International Trade Committee on June 1st, 2017

[Stephen Beatty]

It's important to remember that if the costs of compliance in a revised NAFTA become too high, the external duty rate the U.S. applies to cars is 2.5%, so a cost increase beyond 2.5% might very well lead some manufacturers to decide to relocate manufacturing out of the region. There is a real downside to disrupting those supply chains.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Okay. Thank you very much for that.

I'm wondering about research and development. Where does R and D largely take place? Is it in Canada? Is it in United States? Is it completely outside of North America?

[Hanif Nori]

It's generally done in the United States. Some is done in Japan, but the majority is in the United States right now. We do some of it here, but a lot of that is related to cold-weather testing, such as whether or not our vehicles can match up to Canadian winters. This is especially when it comes to the new vehicles—electric, hydrogen, and things like that.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Is the testing for Canada's cold climate actually done in the U.S.?

[Hanif Nori]

That part of it is done in Canada.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Okay. Thank you.

I'm wondering if you could explain to us the share of your industry operations among Canada, the United States, and Mexico. What percentage, in terms of plant operations, is in each country?

[David Worts]

We're currently producing about a million vehicles a year in Canada. It's probably close to 3.5 million in the United States, and in Mexico I think it's probably around 500,000.

I could be wrong on the specifics. I don't have the data right here.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Okay. Thank you.

My last question is regarding pre-clearance. We've heard from other witnesses before this committee about the significance of pre-clearance. Yes, I know that as a government we've been looking at airports, but would there be an opportunity for maybe streamlining some of the efficiencies at border crossings if we continued with manifests, or e-manifests, and pre-clearance of goods in Canada to go into the U.S., and vice versa?

[Scott MacKenzie]

Both Toyota and Honda have just-in-time manufacturing facilities. Honestly, pre-clearance is necessary for us to have a smooth flow of parts across the border. Any interruptions to that, if they extend long enough, can mean massive problems for us. Yes, we would like to keep what we have—and if not, improve it.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Okay.

Do I have more time?

[The Chair, Liberal, Mark Eyking]

No, that's about right on. Thank you for that.

That's the first round done.

Mr. Peterson, you have five minutes.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

Thank you, everyone, for being with us today.

I understand you guys are in Markham, or at least I'm assuming you are. Are you guys at Honda right now?

[Hanif Nori]

Yes, they are: proudly at Honda.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Perfect. Good stuff. My riding is Newmarket—Aurora, just one riding north of you guys. Look out the window and see how the 404 north traffic is, because I hope to be in it in a couple of hours if I get my flight on time. How's the traffic looking so far, not bad?

[Hanif Nori]

You can always get—

[A voice]

Take a helicopter.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I hope to be driving by there in a couple of hours, if all goes well. And if I get to my questions, we'll get out of here sooner, so I'll start doing that.

[Voices]

Oh, oh!

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

David and Stephen, it's good to see you again. I've worked with you gentlemen in the past. I was affiliated with and worked with Magna for a number of years not too far from where you guys are.

David, you represent more than just Toyota and Honda. What are the other manufacturers that you represent?

[David Worts]

It's all of the Japanese-brand companies that are selling in Canada. We represent the subsidiaries here in Canada. We're not representing the global operations of the companies from Japan.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Right, but they're present in Canada. Obviously Toyota and Honda are key members of your group. This is just to let people know that it's bigger than just those two, of course.

[David Worts]

I would just make the point that Hino is also manufacturing here in Canada with a plant at Woodstock, making medium-duty trucks specifically for the Canadian market.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Right. I want to dig a little deeper and find out whether there's any distinction or space between the position of some of the Japanese manufacturers when it comes to NAFTA, when it comes to free trade, and when it comes to things like consolidating regulations and so on. Is there some dissenting voice in your association, David—or even between Honda and Toyota, as you're both here—on these sorts of things, or is everyone united about the importance of these free trade agreements and the regulatory change that may follow?

[David Worts]

Well, as JAMA Canada, we tend to operate on a consensus basis with all of our members, so yes, I would say that's probably the case.

[Stephen Beatty]

I think it's also important to understand that every one of our member companies manufactures in the NAFTA region. The experiences we have in importing or exporting from Canada are the same experiences other member companies have with their operations in the U.S. or Mexico, if they don't manufacture here. There's a common vision.