Mr. Chairman, committee members, thank you for the invitation to take part in your prestudy of the Trans-Pacific Partnership.
The Business Council of Canada represents the chief executives and entrepreneurs of 150 leading Canadian companies from all sectors and regions of the country. Our member companies employ 1.4 million citizens, account for more than half the value of the Toronto Stock Exchange, contribute the largest share of federal corporate taxes, and are responsible for most of Canada's exports, corporate philanthropy, and private sector investments in research and development.
We have recently changed our name. We were the Canadian Council of Chief Executives, just for those of you who hadn't noticed the name change.
Trade has long been a powerful engine of Canada's economy, and the Business Council is a strong proponent of Canada's participation in the TPP. In an era of slower global growth and increased volatility, it is critical that Canada do everything possible to create new economic opportunities and improve our long-term prosperity.
The TPP is a groundbreaking agreement that will support Canada's standard of living and create high-value jobs. If both the TPP and Canada's agreement with Europe were implemented, Canada's trade network would cover more than 60% of the global economy, giving Canadian companies preferential access to nearly 90% of existing export markets.
This would make Canada the only G7 nation with free trade access to the United States, the Americas, Europe, and the Asia-Pacific region, including three of the world's four largest economies. This wide-reaching trade agreement network would position Canada as a global export platform, attracting investment and jobs to communities across the country.
As with the North American Free Trade Agreement and pre-existing trade agreements, the TPP will spur innovation and productivity by giving Canadian companies new market opportunities, all while providing Canadian consumers with a wider variety of goods and services at more competitive prices.
There are three main reasons I'm going to go through today as to why TPP is critical to Canada's long-term economic prosperity.
First, Canada must diversify its trade relationships. According to the Bank of Canada the growth potential of emerging market economies is projected to be about four times that of the world's advanced economies. Emerging markets now account for 80% of global growth, but only 12% of our exports go directly to fast-growing emerging markets, while 85% go to slow-growing advanced economies.
If Canada's exposure to emerging markets matched that of the United States, demand for our exports would increase by $60 billion. Japan alone offers Canada significant new market potential as the country has an average MFN applied tariff of 4.2% and low import penetration, 21.9% of GDP. While Canada currently sells $4 billion of agrifood products to Japan—that's nearly 10% of our total agrifood exports—tariff reductions in the TPP will significantly boost our exports into that market.
Second, the TPP builds on the North American partnership. NAFTA is the cornerstone of Canada's international trade policy and is by far our most important trade agreement. Ratifying the TPP improves upon the North American platform that has driven Canada's economy since NAFTA's conclusion over 20 years ago. Even with the growth of emergent economies, the U.S. and Mexico are our most important markets in the TPP. As our largest and third-largest merchandise trade partners, nearly 78% of Canada's exports go to these two countries.
We must implement the TPP to deepen these strong commercial ties, enhance North American competitiveness, and ensure our countries are on the same footing when it comes to international trade standards. Failure to take part in a trade agreement with such important trading partners would be disastrous for Canadian companies integrated into North American supply chains. Whereas NAFTA has given Canada a leg up on global competition by building a strong North American platform, being left out of the TPP would see the erosion of that advantage to participant countries. Signing on ensures that Canada maintains strong relations with our North American partners.
Third and finally, the TPP sets a new standard in regional trade agreements. By setting reciprocal and forceful trade rules and establishing disciplines in key areas of interest to Canada, a high-standard TPP agreement will promote Canadian economic growth and jobs.
One example is in the services sector, which accounts for 13.6 million jobs and 70% of Canada's GDP. Canadian companies that excel at providing knowledge-intensive services, such as the financial services sector, will benefit from enhanced obligations covering a broad range of services. Through its potential expansion to new members the agreement will also provide the architecture for market-based rules to the growing economies in the Americas and Asia. For example, Indonesia and the Philippines have already indicated their intention to join the TPP. These two countries alone would add 354 million people to the TPP market and they would grow GDP by $1.17 trillion U.S.
With that I conclude my remarks and I'd be happy to take any questions.
Thank you very much.