Merci beaucoup. Bonne après midi.
I'm here this afternoon to represent Canadian Manufacturers & Exporters. We're Canada's leading trade and industry association. I'll talk a little about the state of manufacturing and exporting right now in Canada, and then I'll talk about some of the challenges, opportunities, and priorities as they relate to this free trade agreement that's being negotiated with Korea.
The sector we represent is quite significant in Canada, as 16% of Canada's GDP relies on manufacturing and 21% relies on exports. It's the most significant economic sector in Canada. What's also important about manufacturing is that every dollar of output generates $3.05 in total economic activity. You tend to see that when there's a plant closure in a small remote community. Usually that community faces serious economic hardship.
We're a sector that does business in pretty much every country in the world, exporting our products to nearly 200 countries. We account for approximately two-thirds of Canada's goods and services exports. So trade policy is definitely an issue that matters to our members.
As you are well aware, manufacturing and exporting companies in Canada are facing tremendous pressures right now trying to adapt to the high value of the Canadian dollar. The dollar is currently trading at about 99¢ U.S. That's a 60% appreciation in about five years. Just from the beginning of the year we're talking about a 16% increase. That's propelled by a number of factors that are included in my presentation.
You have to understand that right now it's very difficult for manufacturers to make any profit. On the one hand they're faced with this rapid appreciation of the dollar, and it's very hard for them to increase their prices because of competition. In fact, if you look at the statistics, export prices have increased by only 4% over the past five years. So basically manufacturers have taken a hit with the increase in the dollar. For example, if they sold a product to the U.S. that was worth $100 U.S. five years ago, they made $160 Canadian. Now they're making $99. So that's a huge hit, and most of it has been felt by manufacturers.
On the other hand, there's what we call the cost squeeze. The cost of inputs, whether it's raw materials, inputs, or energy, has increased quite significantly over the past few years. We're seeing a lot of companies cutting costs to try to remain in business. That's why you have seen about 300,000 jobs cut in manufacturing in Canada over the past five years.
If we go to the trade agreement being negotiated with Korea, there are some challenges that we've identified specifically. First, you have to understand that manufacturers' current priority is to deal with the high dollar, and they're doing that by controlling costs. That's why you've seen a lot of layoffs. It's one of the reasons, but they're also trying to improve productivity within their plants in order to maintain market share, both here in Canada and in their main export market, which is the United States.
If you talk to manufacturers, they'll say that future growth depends on their ability to invest in plant modernization, employees and upgrading their skills, innovation, and product and market development. That's what they need to do to be successful in the long run, but it's very difficult right now because profit margins are very thin.
I have included some data in the presentation. It was taken from our latest management survey that was issued last October. It shows some of the current challenges and determinants of growth that manufacturers have identified.
One of the issues we have with the trade agreement that's currently being negotiated is timing. The Canadian industry is going through a perfect storm right now. They're already facing increased competition in Canada and the U.S. There are some concerns that this trade deal would lead to even more competition domestically and in our main export market, which is the United States.
On the other hand, there are some potential benefits from this trade agreement if we really get better market access for Canadian exporters into Korea. There are issues associated with that, but many exporters will tell you that it's not a market they're even considering, because of the reputation it has of being closed and protected. Second, a lot of companies are just not looking at expanding in that part of the world right now.
We at CME are very supportive of trade agreements if they offer effective access into foreign markets, and that includes the removal of non-tariff barriers, which is a major issue when you're talking about the Korean market.
Now, if we turn to some of the opportunities that we've identified with this trade agreement, I think there are three main opportunities for us. The first one is for those companies that are already present in the South Korean market. This trade agreement is very important for them in light of the fact that the United States has been negotiating and has signed a deal with Korea. It hasn't been ratified yet, but if it does get ratified, they're worried they'll be priced out of the South Korean market. So they say it's important for Canada to follow suit and come forward with an agreement.
A second opportunity with the trade agreement is that exporters are looking to expand in more export markets. There was a big focus on the United States for the past 15 or 20 years. I think a lot of companies are looking to expand outside North America. If you look at the statistics, our share of exports going to the U.S. has declined from 87% to 81% over the past five years. So that's a good indication that a lot of companies are going global. In our survey, 8% of those companies surveyed said that Korea has a future growth potential for their company. So it is a market that some companies are interested in.
I think the third opportunity that it offers us is that there are some, albeit limited, global sourcing opportunities for companies that are looking to import some parts, some inputs from a lower-cost country.
In conclusion, I think the key priority for us as these trade negotiations are being conducted is the importance of addressing non-tariff barriers. We've consulted our members over the past couple of years to identify these non-tariff barriers, and we've communicated these non-tariff barriers to the government to assist them in their negotiations. It's important to say that they're very nervous.
For some sectors, tariff reductions are on the agenda, especially for raw materials or food products, for example; but for most other economic sectors, if we really want to provide them with effective access into the Korean market, there's a whole series of non-tariff barriers that must be addressed. I've listed some of the categories in the presentation I've given you, dealing with standards, testing, and customs procedures. I know some of the previous witnesses at the committee mentioned, or gave you some indication, what types of hurdles or what types of barriers they're facing in their own economic sectors when they try to do business in Korea.
I'll be glad to pass on the information that we have to your committee if you deem that it will be helpful for your proceedings, but I think it's important to conclude by saying that dealing with non-tariff barriers is the number one priority as we're talking about these free trade negotiations. We at CME certainly hope that those will be addressed.
Thank you.