Thank you very much, Mr. Chairman.
My name is David Worts. I'm the executive director of the Japan Automobile Manufacturers Association of Canada. With me is Stephen Beatty, vice-president of Toyota Canada.
Thank you for the opportunity to address the committee as it begins its study of the TPP.
To begin, let me outline who we are and what our members are doing in Canada, as this forms the basis of why we support trade liberalization such as the TPP to balance other agreements like the Canada-Korea FTA and the CETA.
As a small market with a large export-focused manufacturing sector and a postwar history, the auto industry in Canada is rooted in trade liberalization. Over the past 50 years, we've become an integral part of that industry. Since 1965, when Japanese cars first entered the Canadian market, our members have sold 15.1 million units. Since 1986, when the first vehicle assembly plant opened in Canada, Japanese manufacturers have built over 16.4 million vehicles. We are not only building where we sell, we are building more than we sell in Canada.
Last year was the second consecutive year of record production, exports, and sales for our members. Canada has been a net exporter of Japanese-brand vehicles every year since 1993, a cumulative total of almost four million vehicles. In 2015 we exported over five times as many vehicles as we imported from Japan. Nearly eight of every ten vehicles we sell in Canada are currently built in North America. Moreover, models built in Canada are among the most popular with Canadian consumers. Building locally brings us closer to our consumers.
New investments in the past year, such as the global lead designation for the new Civic in Alliston and a new generation Lexus RX launching in Cambridge, combined with the announced future growth of RAV4 into the Cambridge plant, underscore our long-term commitment to Canada, which will benefit Canadian parts makers as well.
To date, Canadian automakers' cumulative investment in Canadian manufacturing facilities is in excess of $10 billion and has resulted in attracting to Canada over 50 operations related to auto parts. The growth of our part of the industry now accounts for 43% of total light vehicle production in Canada. Direct and indirect employment stands at over 72,000 across Canada, including about 30,000 in vehicle and Japanese-related auto parts plants in Ontario, Quebec, and B.C.
As we believe in free trade, we are supporting the TPP, but not just for the five-year phase-out and the forward-looking flexible rules of origin. For the highly trade-dependent auto industry, the TPP will restore a level playing field aligned with new trade agreements, such as the Canada-Korea FTA and the CETA.
In fact, we were disappointed that the TPP tariff phase-out period was not immediate on implementation, as this would have kept us competitive with vehicles imported from South Korea, which will be duty-free on January 1, 2017. On the other hand, the five-year phase-out gives Canada preferential access to the U.S. market for 20 years over Japan, which offers the opportunity to boost production and exports from Canadian plants.
While the 25-year and 30-year U.S. tariff phase-outs, which apply only to Japan, are unnecessarily protectionist, the impact is not particularly significant. The tariff rate on cars is a nuisance level of 2.5%, and the 25% tariff on commercial trucks is not really an issue, as Toyota, Nissan, and Honda all make pickups in the U.S. Canadian and U.S. auto tariffs are not aligned, as there is no common external tariff, so there's no reason for phase-outs to be aligned. Passenger vehicle tariffs, at 6.1%, are two and a half times higher in Canada than in the U.S.
If the same phase-outs had been applied in Canada, not only would Japanese imports be at a competitive disadvantage for 25 or 30 years, it would create a serious disincentive for further investment in Canada. As such, we support the early ratification of the TPP as a positive signal to automotive-related investors in Japan that Canada recognizes the significant and growing presence of Japanese automakers and parts makers and, above all, that we conduct business on a level playing field.
Expanding international relations through comprehensive trade agreements such as the TPP will increase business opportunities and send a strong message to Canadian consumers of more choice in their car-buying experience. From our perspective, the TPP represents a critical balance as Canada forges new agreements with Korea and Europe, with a long-term positive outlook that will benefit consumers as well as many sectors of the Canadian economy, including auto and auto parts manufacturing.
Finally, to echo what others have said, if the TPP goes ahead, it would be the height of economic folly for Canada not to be in the TPP. In the unlikely event that the TPP fails in the U.S., then Canada should immediately resume bilateral EPA negotiations with Japan.
Thank you very much.