International Trade Committee on April 24th, 2018

[Mark Nantais]

We see currency manipulation as a principle in terms of what would constitute an effective trade agreement. In our view, all trade agreements should incorporate some means of currency disciplines. That's a fundamental principle of any successful agreement in our mind. I'm not saying those countries manipulate currency, but we need to have something in there to ensure that it does not happen. We have seen it exist and be deployed by other CPTTP countries: Japan, China, Korea. These countries, at some point in time, have undertaken to manipulate their currency to the benefit of their domestic industry and undermine our market access provisions. We see that as a principle of any trade agreement.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You mentioned earlier that 96% of automobile industry suppliers are in Ontario.

I represent the riding of Rivière-des-Mille-Îles, where Boisbriand is located. That's where the General Motors factory was located before. The Montreal factory was in our region.

There is also Raufoss, a division of Neuman Aluminum, which you surely know since the company must be part of your association. Raufoss exports all over the world, and its factories, located in Mexico, Canada, Norway and China, make aluminum suspension arms.

Does Raufoss export to Mercosur countries?

[Mark Nantais]

I'm sorry, to whom?

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Raufoss, a division of Neuman Aluminium.

[Mark Nantais]

Do they export to the...I don't know.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You don't know.

[Mark Nantais]

I'm not sure of that.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

I know the company exports its aluminum rims around the world and does business with many companies, including Ford, BMW and Mercedes-Benz.

I understand your point of view when you say that it is an integrated automotive industry, but there are surely suppliers that can benefit from Mercosur's opportunities, aren't there?

[Mark Nantais]

I'm sure there are. For our industry we source aluminum, steel, and other lightweight metals from smelters, like in Quebec for aluminum. They are a key source for North American production. Those countries presumably would want to also open markets for themselves in other countries. Normally, on products like that where we have a manufacturing presence, let's say in Mercosur or elsewhere, then obviously you have to source in areas close to your production facilities. If they're not time sensitive, then you can look elsewhere. If they are time sensitive then we normally localize our suppliers, and our suppliers come to us, generally speaking. No question, when you look at the North American industry and all three NAFTA countries, this was part of the new NAFTA objectives, to source more in North America, and from the U.S.'s perspective, more from the United States.

We already source a lot of aluminum and whatnot from Canadian aluminum companies and other steel as well. The U.S. is trying to change that, so it's more focused on U.S. sourcing. But we believe that as an integrated industry, we need to be able to source from all three countries.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

Mr. Dietrich, I would like to ask you a question.

I would like to talk about suppliers. Earlier, you said that your suppliers were mainly Canadian. Do you have other suppliers in Brazil?

[Robert Dietrich]

I'm sorry, the translation went very soft.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

I was talking about suppliers.

Your main suppliers are in Canada. Could you help suppliers that are in Canada or establish others in Brazil?

[Robert Dietrich]

We use suppliers from around the world. Today, in Brazil, we import from India, Canada, and use a local Brazilian supply chain. There would be certain components that would come form Canada should we have the ability to not have tariffs and non-tariff barriers. We would likely increase the amount of supply, particularly of electronic components, which we would manufacture in larger quantities in Canada and supply to Brazil.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go over to the Conservatives.

Mr. Hoback, you have the floor. It's good to see you back.

[Randy Hoback, Conservative, Prince Albert, SK]

Thanks. I appreciate that.

Thank you, gentlemen, for being here this morning.

Mr. Dietrich, I used to work for a company called Flexi-coil, which was bought out by New Holland and they were bought out by Case New Holland. We were selling seeding equipment into South America, into Argentina and Brazil. Your story sounds so familiar. It really is amazing that nothing has changed. This was back in the early 2000s, and it's the same scenario. We always looked at those marketplaces and we just drooled, but nobody was able to really make it work unless they actually did what you did and actually located down there.

To have a good trade agreement, there has to be a win-win on both sides. There has to be a win for the Brazilians or the Mercosur countries and for us. You talked about componentry. Is there componentry in Brazil or in the Mercosur countries—not just Brazil—that would actually take your product here in Canada and make it more competitive internationally? Say I took this component and had better access to it from Brazil, at a cheaper price, and then brought it into Canada and finished the product here and shipped it out. Or I could take your components down to Brazil and then sell them into other Mercosur countries or into other countries outside of Mercosur.

Do you see that potentially happening here? That's the only win-win I can really see.

[Robert Dietrich]

Absolutely.

I mentioned motors as an example. WEG motors is a Brazilian company and they are one of the largest in our industry, with better access to their products. They actually manufacture in the U.S. now, so it's a question of supply chain. We would also ultimately use Brazil for manufacturing certain products for other Mercosur countries. I'm interested in how the TPP and Mercosur would integrate as well, because then we could access other markets in South America with Brazil as an assembly location.

[Randy Hoback, Conservative, Prince Albert, SK]

Standards would be different and more relevant to Brazilian standards, maybe, in some of those countries for sure.

Mr. Nantais, with regard to competitiveness, something we're now hearing more and more all the time is that we're not competitive. That really scares me, because I'm a very pro-trade guy and I've always believed that we've been competitive.

Can you give me an example of some of the things that are making you uncompetitive here in Canada?

[Mark Nantais]

First off, before I answer that question, a document just produced by the Canadian Automotive Partnership Council speaks to the future of the industry from the perspective of innovation in manufacturing, innovation in product development, and innovation in materials, and so forth. I would really recommend that if you haven't seen that—

[Randy Hoback, Conservative, Prince Albert, SK]

Can you table that document, actually send it to the clerk?

[Mark Nantais]

Yes. I'd be glad to furnish that document, absolutely. It's a good one to look at.

To your question, for example, cap and trade in Ontario imposes a cost on our industry that our competing plants in the United States do not have. Electricity costs are two to three times higher in Ontario than for our competing plants in the United States. There are other regulatory issues and complexities that we have in Ontario that they don't have elsewhere. It's this continued list in aggregate that pushes us over the limit. We have to make sure that we can continue to build a business case for reinvestment. These are the things—

[Randy Hoback, Conservative, Prince Albert, SK]

You compete for investment of your money within your own companies.

[Mark Nantais]

It's within our own company.

There's a pot of money for new investments, let's say on a North American if not global basis, and you and your plant, let's say in Ontario, have to make the business case that you can produce that product efficiently, competitively, and at the price point at which it ultimately has to be sold. If you can't do that, then you're probably not on the list for future investments.

[Randy Hoback, Conservative, Prince Albert, SK]

To sum that up, it doesn't matter how many market access agreements we get. If you're not competitive and if you can't take advantage, and if your costs are out of the market just because of internal costs here in Canada, what good are they?

[Mark Nantais]

I would suggest that's a true statement.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

When we look at competitiveness, when we look at the aggregate, you talked about how you have provincial programs, municipal programs, and all variety of people adding costs to your production. How do you take companies such as yours and now put them in the global marketplace and compete with Brazilian companies with different standards and different regulations? Everything is different. The labour standards are different. We said this with Mexico, but in the same breath, Mexican standards came up and joined North American. It actually was a win-win-win in a lot of ways. If you look at where Mexico was 40 years ago and you look at where Mexico is today, it has made vast improvements. Some people may not be happy with where they are at today and might want to see better, but it is different and it is better than what it was.

How do you go into a market like Mercosur? I kind of view Mercosur as being a little different from Pacific Alliance. Pacific Alliance is a pro-trade bloc. Mercosur, to me, started that way but turned into a protectionist bloc. How would you see this?