Evidence of meeting #6 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 tpp.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jerry Dias  National President, Unifor
Dianne Craig  President and Chief Executive Officer, Ford Motor Company of Canada Limited
Caroline Hughes  Vice-President, Government Relations, Ford Motor Company of Canada Limited
Angelo DiCaro  National Representative, Unifor
David Worts  Executive Director, Japan Automobile Manufacturers Association of Canada
Flavio Volpe  President, Automotive Parts Manufacturers' Association
Stephen Beatty  Vice-President, Toyota Canada Inc., Japan Automobile Manufacturers Association of Canada

10 a.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Thank you.

10 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, Mr. Hoback.

We'll move over to Ms. Ludwig. You're splitting your time with Ms. May, so you have three minutes and she has three minutes after you.

10 a.m.

Liberal

Karen Ludwig Liberal New Brunswick Southwest, NB

Thank you, Mr. Chair.

Good morning and thank you, panel. These are excellent discussions.

I'm very pleased to hear that we're all involved in public consultations and also to share time with Madam May. I think the public needs to be aware that we are very collaborative, that we're open, and that we're hearing from a variety of stakeholders both for and against.

In the last set of speakers, one of them mentioned that we are at a $122-billion trade deficit. So to stay with the status quo puts us into further challenges. We are significantly reliant on the U.S. market. In terms in ratifying the TPP, my colleague mentioned our not ratifying when the other countries do. If the TPP is ratified, how might the Japanese or the Korean automakers invest in Canada? How could we become more innovative and more competitive? How might that affect job creation and foreign investment?

10 a.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

Thank you for that question.

I think the issue for us is that we're trying to catch up to what Canada signed, the deal with Korea, and so, on the import side we're facing competition basically from our Korean competitors. They're going to be able to come in duty-free as of the first of January next year, with a significant competitive advantage. That was really our issue going into this and the reason we were supporting the bilateral negotiation between Canada and Japan. Actually we thought that might be an easier way to go, given that it was a bilateral deal and that Canada's and Japan's economies are quite complementary and our relationship with Japan has been very positive.

I can't speak on behalf of Korean investors as to why they wouldn't think about investing in Canada. In fact they were. They were here. They were invested in Quebec for a few years back in the nineties, but subsequently they pulled the plant and went to Brazil.

10:05 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

I have a quick thought on the increased investment by the Japanese and Koreans. Koreans deal with the Korean accord. This deal is about movement of product, and so this deal makes it easier for product made in Japan or in other countries outside of North America to flow into Canada. So if you're opening the doors to ease the movement of goods manufactured somewhere else, you're undercutting the value proposition of increased investment in this market. If what you're doing is then redefining the local value content and you're at a point where the vast majority of the regional value content can be sourced outside the TPP, that means China. So if you're going to manufacture in Asia and you're going to source from China, why would you build new plants here?

10:05 a.m.

Liberal

The Chair Liberal Mark Eyking

We're going to move to Elizabeth May for the remainder of the time. There are two and a half minutes left.

10:05 a.m.

Green

Elizabeth May Green Saanich—Gulf Islands, BC

Thank you very much, Mr. Chair.

My question is for Mr. Volpe.

First I want to thank you, because I think your narrative presentation of how the TPP evolved and how Canada got squeezed in so many places to make this disadvantageous to us explained it better than I've ever heard anyone explain it.

I would also say parenthetically that I don't believe it's so unlikely the U.S. won't ratify the TPP. Hillary Clinton has come out against it. A bunch of Republicans and Congress are against it.

How much damage will this do to the Canadian auto parts manufacturing industry, most members of which are small and medium-sized enterprises, if it goes through as currently drafted? Do you believe there's scope, particularly with the concern in the U.S. politically, for us to renegotiate key pieces to protect your sector?

10:05 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

I have two separate thoughts. Renegotiation, I think, isn't on the table. I do think there are some side agreements to this deal that I'd like to see someone challenge. Those side agreements do things like deal with snap-backs and safeguards and tariff elimination schedules. You know, the premise for Canadian manufacturers, both small and medium-sized ones.... I represent all of them. You heard from a lot of large ones who said they were happy and they support the deal, but I want to parse what they're saying. They're saying they're getting access to new markets, and that they can find new customers and sell to them. But it's a GNP discussion, not a GDP discussion. If you're going to supply somebody who's assembling in Asia, you're going to assemble your parts in Asia.

The inverse in this deal is true. We are now opening the market for larger players to compete. They have mobile capital and economies of scale, and they can bid on products and bid on lines that the small and medium-sized single footprint companies that are healthy today will have to compete with. You can't argue one without the other. Even though some of the larger billion-dollar Canadian tier one companies are going to possibly benefit from getting new customers, they will benefit from getting those customers somewhere else, hiring people in other countries, and sourcing goods in those countries to make those parts to build those cars. That's where we are on this.

10:05 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much, Mr. Volpe.

Time is up and we're going to go to the Conservatives now.

Mr. Ritz, you have five minutes.

10:05 a.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Thank you. It's a very interesting discussion today, folks.

I want to talk about trade discussions, which are always about balance. There are always people who think they won more, and other people who think they lost more.

Mr. Dias made the point that the auto sector is the largest manufacturing sector in the country. That's not true; it's actually food processing.

You also made a point on currency manipulation, and I couldn't agree with you more. There are side agreements under global discussions that take care of currency manipulation, should it rear its ugly head.

There is also a lot of talk about job loss, but there has never been much talk about job creation, so I'd like to hear your side of that. I know that on the last panel they talked about 20,000 jobs being lost immediately, but that's a worst-case scenario, and I don't see it happening. There are also the job creators. In the last 40 years, you've created 72,000 direct jobs. Do you see the opportunity to create more jobs as we increase our automotive footprint?

We're not dealing with domestic consumption of 30 million people, or even with the U.S. at 300 million people. We're dealing with 900 million people all over the world, and we can start to talk about global exports. Do you have a number that says which kinds of jobs could be created?

10:10 a.m.

Executive Director, Japan Automobile Manufacturers Association of Canada

David Worts

Actually, we're coming at it from a slightly different perspective. We're trying to catch up with what Canada has negotiated with Korea and with CETA. Those are our main competitors.

Given the amount of investment the Japanese automakers and the auto parts makers have put into Canada, it would be perverse if European vehicles and Korean vehicles were coming into Canada duty-free and Japanese vehicles weren't.

Our story is that trade liberalization has been at the root of all we do and have done in Canada. We are continuing to make commitments to Canada, not just at Honda and Toyota, but also at the Hino medium-duty truck operation in Woodstock, and at Toyota's wheel plant in British Columbia. It is there for the record. We're not in the business of forecasting where this might go, but we're saying that we need to create a competitive, flexible environment.

We can look at things like the CETA and the TPP for new business opportunities. It's not going to be immediate, necessarily, because these are long in gestation and so the benefits are going to come over time. But I think we have to make sure that you maintain a positive environment here in Canada.

10:10 a.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Pre-CETA, pre-TPP, and pre-South Korea, we saw a huge erosion of the whole auto sector, sliding into some tax-free states in the U.S., sliding into Mexico, and into China in the case of Magna building plants there. I see trade liberalization as a way to divert a lot of that and maintain our auto sector here in Canada. When I look at the removal of our tariff barriers over that five-year period, as opposed to the U.S. maintaining them for 25 and 30 years, depending on the equipment, where they already build a lot in the U.S. anyway, I see that as an opportunity. We would now have a level playing field to draw investment into Canada for an extra 20 to 25 years. This should help to stop that erosion.

Are there any comments on that?

10:10 a.m.

Vice-President, Toyota Canada Inc., Japan Automobile Manufacturers Association of Canada

Stephen Beatty

There are two things we would tell you, and it goes back in our history, and that is, manufacturing follows sales. The greater the opportunity for us to reach a market, the greater the opportunity there is for us to build manufacturing. This has been our history.

The other aspect of this is that keeping the NAFTA rules in place has often been touted as what will save the Canadian industry. Clearly, that same period of time has demonstrated there has been a drift of Canadian manufacturing toward Mexico. The NAFTA region was set up in such a way that if you wanted to have the lowest cost of production, you were going to move south. That is not the most compelling argument for manufacturing.

What you want is a manufacturing operation that provides the highest quality, the greatest responsiveness to the marketplace, and is able to manufacture high value-added, technologically advanced products. That is what we've brought into our Canadian facilities.

With that in mind, I'm confident that with a lot of hard work, we've built a competitive manufacturing base here in Canada. But over the long haul, it's very difficult for us to think that staying behind tariff barriers, and in particular impeding Japanese manufacturers' ability to respond effectively to the marketplace is going to create net benefits for the sector in Canada.

10:10 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much, Mr. Beatty.

We're going to the NDP now for three minutes.

Ms. Ramsey—

10:10 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

Mr. Chair, may I just say something in response?

I think we're focusing on tariffs, and tariffs are important for movement of goods. The opposition to the TPP terms has never been on tariffs. You can expand markets, you can drop tariffs and allow people to sell, and the devil is in the detail, the regional value content.

If you kept the regional value content at a level that underpinned the proposition of buying locally, that would be a little different from saying that on some auto parts, we're at 35% local value content. Just to be clear, that's 65% of that part. It doesn't have to come from a TPP country.

If you make the premise that you can buy more parts from outside TPP countries in lower cost jurisdictions that currently underpin production in Asia, it does not then somehow create a value proposition for new investment in Canada. It does the opposite.

10:15 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, Mr. Volpe.

We're going to start the clock. He didn't take up your time. You have three minutes. Go ahead.

10:15 a.m.

NDP

Tracey Ramsey NDP Essex, ON

My question for you is around the RVC, regional value content.

Jerry Dias said that if they see a 20% reduction in the content, which is included in the TPP, it would ultimately result in 20,000 Canadian auto jobs lost. There are 81,000 parts jobs in Canada. Can you tell us the impact on the jobs that you can see coming forward from the regional content being reduced?

10:15 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

I think that Unifor has done some study. What we've been saying from day one is that until we've boiled these terms, it's very difficult to say a specific number, but I'll partition it this way.

About 40,000 of the auto parts manufacturers' employment is in small to medium-sized companies. Those companies are single footprint firms, or they are tool and mould makers, or they may be double footprint, usually Canadian-based firms. Those firms are going to see new competition on the lines that they supply from outside North America and outside TPP countries. They have new competition.

The other 40,000-plus are employed in companies like Magna, Linamar, and Martinrea. These are companies that have large global footprints and mobile capital. I think we've all heard from some of their CEOs saying that they'll be fine.

I think the focus is on those small and medium-sized companies.

If you're supplying a line right now under our current NAFTA rules, and the OEM is looking at a NAFTA sheet—and, of course, it doesn't work that way, where you're sitting with a sheet with a checklist—you do have to be compliant. You look at that compliance, and it says now you're going to have to be somewhere in the 60% compliance range. It opens up other options. This is just common sense. It's good business practice to look at other options.

We can look at other options not just from Japan, which is a wonderful manufacturing partner. Frankly, the Japanese investment in Canada, specifically in Ontario, is the difference between Ontario's success and Michigan's success. We're very respectful of that, and we represent them. If you're purchasing in those companies, you now get to look at other TPP countries, and you get to look ostensibly at China and other lower cost countries which, by the way, make great stuff.

10:15 a.m.

NDP

Tracey Ramsey NDP Essex, ON

Is it fair to say then that the SMEs would experience job loss?

10:15 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

Without question.

10:15 a.m.

NDP

Tracey Ramsey NDP Essex, ON

You also mentioned about consultation, that you weren't consulted at all. Can you speak to the current federal government and whether you've had any ability with the current trade minister or with the current government, in between the window of time from the election until the signing on the 4th, to let them know your position?

You talk about how much you were really digging into the TPP and the impacts across the different NAFTA partners. I'd like to know more about the consultation process with our current government.

10:15 a.m.

Liberal

The Chair Liberal Mark Eyking

Sorry, you'll have to be quick. This is the last question.

Mr. Ritz asked the question when he was done and it was answered, but that's fine. Go ahead.

10:15 a.m.

President, Automotive Parts Manufacturers' Association

Flavio Volpe

I'll give credit where it's due with the new government. I think that right after the new minister was sworn in, her office called us and she came to see us. I think we were the first meeting. If I could characterize the meeting, it was technical, and it was three hours long instead of the allocated one hour. To her credit, the minister for whatever we're calling Industry Canada today came. We had deputies, chief negotiators, office staff; we had the whole crew there, and we've been in constant contact since.

The deal is baked, but what we're focusing on is what the process looks like in the United States, and why Canada should take its foot off the gas pedal and wait and see how the Americans deal with it. And they've been listening.

10:15 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much.

March 8th, 2016 / 10:15 a.m.

Liberal

David Lametti Liberal LaSalle—Émard—Verdun, QC

May I just say it was the Minister of International Trade who met with Mr. Volpe.