Evidence of meeting #7 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 need.
A recording is available from Parliament.
Liberal
The Chair Liberal Judy Sgro
Thank you, Professor. I'm so sorry, but you're a minute and a half over.
The members have a lot of questions, so I have to try to keep the speakers confined to under five minutes. Thank you so much.
Mr. Kingston, you have up to five minutes. I'll cut you off then, so the members have time for their questions.
Brian Kingston President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
Thank you, Madam Chair.
Honourable members, thank you for having me here again today as part of your study on the CUSMA review.
As we discussed last time, since the Auto Pact of 1965, Canada has reaped enormous economic and social benefits by being part of the integrated North American auto sector. Through common regulation, competitive supports and, most importantly, duty-free trade, we've been able to manufacture and sell into a market that accounts for annual sales of nearly 20 million vehicles. Just last year, Canada exported about $46.5 billion in vehicles, and 92% of that went to the United States.
It is the CUSMA that's really the foundation for the integrated industry we have today. That agreement provides certainty, reinforces the long-established integration of the auto industry supply chain that is necessary for manufacturers to compete globally, and facilitates the regulatory alignment of vehicle technical regulations with the United States. With this upcoming review of CUSMA, we must do everything possible to, first, renew the agreement and restore certainty for companies that make long-term investment decisions, protect our preferential access into the United States and, ultimately, support this integrated supply chain. We've identified three priorities for your consideration here today, as we prepare for this CUSMA review.
The first is obvious. We must remove the section 232 tariffs on the automotive industry and Canada's retaliatory measures. They are doing enormous damage. Right now, through the first 10 months of the year, automakers have paid $10.6 billion U.S. in tariffs on parts in vehicles that are imported into the United States from Canada and Mexico. That doesn't include steel and aluminum, so the numbers get higher when you look at all the other U.S. tariffs that affect the supply chain.
According to the Center for Automotive Research, that tariff bill is going to hit $188 billion U.S. in the next three years. That's U.S. manufacturers building cars in the United States, so this will significantly weaken the competitiveness of the industry. It has created this bizarre situation in which, right now, it's more cost-effective to build a car in Japan or Germany and send it into America than to build a car in America. This has to be addressed and reversed.
Second, eliminate the federal EV mandate. It won't surprise you to hear me say this. The EV mandate—the electric vehicle availability standard—prioritizes EV sales over the development of our supply chain. It's a direct challenge to our integration, through CUSMA, with the United States, and our competitiveness as an auto-manufacturing jurisdiction, because it levies punitive costs on companies that don't achieve these arbitrary sales targets the federal government has established. Under the regulation, the vehicles manufactured here today, in Canada, are actually being phased out of the Canadian market by that regulation. It's inexplicable that policy would remain in place, particularly given the challenges we're facing. It must be repealed before the CUSMA review process commences.
Last, third, we must align with the United States on the approach to China. As we mentioned when we appeared here last time, we are strongly supportive of what the government has done with respect to the China surtax order, which levies a 100% tariff on Chinese-manufactured EVs. If we are going to secure a trade agreement with the Americans, we simply cannot be out of step with them on China, and we think that the government should do even more. There should be efforts to ban certain Chinese-connected vehicle software—again, aligned with what the U.S. has done—and to strengthen trade policy and investment authorities to ensure we can be more responsive to anti-subsidy investigations and any national security threats in the EV battery supply chain.
It goes without saying that, regardless of the outcome of the CUSMA review, we also recommend that the federal government move quickly to implement policies to enhance our tax and regulatory competitiveness. They're needed to secure both the existing automotive manufacturing footprint and research operations, but also to allow us to compete into the future. The government has implemented many helpful policies over the past few years, but in many instances we've been very reactive to U.S. policy as opposed to proactively putting forward a framework to make Canada ultracompetitive. Now's the time. Regardless of CUSMA, we need to do that.
Liberal
The Chair Liberal Judy Sgro
Thank you, Mr. Kingston.
We go to Ms. Hasenfratz. Welcome to the committee.
Linda Hasenfratz Executive Chair, Linamar Corporation
Thank you so much. It's great to be here.
I agree with everything that Brian just said. I thought he did a great job.
I'd like to say at the outset just how important I think this agreement is to all three countries in North America. It has brought enormous economic possibilities, as Brian says, to all three counties. I think it's really critical that we successfully renegotiate it.
I do love the idea of encouraging Canadian business to grow more internationally. After all, we have free trade agreements with 56 countries around the world, two-thirds of the world's economy, so we have a great framework for that. However, we cannot not make a deal with the United States. They're the biggest economy in the world. They're on our doorstep. We must come to an agreement with them. I think that's important to know.
I do think we're in a good position going into this negotiation because, despite the things that the U.S. administration says, both Canada and the U.S. have a lot at stake and a lot of reliance on each other right now. We have a pretty balanced trade relationship with the U.S., excluding energy. I'm sure you know that the U.S. actually sells more goods and services to Canada than we do to them. We're the only top five trading partner that they have a surplus of trade with, and that has to matter a lot.
I think it matters, certainly, to the governors. Thirty-six American states have Canada as their number one customer. I know that they're calling on Trump to get a deal done with their most important trading partner, Canada. I do think it's super positive that Trump and Carney have a good relationship. I think that's the foundation of getting a deal done.
The absolute top priority right now should be getting an interim deal ahead of the renegotiation of the agreement to eliminate the 232 tariffs. We can't wait six, eight or nine months to get the tariffs on vehicles, metal and metal derivative products—importantly—dealt with. They're creating an enormous amount of cost, of course, for U.S. businesses and U.S. consumers, but also for Canadian companies that are faced with a decision, as importers of record who take products into the United States, whether to absorb that extra cost or pass it on to customers and potentially lose market share.
I look at the inflation rate in the U.S. right now. It's so much higher than it is in Canada. It's around 50% higher, and it's growing faster. That has to be motivation for the U.S. to come to the table. I think that Canadians too often feel like we're the ones who have everything to lose. I think the U.S. has a lot to lose as well.
One thing that's really critical to understand is that since the inclusion of the 232 metal product derivatives in those that are subject to tariffs, the impact of the 232 tariffs has spread dramatically. You hear the number 85% thrown around a lot—the notion that 85% of exports into the U.S. are going tariff-free. That is no longer the case. There are more than 900 product categories that are deemed to include steel and aluminum. That's only round two of four consultations in the United States. That's only going to grow, so please be aware that the impact is much more broad. Of course, the next priority is to renegotiate the broader agreement when that comes up.
I mentioned a minute ago that there's a lot at stake when it comes to trade agreements with the U.S., and nowhere is that more true, as you've just heard, than in the automotive industry, which of course, is a key focus. At Linamar, it's more than 70% of our sales. I'm sure you've also heard many times about the highly integrated nature of the supply chain in North America, which is really critical to our cost competitiveness. It's a big part of why trade agreements get put in place. It's so that we can consolidate our requirements and become experts at making higher volume product.
In North America, as noted, the supply chain is very integrated. Parts are crossing the border, as I'm sure you've heard, six or seven times in some form or another. I'll give you one example from Linamar. We have a casting we make in Mexico. We ship it up to Canada. We machine it. We bring it into another location in Canada where we assemble it with other parts that we're bringing in from the United States. That bigger assembly then goes down to the U.S. and goes into a transmission. That transmission comes back to Canada and gets put into a car, and some of those cars go back into the U.S. as well, so there are lots of border crossings.
President Trump says that all those border crossings are inefficient, but that couldn't be further from the truth because all of this activity is actually happening within a very small radius of a couple of hundred miles. The fact that there's a border in between is irrelevant. We've had free trade with the U.S. since 1965, so we're all very reliant on each other.
The U.S. has so much at stake right now. Most vehicles built in North American have 40% to 50% North American content. They make, by far, the most vehicles in North America, so as costs go up by, as you heard, billions of dollars, that's going to translate into higher consumer prices. We're going to see volumes go down, and that's going to hurt all of us.
Liberal
The Chair Liberal Judy Sgro
Ms. Hasenfratz, I'm so sorry, but I have to stop you because the members have so many questions. It's always a balance.
Mr. McKenzie, go ahead, please, for six minutes.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
Thank you very much.
I greatly appreciate the witnesses' time here today and the opportunity to ask some questions.
Ms. Hasenfratz, you're perhaps one of the few in this room who is on a private sector paycheque. Can you describe what efforts you're able to make, in the course of your business, reaching across the border?
There must be as many suppliers and business partners interested in your success and the continued relationship on the U.S. side of the border as there are here in Canada.
Executive Chair, Linamar Corporation
Of course, we have many suppliers and customers in the U.S., all of whom are equally motivated to see things get back to a lower cost platform.
The problem is, in the U.S., there's a hesitancy to raise their hand and highlight that they're feeling pain and that this is a difficult situation for them. As time goes on and that pain continues to build, it will become more of an imperative to deal with the situation.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
Are you sensing that? Are your American partners speaking to their representatives and elected officials?
Executive Chair, Linamar Corporation
Yes, I believe they are. They're reluctant to do so in a very public way, but I believe they are doing so in a more private way, where they can try to get their point across.
As noted, billions of dollars are being impacted just in the automotive industry, and with time, these costs will start to take their toll on an already difficult situation. If I look at vehicle production levels in North America today compared to before COVID, we're down about 10% to 15%, and that has nothing to do with tariffs. That was other factors impacting vehicle production levels. When you layer onto that the enormous cost of the tariffs, we're seeing an enormous amount of supplier distress in the U.S.
It's an opportunity, frankly, for us to take over work from those companies or even potentially acquire them, which we've recently done. That kind of distress, when it builds up in the industry, does start to take its toll on the overall production, because you need every piece to make that car. If somebody goes down and you can't retool quickly, it's a problem.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
It's a problem we're about to face more of, I suspect.
Can I ask, without revealing any sensitive information respecting your company, if you are under way with efforts to export more substantially outside of the U.S.?
Executive Chair, Linamar Corporation
Our strategy at Linamar has always been to produce on the continent on which our customers reside. We make product in North America for customers in North America. We make product in Europe for customers in Europe, and we make product in China or Asia for customers in Asia.
We don't do a lot of shipping back and forth to other countries, not with our automotive components, where the volumes are a lot higher. With some of our industrial products, yes, we are supplying other countries. It has been a big initiative for our agricultural business and our Skyjack business to increase our international sales, and we've been growing our market share accordingly.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
I'm going to ask this question to you first, but then also to our other two witnesses.
What's number one on your list for this government to pursue in respect of a trading relationship with the U.S.?
Executive Chair, Linamar Corporation
As noted, number one in my mind is to get rid of the section 232 tariffs, not just on metal and metal derivatives, which obviously are the bits that are impacting me, but also on the vehicles, because having a healthy vehicle assembly presence in Canada is critical to our economy.
For every OEM automaker assembly job, there are six or seven jobs that are created to support that, so I feel a little worried that there's a tone that is shifting away from the importance of vehicle assembly. I want to emphasize how critical it is that we keep that, not just for those assembly jobs but for the six or seven other jobs. The impact on Canada economically would be felt for generations if we decided we were going to abandon vehicle assembly. We absolutely should not do that.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
Thank you.
Mr. Kingston, I'll put the same question to you. What is at the top of your list?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
I fully agree with what Linda has said and would have the same recommendation: the removal of the section 232 tariffs.
Conservative
Professor, York University, As an Individual
I think we should look at an agreement that raises the bar on labour and environmental standards across all three countries. This is something that the first Trump administration was quite interested in. As I've already noted, our time would be better spent in bilateral negotiations with Mexico and other trading partners than in negotiating at this moment with a very unpredictable U.S. administration.
Thank you.
Conservative
David McKenzie Conservative Calgary Signal Hill, AB
Your point is well taken.
I want to ask about the EV mandate. Mr. Kingston, I think you've indicated quite clearly that you believe it should be eliminated. It is not something I've heard very much about from this government.
I live in western Canada, and we have great distances. Ms. Hasenfratz referred to the small circumference of the manufacturing of a lot of motor vehicles, but we go long distances on a regular basis. Have you had any experience talking directly with business people in western Canada about that EV mandate and its impracticalities?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
Yes, regularly. Using the government's own estimates, we needed 100,000 chargers to be installed this year to meet the government's mandated targets. There are 35,000, so the gap is massive and it grows every single year. To address the concerns people have in western Canada, rural Canada and northern Canada, we need massive amounts of infrastructure, and we're not building at nearly the pace needed to address that concern.
Liberal
Liberal
Yasir Naqvi Liberal Ottawa Centre, ON
Thanks, Chair.
I'm going to share my time initially with MP O'Rourke, please.
Liberal
Dominique O'Rourke Liberal Guelph, ON
Ms. Hasenfratz, you were at the industry committee this morning, and Linamar, in Guelph, is a Canadian and global success story. You described the strength of the sector this morning and the productivity that exists in the sector. As we engage in our current negotiations and as we prepare for a renegotiation of CUSMA, what should we know in order to negotiate from a position of strength and confidence and with a united front?
Executive Chair, Linamar Corporation
I talked this morning about all the things I think Canada has to offer right now and that we should be feeling pretty good about. We do a good job of telling ourselves how bad we are all the time when, in fact, that's often not the case.
I talked this morning at the industry committee about the very strong productivity that we see in the manufacturing sector in Canada, which, by the way, has been growing at twice the rate of productivity in the U.S. over the last 15 years. Since 2010, it has grown 13% compared to the U.S.'s productivity growing by 6%—more than double the level of productivity growth.
When I look at our own organization, we have 75 plants around the world, and 29 of them are in Canada. Our most productive facilities by far are in Canada. It is where the vast majority of our investment is going—more than half. Well under half of our plants are here in Canada, but well over half of our investment this year, in 2025, is in our Canadian plants, with our strong, deep teams who have the ability to improve every day like no other plant of ours around the world.
It is important that we all understand that, because it's not just us who are like that. Many people in the manufacturing sector writ more broadly and certainly in the automotive sector, where we have drummed into us the need for lean manufacturing and continuous improvement, have to give 2% price reductions to our customers every single year. Every year, we give 2% back to our customers. Even with that, over the last 10 years, between 2014 and 2024, Linamar increased our productivity—our value-added sales per employee—by 54%. That is a 54% increase even after we gave 2% back to our customers every single year.
That's the kind of productivity that we have in Canada, and it's something we should all feel really proud of and know that we have a base we can build on internationally.
Liberal