Evidence of meeting #71 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 vehicles.
A video is available from Parliament.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Do you think that in the context of the new NAFTA 2.0, this would be the type of problem we could attack and resolve?
Vice-President, Corporate, Toyota Canada Inc.
I think there is an opportunity, since we're going back to the table to have those negotiations, to address some of those areas that were not dealt with at the time of the original free trade agreement and to do it in a constructive way that creates not only opportunity but also ensures consumer safety. I think that's where the opportunity of this renegotiation is, and not so much on dealing with the rules of origin and other elements of the package.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
You spoke earlier of flexibility with regard to international standards.
The standards in the United States, Canada and Mexico are different. You said you hoped that a certain flexibility would be applied in this regard.
Could you give us more details about that?
Executive Director, Japan Automobile Manufacturers Association of Canada
The two global standards that we mentioned in particular were the U.S. standards, which are extant certainly in North America, but because of CETA and global trade with other jurisdictions—particularly in CETA with UNECE standards and the fact that Japan is moving toward UNECE standards as well—it makes sense to have as much flexibility as necessary to be able to support the operations not only here in Canada, but also in North America and around the world.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
You are speaking about flexibility in the broad sense, particularly as regards Europe, but in your opinion, what could be more flexible in NAFTA so that we may more easily conclude this free trade agreement?
Executive Director, Japan Automobile Manufacturers Association of Canada
Well, I guess that's a broader discussion. It has to include the U.S. if they began discussions in the TTIP. I think it can come down to alignment in some respects, mutual recognition of those standards, and being able to be flexible enough to accommodate the high standards.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you.
If the conclusion of an agreement between Mexico, the United States and Canada proves to be impossible, would you be favourable to our signing a bilateral agreement with the United States, and another one with Mexico?
Executive Director, Japan Automobile Manufacturers Association of Canada
No, we're not advocating separate bilaterals. We think we should maintain the trilateral nature of NAFTA, including on regulatory standards.
Liberal
The Chair Liberal Mark Eyking
Thank you, Madame Lapointe.
Mr. Duvall from Hamilton Mountain, I'm glad to see you here. Welcome.
Liberal
NDP
Tracey Ramsey NDP Essex, ON
Thank you.
Good afternoon, gentlemen. Thank you for your presentation today.
I'd like to pick up where Madame Lapointe left off. Perhaps you could dig a little further and elaborate on some of the advantages and disadvantages of the trilateral trade. Ultimately, the U.S. may indicate to us that they want to convert NAFTA from a single trilateral deal into bilateral ones. Can you speak more specifically to the advantages and disadvantages of the trilateral agreement that exists?
Vice-President, Corporate, Toyota Canada Inc.
Perhaps I could start from a general plane. From a manufacturing standpoint, I think every vehicle manufacturer would say the same thing to you—that we are not hung up about where you set the bar on standards, but we do want to have as large a consumer marketplace as we possibly can. This is because of the incredible expense in developing new technologies for powertrain, for connectivity, and for safety. The best result for the consumer is for us to manufacture in volume for the largest possible consumer marketplace. It amortizes the cost of development of those technologies across that product consumer market. High standards shared amongst three countries will be a much better outcome from a manufacturing efficiency standpoint and from a public safety standpoint than a welter of bilateral arrangements.
I will say that one of our conversations in terms of where we go with this is that ultimately we'd like to see common regulatory standards between the United States and Europe. It doesn't make sense for us to make small changes in vehicles based on testing standards where the actual outcome of performance in the vehicle is very close. But that's where it comes down today. A lot of it comes down to the technical detail of the standard, not in terms of the real performance of the vehicle. When we talk about mutual recognition, it's about speeding the flow of those technologies to the consumer marketplace.
NDP
Tracey Ramsey NDP Essex, ON
Okay.
My next question, for Honda and Toyota specifically, is about where you go forward from here. Obviously you're expanding and growing your North American platform. Perhaps you could both speak from your company's perspectives on where those plans are developing next. Will there be investment in Canada? Are you looking at investment in the U.S. or in Mexico as your next step? I'm just curious as to where you see your potential market growth.
Scott MacKenzie Manager, Business Planning and Government Affairs, Toyota Motor Manufacturing Canada Inc.
For us, growth would probably be another market, whether it be Europe or elsewhere. In terms of investments, we are planning on investing in Canada at our manufacturing facilities in Cambridge and Woodstock. We have plans in place to reinvest and continue to manufacture high-quality vehicles in Canada for the Canadian and U.S. markets. It's important to recognize that, at least in our operations, 80% of our vehicles are going to the U.S. market.
Hanif Nori Manager, Government and Environmental Affairs, Honda Canada Inc.
Scott is obviously more of an expert on this than I am, but perhaps I can add to that. The North American market right now is generally moving toward compact SUVs, or at least that's what we've found for our products. In the U.S. especially, that's where it's growing. We build the CR-V in Alliston. Like Toyota, we export the majority of our product, about 75% of it, to the U.S.
As you can see, the investment opportunity here is dependent on us being able to build product that can be exported to other jurisdictions. Obviously we can't absorb all of it. So when it comes to making those investment decisions, which are made in large part in consultation with, if not by, our head offices overseas, we look at where the market is and where it's going. I think the tripartite agreement, the way it's structured in North America right now, lends itself to favourable decisions being made in terms of investments in Canada.
NDP
Tracey Ramsey NDP Essex, ON
Okay.
My next question is really about the highly integrated supply chain that exists. We certainly heard about that from other automotive manufacturers who came before the committee. I think we understand that well.
I wonder if you could speak to us about what a disruption to that chain would look like for you, and how you would address that type of disruption.
Manager, Business Planning and Government Affairs, Toyota Motor Manufacturing Canada Inc.
It would be almost impossible to address that quickly. A lot of our sourcing decisions are made several years out. Right now more than 50% of the content in our vehicles that are made in Cambridge and Woodstock comes from the United States. Any trade-related impact to that would affect our profitability and also our ability to produce an optimally priced car for our customers.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir.
We'll move over to the Liberals now.
Madam Ludwig, you have five minutes. Go ahead.
Liberal
Karen Ludwig Liberal New Brunswick Southwest, NB
Thank you.
I'd like to continue on from Ms. Ramsey's question about disruption and the potential that might have. Let's say there were a disruption in trade between Canada, the U.S., and Mexico. I'm wondering if you could speak specifically to what that might mean for jobs on the Canadian side as well as American side.
Manager, Business Planning and Government Affairs, Toyota Motor Manufacturing Canada Inc.
In simple terms, Toyota manufactured 600,000 vehicles in Canada last year, and we sold about 215,000. If we didn't have access to the United States market, we would have to find another market in order to sell our vehicles. I don't know if there are a lot of markets available right now that we could export to that would make up anywhere close to the market that the U.S. provides.
Liberal
Karen Ludwig Liberal New Brunswick Southwest, NB
Next week we as the trade committee will be heading out to Detroit. If 50% of your content is imported from the United States, then what would a disruption in trade with the United States—maybe a border tax, maybe additional duties, or maybe other issues—mean on the American side for jobs in terms of the supply of content?
Manager, Business Planning and Government Affairs, Toyota Motor Manufacturing Canada Inc.
In the short term, it wouldn't mean much. Again, those sourcing decisions are made several years out. We wouldn't be able to make decisions quickly enough to affect that.
In the long term, sourcing decisions and also vehicle allocation decisions would gradually move the manufacturing and final assembly closer to the market they're sold in. There would be a natural inclination to build where you sell, even more than currently. Natural forces would force that toward the United States.
