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
The Chair Liberal Mark Eyking
Order, MPs. It's good to see you. It's very nice to see everybody getting along so well after question period.
Liberal
The Chair Liberal Mark Eyking
To our panellists via video, thank you for joining us today. This is a continuation of the study we are doing on future opportunities with our trading partners Mexico and the United States.
We have already had quite a few presenters come forward to us, and not only stakeholders in Canada, because we've also visited the western states of the United States. Next week we are going to Detroit, Michigan, and then Chicago, Illinois. We'll finish up next week in Washington for a couple of days. We also have plans to go to the midwestern states and our trading partner Mexico in the fall.
We have a very ambitious agenda. It's very important right now, and we're very honoured that you people have come to join us today to do your presentations. My understanding is that we have with us Honda and Toyota.
Mr. Worts, you are kind of the head guy there. The floor is yours. Use whatever time you need. The quicker the better, because then we can have a dialogue with you and continue our afternoon.
Go ahead, sir.
David Worts Executive Director, Japan Automobile Manufacturers Association of Canada
Thank you very much, Mr. Chairman, for the opportunity to address the Standing Committee on International Trade on the proposed reopening of NAFTA.
I am David Worts, executive director of JAMA Canada. Joining me today on the video conference is Hanif Nori from Honda Canada, Stephen Beatty from Toyota Canada, and Scott MacKenzie from Toyota Motor Manufacturing Canada.
JAMA Canada represents the Canadian subsidiaries of Japanese automakers. These include Hino Motors Canada, Honda Canada, Mazda Canada, Mitsubishi Motor Sales of Canada, Nissan Canada, Subaru Canada, Toyota Canada, and Toyota Motor Manufacturing Canada. A variety of light-duty vehicles, engines, and medium-duty trucks are currently being built in Canada by Hino Motors Canada, Honda Canada, and Toyota Motor Manufacturing Canada.
Let me first outline our recommendations for updating NAFTA. JAMA Canada strongly supports the continuation of NAFTA as a trilateral trade agreement, recognizing that three out of every four Japanese-brand sales in Canada are vehicles built in Canada, the U.S., and Mexico. Moreover, the success of NAFTA for the auto industry stems from a single set of rules established through uniform regulations. This has allowed automakers to develop highly integrated supply chains in production facilities across the region, allowing increasing levels of trade in both vehicles and parts to the benefit of all NAFTA countries.
The current NAFTA automotive rules of origin should be retained. To be effective, rules of origin in modern trade agreements should be clear, simple, predictable, flexible, and easily administered. It is also important to recognize that NAFTA automotive rules of origin have the highest regional content thresholds and do not include any country-specific sourcing.
Improvements to modernize NAFTA in the 21st century include the following: update and expand the list of job opportunities for temporary entry of business persons; update customs and trade facilitation provisions, recognizing the integrated nature of the global supply chains in North America and around the world; update border infrastructure with mechanisms to address bottlenecks; create additional framework agreements within NAFTA, including for automated vehicles, data flows, cybersecurity, or other measures that facilitate e-commerce; and increase regulatory co-operation with the flexibility to align with, or have mutual recognition of, such major international standards as UNECE and U.S. FMVSS. Finally, as a general rule we strongly recommend not including any provisions in trade agreements that signatories don't want to use, or have used against them.
JAMA Canada supports such liberalized trade as NAFTA for delivering mutual benefits to trade partners that enhance competitiveness for both automakers and parts suppliers and encourage adoption of advanced technologies to provide safe and sustainable mobility for consumers that meet their transportation needs and provide reliable long-term employment for skilled and highly qualified Canadians. The auto industry in Canada is built on a foundation of open trade, and continues to be highly trade-dependent and deeply integrated in North America.
Looking at the NAFTA region as a whole, Japanese automakers have made significant long-term commitments to localization under the principle of “build where we sell”. Japanese automakers have established a high-quality manufacturing and R and D presence in North America based on the NAFTA framework. The NAFTA framework has made North America a highly integrated and globally competitive region for automotive manufacturing and trade. JAMA and JAMA Canada hope for a framework that will continue to support and strengthen the competitiveness of the North American auto industry.
Let me summarize the impact and benefits that have arisen in Canada from liberalized trade and illustrate the “build where we sell” principle. Since 1965, 15.8 million Japanese-brand vehicles have been sold in Canada. Since 1986, 17.4 million Japanese-brand vehicles have been built in Canada. In the mid-1980s, virtually 100% of our sales were vehicles made in Japan. In 2016, 76% of Japanese-brand vehicles sold in Canada were locally built in North America. About 29% were built in Canada, 36% were built in the U.S., and 11% were built in Mexico.
When the Canada-U.S. FTA came into force in 1989, Japanese-brand light-vehicle production in Canada was a little more than 100,000 units annually. In 1999, five years after NAFTA was implemented, output had climbed to about 500,000 units annually. In 2016, production had doubled to over one million units for the first time.
Needless to say, the investment in growth of production in Canada would not have happened without open access to the much larger U.S. market through preferential trade agreements like the Canada-U.S. FTA and NAFTA. Currently, as a result, over 77,000 direct and indirect jobs have been created in Canada, including jobs in sales, service, distribution, manufacture, and export and import of vehicles and parts.
Let me conclude by saying that while our success in Canada has been based on a foundation of liberalized trade in North America, Canada must also pursue other opportunities to be actively connected to the increasingly interdependent global economy. With the CETA recently completed and the Canada-Korea FTA fully implemented, we look forward to Canada securing a free trade agreement with Japan, whether bilaterally or multilaterally, in the near future.
Thank you. We all look forward to any questions the committee may have.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir.
Just for the record, I drive a Tacoma and my wife drives a Honda Civic, so we're doing all right. They're working well.
We're going to start the questioning. We'll go right to Mr. Hoback.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you.
I was under the impression that they all had presentations.
Executive Director, Japan Automobile Manufacturers Association of Canada
No, that's it. We're all here to answer questions.
Liberal
The Chair Liberal Mark Eyking
So I understood. I'm sorry about that. There was just a little misunderstanding here.
We're going to start the dialogue with the MPs. We're going to have Mr. Hoback for the Conservatives for the first five minutes.
Go ahead, sir.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair.
Gentlemen, in some of the earlier testimony by other manufacturers in North America, and in some of the meetings I've had with them, they've talked about trying to get the regulations right, so that we have the same standards and create a North American standard for the auto sector here in North America. What's your opinion on that? Do you have any advice on pursuing that?
Executive Director, Japan Automobile Manufacturers Association of Canada
Certainly from a JAMA-Canada perspective, we're, as we mentioned, in favour of alignment of the regulatory environment in North America. We have been supporting the Regulatory Cooperation Council and their activities in that regard. We just think that it shouldn't be exclusively one set of standards. There should be the opportunity for flexibility to recognize other global standards as well.
Conservative
Randy Hoback Conservative Prince Albert, SK
Okay. With these regulations, then, do you see that as being something that should be done in NAFTA right now, in an agreement, or is this something that should be done on the side of NAFTA?
Stephen Beatty Vice-President, Corporate, Toyota Canada Inc.
If I may answer, one of the things we look at the regulatory cooperation initiative under way to look at existing regulations and how they line up. That's one activity, and I think it's a valid one, but it probably isn't the more significant piece of this puzzle.
As we're moving forward, technology is moving very rapidly, particularly in areas like connected vehicle technology and automated vehicles. In that space, certainly, the Toyota point of view would be that there is an opportunity in the context of NAFTA to try to set up a framework agreement so that we create a common set of rules here in North America. That has a couple of benefits. One is that vehicles travel back and forth across borders in North America, but number two, by setting a common set of standards for the North American marketplace, you're going to get vehicles at the lowest possible cost to consumers in ways that make them the most easily manufacturable vehicles here in the region as well.
Both from an industry and a consumer standpoint, I think that putting in that type of framework agreement would be a valuable addition.
Conservative
Randy Hoback Conservative Prince Albert, SK
Yes, and I'm glad you went there, because I was going to go there with my next question. When we start looking at the new technologies and vehicles talking to vehicles, I want to make sure that a Ford can talk to a Toyota and to a Honda when it's driving down the road, especially as we go to automated driverless cars and stuff like that.
One of the other concerns I have is that when you you go car, let's say from Windsor, across the border, all of a sudden it's using data in the U.S., so you're going from an unlimited data package in Canada to ten bucks a megabyte in the U.S. Have you put any thought into what should be done to solve some of those problems as vehicles cross the border? The owner of the vehicle may not even be using his phone or the data on the phone; it may be the car itself using that data. How do we handle those types of things?
Vice-President, Corporate, Toyota Canada Inc.
Again, from the standpoint of the way our vehicles perform, I would say that they will roam in both markets, so it's covered by part of your existing data package, but above and beyond the cost of the data itself is the question of how you treat the privacy of the data that's flowing into the car—
Vice-President, Corporate, Toyota Canada Inc.
—when you move between jurisdictions. Again, those issues of privacy and security, I think, lend themselves to that type of North American strategy.
We can handle the commercial side of it, but that sort of legal framework in which it operates, I think, is very important for government-to-government dialogue.
Conservative
Randy Hoback Conservative Prince Albert, SK
We have some great technology companies here in Canada, of course, but it seems like they can't sell here in Canada. What are you doing to reach out to technology companies here in Canada to take advantage of that world-leading technology? It's amazing. You see Canadian companies going down to the States to buy Canadian technology instead of buying it here in Canada.
Are you working with other technology companies here in Canada? I'm think of dashboards and, again, getting back to the fact that we're starting to have cars talking to cars, of the safety aspect of the benefits that would provide. Where do you see that going?
Vice-President, Corporate, Toyota Canada Inc.
Again, across the industry, our companies are working with a variety of suppliers, including a number of Canadian suppliers. There certainly has been a lot of spin-off from the BlackBerry group into organizations such as QNX, but beyond them into companies with security technology and so forth. That's being rolled up into technologies delivered by Toyota, as an example, but I think that's true across the industry. There's an opportunity for those joint ventures.
Conservative
Vice-President, Corporate, Toyota Canada Inc.
Yes, but with a very serious look, manufacturer by manufacturer, at how to maintain data integrity and security.
Liberal
The Chair Liberal Mark Eyking
Thank you, Mr. Hoback.
We're going to the Liberals now.
Madam Lapointe, you have the floor for five minutes. Go ahead.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you very much, Mr. Chair.
Gentlemen, what you have just been discussing is very interesting, as were the questions my colleague Mr. Hoback asked.
You spoke about new technologies. Regarding self-driving cars, you may know that there is a test track in Blainville, Quebec, just north of my riding. This is where most tests will take place.
Since you represent a Japanese car manufacturer, I would like to know what you think we should take into consideration. You seemed to advise us to consider the possibility of adopting the same standards for the new technologies.
Vice-President, Corporate, Toyota Canada Inc.
In the auto industry we already work toward very broad-based standards but use different technologies to achieve those technology outcomes. What is very important is not the specifics of the technology in the vehicle, but the protocol for communication car to car. Amongst the other things we look at is how to maintain the integrity of the message that will travel from a vehicle to another vehicle or to built infrastructure. That's one of the areas where a lot of research is being done here in Canada in terms of that data security and integrity.
In the same way that today cellphones talk to each other but offer different styles, different designs, and different operating systems, you're going to see that in the auto industry as well, but it's how we make it all work together that's going to be the important question, as well as where the industry works together and in collaboration with government to ensure those standards are in place.