International Trade Committee on March 8th, 2016

[Caroline Hughes]

Certainly.

In terms of the consultation process, both as an industry group and as Ford, we engaged with the negotiators. Again, going back to the integration of the North American market, we felt that this concept of integration of the North American auto industry—Canada, the U.S., and Mexico—was so critically important that we arranged for a meeting of Canadian negotiators in Washington with the USTR, with our auto sector and the U.S. at the table, so that both sets of negotiators heard at the same time about how important it was for us to both land on the same terms.

That happened in 2013. We offered to arrange ongoing joint meetings, because the one thing we didn't want to have happen is the negotiators on either side of the border misunderstanding our position. We wanted to present a united North American front. As I said, we offered to arrange additional meetings, but unfortunately, we couldn't find a date that worked for the negotiating teams. We would have been happy to have that conversation continue.

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

Thank you.

Mr. Dias, you made some statements about job losses here in Canada. The number I've been able to find is around 20,000 possible job losses. Can you give us a bit of an understanding of the analysis you did and where those job losses would take place and over how much time?

[Jerry Dias]

We were arguing not to change the threshold as it relates to assembly and auto parts assembly in Canada. In the previous NAFTA deal, it was at 62.5% and 60% for assembly in auto parts. We said that whatever you do, don't change it. So of course they reduced it to 45% and then to between 35% and 40%. When you take a look at the thresholds, that's a 20% reduction in thresholds that have to be met, and with a 20% reduction based on 100,000 jobs, you're looking at about 20,000 jobs lost within the auto industry.

It's clear the auto part suppliers are going to follow assembly, and this deal is a disastrous deal for the Canadian auto players. I just want you to look at it from this vantage point if you wouldn't mind. The Japanese automakers will come here today and say it's a great deal. If the Japanese automakers are saying this is a great deal, it's going to be great for the Japanese companies based in another country. When you have a North American player, a major employer, saying that it's a bad deal, then I would suggest we have to decide whose interests we're looking out for.

With this deal, I can't believe we would do a snap-back in five years or a tariff elimination in five years, especially when we knew that the U.S. and the Japanese governments were bargaining weeks beforehand and had agreed to a 25-year and 30-year threshold. With Malaysia and Vietnam, it will be 13 years before the tariff comes off. Why would we do five years? Why? Either we don't understand the industry, or we didn't care about the impact it would have on Canadian jobs, or we were incompetent. It's one of those things, because we couldn't have such a low threshold that the tariff was coming off when we knew what everybody else around the world did.

We're talking about a government that has perfected the art of currency manipulation. They already sell 135,000 vehicles a year to Canada. We ship 500 back. With elimination of the tariffs and lowering of the thresholds, our supply jobs and assembly jobs are not only going to be threatened by the TPP players, but they're also going to be penalized by non-TPP imports from China, from Malaysia, and from other countries around the world that aren't even a part of the TPP agreement. This is a huge threat. And it's not just the labour movement that is saying so; the major corporations are also saying that.

Dianne is right. Reid Bigland from Chrysler said that if the TPP had been in place three years ago, they wouldn't have made the $3.6 billion of investments in their two assembly plants in Canada. As Dianne said, and as they all say to me, why would we invest in a country that doesn't respect the role we play in the economy? Auto is the number one export industry in Canada, more so than oil and energy. It's number one. Japan goes into trade bargaining and they want to solidify and enhance their export base. What's their number one export industry? It's auto. So they go in with a mindset to encourage it, to enhance it. We don't. We go in as if auto really doesn't matter.

The TPP was a rush deal for political purposes. It wasn't done in the best interests of Canadians, and the fact that there isn't an economic paper that shows what the impact is shows that it wasn't necessary.

[The Chair, Liberal, Mark Eyking]

Thank you very much, sir. The time is up.

We're going to move to Ms. Ramsey for the NDP.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

Thank you so much for presenting to us today. It's been very informative.

There are a couple of things I'd like to ask about. The TPP includes a motor vehicle safeguard mechanism that would be available to Canada and Japan. If a surge of Japanese auto imports threatened Canadian auto producers with “serious injury”, and I'll put that in quotes because that's the actual term that's used, this mechanism would allow Canada to apply tariffs for up to five years on these imports at a higher rate than what is outlined in Canada's TPP tariff schedule.

According to the TPP, a “serious injury means a significant overall impairment in the position of domestic industry”. So if a surge of Japanese auto imports were to occur, what would be your definition of serious injury to the Canadian domestic market?

[Caroline Hughes]

Let me answer your question in a bit of a different way.

Ford has made the move to be a truly global company, and our Canadian footprint is part of our overall global footprint. In terms of an export platform, today, as Dianne mentioned, we export 90% of the vehicles we build from Oakville. Fifteen per cent of the vehicles we build in Oakville are exported outside of North America. In 2014 we exported 21,000 vehicles to China, 13,000 vehicles to the Middle East, and 5,000 vehicles to South America. There's a bunch of other countries as well. In fact, we export the Edge to over 100 markets, but those are the big chunks. I say that to demonstrate that the old paradigm of just shipping to the U.S. is gone. We ship around the world.

In terms of harm, I have to bring it back to the fact that the single most significant trade barrier we see is currency manipulation, and that will affect our vehicles that are built in Canada and exported around the world. That's one of the challenges also of the safeguard. From a company perspective, we'll look at the overall deal, and we'll look at whether Canada is truly a country that wants to support a competitive and forward-thinking auto sector. In this deal, without the currency manipulation in place and with a much more accelerated tariff phase-out, we don't see that it meets that definition.

[Tracey Ramsey, NDP, Essex, ON]

I have a second question.

There's a concept out there that there's an assistance package that's going to be offered to auto, similar to what we've heard around supply management.

It's my understanding, and I'd like if you could clarify this, that that's actually a shift of funds that already existed in the auto innovation fund. Could you also explain to the committee whether that was something the automotive industry sought, or whether it was something the government was attempting to smooth the deal with?

[Caroline Hughes]

You go ahead.

[Dianne Craig]

I'm a little bit familiar with this proposed package to try to soften the blow, especially for the smaller parts makers. But global agreements you presumably live with for a lifetime. We cannot be making concessions on principle, especially for these parts makers.

Jerry made a really important point. I would implore you, as you're talking to all the witnesses, to understand what their self-interests are. I've been asked the question of why, as an industry, we're not united around this issue. It's very simple. When you look at those who are against it and those who are for it, I ask you to ask them what the interests of their companies are, and then what is in their interest for Canada.

Ford Motor Company is a global company. As much as we've certainly been arguing for strong currency disciplines, and obviously the tariff was very different in the U.S., Ford Motor Company is a global company. We source from all over the world, and we ship to all over the world. The TPP is not going to make or break Ford Motor Company. The TPP will hurt or help Canada. That's why we are advocating for what is in the best interest for Canada.

As the TPP is outlined today, this will not be in the best interest for Canada in terms of creating any export opportunities.

[Tracey Ramsey, NDP, Essex, ON]

My last question is about the tariff phase-outs.

We know there's a huge difference between what the U.S. has in this agreement and what we have. You've touched a little bit on how this phase-out would affect auto. You've talked about the 20,000 jobs that would be lost under the content changes.

Could you let us know what the conversations were during your consultations around this difference in the tariff phase-out with the U.S? Was there ever an opportunity for us to have the same deal that they did? Under the current Liberal government, what have those conversations or consultations been?

[Caroline Hughes]

In terms of the tariff fees we were clear from the beginning [Technical difficulty—Editor].

I'm not sure why we didn't get there, but I know that our advice was very clear in terms of having, because of the North American integration of the market, to land in the same place on the auto tariff phase-outs.

[Dianne Craig]

To add to that, the U.S. knew, because Japan has been a historically closed market, that it would take maybe years to open up the market. Maybe the Canadian negotiators, with all due respect, were a little bit naive to think it would actually open up in six years. When this tariff phase-out goes out in five years, the 6% tariff, you can call it $2,000 on average for a vehicle. If you add that to what the Canadian revenue loss will be, it will be about $200 million that the Canadian government is going to basically gift back to the Japanese automakers, because they're no longer going to be spending that tariff. I promise you it won't come in terms of consumer-reduced prices. They're going to take that $200 million to $250 million and they're going to invest it in their home country in autos. And that is a big problem for us.

[The Chair, Liberal, Mark Eyking]

Thank you, Ms. Craig.

We'll move on to—

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Chair, would it be possible for me to get back in at the end of this round?

[The Chair, Liberal, Mark Eyking]

I think what we do is.... We have recognized parties here. If you want to ask a question, we will discuss it in camera among ourselves. If you ever want to ask a question, because you're not a recognized party, I'm not saying we can't do it, but we'll discuss it among ourselves in camera. If you had put this request in before, we would have looked at it, but right now we have a list.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

With all due respect, Mr. Chair, that's a brand new rule. When I appear before other committees, I ask, and it's at the discretion of the chair, and then they can decide to let me ask the question. I don't want to take a lot of your time, but what you've just proposed isn't normal practice.

[The Chair, Liberal, Mark Eyking]

We're going to wait for this round to finish and I'll check with the committee. Right now we're in the midst of questioning.

Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you, Mr. Chair, and welcome to the witnesses.

Ms. Craig and Mr. Dias, you mentioned meaningful consultations, and Madam Ramsey asked about the consultations you have had with the Liberals.

Actually, this is a chance to have real consultations, because this is an open process, and we have a parliamentary secretary sitting here taking this voice to the minister and to the government. This is not just a study, but real consultation is happening.

Mr. Dias, you mentioned that the TPP will have an impact on the export of logs. I come from British Columbia, where there are almost 27,000 members of Unifor. You represent them, so thank you. How would it affect the B.C. lumber situation? Everyone I talk to who is concerned about B.C. lumber says, “We are supportive of the TPP, but this is the first time I'm hearing...”.

[Jerry Dias]

There are several problems with it. There's a side letter which says that Japan can immediately request and be granted the export over all logs. The impact that's going to have on B.C., New Brunswick, Ontario, and Quebec will be whether or not we have enough supply within Canada to run our own mills, if in fact they have the right to unilaterally request raw log exports. That's going to have an impact on saw mills and on the system in a lot of remote communities across the country.

[Angelo DiCaro, National Representative, Unifor]

To the point that was made, one thing in addition to what Jerry was saying is the lack of clarity about what was negotiated. Our intelligence on this suggests there's still some discrepancy about the understanding of the terms in that deal and what this will mean about protecting that raw log export regulation in B.C. We raise it as something that our members are flagging. We want clarity on that, but it's another example of how there's still a lot of questions to be answered around that.

[Jerry Dias]

We have a $122-billion deficit. Do you know why? It's because we have no vision. We're a country that has lost our way as it relates to manufacturing anything. A country so rich in natural resources and raw materials, and we don't do a damn thing with them. We cut down our trees and we ship them overseas. We pull a mineral from the ground and we ship it. We're so rich. We could have such an incredible economy if we utilized our strengths as the foundation for a strong economy. We don't do that.

Even in the manufacturing sector and even when we do things well—we were number four in the world in auto assembly, and today we're about number twelve. It's the same with aerospace. We used to be four, and today we're about ten or eleven. Even the manufacturing things we did well drop if you don't have any sort of an industrial strategy. We have no industrial strategy for manufacturing, and we have absolutely no industrial strategy to do what we're going to do with our natural resources and raw materials.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you.

Ms. Craig said we should at least match the phase-out period with the U.S. Would you agree, Mr. Dias?

[Jerry Dias]

Of course. Twenty-five or thirty years gives you an opportunity to prepare. It also gives us the opportunity to make the arguments about trade. Trade means that I give you something and you give me something. These aren't trade deals in that conventional sense. This is about investor rights. This is about the free flow of capital. This is about the corporate community making whatever decisions they want.

Do we agree with a 25 to 30 year phase-out? The answer is yes, but more importantly, what should be in place is that in fact this isn't going to be fair trade. There has to be a snap-back provision that puts the 6.1% tariff back on. This can't be a situation where we go for 134,000 vehicles a year come into Canada and 500 go out to Japan, and that becomes 200,000 vehicles dropped into Canada and then 750 go to Japan. That's not what I call trade.

[Angelo DiCaro]

Just to supplement that, we followed closely the response of the U.S. special committee on autos that was part of the USTR, and we dug out a memo they had produced after the deal was struck. The auto trade committee called this long-term 25-year to 30-year phase-out a welcome result. They acknowledged that it was unusually long, but it was appropriate given the history Japan has with its unwillingness to open up its market. They claimed that's in some sense of victory and again on our end it's far from that.

Then on the snap-back provision one piece of what was negotiated, which is a bit troubling for us, is how time limited it is. We simply have six years to do this and if we miss that window, as Ms. Craig said, we have these things for a lifetime and not six years. So this becomes a troubling fact.

[Caroline Hughes]

May I add that in terms of the tariff phase-out, the U.S. auto tariff phase-out is back-end loaded. That means on the car side the 2.5% tariff on cars does not change for the first 14 years. It remains in place at 2.5%. Then in year 15 it begins to gradually decline to 0% by year 25. On the truck side, the truck tariff remains in place until year 29. So for the first 29 years of the agreement, there is absolutely no change in the truck tariff for vehicles that are imported into the U.S. from Japan or any of the TPP countries.