Thank you very much, Mr. Chair.
Good afternoon, members of the committee.
Thank you for inviting CME here to speak on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss Canada's trade with our NAFTA partners. NAFTA is the most critical trade relationship that exists for Canadian industry, and we are here today to show our support for the government's efforts to maintain that relationship and to find ways to modernize and strengthen it, where possible.
Canadian Manufacturers & Exporters is Canada's largest industry and trade association, with offices across the country. It is the chair of the Canadian Manufacturing Coalition, which represents 55 sectoral manufacturing associations. More than 85% of our members are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Manufacturing is the single largest business sector in Canada and across the NAFTA region. In Canada, manufacturing sales surpassed $600 billion in 2016 for the third consecutive year, directly accounting for 11% of Canada's total economic output, while employing over 1.7 million Canadians directly in highly productive, value-added, high-paying jobs.
With the base in the NAFTA region, manufacturers are also directly responsible for most of Canada's exports. In 2015 and 2016, manufactured goods exports reached nearly $350 billion each year, an all-time record high, and accounted for almost 70% of total Canadian exports, with nearly 80% of these exports going to our NAFTA partners.
Much of this trade is due to the deep integration of manufacturing operations across the NAFTA region, and in particular between Canada and the U.S. This integration has created a unique relationship for our countries globally. We do not simply trade goods with each other; we build things together, we innovate together, and we compete with the world together.
NAFTA, in most ways, is a model for which all trade agreements should be judged. It has helped increase the standard of living of all participants. It has strengthened industry by combining the talents and expertise of each market, creating bigger markets at home and strengthening our combined competitiveness globally. No other trade agreement that Canada has can compare with the historical, current, or future importance for our economy and our citizens.
At the same time, it does not mean that the agreement should not or could not be improved. Over the nearly 25 years since it was negotiated and came into force, the world around us has changed remarkably. Things that we take for granted today were barely even on our collective radars at the time. The Internet and e-commerce, smart phones, and connected devices are just a few of the technologies that have changed the way we live and work.
The world around us and our global competitors have also changed. China, for example, had a GDP of only about $440 million in 1993. Today it is a $12-trillion economy.
The world of manufacturing has also changed. No longer is it simply about taking raw materials and turning them into a consumer product. Today the lines between manufacturing, technology, and services have blurred, and companies are focused on creating solutions for the lowest cost with the greatest customer value.
CME has worked constructively with the federal government for years on avenues to improve and strengthen the existing NAFTA framework to reflect these changing realities. Efforts such as the border action plans of the 2000s, and the Regulatory Cooperation Council and the beyond the border agreements of the 2010s were aimed directly at improving the NAFTA manufacturing platform without opening up the agreement, because that was seen as politically impossible.
Now, opening the agreement is a political reality, and we should look for ways to cement improvements that support the economic base of NAFTA. To help prioritize, CME is surveying our members to identify priorities for NAFTA modernization and improvement. While our survey is still ongoing, I can give you an overview of the responses as they currently stand.
As a starting point, and most primarily, the overwhelming priority is for Canada to maintain market access across the NAFTA region. While companies want improvement, they are also very concerned about renegotiation that leads to worse economic outcomes through more restrictions, barriers, protectionism on imports and exports of people, goods, or services.
On specific measures for improvement, the priorities mainly stem from the deep level of integration and the volume and value of the trade. Improved customs processes to speed border transactions and eliminating uncertainty through reduced red tape for both people and goods rank as top priorities. Following that, companies are looking to maintain effective dispute settlement processes, improved regulatory co-operation and alignment, and coordinated action on dumping of goods from other markets, and trade policy more generally.
Many of these priorities have already been included in the existing Canada-Europe comprehensive free trade agreement, as well as having been negotiated in the TPP; and we believe they could create a framework for a modernized NAFTA.
At the same time, the relationship between Canada, the U.S., and Mexico is fundamentally different from those represented in those other trade agreements. We believe that if Canada can come to an agreement on these priority areas with other largely new trading partners, we should be looking to go beyond these commitments with our NAFTA partners.
As mentioned earlier, we don't simply trade goods with them, but rather we build goods together by leveraging the 25-year-old NAFTA platform. This negotiation should be the time to create a new phase of NAFTA, and cement in place and go beyond, where possible, the direction started under the recent RCC and beyond the border agreements, where Canada, the U.S., and possibly Mexico, are regulating security on the perimeter together, and restrictions on the internal economy are limited as much as possible.
Thank you again for inviting us to participate in your study. I look forward to questions and discussion.