First of all, let me say thank you to the Government of Canada for holding these meetings and for inviting me to comment on the Canada-Japan partnership agreement.
I also thank the committee members for your hard work on these public hearings and for your valuable and admirable service to Canada and to Canadians. I really do thank you. I really appreciate your long hours and your dedication.
In opening, I’d like to give you some brief insight into my background. It's unique, of a sort. I studied business at the British Columbia Institute of Technology and then graduated from the University of British Columbia, in 1982, with a B.A. in Asian Studies and the Japanese Language. While my last name sounds Asian, it’s actually Dutch. I get all the mailings from the Chinese legal association in Chinese, because many people think I'm Chinese.
Following graduation from UBC, I studied in Tokyo at Stanford University’s centre for advanced Japanese and did postgraduate research in the economics department of Kyushu University, in the south of Japan. My postgraduate education in Japan was financed by a $30,000 scholarship kindly provided by the Japanese ministry of education and the Japan Foundation.
I speak and read Japanese, and I used these skills to open and manage Magna International’s first office in Tokyo. I also spent five years in Tokyo as the senior representative managing British Columbia’s trade and investment office. While at Magna, our exports of Canadian-made auto parts sold to Japanese automakers increased to $90 million. Since then, Magna has grown those exports to hundreds of millions of dollars, including expansion to other tough, competitive auto markets, such as Korea.
After Magna, I joined Mitsubishi Corporation, following their $50 million investment in Magna.
Let me say that from that experience, Canadians can successfully export value-added, manufactured products to Japan, and we absolutely must do so to improve our economy and to create jobs. Therefore, on a personal basis, and also in my role as vice-president representing the Canada-Japan Society of British Columbia, and as the vice-president of international business for the Factors Group of Nutritional Companies, which is Canada’s largest manufacturer of health supplements, I strongly encourage the Government of Canada to negotiate and sign a bilateral trade agreement with Japan.
There are many strong reasons to complete such an agreement, and I believe that there are few to argue against it.
I often look at Australia with envy. Australia shares many similarities with Canada, including an economic structure based on a wealth of natural resources. As well as a British colonial history, we share the leading international language of business: English. But Canada also benefits from our other national language: French.
Where we differ from Australia in regard to Japan is in the effort Australia puts into selling into and penetrating the Japanese market. Japan is Australia’s second-largest export destination. It is number two for Australia. Australia is Japan’s third-largest source of imports.
For Canada, Japan has fallen to be our fifth-largest export destination. On the other side of the ledger, Canada is only Japan’s 14th-largest source of imports. The actual trade numbers are compelling. In 2011, Canada exported about $11 billion in product to Japan, while in the same year, Australia exported over $50 billion in product to Japan.
The math here says that we can do better. We should do better, and I believe that with an EPA, we will do better. We can do a better job in selling to the Japanese in a way they want to be sold to. If you ask a lot of Japan market experts in Canada what they think of how we sell in Japan, they will share a common view that the majority of our $11 billion in exports to Japan were purchased from us by Canada experts in Japan. We weren't doing the selling; we were basically purchased from. We have an opportunity to increase our exports by selling—really selling—in Japan.
A free trade agreement with Japan would act as a strong catalyst. It would promote Canada and Canadian exports by removing trade impediments such as tariffs—certain tariffs do exist—and certain non-tariff impediments that do exist, and by raising the profile of Canada, and Canada in Japan.
A free trade agreement with Japan is not without risks, but they must be objectively analyzed.
The auto sector has expressed concern about liberalized trade with Japan in this sector. However, when you look at it, Japanese cars are imported into Canada at a tariff of about 6%. There is some concern that a free trade deal would reduce this tariff or eliminate it completely, and therefore, conceivably, Japanese cars would have a stronger competitive advantage in Canada. Many Japanese cars are already manufactured in Japan, but yes, removing the tariff would provide them with an advantage.
However, when we export our Canadian-made cars to Japan there is no tariff—no import tariff—and in spite of that North American automakers have hardly gained a sliver of market share there. While claims are that there are all these tariffs and non-tariff barriers, that, quite frankly, doesn't stand the test of close examination.
I pointed out earlier that Magna, when I was there, exported $90 million worth of auto parts to the Japanese market, and other Canadian auto parts makers are also doing the same. In addition, we sell hundreds of millions of dollars into other tough markets like Korea and China.
I would also give one other example of a sign of how that market is more open for automotive sales than we might think. Look at Harley-Davidson. Harley-Davidson is selling its North American-built motorcycles in Japan. They have a large market share. Why did non-tariff import barriers not prevent Harley-Davidson from gaining the market share that they have to date? When I worked in Japan I was able to work in trade shows. I was able to go to head office meetings at Japanese corporations and operate freely in Japanese, and they appreciated that. I was able to understand how they do business there, how they want to do business there, and we were successful. We were not always successful, but we proved that we could do business there. So I think there's a real opportunity for others to do the same.
One cannot ignore the opportunity to trade with China. It is now our number one trading export destination for Canada. But I think we also have to recognize that engaging in trade with Japan is somewhat less risky than trade with China, given that Japan is more familiar with and accepting of western trade negotiating styles, contracts, and dispute resolution mechanisms such as binding international arbitration. An EPA with Japan would enhance this even further.
Along with an EPA, the Government of Canada should reopen its consulate general and trade office in Osaka, which was closed a few years ago, along with the immigration and visa office that was just closed. I realize there are cost restraints. I would encourage just a second look to see what the dynamic is there. Maybe it is worth it for our trade. If we want to go from $11 billion to $20 billion, how do those offices play a role? I'd really encourage taking a second look. Again, I want to do what the Australians are doing, get to $20 billion and eventually get to $50 billion in sales.
In negotiating the EPA, Canada should have Japan eliminate its current 12.5% duty on health supplements. Currently, companies like ours—we are the largest manufacturer of health supplements in Canada—are importing health-supplement ingredients from Japan. They pay no duties when they come in. We build them into products and when we send them to Japan for export we get slapped with a 12.5% duty on stuff that we got there for free, with no duties coming into this country. It makes absolutely no sense to have that duty. We strongly encourage you to look at that 12.5% duty and request that it be removed.
In short, I would say that I support comment to date that an EPA with Japan would offer a platform for further deepening the already well-established strategic partnership between Canada and Japan. It would be an important step into the two countries' shared aspiration to foster further regional economic integration based on market principles towards a free trade area of the Asia Pacific, which is extremely important for us, and deliver substantial economic gains for both countries, including increased economic growth, production, national wealth, and consumer welfare. Finally, it offers stable access to reliable supplies and demand of resources such as energy and other natural resources as well as food products.
Thank you for your time and attention.