Thank you very much, Mr. Chair.
Good morning, ladies and gentlemen.
Thank you for inviting me to appear before the committee today on behalf of Canadian manufacturers and exporters. We're glad to take part in your consultations on the trade negotiations with the European Union.
Before I begin my remarks, I'd like to say a few words about the association I'm representing. CME is Canada's leading trade and industry association and the voice of manufacturing and global business in Canada. The association, through various initiatives such as the Canadian Manufacturing Coalition, represents more than 10,000 leading companies nationwide engaged in manufacturing, in global business, and in service-related industries.
Manufacturing remains the single largest business sector in Canada. In fact, manufacturing sales totalled $534 billion last year. Companies that make things in Canada currently account for 13% of Canada's gross domestic product. Manufacturers employ more than 1.7 million Canadians in highly productive and high-paying jobs. Their contribution is critical to the wealth generation that sustains the standard of living each and every one of us enjoys here in Canada.
Manufacturing is also a very export-intensive business. More than half of what we make in Canada is exported directly to other markets. As a result, issues around manufacturing competitiveness in Canada are closely intertwined with the ability of Canadian businesses to compete and to succeed in international markets. It's increasingly critical for our members to succeed in global markets.
As manufacturers increasingly invest in innovation and become more agile, more specialized, and better able to serve niche markets, the more critical it becomes for them to find customers, to find suppliers, and to find business partners globally. We also know that a growing share of our members is looking to take advantage of new opportunities beyond North America, in Europe and in other parts of the world: the European Union currently accounts for over 8% of our exports and close to 12% of our imports. We expect these proportions to grow as the result of a trade agreement.
That being said, CME has been supportive of the launch of trade negotiations with the EU, along with CERT and several others, and we've been quite supportive of the conclusion of this agreement. The conclusion of the CETA has the potential to help Canadian manufacturers and exporters diversify their sales into new export markets, to increase their presence in Europe at a time when they are looking for new business opportunities, and to position Canada as a more attractive destination for manufacturing investment by giving Canadian companies privileged, duty-free access to the two largest markets in the world, that is, the European Union and the United States.
For this potential to be fulfilled, it's critical that the agreement take into account both the offensive and defensive interests of Canada's most important trade and industrial sectors. I'd like to go into some of these concerns very briefly.
Obviously, our overarching concern in the negotiations is to ensure the agreement provides a net benefit to Canadian manufacturing. Manufacturers have the most to win and potentially also the most to lose in our negotiations with Europe.
Any agreement must reflect the importance of this critical business sector, reflecting the fact that manufacturing is a key driver of the Canadian economy and especially of Canada's international trade and innovation performance. In fact, manufacturing accounts for two-thirds of Canada's goods and services exports—we're very export-driven in the sector—but also for 88% of business spending on research and development and 90% of all new products commercialized in Canada. We're talking about a very innovative business sector.
As a result, we expect the outcome of our negotiations with Europe to deliver a demonstrable net economic benefit for manufacturers in Canada. Specifically, the agreement should result in a net increase in manufactured exports from Canada as well as higher levels of production and investment within Canada.
For this agreement to have a net benefit to Canadian industry, the conditions that need to be met through the negotiations include ensuring that the agreement results in real improvements in access to the EU market. Meaningful commitments to address tariff and non-tariff barriers to trade, investment, and labour mobility, including the use of regulatory requirements to protect the European market, are vital to us for a balanced agreement. Commitments to improve market access must therefore be genuine, verifiable, and also substantial.
We expect the CETA to also include an ambitious schedule of tariff elimination, but it must also deal with the technical barriers to trade that for a lot of companies constitute a real obstacle to doing business in the European market, so we look for the agreement to have a balanced approach to dealing with regulatory barriers to trade. While some sectors—and I'm sure you'll hear from some of them—look for greater harmonization or mutual recognition with the European Union, other sectors look for more of a status quo approach because we've aligned our standards and regulatory practices with the United States, as some sectors are highly integrated on a North American basis.
We also expect the agreement to be ambitious with respect to tariff elimination, and we expect that tariffs in more sensitive areas will be phased out over timelines that provide Canada-based manufacturers the time they need to build capacity to take advantage of more open access to the European market, but also to adapt to changes in the domestic market that would result from an agreement. In that regard, we would look for the agreement to set tariff phase-outs that would provide for an adequate time for industrial adjustment and be contingent on real improvements in market access in Europe.
Procurement is another very important area in the negotiations. Our members look for reciprocal benefits in expanding access to procurement markets. I'm sure you've heard that Europeans have a very offensive stance on access to our provincial procurement markets, but we have several members in several industry sectors that also have offensive interests in European Union procurement markets.
Another important condition that must be met for the agreement to be of net benefit to Canadian industry is that the rules of origin requirements within the CETA reflect North American--not just Canadian--value added. In other words, when you make the rules of origin requirements under the agreement, it's important to recognize that Canada's manufacturing industry is very closely integrated with that of the United States, and that levels of North American content might be quite high, but in some cases the levels of Canadian content would be a little bit lower. In the European Union they don't necessarily have that problem, given that it's a single European market. The importance of this issue is that unless we get the rules of origin right, the percentage of Canadian-made goods that qualify under the agreement would be limited and would diminish over time.
Third, we also look for the agreement to have a robust dispute resolution mechanism so that we can ensure the agreement is effectively enforced once it's in place. It's critical that the agreement not diminish the efficacy of Canada's trade remedy system and our ability to enforce market-based international trade rules. CME members frequently face unfair competition from imports that benefit from government subsidies, product dumping, and other forms of support that contravene international trade rules. Canada's trade remedies system and WTO rules provide us with a transparent, rules-based means to address trade practices that unfairly and illegally threaten the competitiveness of Canada's manufacturing base.
Fourth, we expect the conclusion of the CETA to facilitate business travel between Canada and the EU by providing an expedited process for delivering visas for cases when they're required for business travel--and this should cover not only general business travel, but also after-sales service and other related business activities--as well as for temporary foreign workers travelling between Canada and the European Union. Manufacturers and exporters succeed today by adding value in global supply chains. A growing share of that value comes from services associated with the products that our members make. We're talking about things like conducting joint research and development with clients and suppliers, designing and doing engineering work with international partners, and providing after-sales service and the like, so it's important to also look at facilitating the movement of business people and workers.
Another important element of the negotiation has to do with ensuring that we modernize the Copyright Act. That's a very important issue not just for European companies, but for Canada's industry. Another element is implementing the Anti-Counterfeiting Trade Agreement. We're also looking for Canada to resist European demands to protect generic and semi-generic geographical indications commonly used by food manufacturers.
Finally, CME has recognized and applauded the government's leadership in helping Canadian manufacturers and exporters grow their business in global markets. We support the conclusion of an ambitious agreement with the European Union that effectively expands business opportunities and leads to greater production, greater export sales, and greater investment levels for Canadian industry. We also expect the government to complement this agreement and other trade agreements simultaneously by taking the steps required to improve our manufacturing competitiveness in Canada.
I'll stop there. I'll be pleased to answer your questions.
