Evidence of meeting #40 for International Trade in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was equipment.
A recording is available from Parliament.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
Thank you very much, Mr. Chair.
My questions will start with you, Ms. Malone.
Through the earlier questions and the testimony, I think what I am asking has come out already, but perhaps we'll start with it again.
What would be the impact on your members, particularly those in Canada, if there were no longer tariff-free transport of equipment from the U.S. to Canada?
Vice-President, Canada, North American Equipment Dealers Association
It would depend on the percentage of the tariff. For instance, if you were to take a machine like a combine coming in from the U.S., that machine costs approximately $1 million. When we are talking about 25% countertariffs, that cost would be a pretty big chunk—$1.25 million. Suddenly the dealer needs to finance that to have the equipment on their lot, and then the farmer needs to be purchasing that, which means taking out a bigger loan. It comes all the way through the value chain.
It becomes a problem for the farmers to fulfill their relationships with their manufacturers because dealers are under contract to carry a certain number of machines on their lot. The total value of their inventory becomes higher with the holding fees, the interest fees and those sorts of things. It then becomes more difficult for their customers, the farmers, to be able to purchase new equipment.
It also creates an imbalance in the used equipment market because the new equipment is inflated in value. Once those machines work their way through the system, the purchase value doesn't really hold true at the end of the day.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
The delay and the uncertainty have been over you for the last year because of potential tariffs, and even countertariffs. For dealers, of course, there are the large inventory expenses you talked about. Also, the sales and the actual dealerships themselves are not inexpensive. What would you estimate or, if you could, just give us at least an anecdotal flavour of the amount of investment that has not occurred because of the uncertainty created by the potential for tariffs and countertariffs?
Vice-President, Canada, North American Equipment Dealers Association
We haven't studied that directly. There would just be things like investments in new stores. Perhaps a dealer would be planning on either renovating or building a new store, and they might have held off on that. That's the clearest example of holding off on investment.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
Among the mitigating narratives the government attempted to put forward is that the government would have the ability to diversify away from the potential impacts of losing tariff-free access to the U.S. market. However, for many industries—and I would presuppose yours as well—there's no miracle for Canadian manufacturers of equipment or for dealers to diversify away. You can't, obviously, have your dealers in North Bay selling vehicles in Vietnam. Is that not correct?
Vice-President, Canada, North American Equipment Dealers Association
For our large mainline equipment, that is correct. The U.S. has become the manufacturing base for the types of machines that are most commonly used in North America. Our Canadian manufacturing is actually quite strong; it's just that they don't specialize in that larger equipment.
In order to make those types of investments—building a factory that could produce a Canadian-made combine—it would require a great deal of financial capital and time. We've had such an integrated relationship in farming equipment with the U.S. for so many years that we have become reliant on the U.S. for those larger pieces of equipment. As I said, even the brands that are based in Europe or Asia are building that equipment for North America in the U.S.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
For your members, a failure to renegotiate CUSMA on similar or the same terms that currently exist would be devastating.
Vice-President, Canada, North American Equipment Dealers Association
It would be very difficult, yes. It would be very challenging indeed.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
That would translate into additional costs, not just for farmers, obviously, but for the end-users, for all the consumers. In Canada, we already lead the world in food inflation. This would yet be another cause of driving up the cost of food. Getting a deal for equipment manufacturers in CUSMA—or outside of CUSMA, for that matter—is absolutely critical, not just for your members but for all Canadians who are currently fighting the worst food inflation in the G7. Is that correct?
Vice-President, Canada, North American Equipment Dealers Association
Our dealers would be victims of circumstances beyond their control because of those manufacturers having to play on the global market. If there were an inability to move equipment across seamlessly, there would be a huge impact, for sure, yes.
Conservative
Liberal
Yasir Naqvi Liberal Ottawa Centre, ON
Thank you very much, Chair.
I want to thank our three witnesses for being here today and for their very thoughtful guidance and advice to us.
I think I heard from all three of you that CUSMA works, is beneficial to the people you represent and has been good for not only the Canadian economy but for the U.S. economy as well. We also know that the circumstance we find ourselves in is not really the doing of Canada but is due to the unjustified tariffs that have been put on certain very important sectors, like steel, auto, lumber and aluminum. However, here we are, and we're in the process of a review.
I think, Ms. Malone, that you referred to the letter that Minister LeBlanc issued today, expressing Canada's desire or intention to have the agreement renewed for another 16 years because it is mutually beneficial to all three economies.
My question for all three of you. We'll start with you, Ms. Malone, then Mr. Maloney and then Mr. Larochelle. What is your advice to the Canadian government as it is in the process of engaging with United States and Mexico, but with the U.S. in particular, in renewing this agreement? From your members' perspectives, what is your advice for the approach Canada should be taking in order to preserve the agreement that will benefit our economy and your respective members?
Vice-President, Canada, North American Equipment Dealers Association
I would say maintain the current approach, in terms of being thoughtful, thinking about the long term, not being reactive and always targeting zero tariffs and free and fair trade across the board, through all three countries. Although we are not currently engaged with the U.S.—although there are meetings today—I believe that the strategy is sound, for the moment. The target is always the same, which is to keep zero tariff barriers and free trade.
Representative, Canada, International Brotherhood of Boilermakers
I agree. I think we should try to roll over the agreement as it is, do some minor tweaking, here and there, and continue it on for another 16 years. It works.
Chief Executive Officer, Nordic Paper Quebec Inc.
For us, that would mean maintaining the current agreement. We recommend renewing the agreement and maintaining the current terms, which are very beneficial for us and our customers, both in the United States and in Mexico.
It's also important to think about the future, to ensure that the terms cannot be changed. What hurt us was that they wanted to amend the agreement and impose tariffs on us that were also unjustified, in my opinion. The mere fact that this was mentioned for two or three days had significant repercussions.
So, our recommendation would be to maintain the Canada–United States–Mexico Agreement.
Liberal
Yasir Naqvi Liberal Ottawa Centre, ON
Thank you very much.
I agree with the responses from all three of you. You passed the exam, from my perspective. Obviously, we need to find a way to keep the advantage and maintain the agreements. There are always some irritants. There always are, in every relationship. We need a thoughtful way of dealing with them, and I think that's the approach we're taking.
Having said that, I think we also recognize, especially in the circumstances that we've seen over the last year or so, that it is important that we look at diversifying our trade portfolio as well, so to speak. We cannot be solely reliant on the United States. We need to look at other markets.
I would like to hear from all three of you, if possible, please. In that effort, what opportunities exist that you see?
I understand the U.S. is probably the biggest market for us and beneficial, but what would be the second or third place that you would like Canada to focus on in terms of creating more opportunities and opening up barrier-free, tariff-free, markets for your members, Canadian employers and Canadian workers?
Let's start with Ms. Malone.
Vice-President, Canada, North American Equipment Dealers Association
I think our dealers have opened those markets. There are European equipment and Asian equipment brands that are available in Canada. Some are brought into Canada directly, but most are through the manufacturers' bases in the U.S.
I think that's our challenge. The companies are selling to their biggest markets. They are creating bases in the U.S., and we are importing from the U.S.
Liberal
Yasir Naqvi Liberal Ottawa Centre, ON
You're not seeing a shift, perhaps, so that they can avoid those tariffs by shipping directly to Canada.
Vice-President, Canada, North American Equipment Dealers Association
It's only with European brands.
Like I said, the largest market share brands are U.S.-manufactured brands.
Brands like New Holland, Kubota and CLAAS are European and Asian brands. They do have the ability to ship direct to Canada, but that's only a certain number of dealers.
Our dealers have contracts with their manufacturers that are pretty ironclad, in terms of the brand of equipment that they can sell; therefore, they don't have the ability to expand their horizons, in terms of diversification. Like I said in my remarks, it's a very competitive market. There are not a lot of new players that come into the market. In order to compete with brands like John Deere and Case, the investment would be enormous. They are companies that have been around—in John Deere's case—for over 100 or 160 years. They're the market leader for a good reason. I think our dealers have sought out those who compete with them, for diversity.
Conservative
The Vice-Chair Conservative Adam Chambers
Thank you.
We're two minutes over. We're generous with the time today, but I appreciate the chair's indulgence when I'm in your seat, so I'm feeling in the giving mood today.
Mr. Ste-Marie, you have the floor.
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Thank you, Mr. Chair. I understand that I have four and a half minutes, given this extension; but no, I'm just kidding.
I will be asking Mr. Maloney some questions.
My question is not related to the main focus of your presentation, but rather to the impact of U.S. tariffs on certain sectors of the economy that could affect your members. So far, energy projects have not been directly affected by the tariffs. However, I would like to know if certain companies where your members operate are affected by the tariffs and if your members have seen a decline in the number of jobs or the number of hours worked due to U.S. tariffs.
Representative, Canada, International Brotherhood of Boilermakers
The tariffs do impact our industry, particularly, in the steel industry because we work with steel every day. Buildings go up with steel. Equipment is manufactured out of steel. As the tariffs go up with steel, things slow down a little bit and push back. They're not built as fast as they would be, or they're put on the shelf and just put on hold. It does impact our membership, but it's the way we look at that.
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Is your sister union in the United States aware of the impact these tariffs are having on jobs here? Is it showing solidarity with you by calling for the removal of these tariffs?