Bonjour.
Thank you, Mr. Chair.
Thank you, members of the committee, for the opportunity to testify on behalf of Canadian Manufacturers & Exporters this morning on your study of Canada-U.S. relations. We're glad we're able to provide input to your study.
Before I get started, I'd like to say a few words about the association that I have the privilege of representing.
Canadian Manufacturers and Exporters is the leading trade and industrial association in Canada. We represent manufacturing and exporting businesses in every Canadian province and industrial sector. Manufacturing and exports in Canada are the two major sectors of our economy. Manufacturing represents 16% of GDP and exports 21%.
In Canada, manufacturing represents $605 billion in annual manufacturing shipments. We're talking about an industry that occupies a very large position in the Canadian economy. Last year, we had $483 billion in export sales. That represented nearly two million direct jobs across Canada.
On the issue that's being discussed today, I think your study matters a great deal to us because Canada-U.S. trade matters a great deal to Canada, and obviously to our members who are responsible for the bulk of our trade with the United States. Some 39% of manufacturing production in Canada is sold in the United States. So almost half of what we make in our plants is sold in the United States. It's actually our main market. We sell more to the United States, more of our industrial production to the United States, than we sell to Canada. And 78% of Canada's goods exports are sold to the United States, so it's our main trading partner, as you know. If you exclude oil and gas, 72% of industrial shipments, industrial exports, are sent to the U.S.
In fact, our exports to states like Michigan, Illinois, New York, California, Washington, Ohio, Pennsylvania, Minnesota, and Texas, if you take them individually, to each one of these states, are greater than our exports to our second-largest trading partner, which is the United Kingdom. Not only do we export more to Texas than we do to the U.K., but we export more to New Jersey than we do to Japan, we export more to Tennessee than we do to China, we export more to Montana than we do to Mexico, and the list goes on and on.
But I think some stories need to be told. I think when we go to Washington and when our members go to Washington, the story we need to take across as much as possible is that Canada-U.S. trade matters a great deal for the U.S. economy as well. You know, Canada is a top destination for American exports. The U.S. sold $260 billion worth of goods to Canada last year alone. Actually, U.S. exports to Canada are $38 billion greater than American exports to Mexico and China combined. So we're talking about a pretty extensive trade relationship and a pretty important market for U.S. manufacturers and exporters.
Exports account for 13% of the U.S. economy, so it's still a large part of the U.S. economy, and actually, U.S. exports have been one of the strongest parts of the U.S. economy if you look at the last five years. They've been able to count on exports as a source of growth for their economy. You often hear about the growing trade deficit when you go to Washington, but if you look at U.S. manufactured goods and their trade with countries with whom they have a free trade agreement, they are actually a trade surplus. When you talk about countries like Canada and other countries with whom they have trade agreements, they're in a trade surplus when it comes to manufactured goods.
I think a key message we also try to take across is that Canada and the U.S. make things together. We estimate that approximately 70% of Canada-U.S. trade is within one industrial sector, and 40% approximately is within one corporation and within companies that are affiliated with one another. About a third of our exports to the U.S. are composed of goods that were previously imported from the U.S. In other words, we import components from the U.S. and we export finished goods to the U.S., and you can make the reverse argument as well.
Another story we can tell Americans is that when you look at American exports to individual provinces, they're often greater than countries for which...you wouldn't think there would be such a large export market. For example, American exports to Ontario last year were greater than American exports to China and Germany combined. So that's a pretty important market, and the list goes on and on. If you take Manitoba as another example, American exports to Manitoba are greater than American exports to Russia.
In terms of our priority issues when it comes to Canada-U.S. trade relations, I think obviously—and David alluded to this in great detail in his presentation—the U.S. government's response to the current economic crisis and the measures that are put in place to make sure the economy can recover quickly are certainly a priority issue for our members overall. When you talk about border conditions, which I know is an issue you're taking a look at more specifically, 79% of our members in our annual survey report that reducing regulatory impediments to shipping across the border is one of their policy priorities. So obviously this is a very important issue for us.
In terms of other issues, I know you're also looking at the western hemisphere travel initiative. I know our members are concerned about this coming into force this summer, or actually this spring. We're concerned this could mean longer border delays for our members. Depending on staffing levels and how much time it will take for travellers to cross the border, even though they might have larger staffing levels, we're concerned that the traffic will just build up on the roads leading to the ports of entry, and that could mean a very bad summer and maybe even a bad fall in terms of border delays. This is definitely an issue for our members, given that a lot of businesses operate on a just-in-time basis.
I think when you look at other issues that are upcoming in the U.S., our concern is that a lot of the new border security requirements are going to have a detrimental impact on North American supply chains. We've seen an increased number or increased proportion of inspections at the border, and my colleagues from the CTA alluded to that earlier. And that's happening despite the fact that our members have invested quite heavily over the last few years in the new trusted shipper programs, whereby if you invest in that program, if you qualify, if you're a partner against terrorism or you're a partner in protection, you should have lower inspections and your goods should have an easier entry into the U.S. market. Despite that, our members are reporting more inspections at the border.
I think another priority for us is making sure that, as much as possible, we work jointly with Americans at having a perimeter approach to security; in other words, do a better risk assessment of goods entering our ports and things that are entering the continent so that we can make fewer inspections at the land border.
We're also concerned about new mandatory cargo reporting requirements that are coming up in the U.S. because that adds to the cost of doing business. We're also worried about new border inspection fees, oftentimes originating from other departments than DHS but that are being administered by the Department of Homeland Security and Customs and Border Protection.
Finally, as I said earlier, border delays are certainly of great concern to us because they affect delivery schedules and our ability to compete “just in time”, and they always end up hurting Canadian businesses more than anyone else.
Another issue that needs to be raised—I don't think it's part of the agenda for your meeting, but I wouldn't be fair to my members if I didn't raise it—is the “buy America” requirements that were introduced in the stimulus package. We're obviously concerned with that. We're working very closely with Ambassador Wilson and the staff at the Canadian embassy in Washington. Our members have been feeding us information. Obviously, I think the issue has died down a little bit in the media because of some of the administration's comments, saying that this would not be in contravention with any of their trade agreements. On the other hand, a lot of the procurement that this stimulus spending will fund is going to be done by state and municipal governments, which are not covered by any trade agreements. So, actually, we're consulting with our members to come up with as precise information as possible to make sure we can feed that into our colleagues and allies in Washington.
Just to conclude, one of the key messages that I think we need to take across when we go to the United States is reinforcing the notion that Canada matters to the U.S., because we make things together. We're part of integrated supply chains. I think David rightly said that we're partners in security as well. Our defence industries are very closely integrated. Actually, Canada supplies a number of innovations and solutions to the U.S. defence sector that they wouldn't be able to access if Canada wasn't a key ally for them.
We need a better coordination of programs and policies. For example, both governments have developed new frameworks to look at product and consumer safety. I think in many cases it would make sense to have better integration of these programs and policies. I think we need more constructive dialogue, not only between governments but also between legislators. I do know the work of the Canada-U.S. Inter-Parliamentary Group has been pretty helpful in doing that, and I know some of your work will be very helpful as well.
I think it's important to coordinate with the Canadian embassy in Washington because they've organized a number of advocacy initiatives in the recent past that we've taken part in. I know some of my colleagues in other associations have as well, and I know some of our members that have plants and operations in the U.S. have been pretty active in driving across those messages to U.S. legislators.
Finally, I'd like to say that, as you complete your study, you can count on the cooperation of Canadian Manufacturers & Exporters. Actually, since very recently, we have an office in Washington. We have an adviser to our president, who's based there, who knows a lot of the U.S. trade associations, which, as David mentioned, can be key allies in driving across some of the messages we need to drive across in Washington.
That concludes my comments. I look forward to your questions.
Thank you.