I'll give that a go. Thank you very much, and again I apologize. My flights were cancelled because of the ice storm here. I would very much prefer to be there in person today.
I think the CAW's organization is well known. We're the largest private sector trade union in Canada. We represent about 265,000 members in a wide range of different sectors, including the auto industry, but other sectors as well.
Our criticisms of the proposed free trade agreement, I think, are well known as well. We have argued that the current state of trade between Canada and Korea is very unbalanced, a one-way pattern of trade, and that will only be exaggerated by a free trade agreement. The deficit is likely to get larger, especially in the higher-value manufactured goods, which we tend to buy from Korea. And we have predicted that will impose serious damage on a range of high-value-added manufacturing industries in Canada. And it's not just the auto industry. I know we have the auto industry representatives here today, but it's important to recognize that a wide range of industrial sectors will be hit by this, including computers, electronics, machinery, metal products, plastic and rubber products. These are likely the most at risk.
We have prepared and distributed to the committee a study that estimates that if the experience of free trade with Korea matches the average experience that Canada has had with the other five free trade partners that we have today--that being the United States, Mexico, Israel, Chile, and Costa Rica--we'll likely be looking at about 33,000 net job losses in Canada.
More recently, we have disaggregated those job loss estimates across the different regions of Canada. Ontario and Quebec, not surprisingly, lose the most jobs. Over 17,000 jobs were lost in Ontario and over 8,000 were lost in Quebec. But the interesting thing is that in every region of Canada the net employment impact is negative; that is, nowhere are the modest jobs created in agriculture and mining because of the free trade agreement enough to offset the larger job losses in manufacturing.
For today's discussion, I'd like to focus on presenting our views on a couple of more recent issues related to this free trade agreement. First, the Department of Foreign Affairs itself has finally released an economic study with an assessment of the economy-wide effects of the proposed free trade agreement. Secondly, DFAIT has also invited reaction to its draft environmental assessment of the FTA. I think both of these documents have very important implications regarding the government's approach to negotiations with Korea that I'd like to bring to your attention.
I'll start with the economic study first. Initially, I have to make a point. It's surprising that it's only now, after some 14 rounds of negotiations with the Koreans and a clearer, concerted push by the government to reach agreement, that the government has actually performed an economy-wide study of the impacts of the free trade agreement. That strikes me very much like the tail wagging the dog. This economic study was prepared as part of the environmental assessment process. I think we should have had a very careful economic study of the economy-wide impacts of the FTA before we even entered negotiations with Korea to make sure that we had a chance to generate net benefits that were worth the risks and costs.
I do want to talk, just briefly, about the methodology of the government's study. It belongs to a type of economic model called the computable general equilibrium model, a very controversial approach in economics. Some of the assumptions that are built into the model include the assumption of sole employment; the assumption that workers are paid the same wage in every industry; the assumption that the whole country consists of one representative household that shares all the income from different industries equally, so there's no income distribution problem; the assumption that Canadians are inherently loyal to domestic-made varieties of different products; the assumption that Korean consumers will behave as aggressively in response to tariff reduction as Canadian consumers do; and other economic assumptions that are very unrealistic.
We've described and critiqued those assumptions in detail in a letter to Mr. Hildebrand, the chief goods negotiator with the Department of Foreign Affairs, which we'd be happy to share with anyone who wants to see the details.
There are some particularly outrageous assumptions that the modellers made in regard to the auto industry. In particular is one crucial but very unfounded assumption. The modellers have assumed that 65% of Hyundai and Kia's automotive production that is destined for Canadian markets will migrate, within the period covered by the free trade agreement, to assembly plants that the company is building in the United States. And the implications of that are, since Hyundai and Kia, in theory, are going to be supplying Canada from the U.S., which we have a free trade agreement with, of course, that the impact of the free trade agreement with Korea on the auto industry will be very mild.
This assumption is very wrong. The 65% assumption is based on an analogy to the experience of Japanese automakers, who in some cases, not all, have located a lot of their production in North America. But Japan had a very different economic situation. It had much higher labour costs than Korea, and it was trying to avoid trade barriers that the Americans were putting in place. Also, Japanese companies are much larger scale than the Korean ones are, and that allows them to produce more vehicles in North America while still offering the full range of vehicles for sale.
We have heard this argument from government negotiators informally many times, but this is the first time we've seen this assumption in written form, and we're very worried about the implications. If federal negotiators wrongly believe that 65% of production from Hyundai and Kia is going to move to North America anyway, that could contribute to an enormous strategic mistake in their negotiations with the Koreans. The implication is that the free trade agreement won't really impact the auto industry, because it's all coming to North America anyway, and if negotiators wrongly believe that concessions they make in the auto talks aren't that important, then they won't get full value for those at the bargaining table.
We could go into more detail on the questions about the model's unrealistic assumptions, and also about its results, because even with those unrealistic assumptions, the model itself presents a very underwhelming case of the benefits of the free trade agreement. They expect an increase in Canadian GDP from the free trade agreement of 0.1% spread out over a period of several years--probably 10 years--so it's an infinitesimal effect on our economy that would be impossible to measure, and under alternative assumptions it's possible it would be a negative impact rather than a positive impact.
Let me take just a minute, Mr. Chair, on the environmental assessment report, which DFAIT also invited comment on. In our view, that report is also very flawed. The environmental assessment totally excludes at least two very important aspects of the environmental impact of our trade with Korea. First of all, it excludes the environmental impact of Korean use of expanded quantities of Canadian resources, including energy resources like coal, which we will be shipping to Korea in increased volumes after a free trade agreement, and this is absolutely wrong. For example, in Korea today there is a gigantic coal-fired power plant, the Poryong coal plant, and it is the second-largest source of coal-fired CO2 emissions in the world. We will be supplying more coal to Korea, to that plant and other facilities, after a free trade agreement, and we can't ignore the environmental implications of that simply because the plant is in Korea.
Secondly, the study also ignores the emissions resulting from the shipping of goods back and forth between Korea and Canada after a free trade agreement, so we're very unsatisfied with that environmental assessment, as well as with the economic model. Our advice would be for the government to stop the negotiations with Korea, go back and conduct a genuine, more realistic, sector-by-sector economic analysis of the free trade agreement to identify exactly where some possible benefits will come from, and conduct a proper environmental assessment at the same time.
I'll leave those as my opening remarks, Mr. Chair. Thank you very much again for your flexibility, and I look forward to the questions.