remarks regarding.... In fact, what is happening in our sector in Quebec is the same as what is happening in the other provinces. There is not much difference in the challenges our industry faces, regardless of which province they are located in. However, the province of Quebec is the largest employer and the largest producer of garments in Canada. We represent more than half of the production.
The Canadian apparel industry as a whole directly employs approximately 70,000 people, with, as I said, the largest concentration of companies and workers in the Montreal area. In fact, you might be surprised to know that Montreal is probably the second largest manufacturing centre for garments in North America, the first one being Los Angeles, and New York having lost some ground in recent years. In the province of Quebec we used to employ approximately 40,000 people directly in our industry. Sadly, this number is melting as we speak, as companies are either closing or changing the way they do business by not manufacturing any more but moving into import and distribution. Of course, there are a lot of challenges that face our industry as we try to protect the jobs in our province and in our country.
The apparel industry requires various kinds of workers, from those who are relatively low-skilled and work with low technology to those who work in highly advanced engineering and software development.
We have made available to the clerk of the committee copies of Export Wise magazine, which is produced by Export Development Canada. In this issue, our industry is featured in the cover story. So for your bedtime reading you might find some very interesting information.
As this article illustrates, many Canadian companies have become market leaders and successful exporters over the past decade, making major inroads into the U.S. market in particular. In fact, when you look at the figures, you see that, sadly, we have lost our domestic customers. Many years ago when this trend started, when the major retailers started to import, started to have their own importing design departments--and thanks to ALENA--we woke up and took this wonderful opportunity to go into the U.S. market.
Right now, the value of production of garments in Canada is approximately $6 billion. Exports are worth approximately $2 billion. Those figures have been decreasing in the last years; however, they have to take into account the change in the value of our currency compared to that of our U.S. partner. On average, 40% of a manufacturer's production goes to the U.S. This is the picture of our industry.
We find that we have been successful. We find that we have been able to open up new markets, which is not an easy task when you go into the biggest market of the world, which is viewed by everyone as a street paved with gold. We have a lot of competitors in that market. Notwithstanding the fact that our major domestic retailers went to imports, we survived, thanks to our exporting business.
In recent years--in the two last years, I would say--Canada first abolished all duties and import quotas on apparel coming from least developed countries--the LDCs, we call them. Then it abolished import quotas from all countries.
In doing so, Canada ended a 40-year program of import controls that provided a measure of protection for domestic apparel manufacturers. It should be noted that the quota system in place until the end of 2004 not only protected Canada's industry; it actually fostered the development of the apparel manufacturing industry in countries throughout the developing world. Because exports from key suppliers such as China and India were capped by import quotas, other countries were able to develop export-led apparel industries to supply the markets of Europe and North America. With the end of quotas, we are now seeing substantial adjustments throughout the world, as production that was established in certain countries in Asia, Africa, and Latin America migrates to larger, more efficient producers, especially China. The effects are, of course, being felt in Canada. It is in this context that we view the issue before this committee.
First, as to globalization, the clothing industry is one of the truly global manufacturing industries. Clothing is made in virtually all countries, and in developing countries it is seen as a key strategic industry, so moneys are being invested by their governments into this key strategic industry.
Unfortunately, the reality is that it is now also an industry with massive overcapacity on a global basis, which means that we have more and more competition as outside manufacturers are getting into our domestic market and to our primary customer, the U.S.A. It is not only that; the price issue is also of the utmost importance.
So you have numbers and you have price. Mind you, I can assure you that our members understand globalization, because they know they are competing with manufacturers based all over the world who are keenly interested in our domestic market and our major export market.
First was globalization. Second is the Canadian dollar. All the members here know that our currency has increased its value, but I don't think you realize the percentage it has increased and the way it affects what I should call the bottom line of Canadian manufacturers. The issue of the appreciation of the Canadian dollar is extremely important for this industry. I told you that our major customer is the U.S. We are not as present as we used to be with our domestic manufacturing. The rise in the Canadian dollar has dramatically reduced the value of our exports and made it more difficult to compete.
In 2002, Canadian apparel exports, primarily to the U.S., were approximately at $3 billion. Export of clothing declined steadily from 2003. This decline, as I said, largely corresponds to the appreciation of the Canadian dollar. If you take a look at the Bank of Canada average rate from 2002 to 2005, we were at 1.57 in 2002; we are now at 1.14 in 2006. It was 1.3015 in 2004 and 1.2117 in 2005.
This increase in the value of the Canadian dollar is taken right out of the bottom line. There is no way you can tell a U.S. customer who doesn't even know the Canadian dollar exists that you have to increase your price this year by 13%, next year by 7%, and that the year before you should have done it by 17%. This money is coming out of the manufacturing process. It is coming out of the bottom line.
These are the margins of profitability, and the small margins we have are gone. This is the most important challenge for the manufacturing of garments as of now. The speed of the increase is such that you cannot, in a few months, come out with new collections, new products, new ways of doing business. It is too fast.
I know the Canadian government will tell me there is nothing they can do, but I think it is important that you see the bigger picture.