International Trade Committee on March 8th, 2016

[The Chair, Liberal, Mark Eyking]

We have a lot of people talking here.

Mr. Worts, if you want to make a few comments on this, go ahead.

[David Worts]

I'd like to say a couple of things.

[The Chair, Liberal, Mark Eyking]

Because you're using up somebody else's time.

Go ahead, sir.

[David Worts]

I would say, first of all, auto parts tariffs currently in Canada are zero and have been since 1998, so that right now, parts can come in from anywhere duty-free without any kind of rule of origin. That has been the case, because the duty remission programs that were in the NAFTA were eliminated and that was the response Canada gave at that time in order to effectively support the manufacturing operations here in Canada.

The second thing I would say is NAFTA doesn't guarantee any country-specific sourcing. A part could have zero Canadian content and still be NAFTA compliant.

The competitive pressure on parts makers hasn't really changed with respect to the TPP, but that said, because of the way just-in-time assembly works in most vehicle companies these days, which is that you look first at the local supply community, maintaining a footprint in Canada is good for and critical to maintaining the Canadian auto parts sector.

[The Chair, Liberal, Mark Eyking]

Those are good comments and thanks for bringing that up, Mr. Worts.

We have about four minutes left. My understanding is the Conservatives want to split that, so you're going to split it with.... We have two minutes for the Conservatives, and then we have two minutes for the Liberals, and then we'll wrap it up.

Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I thought I had four minutes. I'm going to try to do it as quickly as possible. I want to ask a direct question.

The former government focused on an auto policy that surrounded the corporate tax rate, centres of excellence, capital cost allowance, harmonization, the bridge, the freezing of the EI rates. Is that something that helped Toyota build a footprint here in Canada and make policy decisions that led to expansion?

[Stephen Beatty]

I think those were very helpful. I would also say that there was through that whole period a lot of conversations about the need for better bilateral relations with Japan, and action was initiated during that period.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

You talked about how built into this agreement are standards on labour and environment policies. Would a carbon tax have an effect on competition with the U.S. and Japan if Canada were to adopt a carbon tax, which would not then be a level playing field with those other two countries?

[Stephen Beatty]

Again, anything that affects costs of production ultimately affects the competitive position of manufacturing operations back and forth.

It comes down to what sorts of issues are being taken in the other trading jurisdictions with which we have a primary relationship. If Canada moves by itself, then it's bound to have an impact on manufacturing competitiveness.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

Madame Lapointe, for two minutes.

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

Thank you, Mr. Chair. I thank the witnesses for being with us today.

Mr. Worts, I would like to know if your employees are unionized, and if they are, with which union. I am talking about the Japanese companies you represent.

[David Worts]

Honda and Toyota are not unionized and neither is Hino. There was a joint venture between General Motors and Suzuki that was called Cami, which is now a 100% General Motors factory, but they were unionized at the time.

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

Thank you.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

With the success we heard that Ontario has had with the Japanese plants that located here, in your opinion and with your understanding of the TPP, what would the chances be of us landing another assembly plant like that here in Ontario or in Canada?

Would we be at a competitive advantage or disadvantage at the global table now?

[Stephen Beatty]

Let me go back in time. I think a lot of water is under the bridge since the original free trade agreement was signed, but I would say to you that high content rules of origin in the original Canada-U.S. agreement actually worked against Canada in attracting new automotive investment.

The higher your starting rules of origin are, the less flexibility a new plant will have and if you don't have a group of dedicated suppliers in place to provide things like powertrain, then you're not going to be able to meet the requirements.

If you are a new investor, under those circumstances, you'd likely go first to the U.S. and not to Canada.

[Flavio Volpe]

The devil is in the details. This is not in a tariff. We talked about whether auto parts had a tariff coming in and out. Cars get made in a place. There are concentric circles. You source from those concentric circles because you need hundreds of thousands of parts at a specific time. The idea that the auto parts coming into Canada didn't have a tariff was irrelevant in this discussion.

What's relevant in your question and in this discussion is regional value content. Maybe 62.5% is a barrier to entry for new investment, but certainly 35% is no barrier at all. Why would I build something if I could sell it here for the same price?

[The Chair, Liberal, Mark Eyking]

I thank the witnesses for all the information today and the good questions. We had a good day.

This is not the last we're going to hear from the auto industry. Our committee's going to be travelling across the country, so we might be in your town. You'd be welcome to come.

On that point, thank you very much for coming. It was an informative day.

We'll suspend the meeting as we're going to go in camera as soon as the room is cleared.

[Proceedings continue in camera]