Thank you for the opportunity to provide Ford of Canada's views on the automotive terms in the Trans-Pacific Partnership agreement. Ford Motor Company is a global automotive industry leader founded in 1903 that today employs 199,000 people in 67 plants worldwide to manufacture and sell vehicles in more than 200 international markets. Today, on a global basis, Ford exports over 40% of the vehicles it produces worldwide.
In Canada, Ford has been part of the economic fabric for 112 years, providing high-quality jobs that build and sustain Canada's middle class. Today, Ford of Canada employs over 8,200 men and women in three vehicle assembly and engine manufacturing plants, two R and D centres, and two parts distribution centres. Ford purchases over $5 billion annually from parts suppliers across Canada, and Ford's network of 425 dealers employs 19,000 employees in communities across Canada.
Since 2000, Ford has invested over $12 billion in our Canadian operations, including $700 million in Oakville, to produce the Ford Edge for global markets, including the right-hand drive and diesel vehicles that today we are exporting to Europe. Trade and trade policy is hugely consequential to the success of Ford's Canadian operations since 100% of our engines and 90% of our vehicles are exported around the world, including to markets like China, South America, and now Europe.
Ford was one of the first companies to publicly support CETA. At Ford, we are not just philosophers of trade, we are practitioners of trade. That is why we have supported every free trade agreement ratified by the Canadian government, with the exception of the Canada-Korea Free Trade Agreement. In fact, it was the auto sector, in the 1965 Canada-U.S. Auto Pact that became the foundation for the Canada-U.S. Free Trade Agreement, and then the North American Free Trade Agreement. Today, as a result of these historic agreements, Canada's auto industry is fully integrated in the North American auto industry, allowing Canada to achieve economies of scale that drive global competitiveness.
Canada's auto industry is at a very important inflection point in the highly competitive global industry, and trade policy matters to Canada's future success. Trade agreements open new markets for Canadian-produced goods and level the playing field for Canadian manufacturers and workers. Unfortunately, the auto terms that Canada agreed to in the TPP do not meet that test.
In Ford's perspective, the TPP falls short on two very important points. First, Canada accepted an accelerated tariff phase-out period of five years, or five times faster than the U.S. tariff phase-out period of 25 years for cars and 30 years for trucks. Both of the U.S. tariffs are back-end loaded. Second, the TPP fails to include strong and enforceable currency disciplines to address currency manipulation as defined by the International Monetary Fund.
Currency manipulation is perhaps the most significant trade barrier and risk that Canadian exports from any sector face around the world. When governments intervene to depress the value of their currency in order to increase export competitiveness for domestic manufacturers and decrease imports, they are widely understood to be manipulating their currency. In the context of a free trade agreement, currency manipulation can completely offset the benefits of tariff reductions by simultaneously creating an unfair export subsidy and an import surcharge. World trade rules have long obliged countries to refrain from currency manipulation because of the potential to distort trade. Yet, despite these rules in place at the IMF and the WTO, no multilateral enforcement actions have been taken in the seven years this global economic system has been in place—not one single multilateral enforcement action.
Canada's vehicle sales market is one of the most open vehicle markets in the world, with 83% of the vehicles sold in Canada being imported from another country. Yet markets like Japan and South Korea remain closed to vehicles produced in Canada. In 2015, Canada imported 134,000 vehicles from Japan, but only 500 Canadian-produced vehicles were exported to Japan. Closed markets can only be opened by achieving the right terms in trade agreements that eliminate all trade barriers, including currency manipulation.
The TPP auto terms will not increase Canadian auto exports in any meaningful manner, but instead will put Canada's automotive manufacturing footprint at further risk. It is for these reasons we are recommending that Canada not ratify the TPP in its current form.
Instead, Canada should play a constructive role in working with other TPP members to make this deal better for Canada's auto sector by matching the U.S. auto tariff phase-out periods. Canada should also seek to make the TPP better for all Canadian sectors by including strong and enforceable currency disciplines. From the start, Ford of Canada has played an active and constructive role in articulating the trade policy issues that the TPP agreement needed to address in order to support Canada's auto sector. We will continue to play this role, not only because 90% of our vehicles and 100% of the engines that Ford builds in Canada are destined to be governed by the policy and rules of international trade, but also because we know there are other Canadian companies and other workers that will not have a fair chance to compete if the TPP is ratified in its current form.
In summary, free trade must truly be free, with companies and industries succeeding on their own, not with a government thumb on a scale. If a trade agreement with accelerated auto tariff phase-out and without strong and enforceable currency disciplines were approved, it would send a message that the status quo is acceptable, that countries can continue to subsidize their exports and undercut Canadian manufacturers and workers while keeping their domestic markets closed to Canadian exports.
We can do better. We should do better.
Thank you very much.
