I don't know if I'm an expert, but I've had the pleasure of coming here a few times.
Thank you, Mr. Chair, for inviting me to appear before the committee again on behalf of the Canadian Manufacturers and Exporters. We are happy to take part in these important consultations on an economic partnership agreement with Japan.
I see some new faces around the table, so before I begin, I'll say a few words about our association. CME is Canada's leading trade and industry association and the voice of manufacturing and global business in Canada. Our association, through various initiatives such as the establishment of our Canadian manufacturing coalition, represents more than 10,000 leading companies engaged in manufacturing, global business, and service-related industries. More than 95% of our members are small and medium-sized companies representing every industrial sector and every export sector of the Canadian economy.
I always like to remind people that manufacturing is the single largest business sector in this country. Our members' sales totaled $571 billion last year. Companies that make things in Canada account for approximately 13% of our GDP and employ 1.7 million Canadians in highly productive jobs that pay better than the average. Our members' contributions are critical to the wealth generation that sustains our standard of living. Also, the business of manufacturing includes much more than the companies that make things. In fact, manufacturers consume close to half of the resources grown and extracted by Canada's farming, fishing, forestry, mining, oil and gas industries. Manufacturers account for one-third of the output of our utilities sector. We consume 30% of the value delivered by business management, engineering, technical, and software services; and we estimate every dollar of value created by Canadian manufacturers generates more than $3 in total economic activity.
Manufacturing is an export-intensive business—more than half of our industrial production in Canada is exported directly to other markets, mainly the U.S. Taken together, manufacturers are responsible for 63% of Canada's merchandise exports. It's increasingly critical for our members to succeed in global markets. The more manufacturers invest in innovation, become more agile, and specialize to serve niche markets around the world, the more they need to find customers, suppliers, and business partners outside North America.
A growing share of our members are looking to take advantage of new and emerging opportunities beyond North America. By opportunities, we mean finding customers and new markets, looking for potential investors in Canada, seeking investment opportunities in other markets, and sourcing services from around the world. We are also looking for qualified personnel to address some of our skill shortages. When it comes to the government's trade policy agenda, as well as specific trade negotiations such as those with Japan, our priority is to ensure that we enhance manufacturers' and exporters' abilities to compete and win in both domestic and global markets. In other words, our priority is to ensure that trade agreements put us in a position to grow and strengthen Canada's manufacturing base and increase Canada's exports of goods and services.
In the case of Japan, here are some of the key facts about these trade negotiations. For starters, Japan is the world's third-largest economy after the U.S. and China, according to the World Bank. It's our fourth-largest export market after the U.S., Europe, and China. It's also our fifth-largest import supplier after the U.S., China, the EU, and Mexico. Coal, canola, copper, lumber, and pork are our top five exports to Japan, and they account for 58% of our exports to that country. Autos, auto parts, heavy equipment, printing equipment, tires, aerospace parts, and telecommunications equipment—these seven products taken together account for 52% of Japan's exports to Canada.
As you can see, the majority of our exports to Japan are natural resources. They are natural resources that Japan needs to procure outside of their own borders, while the majority of our imports that Japan sells to Canada are manufactured goods that we in large part also happen to make in this country.
In total we have about an $8.2-billion trade deficit with Japan on manufacturing goods, and a $5.9-billion surplus in natural resources and goods, such as agrifood products—Richard can talk about that—forestry and energy products. Overall it makes for a negative trade balance of $2.3 billion.
Taking all of these facts into account, we believe we should conclude a trade agreement with Japan to the extent that it provides a net benefit to the Canadian manufacturing and exporting sectors.
I'll let Richard and my colleagues talk about it from a resource and services perspective. But from a manufacturing perspective, while we definitely see potential in the Japanese market—it's after all one of the largest markets in the world—at the same time we're also concerned that an agreement could exacerbate our trade deficits on manufactured goods.
In our opinion it's critical that a trade agreement with Japan provides a net benefit to our members by providing open and reciprocal market access. I mean, some of those barriers to trade and investment between Canada and Japan are structural in nature. We have some questions as to whether we can deal with them through a bilateral trade agreement.
Given that both Canada and Japan are interested in joining the trans-Pacific partnership negotiations, we believe we're more likely to be able to address these market access issues on a regional basis through TPP, if only because Japan will secure access to a much greater market as a result and might be willing to provide more in return for an accession to TPP. In fact, Canada would not be alone in raising these issues with Japan in the context of TPP. I know that the U.S., Vietnam, and Malaysia have also voiced concerns with respect to market access into Japan.
That being said, we'd rather negotiate with Japan on a regional basis through TPP, for three reasons. One is that we have a strong level of manufacturing supply chain integration in North America. Negotiating an agreement alongside the United States and Mexico—our two NAFTA partners—would ensure we could open markets throughout the Asia-Pacific region, including Japan, in a way that allows our manufacturing base to meet rules of origin requirements and doesn't hinder North American manufacturing competitiveness.
Also, as I outlined earlier, we have a strong convergence of interest with the U.S., and to a lesser extent with other TPP countries, with respect to Japan.
Thirdly, and finally, I think we would have more negotiating leverage with Japan by standing alongside our NAFTA partners in a regional context.
The decision on whether Canada will be allowed to join TPP rests with the U.S. and the other countries negotiating the agreement. I think our trading partners have gone on record, saying they'll be allowing new entrants on the basis of whether we'll be able to hit the ground running and join the negotiations in progress and meet the level of ambition that other parties are pursuing. They will invite new partners that have a good track record of addressing bilateral trade issues.
I think in that context it's important that we pursue negotiations and discussions with the U.S. and other countries, and that we do what's needed in the context of TPP, but we also understand that the government is simultaneously pursing bilateral negotiations with Japan. I think we can't put all of our eggs in the same basket.
I think the way we see these trade negotiations is that they provide us with an opportunity to address our persistent trade deficit, especially as it relates to manufactured goods. I want to put it on the record that our members have as much at stake in these negotiations as probably anyone else in Canada, so for that reason alone we will be following these negotiations with a very high level of interest.
I'll stop here. We'll be pleased to answer any of your questions and maybe expand on some of the points I touched on in my comments.