Evidence of meeting #40 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was zealand.
A recording is available from Parliament.
October 25th, 2016 / 12:05 p.m.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you, Mr. Chair.
I would like to thank the witnesses for being here. Their comments have been very interesting.
My first question is for Mr. Giroux.
You referred earlier to currency manipulation. Which country were you referring to primarily?
Chairman, International Trade Committee, Canadian Association of Railway Suppliers
It would tend to be more of an up-and-coming economy and an economy that would be more difficult to police.
I wouldn't want to point a finger, per se, but we've seen alleged examples of it on numerous occasions. Asia-Pacific markets have been widely regarded as culprits.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Are they countries that have signed the TPP or countries that have not yet signed it?
Chairman, International Trade Committee, Canadian Association of Railway Suppliers
There are a few TPP countries that are potentially capable of this type of action.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
I now have a question for Mr. Nantais.
You represent the U.S. automotive manufacturing sector. The Japanese are not among your automakers, is that correct?
President, Canadian Vehicle Manufacturers' Association
That's correct. We represent the traditional automakers.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
You also mentioned currency manipulation. You talked about eliminating tariffs in five years.
With respect to automotive plants, you said 25 years, and 30 years for trucks. Is that to set up a new production line?
Could you tell us more about that?
President, Canadian Vehicle Manufacturers' Association
Yes.
First off, on currency manipulation, there are several countries within the TPP that have exhibited that manipulation in the past, such as Japan, Korea, and China.
When I speak about the tariff, what I'm referring to is the tariffs that were negotiated by the United States, which are the 25-year and the 30-year tariffs, and then the tariffs that were negotiated by Canada, which were basically five years. You have 25 years to phase out a 2.5% tariff on passenger cars in the United States, and you have a five-year tariff schedule to eliminate a tariff of 6.5% on passenger cars here. There's a huge amount of daylight between those two tariffs and the schedules, but the impact is far more significant on vehicle manufacturers that produce here in Canada than it would be for those in the United States.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
So eliminating tariffs is more of a problem for Canada than it is for Mexico or the United States.
President, Canadian Vehicle Manufacturers' Association
That's because we are such a highly integrated industry.
The integration started in 1965 under the Auto Pact. Under the Auto Pact, there were principles that led to the full integration of our industry, and that literally led to tens of thousands of jobs in Canada. Now we have a very disparate tariff elimination schedule between the United States and Canada, so you start to decouple that integration.
We have plants, for instance, that produce parts and components for both sides of the border. We export more than 87% of what we build into the United States. This could be very disruptive to our industry, and it really starts to decouple that integration that has been so beneficial to Canada.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
As I understand it, your association does not support the TPP.
President, Canadian Vehicle Manufacturers' Association
We support free trade and we support trade that provides benefit in our industry. CETA is a very good example of a modern class A type of agreement that recognizes the integration of our industry.
We do support free trade, but we think that the TPP has some aspects that are not very useful.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you.
I have a question for Mr. Izurieta.
What is your definition of full employment, which should have been used in the TPP during negotiations?
Senior Economist, United Nations, As an Individual
We don't use full employment in our models. We let the labour adjustments take place, and we measure the number of employed people in the entire economy. That's the reason for the difference between the projected baseline and the TPP scenario.
Other models use different definitions of full employment. These definitions are tautological, in a sense, because every worker who is displaced and has lost his skills and is no longer, after a period of time, looking for a job is therefore not considered part of the labour force any longer.
That is how in these other models—not ours—you can get away with the problem of the unemployed, because they simply disappear from your definition of the unemployed. In our model, we don't do that. We measure the number of employed people in different scenarios.
Liberal
The Chair Liberal Mark Eyking
We have time maybe for two short sessions. We'll keep it to around three and a half minutes.
Mr. Fonseca is next, and then we're going to have somebody from the Conservatives for three and a half minutes.
Liberal
Peter Fonseca Liberal Mississauga East—Cooksville, ON
Thank you, Mr. Chair.
My first question is for Mr. Izurieta and Mr. Capaldo.
In your study that you did of the TPP and of all the countries, did you break down each country in terms of its particular job losses? I know you said for Canada it's 60,000. There may be some winners and some losers in this. Who would be kind of on the top end?
Senior Economist, United Nations, As an Individual
We have various sectors in our model, but only one single pool in the labour market. That is because, dealing with a global model, which is different than dealing with a country model, the amount of data and calculation time that would be required to split the total employment into winners and losers, as you suggest, would be irreconcilable.
That is indeed a partial limitation of our model. At the same time, it gives us the great advantage of seeing the aggregate picture, which is where we can look at a global model.
Research Fellow, Global Development and Environment Institute, Tufts University, As an Individual
Sorry; if I may add, there is also the advantage that at least we do calculate employment impact, which we wouldn't be able to do if we assumed that employment is always full.
In other words, standard models often have a much more detailed disaggregation of the economy, but because they assume away the problem of unemployment, from that point of view, they're useless.
Liberal
Peter Fonseca Liberal Mississauga East—Cooksville, ON
Assuming away the unemployment, and with some of the comments that you made earlier, are you saying that well-paying jobs in Canada are going to now be lower-paying jobs or jobs that aren't as good? Are you saying there will be unemployment or underemployment? Is that what would happen? Is that the shift that you see?
Senior Economist, United Nations, As an Individual
In an economy like Canada, which is pretty diversified between manufacturing industries and the other respondents who are expressing their concerns, it is possible that there could be some winners and losers.
Looking at it from the perspective of the aggregate macroeconomic variables, whatever the industries are producing, they have to sell somewhere, and they sell either to the export markets or to domestic markets. A big part of the aggregate amount in Canada is domestic consumption. A considerable amount of income is spent on what Canadians themselves produce. A big part of that, in turn, is consumer goods.
If household incomes are not rising as fast as productivity, that means that there will be a gap in the shares of spending between income earners on wages and profit earners. There's a gap in favour of profits in our simulation, resulting therefore in lower consumption demand. That's because wage earners tend to spend a larger proportion of their income, more than profit earners. That's the basic logic underlying our analysis.
Liberal
The Chair Liberal Mark Eyking
Thank you.
We're going to move over to Mr. Hoback. You have three and half minutes, sir.
Conservative
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Leamington, ON
I guess it's me, Mr. Chair.
I thank everybody for coming. We only have three minutes, so I'm going to try to zero in.
Mark, it's near and dear to my heart too, as you know. The auto industry is so important in our neck of the woods.
Correct me if I'm wrong, but I think the previous government has probably done more for the auto industry than any government within recent history. I know that we really had some challenges at that time. Your organization was always very helpful in showing where we could help, and we could talk about some of those things: the harmonization, border crossings, and some of the assistance that you needed. I remember at the time that one of the areas that the union was really adamant about was our high dollar. We have a low dollar now.
First, can our auto industry compete with the rest of the world?
Then, what are the top three things, and maybe you'll have five, that make it difficult for the auto industry in Canada to compete at this particular time?
President, Canadian Vehicle Manufacturers' Association
You hit the nail on the head. The key challenge for us is to keep what we have.
As I mentioned, we have a seven to nine job multiplier, so if you lose one assembly job, there are seven or nine others in the economy who also lose their jobs. The key is to keep what we have.
First off, to your question on competing elsewhere, we can compete elsewhere, but our main competitors, in terms of at least production, which produces the jobs, are primarily the northern mid-states.
A lot of the good things that we've done federally and with the province are very helpful—there's no question about that—and we came out of some very dark days in 2008-09. Those things were very helpful. The key now is keeping the cost of business down.
Right now, whether it's regulatory differences or the cost associated with climate change and cap-and-trade programs or the price of carbon, which we don't have in our competing jurisdictions, they add to the cost of doing business. That is very critical to us, and it's critical to any manufacturer in Canada. If we are incurring costs that our competitors aren't, that's a problem.
We have some really positive things in terms of skilled labour, and we now have some new labour agreements. These are all things that are going to work in our favour, but we cannot forget to connect the dots, whether it's trade, whether it's regulatory alignment and harmonization, or whether it's the cap-and-trade costs of doing business. You cannot deal with those singularly. You have to look at them in their entirety, and you have to connect the dots, because that's what ultimately adds up to whether we can or cannot continue business in this country, whether it's auto or otherwise.
