1 EVIDENCE Standing Committee on International Trade NUMBER 018 1st SESSION 42nd PARLIAMENT Thursday, May 12, 2016 Le jeudi mai Standing Committee on International Trade CANADA [Recorded by Electronic Apparatus] EVIDENCE May 12, 2016 Committee Edited Evidence * Table of Contents * Number 018 (Official Version) Official Report * Table of Contents * Number 018 (Official Version) Témoignages * Table des matières * Numéro 018 (Version officielle) 18 12 05 2016 2016/05/12 09:00:00 House of Commons Comité permanent du commerce international Standing Committee on International Trade CIIT Chair The Honourable Mark Eyking 42 1 (0900) [ English ] The Chair (Hon.

Mark Eyking (Sydney—Victoria, Lib.)) : Good morning everyone. It's great to be here in Windsor. You know that we are the House of Commons trade committee. We are a very active committee. We have a lot of things on our plate. We're finishing up the CETA agreement and we have the softwood lumber issue, but the biggest thing on our plate right now is the TPP. Since Parliament started, our committee has been travelling the country. This is our sixth province. We have four provinces and the territories left to visit. We're also doing a lot of consultations in Ottawa with various stakeholders.

In our last few meetings, we've opened up the last hour to the public to get their views on the TPP. We'll be doing this over the next few months. We have also received submissions from the public via email, and we're at over 10,000 right now. We'll be taking them and putting them all together for our final report. That said, we have four panels this morning. With us on our first panel we have Unifor, the Windsor and District Labour Council, and the Essex County Federation of Agriculture. The members of our committee are from across the country.

We have Karen Ludwig from New Brunswick, Linda Lapointe from Quebec, and Mr. Peterson from Ontario. We also have Mr. Van Kesteren from Ontario and Ms. Ramsey from Ontario. Gerry Ritz and Randy Hoback are from Saskatchewan. So we have good representation. Without further ado, we'll start with our witnesses. If Unifor wants to start for five minutes, you can go ahead, sir. Mr. Dino Chiodo (President, Local 444, Unifor) : Thank you very much, Mr. Chair. Before I kick off, I want to say thank you very much.

What you are doing, coming down to Windsor and going to the different provinces and listening and engaging individuals, is being very well received. I want to say thank you very much. It's something we haven't seen for a long period of time, and it's really great to be able to have that dialogue and discussion. Thank you for your hard work and dedication. I know it takes a lot of time away from your families. The Chair : Thank you. Mr. Dino Chiodo : Good morning, Mr. Chair, and members of the committee. My name is Dino Chiodo. I'm the president of Unifor local in Windsor, Ontario.

As well, I'm the chair of the Ontario regional council. Our local union represents 17,500 active members and retirees who work throughout Windsor-Essex county. Our members work in many industries, including food processing facilities, casinos, road transport, aerospace, energy, and most notably, the auto industry. Windsor has the highest auto industry concentration in Canada with the Chrysler assembly plant, major engine facilities, including Ford, and more than independent parts suppliers.

In these operations alone, there are more than 12,000 direct jobs, with thousands created in spinoff jobs in industries such as steel and plastic, as well as office workers, car dealers, engineers, researchers, and so many others. As vital as the industry is in Windsor-Essex, it is a shell of what it once was. Since Ontario has lost over 300,000 manufacturing jobs, including over 40,000 in the auto industry and more than 10,000 in Windsor alone.

In just over the last decade, we've witnessed the closure of the General Motors transmission plant in 2010; the Lear parts plant in 2007; the Chrysler truck plant in 2003; and major cutbacks at Ford engine facilities, just to name a few. It was in that a long-standing trade policy, known as the Auto Pact, was officially abolished, as directed by the World Trade Organization. I don't need to revisit the history of the Auto Pact for the committee, because I'm sure you're all well aware of it.

I raise it only to reconfirm the direct and deliberate effect trade policy has on Canada's export industries, especially auto, Canada's number one export. In Canada exported more than $76 billion worth of auto goods to the rest of the world. Now, in 2016, where smart trade policy has been supplanted by something completely different, the Trans-Pacific Partnership Agreement that is before us offers no benefit to Canada's auto industry. It is hard to see how the TPP will help attract new auto investment to Canada.

In fact, it's unimaginable how our negotiators would conclude a deal with so many major auto concessions. We agreed to phase our 6.1% passenger vehicle tariff in five years when the U.S. protected its tariff for over 25 years. This U.S. extension is considered appropriate by industry experts to guard against more one-way trade flows from Japan. How does an accelerated tariff phase-out help Canada's auto industry? We also agreed to lower the vehicle content threshold for cars and parts in the TPP farther below the current NAFTA standard. Now, a vehicle mostly made in China, up to 55%, can enter Canada tariff-free.

What's worse is that TPP allows for special flexibility that further reduces that threshold by an additional 10%. These rules will simply encourage automakers to explore new sourcing arrangements from lower wage jurisdictions. How does this benefit auto parts workers in Ontario, and specifically in Windsor? How does this develop our Canadian productivity capacity? I think the answer is clear: it doesn't. What's worse, I think auto workers in Canada have been sold a bill of goods. I've been following closely the committee hearings so far.

I was struck by something Jim Balsillie said in his presentation on May 3.He not only criticized various parts of the TPP, he criticized Canada's overall approach to trade. I'm paraphrasing here, but he suggested the approach to trade negotiations is based on myths and orthodoxies. In fact, many of the third-party studies released suggested there is still little to no benefit for us at all.

Yet we're plowing ahead on a blind faith that, if you tear down the rules and regulations, if you limit the decision-making powers of governments, and if you just give corporations more freedom to make money, then somehow we'll all be better in the long run. For more than 30 years we have followed this game plan, and it's not working. NAFTA promised jobs and prosperity; instead, we saw our auto trade deficit in Mexico balloon to $11.5 billion last year and we saw a series of new investor lawsuits by U.S. firms under

chapter 11. The recent Canada-South Korean trade agreement promised new opportunities in fairness for auto experts; instead, Canada's exports fell by 3.9% in the first year. Now the TPP promises more of the same: more prosperity, more jobs. We simply don't believe it. This is a deal we simply cannot accept. The potential damage this will bring to the Windsor community in the long term is severe. We've seen what bad trade policies can do to our jobs. Ultimately, Canada needs to rethink its general approach to trade. Rejecting the TPP might help kick-start this discussion, and that's not a bad thing.

Thank you very much for the opportunity to share my views. To the committee, thank you for being here. I look forward to any questions. Thank you.

(0905) The Chair : We're going to move on now to the Windsor and District Labour Council. Go ahead for five minutes. Mr. Brian Hogan (President, Windsor and District Labour Council) : Dino is one of the past-presidents of the labour council, and as he said, it's great to be here. Thanks for coming down. It's closer for a couple of the MPs. My name is Brian Hogan. I'm president of the Windsor and District Labour Council, representing 40,000 members. My friend Randy is a member of the Council of Canadians, and also a labour council member. Millions of Canadians voted for “real change” with the Liberal campaign.

In February, unfortunately, there was no real change when you signed the Conservatives’ negotiated TPP agreement. At our recent labour council meeting, the TPP was panned by every committee because it affects many citizens in so many ways. Our social justice committee talked about inequality, our sovereignty, and the challenges of local solutions like “buy Canadian” and “buy local”. Our human rights committee talked about our aboriginal community being affected, especially in terms of the environment. Public Health talked about drug costs.

Environment talked about corporations affecting green economy initiatives we have tried here in the province. There are some specific examples of the downside of trade agreements in our area. We've been looking forward to the construction of our bridge. Since it's a public project, it could be challenged under TPP or CETA as having unfair competition. Plenty of local workers would love to work on that project. Who knows if that will actually occur because of trade agreements? Look at Leamington. When U.S. billionaire Warren Buffett was able to buy Heinz at the stroke of a pen, a 105-year-old plant closed.

Now with the plant under new ownership, the workers make a fraction of what they made before; many are laid off, and many face the loss of their pension. This makes no sense, but it is what neo-liberal free trade has brought us. This is what the companies mean when they talk about the need to be more competitive, which is at the heart of the TPP. Look at Hamilton just down the highway. The U.S. owners first took over a competitor, Stelco, in a smart business move.

Now they're shutting it down to strengthen their empire and, in the process, using bankruptcy courts to try to get out of their legal obligations to thousands of pensioners. I'm telling you something you already know. Obviously, the core issue of the TPP and other free trade agreements, which Dino touched on, is the control over our country's economy. Through these agreements, the global monopolies legally gain direct control over key aspects of the economy and deprive real people like us the rights to exercise control over our country, our wages, and our working conditions.

When we talk about so-called free trade, we have to discuss reality. Dino touched on much of this. The downturn in manufacturing in Canada during the last two decades can certainly be traced in some part to NAFTA. The TPP will only lead us further down the same path. It will cause more insecurity in communities like the ones all of you are from. We don't want Windsor and Essex to face collateral damage from the expanded corporate takeovers of our country under the guise of a new free trade deal. That is why workers are against it.

The labour movement in Windsor-Essex is against these free trade deals, and has been against NAFTA and all the others that have come before. It's not that we are against trade; it is that we are against the selling out of our country and our communities to corporations. Merci. Randy has a few comments too.

(0910) Mr. Randy Emerson (Treasurer of The Council of Canadians, Windsor and District Labour Council) : Hi. My name is Randy Emerson. I was born in Windsor and I've lived here all my life. I am treasurer of the Windsor-Essex

chapter of the Council of Canadians, a member of an environmental group called Windsor On Watch, and a Unifor member. I am 56 years old and have worked 32 years at the FCA Windsor assembly plant, 11 years as an assembler and 21 years as an electrician. No doubt you've heard a lot in these hearings about, ISDS, patents, copyright, regulatory standards, etc., but I'm not going to talk about these. Instead, I wish to speak from my heart. Trade has always been good for Windsor. As Dino said, it's gotten us Ford, Chrysler, and GM plants, and, along with those, well-paying jobs. Free trade has not been good.

Free trade has created the loss of thousands of manufacturing jobs. Ford is a former shadow of itself. The Chrysler van plant, Plant 6, is gone, and GM no longer has any presence in this city. A GM transmission plant is in the process of being torn down as I speak. We have low-paying, minimum wage and temporary jobs, for example, call centres. We have more temp agencies than we do Tim Hortons. Our food banks have been considerably stressed; some have even run out of food. My city has had the highest unemployment rate in Canada off and on for over a decade. Recently, though, it dropped by 3%. Why?

Because my plant hired 1,200 people, not because of free trade but in spite of it. All these free trade jobs that we obtained before did nothing for the unemployment rate. Nothing. The call centres did nothing. The rate stayed the same. It was good high-paying manufacturing jobs that did that, and now you want to bring in the TPP. Another free trade deal will put more pressure on manufacturing jobs. Instead of waking up in the morning and looking at my future retirement with confidence, I wonder if this is the deal that will make my employer pull out of Canada.

I wonder if I will lose my pension or just get pennies on the dollar. I ask myself why the federal government refuses to see that their previous trade deals have killed hundreds of thousands of jobs in Canada. Free trade has turned Ontario from a have to a have-not province. Why does the federal government not see the devastation free trade has wreaked on working class families? I implore you to turn down this agreement. The Chair : We're going to move over to the Essex County Federation of Agriculture. Go ahead, gentlemen, for five minutes. Mr.

Louis Roesch (Director of Zone One, Kent and Essex Counties, Ontario Federation of Agriculture, Essex County Federation of Agriculture) : Thank you for the opportunity to speak. I'm not going to take five minutes. I basically have questions. My first question is, what protection do we have as producers in all sectors of the agricultural industry from the importation of products that have medications, pesticides, or herbicides that are not registered in Canada, or have been banned by Health Canada and the PMRA—or, in our case, our own province?

This takes away our competitive edge in many ways, especially with the cost of production. Have the regulations for federal inspections changed? In the near past, federal inspection was done according to the country of origin, and not necessarily following our Canadian federal regulatory standards. What will the labelling standards be for the blending of imported TPP country food products that will still be classed as a product of Canada? How will agriculture be protected for our geared up production for export to TPP countries if those countries are closed because of non-tariff issues?

Our federal support programs have been reduced to a level of basic non-financial liability. These are only a few of the questions that need to be clearly spelled out.

(0915) The Chair : Thank you. Farmers do things quickly. We have some farmers around this table, and it's good to see you here. I'd like to welcome another MP to our table. Over here we have Cheryl Hardcastle. Your riding is Windsor-Tecumseh. It's good to see you here. We're going to start with some dialogue with the MPs. We'll start with the Conservatives first for five minutes, Mr. Hoback. Mr. Randy Hoback (Prince Albert, CPC) : Thank you witnesses for being here this morning. It's great to see you. It's great to be in Windsor.

I was interesting driving through Windsor this morning, as you can see the devastation from what it used to be to what it is today. I think if you go across to Detroit, you'll see the exact same thing of what it used to be and what it is today. One thing I often ask, when you look at trade agreements like this, is how we can change that outcome. How can we leverage a trade agreements to change that? Instead of seeing trade agreements that can harm us, how can we turn around and take advantage of them?

One of the concerns we always have with small and medium-sized enterprises when we do trade deals occurs when there isn't a follow-up to take advantage of those deals or the recognition of what's available for them. I'm curious, for the companies you represent, Mr. Chiodo, and the employees, what have you looked at as far as opportunities in the trade deal are concerned, other than just saying that you don't like it? I understand your concerns about it, and I'm not going to question those. Have you looked at the opportunities?

Do you see anything there that we can look at say, “Hey, we'll be part of that global supply chain, and we'll create some parts manufacturing and other manufacturing here in the Windsor region?” Mr. Dino Chiodo : Obviously, our main focus is dealing with autos and manufacturing, with the nine supplier plants that we have and the big OEMs and Chrysler Corporation directly. All I can do is express what free trade agreements have done in the past and some of the concerns we have with this trade agreement.

When you take into consideration where we have been over the past 25 years with free trade agreements, annual per capita GDP, annual business investments, and annual private sector employment grew faster prior to free trade agreements. If the committee wants the information that specifically deals with that, I can make sure you have a copy of that right after this committee hearing to make sure you can look at it.

By extension of that, to be very clear, we have committed to taking way our tariffs within five years and the United States has looked at taking away their tariffs on their auto manufacturing after 25 years and their truck division after 30 years, and places like Vietnam and Malaysia have even gone as far as looking at 13 years. I don't understand why we would diminish our strengths in the automotive sector and get rid of our tariffs. It's that much easier to be able to reduce our business capacity in Canada in auto.

I see that as a major challenge, and potentially we could lose a fifth of our workforce because of it, since we have lower content in the rules and regulations for that practice. Mr. Randy Hoback : I'm looking at the numbers here, and in before NAFTA, we had $290 billion worth of trade in North America. In it was $1.1 trillion. When you look at that, it's a huge number difference in a short period of time. I'm curious why we're not gaining part of that $1.1 trillion in this region. When I look at other parts of Canada, they're benefiting greatly from these trade agreements. What is different here? Mr.

Dino Chiodo : I don't know if I agree with that. I apologize. I can tell you right now that we've lost a plant in Sainte-Thérèse. We've lost the Oshawa truck plant and the Oakville truck plant. We've lost those all in the last decade. We attribute them to trade deals, so I don't agree with that statement. What I can tell you about manufacturing trade with TPP countries right now in current numbers is that exports to those countries are $295 billion. Imports are $301 billion. That's a $5.9 billion deficit.

Then when you take the United States out—let's just remove the United States and see what the impact looks like—we have exports of $15 billion and imports of $54 billion, which is obviously a deficit of $39 billion. I just don't see that as fair trade at all. At best, with a 6,000-page document, obviously this is some sort of managed trade, and we're at the losing end of it.

(0920) Mr. Randy Hoback : You do understand that we have to look at the country as a whole. You talk about the specific auto sector in one part of it, but then when you look across the country at all the other sectors, the gains that are made are substantial. Mr. Dino Chiodo : I think we're trading pennies for dollars. Mr. Randy Hoback : No, I don't think so. We're talking huge dollars. It's just a matter of perspective. Mr. Dino Chiodo : Not with a $39 billion deficit. Mr. Randy Hoback : Let me ask another question. The Chair : You have half a minute left, Mr. Hoback. Mr.

Randy Hoback : You've got the ability now not only to build cars into TPP countries but also into CETA countries in the future. What are you doing to position yourselves, because Canada's one of the few countries that'll have that benefit. Why aren't we getting more of those platforms here in Canada? If the taxation is right, if the input costs are equal or the same, why are they not locating here when they know they've got unfettered market access into all of these markets out of this country alone? What is preventing them from being here? The Chair : Sorry, you have no more time.

The answer will have to go to your next time around, Mr. Hoback. We have to move on. We'll move over to the Liberals. We have Mr. Peterson for five minutes. Mr. Kyle Peterson (Newmarket—Aurora, Lib.) : I have some experience in the auto sector. I was at Magna International for a number of years, and my father-in-law is a career GM man who just retired. He lives in Oshawa. I have a lot of respect for the auto industry here in Ontario as a driver of our economy. I want to comment briefly. I was around the auto sector in 2007, 2008, and 2009, when, as we all know, sales were plummeting.

We were thankful that both the provincial and federal governments at the time saw the importance of the auto sector to the economy and helped some of the auto companies get through that time. Now we're looking at robust sales. They've been robust since and they're growing. What obstacles are there here in Ontario? It seems that the Ontario auto sector isn't able to tap into the increased sales market. What stands in our way? What improvements can we make? What sort of structures need to be in place to make sure that we can tap into that in Ontario so that we maintain a thriving sector here? Mr.

Dino Chiodo : I appreciate your bringing up that question because, just as of late as yesterday, we had a policy and solutions forum where the Chamber of Commerce, labour, and academics from the University of Windsor and St. Clair College came together to talk about that exact item. The reality is, there are a lot of things we can do. One example is a one-stop shop. Bev Matthews, who was at the forum yesterday, was very much enthralled with what we had put together and how we've collaborated in our efforts to really talk about what we can do to make things better.

With a one-stop shop, as an example, you have a company right now that could go to Mexico. They could talk about starting an investment. There are tax abatements, whatever they need with regard to rushing to get the job off the ground. They go to one office, and it's taken care of. You come to Ontario and potentially you're going to or different offices to deal with, and the red tape is just unsurmountable. People become frustrated. It becomes a political football. It's about corporate welfare and it's not about the benefits of the people in the community.

We heard yesterday from panellists, individuals who own corporations, and a gentleman named Marentette, who was the CEO of Toyota Boshoku Automotive in Japan. He basically said that the problem he has here is that he can't get an answer for what he needs with regard to trying to go forward in investment. I think that's one component of what we need to focus on. We've got great things that we can focus on. As an example, in Mexico, the turnover employment turnover rate is about 20-25%. In Windsor, we're at 1-2%. The reality is that we are doing much better with regard to training individuals.

Our skilled trade is much better. We can do the job. We can build it right and we've got a $2.6 billion investment with no government support to prove that. Mr. Kyle Peterson : That's great to hear and the kind of stuff I love to hear. Free trade, I don't think you're against free trade. I mean, the Auto Pact was the free trade deal that built the auto sector in this country. It just has to be the right deal. It has to be fair trade, is what I'm hearing. I think the problems with the auto sector, perhaps, can be solved beyond the TPP.

I think one of the big issues with the TPP is the differential between the American side deal and the Canadian side deal. I think that's an issue, and you raised it with the 25- and 30-year phase-in that the Americans have, but we only have a five-year period, I believe, on the auto and truck side, which I think is an issue. I do agree. I also think there are ways, even with the TPP, to make sure the auto sector remains vibrant, and we have to continue to explore those. I'm glad to hear that some of those steps have already been taken.

I'd love to talk more about auto, Mr Chiodo, but I'm going to try to move on to our friends from the Windsor and District Labour Council. Just give me an idea of the sort of trades that are represented in your council. How big is the group and how important are some of the industries, beyond auto, for your members?

(0925) Mr. Brian Hogan : I think Dino might be able to help us out better in terms of knowing that sector. Our labour council is made up of public unions and private unions. We have hospital workers, we have teachers, we have city employees, provincial employees, federal employees, and of course we've got all the Unifor groups and a number of other CUPE and OPSEU locals that might be in the public sector. The Chair : You have to seconds left. Mr. Kyle Peterson : Are there members of your organization who look at the TPP in a different light than maybe some of the auto sector guys would? Mr.

Brian Hogan : The answer is that I haven't heard one. As I said, we have monthly meetings of a variety of union members and we have touched on all of those committees: social justice, human rights, political action, public health, and the environment. These are all things that affect the membership and the members know that they affect their entire community and communities across the nation. I think my closing comment really was—and maybe my opening comment, too—power to the corporations. You might know what the Auto Pact was about, but I don't think back then that a corporation could sue a government.

I mean the tail is wagging the dog on all fronts. The Liberal government wants to do right by the aboriginal community in terms of a lot of things, but in particular the environment. If you're going to continue with oil you're going to make sure you work with the aboriginal community. You come in and have an idea to do that, and some corporation says, “Tough luck, we're suing you.” That's the challenge of these trade deals over the last number of decades. The Chair: Can we wrap it up? Mr. Brian Hogan: The power is reversed. You can talk about Monsanto, right? Sorry, Mr. Chair, he got me on a good topic.

The Chair : I know. It's not the witness's fault. Sometimes the MPs get a little excited and throw out a question at the end of their five minutes, and it puts me in an awkward position because you guys start on a roll, and then I have to cut you off. It's not your fault, but I'm going to remind members of Parliament not to throw those balls at the end of your five minutes, because it makes it awkward for everybody to shut you down. I'm sure you're going to get more time this morning to express yourself. We're going to move on to the NDP. Ms. Ramsey, you have five minutes. Ms.

Tracey Ramsey (Essex, NDP) : Randy, thank you for being a passionate voice for people. Often we don't have conversations about people at this table. We talk about corporations and their interests and the government, but people are a key piece of this. Of course I've shared that experience. I've been through difficult times, as you all know, in the auto industry, so I understand that well. Before I go on, I would be remiss if I didn't mention another passionate member of our union family, Rick Reaume, and that the funeral will be taking place today.

I'm sure Rick would be proud of us all sitting at this table fighting for our communities. I'd like to say to Louis Roesch: I hear you. This deal is not the only problem that we're facing. We have many threats to our import controls that aren't being properly dealt with, and so that's a threat to the agricultural industry as well, and we've heard that at this table many times from different groups. It's a concern that I share with you. I'd like to focus on Dino and what you're saying about the auto policy.

It's interesting; you had this great meeting here yesterday talking about a pathway forward for auto, but if we sign the TPP, the ISDS provisions could put us in a position where we will be sued for trying to put into place a manufacturing policy in this country. Why would we put ourselves in a position where we can't actually make the situation better? Kyle Peterson was discussing this. I'd like you to speak, if you can, to the auto strategy that exists in our NAFTA partners. We haven't actually had a clear path here in Canada, and we're losing jobs.

Under NAFTA we have regional content rules that are 62.5% for North American content, and auto parts are 60%. Japan and the U.S. agreed secretly to reduce those thresholds to 30% for parts and 40% for finished vehicles. Canada wasn't even consulted in that. Can you speak to that?

(0930) Mr. Dino Chiodo : I think we have a number of challenges. When you talk about the reduction of the parts content going from 62%, and potentially to 45%, we have some bigger detrimental effects, because obviously you're going to have more vehicles coming from countries like China, with a content of about 55% now. In saying that, within it there's a 10% flexibility, so it's potentially as low as 45%. What that does is give you an opportunity for a bigger exodus of jobs out of our industry.

You can bring it in for a cheaper labour rate in another country that doesn't have environmental controls, doesn't have health and safety regulations, and has a government that supports them and will change or fluctuate their currency in order to support that initiative. When we look at particular regions, our auto trade deficit with Japan, for example, grew by 16% last year to $5.2 billion, with a massively lopsided ratio of $187 coming in for every $1 that we export to that country. When you start to look at numbers like that, it's devastating to think what that could mean for our country.

We talk about one-fifth change, because that's the number that we've been using, and potentially we're in line to lose 20,000 jobs. That's something we shouldn't take lightly, and we shouldn't negotiate ourselves out of jobs for the future. Free trade agreements should look to make our economy stronger, better, and more prosperous for Canadians, not worse. Ms. Tracey Ramsey : When we look at this deal, there are chapters and 6,000 pages. Six of those pages are actually about trade in a traditional sense.

The rest of the chapter, as all of you have highlighted, has deep and serious concerns for Canadians and our lives. Something I think you started to touch upon, Brian, if you could expand on it, is ISDS, which is something we hear consistently. We had people who came to Montreal, and people mentioned ISDS and said they were against the deal. ISDS is one of the most concerning pieces of this deal. It's not the tariffs so much, because 97% of the Canadian exports that we have right now to these countries are tariff-free. We're talking about that 3% that's about tariffs, and the rest is about ISDS.

I wonder if you can speak to ISDS and your concerns around pharmaceuticals. The Chair : Make the answer short. Mr. Brian Hogan : I've read a bit of history about pharmaceuticals, and I think Natalie Mehra will be speaking about this a little later today. We have a great health care system that could be better if we funded it properly. Why we want to give that sector on the medical side over to multinationals, I don't know. I think we need to have our public health care system beefed up by having a better pharmaceutical piece to it. The Chair : Now, we're going to move over to the Liberals.

Madam Lapointe, for five minutes. [ Translation ] Ms. Linda Lapointe (Rivière-des-Mille-Îles, Lib.) : Good morning and welcome. We are very pleased to welcome you today. The General Motors plant in Sainte-Thérèse was in my riding. I saw when the plant was shut down and demolished. It was in operation for 40 years in Boisbriand. That is awful. I understand how Mr. Emerson feels about the retirees and all those affected.

In my riding, we have the company called Raufoss Technology, a division of Neuman Aluminium, which manufactures aluminum parts that you would surely see on the assembly lines of General Motors and Chrysler these days. Based on TPP's rules of origin on original automotive parts, Unifor forecasts a loss of 20,000 jobs, which you mentioned earlier. First, there are the workers in assembly plants and, second, there are the workers who make the parts. Do you think there will be different impacts on those making the parts and those working in assembly plants?

Do you think there will be a difference in terms of jobs? (0935) [ English ] Mr. Dino Chiodo : Yes, I believe there's a direct threat to independent parts suppliers, and there's some concern with that. Again, we talked already about the percentages from 62% moving down to 30%, with the 10% flexibility. However, I think the bigger concern is not only the 20,000 that we think are vulnerable—the one-fifth—but also that once you start taking those independent part suppliers and moving them to other places, like the southern states and Mexico, then an OEM will want just-in-time parts.

It's not conducive for them to spend $2 billion, $3 billion, $4 billion in Windsor, Ontario, when most of their supply base moves to Mexico. It becomes a bigger hit to us in the long run. That is a double whammy, so to speak, because as you start to get some of these countries providing those lower cost items with government support directly to that industry, you have the OEMs who say that they want the plants as close as possible to them—Chrysler, Ford, General Motors, Toyota, Honda.

They will relocate because they have tax incentives, they have tax abatements, they have training costs, they have property right now in Goiana, Brazil. Chrysler got 90% of their overall investment for a full greenfield site by the government. It's just impossible to compete with that kind of money that's thrown at the industry, and when you have a greenfield site like that, this causes more investment from that corporation into that industry because they have major support. We need more of that, and TPP doesn't provide it. [ Translation ] Ms.

Linda Lapointe : Along the same lines, do you think the rules of origin in the TPP agreement could have an impact on steel workers? Do you think they could also be affected? [ English ] Mr. Dino Chiodo : Yes, as I suggested earlier in my report, we have a number that's about ten-to-one on spinoff jobs, which includes steel, which includes plastic. In essence, absolutely every job will be affected in the community of Windsor and Essex County. We just hired 1,200 new employees at the Windsor assembly plant to Fiat Chrysler Automobiles' credit. So thank you to them. That generates almost 10,000 jobs.

That's in corner stores, that's in plastic plants, that's in steel manufacturing, that's in all kinds of industries that we have right here in Windsor. Absolutely, it would affect them. [ Translation ] Ms. Linda Lapointe : Thank you. Mr. Roesch, earlier, you talked about reciprocity in agriculture. You said that the TPP agreement did not have the same standards for food products. Could you tell us a little more? [ English ] Mr. Louis Roesch : As the regulations are now, the federal inspection is done according to the standards of the country of origin.

If there are different regulations for pesticides, herbicides, and health product for livestock, this is not looked at in any way, shape, or form, nor is it reinspected as it comes into this country, as I understand it right now. [ Translation ] Ms. Linda Lapointe : So, according to our regulations, that’s not working properly. Do I still have seconds, Mr. Chair? [ English ] The Chair : You have half a minute. [ Translation ] Ms. Linda Lapointe : Mr. Hogan, just now, you were impassioned as you were talking about all the members you represent.

You said you had members from a number of companies, including environmental workers, teachers and federal, provincial and municipal employees. You said that the signing of the TPP would affect the whole community. We had to cut you off earlier, so I would like you to tell us a little more about it. [ English ] The Chair : You have seconds, and I don't think it's going to be fair. I think we have to move on, and maybe you'll get a chance from another question. That ends the first round. For the second round we start off with Ms. Ludwig for five minutes. Go ahead. Ms.

Karen Ludwig (New Brunswick Southwest, Lib.) : Good morning. I'm very pleased to be here in Windsor. My connection to the auto industry is that my father worked for almost 30 years with Goodyear. As a student attending the University of Guelph, I had the best tires on my old Volkswagen bus. Going back to the TPP and its ratification, I just want to be clear: our government has signed the agreement to be at the table. It has not been ratified, and that's the point of these consultations, to listen and to gather the concerns.

If Canada does not ratify the agreement, and the other member countries do, particularly the United States, Mexico, and Australia, how do we adapt to the changing marketplace where Canada is going to be sidestepped, particularly by the Mexicans and the Americans, in exporting to the Japanese markets? How will that impact the auto industry and the parts manufacturers?

(0940) Mr. Dino Chiodo : First off, I don't believe that we can't change it. I've heard Minister Freeland say that it can't be changed, but the reality is that, according to a column in The Huffington Post, changes might still be possible. At the same time, the EU and the United States have heard from their constituents in their countries, who have suggested that they didn't like the provisions and what was offered in CETA, and the officials were told that the changes would go back to a legal scrub through which they would make changes to their trade agreement.

I'm not sure if there's been enough pressure for us to say that we can't participate and that we need to make sure there are changes that protect our Canadian economy. I think that's the first thing we need to consider and look at with reference to that. Ms. Karen Ludwig : Does anyone else have a comment on that question? Mr. Randy Emerson : I've always wondered why, when we are the second-largest country in the world with million people, and we're going into a trade agreement.... If anybody should have the will to say, hey, we don't have to have a trade agreement, it should be us.

There's no reason why with all the resources and everything this country has and with that small population we couldn't be on our own. I'm not saying to be isolationist, but that we should be bargaining from a position of power, not the way we're doing it now. Ms. Karen Ludwig : One of the challenges, on that note, would be looking at the numbers. You mentioned million in Canada. We are very rich in resources. We know we're threatened in terms of the manufacturing industry and we need to do more work in the value-added sector.

The trans-Pacific area actually represents million people, so that really is one of the challenges we face. We either get into the group or we stay outside of the group. But if we stay outside of the group, we have to learn how to adapt and be better at, as you said, working with businesses coming into Canada for foreign investment. Maybe we could look at the example of one-stop shopping in Mexico. Mr. Dino Chiodo : Let's look at Mexico as an example, because Mexico continues to do too much. They're growing amazingly right now. They had a $1 billion increase just last year.

That's 12% to a staggering $11.5 billion. That's $10 imported here to every one dollar that we export out. I think one of the major challenges we have is that if we did absolutely nothing, it would be better than where we are currently. At the end of the day, if we negotiate our jobs out of here and we lose the major component of our industry, which right now is auto and manufacturing, our number one GDP grower in this country, then what will we really have accomplished? Those are some major hurdles we'd have to get over, and that's why I think you need to take a step back and revisit the whole plan.

The reality is that to sign a bad deal from the outset is not the right decision anyway. That's why I think we need to revisit this. Ms. Karen Ludwig : If we don't ratify TPP, how might that affect our NAFTA situation? Mr. Dino Chiodo : Right now in NAFTA, our regulations are better than what we see under the TPP. Again, I think I mentioned that earlier with reference to Vietnam and Malaysia. They're at 13 years before their tariffs for their independent parts will be eroded. It really begs the question of why we are at five years.

It doesn't even give us a strategy or a plan to be able to react to what the problem is. Then we take a look at the United States, the major component of the TPP with Japan, and they're at 25 years for auto and 30 years for trucks. So if we take a step back and say if we're going to negotiate, wouldn't we want to at least be on a level playing field so we're all playing the same game instead of eroding our economy so the United States could benefit from that? That's something that just doesn't make sense to me, and I don't understand the logic of it. That's why I think we need to revisit it.

They've done it in CETA. They've done it in Europe. I'm not understanding why the answer is just no. I think there's room, and I think we just have to push further.

(0945) The Chair : That wraps up your time. We're going to move over to the Conservatives for five minutes, and Mr. Ritz. Hon. Gerry Ritz (Battlefords—Lloydminster, CPC) : Thank you gentlemen for your presentations today. It's always good to hear all sides of an argument, so we can make an educated decision when it comes to the final ratification of TPP. I've heard a lot of things around the table here that seem to be at cross purposes. I understand Canada is a trading nation with a small population—that's been brought up—of only million people.

We do export a tremendous amount of our manufactured goods and our raw resources. Without the ability to trade them, we wouldn't have the jobs that go along with them. We have to have trade, and I agree with you that it has to be fair trade, and not free. That's why we continue under NAFTA or WTO, and take the U.S. to court, and take other countries to court, the same as they do to us. There's a big point that's been made about how we've been sued times, the vast majority of which have come out to Canada's benefit. Over that time frame, $171 million has been paid out of $5.5 trillion worth of economic growth.

We're always going to have these squabbles. Two-thirds of that $171 million was Danny Williams' privatization of Abitibi—and of course the federal taxpayers are on the hook for that. It's not a bad news story, it's quite good. When it comes to the auto sector, we do a tap dance when it comes to any of the major manufacturing global supply chains, I'll call them. Canada exports five times as many new vehicles as were imported from Japan, because it's a global supply chain. You can't just look at what goes to the U.S., and certainly we're in competition with them.

Our current auto tariff, as you're pointing out, is 6% and TPP will phase that out over five years. The Canada-South Korea agreement, which the NDP supported, phased it out over two years, and we're starting to see some talk of investments from Korea into the Canadian market. It's the same as we've seen with Japan. They've put more investments into Canada in the last little while than Ford, Chevrolet, and Chrysler put together. There are affiliated parts plants working now in Canada that are Japanese. There's been some talk about Chinese parts going to permeate, because.... But China is not part of the TPP.

You guys need to get that part straight: it's only the TPP countries that will be allowed to take

part in that lower number coming into our auto sector. When you put all the facts on the table, I don't see how we can stay out of TPP and maintain our ability to trade on the global stage. Mr. Dino Chiodo : When you say it's those people who are outside of the TPP that can't participate, I don't agree, because when they're lowering their content, with Malaysia, and I'll give you an— Hon. Gerry Ritz : I meant content specifically to TPP countries. It's not a global lowering; it's the TPP countries. Mr.

Dino Chiodo : Right, but what's going to happen with Malaysia, for example, is that they're going to go to countries that are even cheaper to get that part garnered, to be able to ship it back to us at even a lower cost. We're reducing our bottom dollar as much as you want to— Hon. Gerry Ritz : There are points of origin, and they're stipulated in that lower number. Mr. Dino Chiodo : I don't know of any of those stipulations, but as Tracey suggested, there's a total of six pages that deal with that trade. We must have missed it when we read it.

I don't agree with that statement whatsoever, but I will tell you that there are countries that can compete, and those are the countries where their governments support the initiative. Germany has one of the highest cost industries and yet is one of the best with regard to providing their vehicles to market, and they get a lot of support. When you take a look at the European Union with regard to the amount of work they do, their deficit.... It's by 15%, or $6.9 billion. It's $22 they import to our dollar that's exported.

I don't know why we continue to try to attract that kind of economic stability for Canadians, because it doesn't work. We've seen that it doesn't work. When you do a path like that for 30 years, it's like banging your head against the wall to find out if there's a different result. There isn't. It's a bad deal all the way around. Hon. Gerry Ritz : On agriculture, Louis, you talked about blending products coming into Canada and when those are no longer considered a product of Canada. Product of Canada is held at 98%. It has to be produced in Canada to be called a product of Canada, and that doesn't change.

If you start blending below that, then it's no longer a product of Canada, and you have to some other type of label on it. That is entrenched. For our imports, the standards that are implemented are done in the country of origin now, so you don't end with bad products on our shores, and then face the problem of what to do with it. It's at Canadian standards; it's not at the exporting country's standards. That is how it's done. On the use of pesticides, and chemicals, and so on, certainly some countries are ahead of us.

With the Beyond the Border initiative and the Regulatory Cooperation Council, you now have the ability to bring in any product that's accredited in the U.S. for use in Canada, that's used on their product imported into Canada. Under the GROU program, for your own use you have the ability to have access to that product today.

(0950) Mr. Louis Roesch : That could be true, but it's extremely difficult to get that product in, number one. Hon. Gerry Ritz : It shouldn't be. Mr. Louis Roesch : When did they change the federal inspection regulations? That was not the case a few years back when I sold in Ottawa. The Chair : We'll have to wrap this up unless you have any more comments. Mr. Louis Roesch : I just question that, because that's the way it was. It's according to the standards of the country of origin, and it's not re-inspected when it comes into this country. Hon. Gerry Ritz: No, that's not true at all.

The Chair : Okay, you're going to have to have this conversation later because we're way over time, and we have to move on. We have to move back over to the Liberals, and we have Mr. Peterson for five minutes. Mr. Kyle Peterson : I have a couple of questions for the agriculture gentleman, Mr. Roesch and Mr. Faubert. We've travelled across this country now. We started in B.C. and went to Saskatchewan and Alberta, Manitoba, Quebec, and now we're in Ontario. I think it's fair to say from the testimony that we've heard from other farmers and agricultural and agrifood producers that they want to expand their markets.

They want to be able to ship product overseas, and the TPP will help facilitate that. They need to expand their markets to make sure their family farms remain sustainable into the future. What's the sense in Ontario? Ontario is obviously a bigger local market than Saskatchewan or Alberta would be, but is there a sense that shipping overseas is a way to sustain family farms in Ontario into the future? Mr. Louis Roesch : We certainly have nothing against being able to export, as long as everything is on a very equal playing field. That's where we want to be. Mr.

Kyle Peterson : On the TPP specifically, then, is there some concern that we'll be importing competitive products against the Ontario agrifood products that won't be able to compete? Is that the concern with the TPP? Mr. Louis Roesch : The concern is that, again, it's on an equal playing field, like some of these regulations and stuff that are in their country, and I'll still stand by the statement, as I understand it, that it's according to the federal standard of inspection of the country of origin. If there has been a change to that, I'd like to see it in writing. Mr. Kyle Peterson : I just wanted to be clear.

Yes, I'm hearing you're for exports, you look forward to the free trade. It just has to be a fair deal and there has to be an equal level playing field. That's good to hear. Thank you for that. Mr. Faubert, do you have any comments on that? Mr. Ron Faubert (Representative, Ontario Federation of Agriculture, Essex County Federation of Agriculture) : The level playing field is a big issue. We can be competitive. We've proven that, but we need things to be equal for all of our competitors as well. We have a large export opportunity, for which we keep increasing our production to try to keep our heads above water.

The need for those exports is great. That is how we're going to move forward, and that's how we're going to expand. The Chair : Are you able to elaborate on what sorts of products—Ontario products, and from here in Essex County and Windsor—you can produce competitively and that would benefit from an expanded export market? Mr. Ron Faubert : I think the tomato industry has demonstrated that very well. We are very competitive. We produce a larger tonnage per acre locally here than California does, and a very quality product under the restrictions that we have to work with. We are quite capable of doing it.

We have everything in place to do that, and we just need to have a home to ship it to, and a processing facility to hopefully process it, with the value added to it so that we can increase our export markets. Mr. Kyle Peterson : We would want that processing facility here in Ontario, of course. Okay, thanks for elaborating on that. The Chair : You have a minute. Mr. Kyle Peterson : I want to get back to Ottawa here, and it's hard not to. Mr. Chiodo, it's good to have you here because you have some good insight from many perspectives. I wonder if you could elaborate.

When I was at Magna, the CAW was still the union that we dealt with all the time, but I think a lot of Ontarians aren't aware that Unifor, in this case, in the auto sector, actually does work hand in hand, in partnership, to make sure there's a viable auto sector in Ontario. You elaborated a little on working with government and how they're trying to work with you to make sure this remains viable. Can you elaborate more on the partnerships you have with some of the employers your members are employed by?

(0955) Mr. Dino Chiodo : Let's talk about Chrysler corporation first, obviously. We have a very good relationship. We went into bargaining in recognizing that we had to play a significant role with regard to the investment into our Windsor assembly plant facility. We've entwined and accepted a culture of world-class manufacturing that we didn't understand before. We were the first plant in North America, the first OEM, to become designated as a silver recipient for world-class manufacturing.

There were discussions with our CEO, Sergio Marchionne, and governments with regard to getting investment and putting that investment into our facility. He decided to do it alone because of the component of being a political football, so to speak. However, the reality is that we have a great relationship with Chrysler corporation. We've had discussions with regard to where we needed to project ourselves so the company could be viable, the company could do what was necessary in order to make sure that its new launch would take place.

Again, that's because we were willing to change the culture of the workforce, and we did just that. And that's one example. We would do the same with Magna Corporation. We have a plant with employees. We have conversations with regard to changing the culture. They've invested in a new product line within our facility, have paid almost $5 million, and have hired almost new employees, which creates spinoff jobs. And that's because of the relationship between the union and the company. And they couldn't do it alone. Thank you for the question.

The Chair : We're going to our last MP for this panel, someone who is no stranger to this place. Mr. Van Kesteren, you're up for five minutes. Mr. Dave Van Kesteren (Chatham-Kent—Leamington, CPC) : Thank you all for being here this morning. It's been a great discussion. Congratulations on what's happening in the Chrysler minivan plant. Having been in the car business, I can say that we all know what a great vehicle it is. It's great to see the investment that's been made there. I listen and it tears me up as much as anybody who lives in this area when I see the erosion of the auto industry.

It's evident in Chatham-Kent-Leamington too. But the same thing is happening across the border. I think one has to recognize the fact that a lot of these vehicles you're talking about and a lot of these plants that used to produce vehicles have lost market share. I think about the General Motors transmission and engine plant that produced the three-litre three-speed automatic for the Lumina transmission, which was a great transmission in its day, but it lost market share. The fact of the matter is it's painful to see, but what we once called the Big Three, we now call the Detroit Three.

They lost a lot of market share. Wouldn't you agree that there were some big mistakes made in the production of some of those vehicles and that they lost to competition because they just couldn't compete? Isn't that also a large part of the equation? Mr. Dino Chiodo : I would disagree with that only because in 2008-09, there was a recession. Some people might not want to consider that, but some people even considered it a depression to an extent. The reality is that the elastic band was stretching. In the States, they call these “NINJA” loans.

There were people with no income and no jobs, and they still got loans to buy houses, and the market couldn't handle that. And your SAAR rate went from 18.2 million down to almost million vehicles over the course of the year. That's the seasonally adjusted annual rate of sales. When you start to see that and the sales begin to drop, I don't think any company was facilitated to maintain that other than companies that had billions of dollars in a bank account someplace that could kind of wobble through it. But the reality is that we're stronger and better than we've ever been.

We have month-over-month sales increases over the last sixty-five months. We just talked about a first quarter with one of our highest earnings, in which incomes for the company, I think, were over $500 million. Some great things are happening, and again, they did that alone. When you really take that into consideration with regard to the investment at the Windsor assembly plant, I think it's a great thing. Also, they paid back the loans from the government from back in 2008-09 within a few years. I think they did some amazing things.

I think they're on track and I think they're going to continue to be on track because they have a plan in place to be able to maintain that.

(1000) Mr. Dave Van Kesteren : Let's leave those others alone. I think we agree. You're pretty much substantiating what I'm saying. The fact of the matter is that a really great van is being built here in Windsor and it's being put together by people who really do it right, and the result is that the consumer out there wants the vehicle. I'm listening to what you're saying. It's obviously not the first time we're heard that we feel we need to protect our markets.

Are you concerned at all about what's happening across the border with the potential election of a president who is talking about even tougher tariffs than what the union is talking about on this side of the border? Mr. Dino Chiodo : What I'm concerned with right now is that we have politics going on in the United States and the reality is that I can't change what the dynamic is going to be on that side. What I do know is when we have a bad deal in front of us.

What I also know, from a report by Jim Stanford, is that Canada's average annual trade performance is better with nations when there is no free trade agreement in place. We have that document. He's an economist. Other economists support that initiative. Canada's exports to FTA partner countries grew, not including the United States, by only 1.2% annually, while exports to non-FTA partners grew by 6.8% annually. That's between and 2014. That should tell you volumes that free trade agreements do not work.

Again by extension, manufacturing exports to FTA partner countries declined by 0.3% each year, yet manufacturing exports to non-FTA partner countries grew by 4.2% each year. Those are dynamic numbers that prove that free trade agreements just don't work, not the way they're being negotiated today. The Chair : Mr. Van Kesteren, your time is way over. We'll have to end it there, and we'll have to end our panel there. It's been a good discussion with lots of information, and I thank the panellists for coming and giving us submissions and the good questions by MPs.

We're going to suspend now for just 10 minutes because we ran a little over time.

(1010) The Chair : We're going to start our second panel of the morning here in Windsor and continue our consultation process on the TPP. With us for our second panel we have the Cross-Border Institute, the Linamar Corporation, and the Windsor-Essex Regional Chamber of Commerce. Welcome. It's great to be in your city. We had a great evening here last night. We're enjoying all the flowers that are so early here. Where I come from, we're just putting away our snow blowers, so it's great to be here. We'll start with five minutes for the Cross-Border Institute. Mr. Anderson, go ahead, sir.

(1015) Mr. William Anderson (Director, University of Windsor, Cross-Border Institute) : Thank you for the opportunity. My comments today address the question of whether the Government of Canada should ratify the Trans-Pacific Partnership in the case that the United States also ratifies it. If the U.S. were not to ratify, the TPP would effectively be dead, so there's no need to discuss what Canada should do in that case. If the U.S. ratifies then Canada is faced with a choice between two outcomes. The first is Canada being in the agreement, with the U.S. in; the second is Canada being out, with the U.S. in.

This means that there are certain issues of importance that are outside Canada's decision space. For example, some might argue that the TPP dilutes the privileged access to the U.S. economy that is currently enjoyed by Canada and Mexico under NAFTA. If the U.S. is in, however, Canada does not have the power to change that situation. Expanded access to the U.S. market occurs whether Canada is in or out. So I think it's more constructive at this point to discuss outcomes that depend on Canada's ratification decision.

There has been a lot of discussion around the rules of origin in the automotive sector, where the current requirement of 60% or more of NAFTA value content will be replaced with a requirement of only 35% to 45% of TPP content. This places more competitive pressure on Canada's automotive industry in both parts and assembly. However, consider what happens if Canada is out while the U.S. and Mexico are in.

Cars and parts could receive national treatment in the U.S. and Mexican markets with 45% or less TPP value content, while they could only receive national treatment in the Canadian market with 60% or more NAFTA content. In these circumstances, automobile assemblers with plants in the U.S. and Mexico wanting to sell cars into Canada would have three options. They could pass up the TPP rules and continue under the NAFTA rules. They could run separate production lines for cars destined to Canada, or they could adopt the TPP rules and pay the MFN tariff on cars exported to Canada.

The third option seems the most likely. Canadian auto parts manufacturers will continue under NAFTA rules of origin, with Canada out and the U.S. in. Parts production in the U.S. and Mexico will source under TPP rules, so their costs will almost certainly be lower. Furthermore, auto assembly in Canada would be subject to NAFTA rules of origin, while U.S. and Mexican assemblers could take advantage of the TPP rules, creating a competitive disadvantage for Canada.

Thus, it's hard to see how either the Canadian automotive industry or the Canadian automotive consumer will benefit from Canada's staying out of the TPP if the U.S. and Mexico are in. I want to stress once more that the point I'm making is, what's the situation if the U.S. and Mexico are in and Canada is out? That is different from the issue of having no TPP and having a TPP? That's a very important point. I want to turn broadly to the potential for the TPP to open up new markets for Canada's international trade.

For context, it's frequently noted that the potential TPP members account for 40% of world GDP—but bear in mind that 62% of the combined GDP is in the U.S. alone. Combining the U.S. and Japan brings us up to over 78%. Canada is actually the largest of the remaining potential members in terms of GDP, so when you add Canada to the U.S. and Japan, you have 85% of the TPP area GDP, which leaves only 15% of the TPP GDP, or 6% of the world GDP, in countries other than the U.S. and Japan that Canada can trade with.

At least in the short run the two most important questions are whether ratifying TPP will be beneficial to Canada's trade relationship with the U.S., and whether there are substantial benefits to liberalizing trade with Japan via the TPP. Given the limited time I'm just going to focus on the second question. While Japan is now a slow-growing economy, it's very large, and its potential for trade expansion with Canada is great.

Canada's trade relationship with Japan is currently based on Canadian exports of resources and agricultural goods, and Japanese exports of manufactured goods, with a substantial deficit for Canada. Some of the largest tariff reductions in the TPP are in agriculture, so TPP membership could help Canada increase exports to Japan and reduce that deficit. There may also be potential for trade expansion outside the traditional pattern of Canadian resources for Japanese industrial goods. A recent report by McKinsey highlights that Japan is an important market for Canadian aerospace and financial services.

More generally, Canada, with its more open immigration policy, has a comparative advantage in terms of the stock of skilled labour, thus sourcing from Canada may benefit Japanese businesses that are struggling with a contracting labour force. Finally, while rapidly growing countries such as Malaysia and Vietnam make up a relatively small share of current TPP area GDP, their importance will increase in the future. This is the case not only because they will grow faster than the U.S. and Japan, but also because their number is likely to increase as more countries join the TPP.

For example, the leader of Indonesia, with a population of million, has expressed interest in eventually joining the TPP. The point is that it would be much easier for Canada to gain access to the Indonesian market as a TPP member than by negotiating a bilateral trade agreement.

(1020) To sum up, while there are elements of the TPP that are not especially favourable to Canada, under a scenario where the U.S. ratifies it, I believe it's in Canada's economic interest to ratify the TPP. Thank you. The Chair : Thank you, sir, and thank you for a very informative presentation. We're going to move on to Linamar Corporation. We have Ms. Hasenfratz. Go ahead for five minutes. Ms. Linda Hasenfratz (Chief Executive Officer, Linamar Corporation) : Good morning. It's a pleasure to be here. I'll start with a few quick words about Linamar.

We're a diversified manufacturing company, primarily in the auto parts business. We also supply commercial vehicles, off-highway vehicles, energy markets, and access equipment under the brand name Skyjack, where we make scissor lifts, boom lifts, and tele-handlers. There's one out front, thank you very much. In our vehicle business, we manufacture precision metallic components and subassemblies. We're mainly a machining and assembly company, but we've expanded recently into casting and forgings as well. We focus on the engine, transmission, and driveline systems of the vehicle as well as the body.

In sales for Linamar were $5.2 billion. We should be over $6 billion this year, which would be a new record for us. Our current forecast for is to continue to grow our business both globally and right here in Canada. We're currently booked for $7.7 billion out in 2020. We have 24,000 employees. We're manufacturing in countries in facilities. The largest by far is right here in Canada. We have more than 9,000 employees and plants in Canada, which has grown significantly over the last five or six years as well.

I think that there is a lot of rhetoric, which I'm sure that all of you have heard and read about, that Canadian manufacturing is not competitive. I have to say I completely disagree with that premise. I think that competitiveness drives out of two key factors. One is innovation in the products that we're designing, the processes that we design to make those parts, and the efficiency with which we run our operations. When I look at our costs in Canada, they are globally competitive.

We manage our labour costs very carefully and we're constantly working to improve productivity every single day through the ideas of every single employee on how we can do things better. Our labour burden rates, if we look at the combinations of statutory and non-statutory burden rates, are the lowest here in Canada as a percent of our labour costs than in any of the countries we operate in globally. Our productivity, our efficiency, and our purchasing strength in our Canadian operations are by far the best that we have globally. Certainly our Canadian plants are our most productive globally.

Other benefits are here in Canada. Our taxes are lower than in the U.S. and many of the other jurisdictions that we operate in. The support that we are getting from our government is fantastic in terms of SR and ED tax credits as well as in other ways our government is helping to support innovation. In fact, our SR and ED system is one of the most beneficial globally, I think only surpassed by France, in terms of support for innovation, which again is so critical to competitiveness. So the bottom line is: are we winning business or not? The answer is, absolutely.

We're winning hundreds of millions of dollars of new business for our Canadian facility. In fact, in the last three years, we have won $2 billion of annual sales for our Canadian facilities alone. More than half of that was well before the Canadian dollar moved to where it is. The Canadian dollar has very little impact on our business. If I look back over the last several years since 2009, we've increased our sales just in Canada by 160%. That's almost three times. We've grown our Canadian employee base from 5,000 employees to more than 9,000.

We've spent over a billion dollars in new capital just in our Canadian facilities and we've improved our productivity by 50% in that time frame, which, as noted, is our best globally. To me it's really frustrating to hear these constant reports saying that Canadian manufacturing is not competitive, that we're shrinking, that we're not investing, and that we're not productive—that last one really upsets me—when that's absolutely not our story. I know it's not the story of a lot of other great companies.

I think we should spend a little bit more time talking about the positives that can help inspire people to do the same, instead of telling ourselves that we're not productive, which doesn't inspire anything but maybe depression. We will continue to invest hundreds of millions of dollars in our Canadian plants. We have an enormous amount of work that we're launching right now in our plants here in Ontario. I am now going to talk about trade. How does trade fit into all of this?

(1025) The Chair : Sorry, go ahead, but you have to wrap up. You only have a minute. Ms. Linda Hasenfratz : I believe an important area to our prosperity and global competitiveness as a country is free trade agreements. I think we've made great progress in Canada in trying to open Canada to the rest of the world, and to enhance that with free trade agreements with Europe and South Korea, and with the TPP. I think that having bigger markets to buy from and sell to create more opportunities, and more opportunities mean more chances to grow our business. Approximately 90% of what we make in Canada ships to the U.S.

Without free trade, our story would be different. Free trade agreements have been critical in the decision-making of auto makers on where they put plants. For instance, BMW and Audi have put vehicle plants in Mexico in the last few years, with 100% tied to their access to global markets. I think signing on to TPP is absolutely critical for a couple of reasons. To be left out of an agreement that covers 40% of the world's economy would be nothing short of a disaster, particularly if the U.S. is signing on and key competitors to all areas of our business are in this agreement, and we're not.

It's not just on the automotive side—although that would absolutely be the case in this sector—but also in terms of Skyjack. Our two key competitors are U.S. companies. If the U.S. signs on and we don't, that's a disaster for our Skyjack business. Even if the U.S. doesn't sign on, we should still sign on because it would give us an advantage over the rest of the world. I think that's key. There's a lot of talk about Canadian content and local content, but to be clear, Canadian content requirements in NAFTA are zero. Canadian content requirements in TPP are zero.

We've won billions of dollars of work for our Canadian plants, not because of protectionist trade policies, but because we're competitive, innovative, and efficient. That's what wins business, not trade policies that try to protect. Thank you. The Chair : It's good to hear some positive stories out there. We're going to move on to the Windsor-Essex Regional Chamber of Commerce. Go ahead, sir, for five minutes. Mr.

Matt Marchand (President and Chief Executive Officer, Windsor-Essex Regional Chamber of Commerce) : I want to thank the committee, and I particularly Tracey Ramsey and Cheryl Hardcastle, for inviting me here today. It's good to see Dave here as well and former Minister Gerry Ritz. My name is Matt Marchand. I am the president and CEO of the Windsor-Essex Regional Chamber of Commerce representing over employers and 30,000 employee members with billions in sales. I was educated here and at the London School of Economics in London, England.

The lack of transparency during negotiation of the TPP was a source of frustration for many stakeholders, so thank you for the opportunity to participate today. We are the epicentre of business, trade, and tourism, and we host the two most important economic sectors in the country—auto and agriculture. Depending on how you measure it, these are the number one or number two industries in Ontario that drive our economy. Automotive could be described as the family jewels of Ontario with over 100,000 employees and $100 billion in trade related to auto.

There are approximately suppliers of auto and auto-related parts in Ontario, many of which are small to medium-sized with about located in the Windsor-Essex area along with FCA, which directly employs over 6,000 at our Pacifica plant. We also host Canada's most important trade corridor in North America, with nearly one-third of trade, hundreds of millions of dollars per day, supporting tens of thousands if not hundreds of thousands of Canadian jobs, so we certainly understand trade down here.

The Windsor-Essex Chamber does have serious concerns related to TPP in its current form, particularly as it relates to auto. Canada is falling behind the lucrative auto sector globally. Our production, employment, and investment are falling both relatively and absolutely as measured against global investment. Auto is a large funder of the economy of Windsor-Essex, Ontario, and Canada. The TPP is a comprehensive 12-country, 6,000-page trade agreement. The Windsor-Essex Chamber recognizes that some sectors and some employers in different regions of Canada do have the potential to benefit from TPP.

However, the auto sector, Canada's largest and most valuable export sector, does have significant exposure. I am familiar with the testimony of Dianne Craig, president and CEO of Ford, and Caroline Hughes, VP Ford Canada from March 8, 2016. I have it with me right here. Not only the Windsor-Essex Chamber but also chambers across Ontario support their views. Chambers across Ontario just had our AGM at which we passed a resolution to address the fundamental concerns that Ford and many others in the auto community have with respect to the TPP.

They are currency manipulation, tariff phase-out, and content requirements. We've all had discussions about those. I'm not going to get into them at the moment to burn time, but I will speak about them after. I would respectfully request that the Ontario Chamber resolution be part of the official record, and I have a copy with me. It is worth restating to the committee, though, the words of Dianne Craig as the CEO of Ford Canada: The TPP auto terms will not increase Canadian...exports in any meaningful manner, but instead will put Canada's...manufacturing footprint at...risk.

I would also emphasize the comments of Flavio Volpe from the APMA, who on March 8, when asked if SMEs in the auto sector would experience job loss as a result of the TPP, answered “Without question.” Let me add one more layer on top of this: the rising cost of doing business in Ontario. I have seen little commentary on the rising cost of business in Ontario in the record. Let me share with the committee the concerns of the chamber network. Ontario's electricity costs have tripled in the past 15 years and are getting higher. In fact, that's the number one issue that our business community faces across Ontario.

Aggressive U.S. and other jurisdictions are actively courting southern Ontario businesses, including those in Windsor-Essex, to leave and are using our rising cost structure as leverage. Windsor-Essex and Ontario business communities will have additional cost burdens facing them when the Ontario pension plan is introduced in and cap and trade is introduced in 2017. In addition, the province has undertaken a workplace review, which means more regulation and potential costs.

Many countries and jurisdictions that Canada and Ontario compete with did not have these costs, or worker safety regulations or environmental and social responsibilities. We need to ensure that we compete on a level playing field and not be in a position where we are exporting production and jobs to jurisdictions with different sets of rules. Other jurisdictions that are successful in attracting and retaining auto investment view auto as a strategic asset. I want the committee to remember those words: “strategic asset”.

(1030) Here's what today's front page of the Windsor Star says: Business, labour and academia came together yesterday, including Perrin Beatty, my national president, and Jerry Dias, national president of Unifor. We called for an executable automotive strategy that other jurisdictions have— The Chair : Excuse me sir, can you wrap it up with a conclusion. Mr. Matt Marchand : Sure. What can the government do? In once sense, I think we should look at past things and put TPP aside in the interest of time.

I would suggest that the government look at doing what we can do right now without international trade agreements. One is to pass PACA, something that Perrin Beatty has requested at the agriculture committee—and I see Gerry Ritz and Dave Van Kesteren sitting here—and to pass sports betting, which would help our region as well. In conclusion, layering TPP in its current form, on top of the existing rising cost environment in Ontario, sets us on an uncompetitive and damaging economic path—not just for Windsor-Essex, but with implications across Ontario and Canada. The Chair : Thank you.

Before we go to questions from the MPs, I have one question for Ms. Hasenfratz. What does SR and ED mean? Ms. Linda Hasenfratz : It's the scientific research and experimental development incentive, the R and D tax credit. The Chair : The R and D tax credit, okay. It's the research tax credit. We're going to start off with dialogue with the MPs. We have the Conservatives for five minutes. Mr. Van Kesteren, go ahead. Mr. Dave Van Kesteren : What a great discussion we've had this morning. It's one of the few times that I can say that I agree with every one of you.

I agree that the TPP has some great potential, and I agree, Matt, that it has some challenges. There's no question about it. We have seen, as we've travelled, that the small and medium-sized businesses, almost without exception, are excited about this free trade agreement. The other thing I noted—and I was just having a short conversation about this with William and Matt—was that when we travelled through Quebec, we saw there were an enormous amount of small and medium-sized, especially small, businesses that were start-ups.

It appears to me—I'm going to ask you to jump in and weigh in on this—that the challenge is with those organizations that are, let's call them, “institutionalized”. They've been here for quite some time, and specifically the auto industry, which has been here for 100 years in this area. What do we need to do, and what do they need to do, to possibly change the course of this, so that a free trade agreement will be advantageous to them? Can you comment on that, Mr. Anderson?

(1035) Mr. William Anderson : I think there are already companies in this industry, and Linamar is certainly one of them, as we've just heard, that have been able to take advantage of trade initiatives. Mr. Dave Van Kesteren : Linamar, how long have you been around? Ms. Linda Hasenfratz : It will be 50 years this year. Mr. Dave Van Kesteren : Fifty years, okay. Mr. William Anderson : They're well established. I think the automotive industry in Ontario is already efficient. I think the challenges that it faces have to do more with differential costs than with a lack of efficiency.

I think Ontario's labour force in the automotive industry is outstanding. Companies like Linamar, and many others, have been innovative. If you look at engineering types of performance metrics on assembly plants, for example, they're very good. They're faced with a world in which they have some cost disadvantages.

They have disadvantages in terms of labour cost, they have disadvantages in terms of energy costs, they have disadvantages in terms of how long it takes them to get from the point of making a location decision to having production coming out of that facility, and they have disadvantages in terms of access to markets other than NAFTA. Part of the reason you have a disadvantage relative to Mexico is not just labour costs.

If a German company wants to put an assembly plant into Mexico to sell cars into Brazil, those cars will go in much more cheaply to Brazil than if they came from a facility in Canada, because of the trade relations that Mexico has established with other Latin American countries. I think the technical ability is definitely there to compete on a global scale. There are some cost disadvantages, but I think having access to broader markets is a positive rather than a negative. Mr. Dave Van Kesteren : I didn't know that you went to the London School of Economics. I respect you.

I always did, and I respect you that much more because you understand economics. You must agree that, in general, trade agreements—and I recognize what you're saying, that there are some serious challenges, which I see in Chatham as well, where I'm from—are a good thing. There's more to trade agreements than just conducting the business. Trade agreements are there to set the rules. Mr. Ritz always says that just as good fences make good neighbours, good rules make good trading partners, too. Wouldn't you agree that this is a transition and a movement that is going to gain momentum.

We're going to trade more and more across the world, and we need good trade agreements. I know there will be a follow-up question about whether or not this is the right trade agreement. Wouldn't you agree with that statement? Mr. Matt Marchand : You can go back to Galbraith or Ricardo or Adam Smith, or a number of our friends in history and talk about this. With a trade agreement, if I have bananas and you have apples and we trade something like two apples for two bananas, that's what you call trade.

But if one industry is getting either heavily subsidized or has favours, and you and I both have apples, but you have state subsidies to grow your trees, you have state subsidies on your roads, you have state subsidies on other things, then we have to look at that and ask if that is an accurate agreement. The Vice-Chair (Mr. Randy Hoback (Prince Albert, CPC)) : I'm sorry, Mr. Van Kesteren's time is up.

(1040) Mr. Dave Van Kesteren : That's a shame. We were having a good— The Vice-Chair (Mr. Randy Hoback) : You will get more chances to answer his questions later. Ms. Ludwig, you are up next. Ms. Karen Ludwig : Thank you very much for your excellent presentation. My first questions are for Mr. Anderson—or is it Dr. Anderson? Mr. William Anderson : It's Doctor, but call me Bill, please. Not even my mother calls me William. Ms. Karen Ludwig : From someone who worked on a Ph.D, I think you are well deserved to be called doctor. My questions are regarding our research and studies.

For starters, I represent a riding with five international border crossings in New Brunswick. We fully understand the dependence on the American market. We've heard a number of varying positions on TPP. Do you have any research or studies to support what you've put forward regarding the ramifications if we don't ratify it? Mr.

William Anderson : There are a lot of studies on TPP using what are called computable general equilibrium models, and most of them are irrelevant to my argument because those studies just generally compare a world with TPP to a world with no TPP, and I don't think that's the decision you are faced with here. The decision you are faced with here is, do you want to be in a world where the United States is a member of TPP and Canada is not.

Our research is mostly on cross-border supply chains and the integration of other industries as well, agrifood; and certainly the automotive industry is the most important at this crossing. We have an assembly plant here in town. It requires to trucks a day to come across the Ambassador Bridge for that assembly plant to work. Remember that Canada and the United States are not a customs union, so it's not like Europe where stuff just goes across the border. There has to be customs administration on everything, and there are rules of origin that come into play.

If we get into a situation where the United States is able to play by one set of rules of origin, and Canada is constrained to a more restrictive set of rules of origin, even if we would prefer, overall, to be using that more restrictive set of rules of origin, it will put Canada at a disadvantage because it will make it more difficult to operate those supply chains across the border. That's how our research at the Cross-Border Institute relates it. Ms. Karen Ludwig : Thank you. I have just one more question on that.

We've heard from, I believe, Joseph Stiglitz, in terms of his research, that there's a potential of 58,000 job losses. Taking your position of the cost of not ratifying TPP, do you have any estimation of how many jobs might be lost by not ratifying? Mr. William Anderson : I don't have an estimation of that. Again, that's because it would come from a broad type of economic model, and I have not seen one that actually does the right counterfactual, which is to say, looking at a situation where the United States is in the TPP and Canada is not.

Most of the factors that would have a negative impact on Canada will occur whether or not Canada is in the TPP. For example, on preferential access to the U.S. market, if the United States adopts the TPP, we lose that preferential access, which we've had for 20 years, and Canada's decision won't affect that. Ms. Karen Ludwig : This question is for Madam Hasenfratz. Looking at your business, where 90% of it relies on the U.S. market, have you looked at diversifying from that? Obviously, you've been quite successful on your comparatives and have been able to be nimble and innovative.

Have you considered diversifying more from the U.S. market into other international markets? Ms. Linda Hasenfratz : Yes, we absolutely do. While 90% of what we make in Canada is shipped to the U.S., 35% of our overall business is actually outside North America. In Europe and in Asia, we do supply some products from North America, for instance, Skyjack. We do all our manufacturing here in Canada, and then export to Europe and to Asia. For our automotive business, given the volumes, we do locate internationally and supply those markets from those areas.

However, we create jobs and a lot of support for those international operations in our Canadian operations because we're doing a lot of R and D, product development, process development, launch support, and that type of thing for those plants. Ms. Karen Ludwig : How significant is the Japanese market to you and your business?

(1045) Ms. Linda Hasenfratz : We're not going to ship to Japan from here, that's for sure, but we certainly supply the Japanese automakers in other locations. We supply Japanese automakers in the U.S. from our Canadian operations, for instance, and we do buy products from Japan, such as equipment to manufacture the components. The Vice-Chair (Mr. Randy Hoback) : Ms. Ramsey. Ms. Tracey Ramsey : Thank you so much for your presentations here this morning. We're discussing the U.S. and Japan a lot. Japan has come up numerous times at this panel as a market that people would like access to.

In terms of the U.S., though, I'd like to say that whether or not we sign the TPP, they still have the advantage. If we were to ratify here in Canada and go to the U.S., the U.S. still holds the power to determine whether or not they allow our entry. Therefore, really there's no push for us to sign ahead of this two-year window we have for this ratification process. The U.S., as I said, has advantages in many ways. We heard about the auto chapter. They actually opted out of the

chapter on labour mobility because they see it as a threat to their sovereignty. There are many ways that the U.S. was able to protect themselves in this deal that Canada was not. These are things that are deeply concerning to us on this committee. I'll go back to auto, because of course we're sitting here in Windsor. Before I do that, though, Ms. Ludwig brought up the Tufts University study. It's part of the struggle we have, as well, that we have no economic impact study that exists. Global Affairs Canada hasn't done one.

There are different economic models that have been done, and they show, essentially, a 0.0% to 0.2% increase in our GDP by 2030, which—by all accounts we've heard at this committee—is a rounding error. It's not being shown that the benefits are there for us, and the job losses are estimated at around 60,000. I would like to go to Mr. Marchand and basically ask you if you can read into record that resolution you brought before us, and if you can talk a little more about how you think Canada's auto industry and our auto industry here in Windsor-Essex would be impacted by the TPP. Mr.

Matt Marchand : Before I do that, I just want to read something else into the record, too, from our policy and solutions forum that we had yesterday. I just want to read this, as I didn't get a chance to read it earlier: The gathering heard that Canada is not only losing new auto investment to Mexico and American jurisdictions offering better incentives but also to a growing number of new countries around the world entering the lucrative industrial sector, including Indonesia, Turkey and Thailand.

Tanguay said it was troubling to hear at an industry gathering he attended in Michigan that, among automotive decision-makers, Canada didn’t even make the list of potential investment sites for new product. I just wanted to put that on the record. Ms. Tracey Ramsey : If you don't have the resolution now, that's okay, but if you can read into record, I think we would like to hear what the Ontario Chamber has to say.

When we look at the tariffs and we talk about the tariff portion—and out of chapters in this agreement, 6 actually have to do with tariffs—97% of our trade with the TPP countries is already tariff-free. We're talking about 3% of the trade that we're focusing on. We'd like to see businesses succeed in Canada. We know there's a definite relationship between the amount of jobs we would see proportionate to that. I wonder if you could speak— Did you find it, Matt? Mr. Matt Marchand : I can speak from memory because I wrote it, or helped write it.

The resolution from the Ontario Chambers is basically on the content issue. The fact of the 62.5% going down to 30% to 35%—or to 40%, depending on how you read it—is something we need to equalize. We need to equalize the tariffs. For the reduction rate, the U.S. has 25 years; we have less than five. Also, in addition to what you were saying earlier, they asked that the Government of Canada not take a decision on TPP until after the U.S. federal election. Also, there was currency manipulation. That was one of the big issues, and I want to speak to this. This is important.

Currency manipulation is something that is of grave concern to many of my members across Windsor-Essex and also to the Ontario Chamber network. If we're going to be entering into trade deals with countries, they're going to be in a position—and they have done so in the past—to adjust their currencies to get competitive advantage. That's something we certainly find very concerning. In the TPP agreement there's no mechanism by which to enforce currency devaluation. Caroline Hughes talked at great length in her testimony on March about the IMF rules that are in place but at the moment are not able to be enforced.

Under the TPP, as it sits right now, there's just no opportunity to enforce currency devaluation. Those are the concerns across the board from our Chamber network across Ontario.

(1050) Ms. Tracey Ramsey : These are certainly the concerns that were brought forward by the Ford Motor Company. The Chair : Ms. Ramsey, you have only or seconds. Ms. Tracey Ramsey : Ms. Hasenfratz, how many jobs do you think will be created in Canada under the TPP? Ms. Linda Hasenfratz : I haven't done a thorough study so that's a very difficult question for me to answer, but I will say that just because nobody's added up and calculated what that job creation would be, doesn't mean that they won't come. Somebody's gone to the trouble of calculating that there are going to be 60,000 losses.

Nobody has done the work—and it's a shame that they haven't—to identify the number for job creation. That doesn't mean that it's not going to happen, and— Ms. Tracey Ramsey : I think all the economic models show that there's no job creation— Ms. Linda Hasenfratz : I do believe strongly that if we don't ratify the TPP, Canada will become irrelevant on a global stage. We don't want to be there. We want to be relevant. We want to be on the global stage. We want to be part of what's going on in terms of global trade and the global economy, and to not ratify the TPP would leave us out of that.

I think that would be a huge mistake. The Chair : We'll have to move on to the Liberals and Mr. Peterson for five minutes. Mr. Kyle Peterson : I want to thank Professor Anderson for basically comparing what we have to compare, a world without Canada being at the table if the U.S. ratifies it. This is not an analysis between the status quo and the TPP, which I think is something that I think we all need to keep in mind here. As far as the economic assessments and economic impact studies go, most of those assessments were based on comparing the status quo to a world in which members would be in the TPP.

I don't think that's worth as much as the analysis that needs to be done if the Americans and the Japanese are in the TPP, and Canada is not? That, I think, is the analysis that needs to be done. I'm sure Mr. Marchand can agree that any economic analysis is only as good as the presumptions made within it. That needs to be done, and it hasn't been done yet. That's the comparison that needs to be made. So thank you for basing your analysis on the reality of the situation. I do appreciate that. I have a question for Ms. Hasenfratz.

Professor Anderson talked a little about how we'd have to have separate production lines as one of the options if we're not in the TPP and the Americans are. You know the industry probably better than anyone at this table. How viable is it for suppliers to run separate production lines? Ms. Linda Hasenfratz : There's no chance of that happening. You achieve efficiency by scale. The bigger the line, the higher the volume; the more efficient that you are, the lower you can drive your costs and the more that you can drive improvement.

The concept of somebody setting up something to serve 80% or 90% of the volume in one place, and literally just 10% or 20% to serve Canada, is not going to happen. Mr. Kyle Peterson : I wanted you to bring that up because Professor Anderson did dismiss the separate production line theory academically, as he should, but I wanted to have the practical reality. It's not feasible and never could be. The whole industry is based on efficiencies and productions and volumes, and most certainly they won't be met with separate production lines. I want to make sure we're aware of that as a committee.

You can't have some NAFTA-approved product coming up, and then some TPP-produced product coming up. It's just not viable in the industry. Thank you for clarifying that. Can you tell us a little more about your footprint here? How many facilities do you have in Ontario? Ms. Linda Hasenfratz : We have plants in Ontario. Mr. Kyle Peterson : Are your 9,000 employees Ontario employees or Canada-wide? I would imagine most of them are in Ontario— Ms. Linda Hasenfratz : All of our facilities in Canada are in Ontario. Mr. Kyle Peterson : That's good, and I appreciate your success story.

I've spent some years of my career at Magna International, so I understand the industry somewhat. Don't hold that against me. It's great to see your growth in the industry. I was there in 2007, 2008, 2009, a tough time for the industry, as you no doubt are abundantly aware, but a lot of that was driven by decreasing auto sales because of the financial crisis and the reasons that applied then. Right now we see auto sales growing in Ontario and Canada, but it seems that some of the GMs, the Chryslers, the Fords, aren't necessarily here in Canada and able to tap into that growing market.

They're not capitalizing on it. They don't seem to be benefiting as much as some of the other OEMs. Do you have any theory why that might be?

(1055) Ms. Linda Hasenfratz : You are asking why the Canadian plants are not seeing increased production? Mr. Kyle Peterson: Yes. Ms. Linda Hasenfratz: Yes, it depends a little on the product that you're making, obviously. Products that are gaining market share are going to be growing in volume, so it's a bit about that as well. That said, certainly we haven't seen major additional investment coming into Ontario over the last several years, although there have been examples of it. Look at Toyota, Honda. They have both put major investments in place in Ontario.

I do believe they are seeing the value that we have here in Canada, in some of those things that I talked about. I actually think Ray Tanguay is doing a great job of getting out and busting some of the myths around why we shouldn't be operating here, and becoming more proactive at going out and trying to bring new players here, and to enhance the ones that are already here. I think people are starting to listen to him. We haven't had a very good external push, a “let's bring them in” strategy. Having one now, I think, is going to be very helpful. Mr.

Kyle Peterson : I'm presuming that you think these studies should be undertaken whether the TPP is signed or not? The Chair : You'll have to wrap it up. Ms. Linda Hasenfratz : Absolutely, we absolutely should be continuing to try to bring automotive volume here to Canada and continue what is a thriving industry. The Chair : That wraps up the first round. We're going to go to the second round of five minutes. The Liberals start off with Madam Lapointe. [ Translation ] Ms. Linda Lapointe : Good morning and welcome. My riding is in Rivière-des-Mille-Îles. We used to have the General Motors plant in Sainte-Thérèse.

That's the plant that used to build the Camaros and Firebirds. It was in my riding. Ms. Hasenfratz, you said earlier that you are investing and you were going to have other plants. I invite you to consider my riding. We have a great deal of skilled labour and the cost of electricity is very low. I have a question for you. You said that Canadian content was not the reason for the success of companies. You said that we had to be competitive, efficient and innovative. Could you elaborate on that? [ English ] Ms. Linda Hasenfratz : We look at innovation as being two parts.

In the products that we're designing, we try to solve market issues, for instance, fuel efficiency and lower emissions. We're redesigning products to try to reduce emissions and provide fuel economy. That brings our customers back because we're helping to solve problems that they have or helping them to do something that their customers are looking for. Then there's innovation around process, and we're trying to manufacture those components for the very best costs and best reputability, quality, and technology.

If we can do all those things, we're solving industry issues, we're reducing costs, and we've got a compelling reason to bring our customers to us. That's why I'm saying that innovation is so critical to competitiveness. Then of course efficiency is critical, how you're running your operation and how you're managing your labour costs, and your relationship with your labour is critical. Purchasing, planning, and continuous improvement to be constantly trying to drive costs out and find better ways to do things is absolutely critical to staying competitive. [ Translation ] Ms. Linda Lapointe : Thank you very much.

That's very interesting. We could certainly talk about it some more. That said, I have a question for Mr. Anderson. We all know that there is a presidential election now in the United States. Depending on the outcome of the election, we may end up having to hold another round of negotiations for the Trans-Pacific Partnership. You talked about the need to participate if the United States does too. If renegotiations were possible, what would you like to see changed in the agreement as drafted right now? [ English ] Mr. William Anderson : I don't know that I would necessarily change the rules of origin.

I think in terms of the phase-in, obviously the phase-in deal that Canada got was not as good as the phase-in deal that the United States got. Of course, that was a phase-in on a 6.1% tariff for Canada versus about a 3.1% or something like that for the United States. In some sense that balances out. On the rules of origin, I think it would probably be better for the automotive industry in Ontario if you could get those percentages up a little bit. However, you have to look at that in the light of other global arrangements, for example. One of the ones that I've studied is the ASEAN economic community.

Those sort of 35% to 40% types of regional value content rules are kind of what's the standard in those, whereas, if you look at the west, the NAFTA, or the European Union, 60% is more typical for that. In some sense, it's a bit of a compromise among the countries from the different regions that are in the agreement. (1100) [ Translation ] Ms. Linda Lapointe : Thank you, that's very interesting. Mr. Marchand, earlier you talked about the manipulation of currencies. I would like to know specifically which countries you were referring to. [ English ] Mr.

Matt Marchand : Many countries globally have the ability to manipulate their currencies vis-à-vis their central bank. The TPP does not necessarily have enforceable mechanisms by which you can prevent that. You've read stories about China, for example, devaluing its currency, and Thailand with the baht. All sorts of examples globally have happened over the last 10, 20, or 30 years involving currency manipulation.

I don't think countries put out a news release to say, “By the way, we're doing this”, but it happens globally, and it's something we have to take into account when doing international trade deals; there is no question about it. The Chair : The time is up for Madame Lapointe. We're going to move over to the Conservatives for five minutes, and Mr. Hoback. Mr. Randy Hoback : Mr. Marchand, do you know of any other trade deals that have made dealing with currency manipulation enforceable? Mr. Matt Marchand : The TPP is a wide-ranging deal across— Mr.

Randy Hoback : There are lots of countries with trade deals, and not only Canada is involved, but the U.S. is involved with other deals, with Mexico. Do any of them have currency manipulation charters in them? Once you do that, everybody worries about loss of sovereignty. If you were to negotiate it into your TPP, we'd have Canadians screaming about the loss of sovereignty of our central bank. Mr. Matt Marchand : Well, I can throw it back at you. Why would you get into an agreement with someone who can devalue their currency and make themselves more competitive? Mr.

Randy Hoback : They can do it right now, today, if they so choose. Whether it's a trade agreement or not, if they want to devalue their currency to make themselves competitive on the global stage, if they're going to go down that avenue, what do you do? The IMF has policies in place, but that's basically all you have. Whether it's in a trade agreement or not is irrelevant, because they can still do it in or out of a trade agreement. Mr. Matt Marchand : Yes, but if you do it within a trade agreement, now you've legitimized it and have a set rules of trade. Mr.

Randy Hoback : You still have the IMF policy; it can actually go in to try to regulate it. The reality is, countries are not going to give up that sovereignty of their central bank, so it's hard to say we're going to have currency manipulation because of TPP, when it's already happening and we're already complaining about it.

To me it's rather a wash, because unless you decide on the IMF side of it how you are going to deal with China and the way they regulate their currency in other countries, and start putting in really strong regulations at that level, which I don't think the U.S. would ever agree to, you're not going to see it happen. So whether it's in TPP or in NAFTA or any other agreement.... Mr. Matt Marchand : NAFTA is only three countries, and the FTA was only two countries.

What I'm saying is, why would you, as a decision maker, put yourself in a position in which you're going to be dealing with people knowing that they're going to have another set of rules, different from ours? Mr. Randy Hoback : I guess what I'm saying is that they're going to do what they're going to do, whether in the trade agreement or not. If you are not within the TPP, you're still going to have to compete with them, while they will have the ability to do that currency manipulation, so— Mr. Matt Marchand : Why would you compete with them, knowing that—? Mr. Randy Hoback : We already are today. Mr.

Matt Marchand : But why would you go one step further? Mr. Randy Hoback : One thing about going a step further is that you're at least getting a balance in your trade agreement, so you're getting market access that's equal and equivalent, that's equal on a level playing field, so that a company like Linamar doesn't have to overcome a tariff to go into a country that somebody else has preferential access to.

For example, if the U.S. signs on to TPP and Canada doesn't, and they're going to compete out of Canada into Japan—that might not be a good example, but I'll use it for an example—they need to have market access equivalent to what they would have in the U.S. The U.S. isn't looking at currency manipulation, and I find that really interesting, because Ford, out of the U.S., actually backs this deal. In fact, Ford out of the U.S. are the ones encouraging Korea and the U.S. to do a trade deal, yet they come into Canada and say that Canada should not do a trade deal with Korea—

(1105) Mr. Matt Marchand : Well, I have to disagree with you. Hillary Clinton and Donald Trump have both made currency manipulation a key issue. Mr. Randy Hoback : Hillary Clinton started TPP when she was secretary of state. Mr. Matt Marchand : I'm just explaining what you're saying right now. She is concerned about currency manipulation, as is Donald Trump. One of those two is going to be the next president. Mr. Randy Hoback : Yes, and that's fair, and it's going to be interesting to see, if they rip up NAFTA too, what impact that has. I'm going to move on.

We talked about electricity costs, pension costs, cap and trade. These are things that the Ontario Liberal government has done here provincially. How has that affected the effectiveness or the competitiveness of businesses locating in Ontario versus in other jurisdictions? I'll go to Mr. Anderson first. Mr. Matt Marchand : Okay. Mr. William Anderson : Right now energy costs are a big issue. I was at the auto summit yesterday, and I think it was the one issue that just about everybody brought up.

On the other hand, I would say you could make the argument that the Ontario government is also doing something that the rest of the world needs to do by attacking this. I think the problem is that.... A very good point was made yesterday by a gentleman from the Canadian motor vehicle association, saying that if we make the electricity prices so high in Ontario that we drive producers to U.S. states that use coal-fired plants, then we would actually have the net impact of increasing carbon emissions. I think there needs to be some rethinking about electricity.

There are disadvantages in not having the same access that, for example, Mexico has, and you're always going to have that cost disadvantage. If you then get into a situation such that a Canadian assembly plant is going to sell cars into the United States under NAFTA rules of origin, while a Mexican plant can sell cars into the United States under TPP rules of origin, which would mean they could have some lower price content from some other places, it's going to be one more competitive disadvantage. Mr.

Randy Hoback : But if you throw CETA in with Canada—Canada has an agreement coming in CETA—and TPP, now all of a sudden you have a tremendous amount of access globally. One country has a preferential treatment into a wide range of very lucrative markets. Is that not going to attract more businesses here? The Chair : Mr. Hoback, I have— Mr. William Anderson : Very quickly, I would say that's the strategy Mexico has pursued, with the same results. The Chair : We're going to move back over to the Liberals. Ms. Ludwig, you're up for five minutes. Ms. Karen Ludwig : Again, it's a great conversation.

My questions are related to labour mobility. We've heard a number of different panellists across the provinces discuss the significance of the labour mobility

chapter in the TPP. We've heard a previous panellist, from Unifor, talk about the fact that the U.S. has opted out of the labour mobility angle. There are million people who live within the United States and roughly million living in Canada. In the early 2000s there were studies done predicting a skilled labour shortage in Canada. Madam Hasenfratz, do you bring in any skilled labour to help out and provide temporary support at times, or even longer-term support within your organization? Ms. Linda Hasenfratz : Yes, absolutely. The availability of skilled labour continues to be an issue.

We're doing an enormous amount to try to develop people right here. We have more than apprentices working for us globally, in our organization alone. We're growing quite rapidly. We've been growing in double digits every year, and having strong technical people is absolutely key to the innovation that I was discussing earlier from a process perspective and that continues from an improvement perspective. As a result, we have gone beyond our borders to try to bring people into our operations to supplement what we can produce using people internally.

I think immigration is great stop-gap that we can use, until we can start to develop more and more people and encourage more people into skilled trades. That starts much younger, doesn't it, with a focus on STEM—science, technology, engineering, and math—and getting more people into those areas and increasing the number of people going into skilled trades. I think this is working; we are seeing more people in STEM and we're seeing more people starting to go into skilled trades, which is fantastic. It's just that the numbers aren't big enough yet, so we need to keep that effort going.

In the meantime we can use immigration to help fill the role.

(1110) Ms. Karen Ludwig : Dr. Anderson. Mr. William Anderson : On that same issue, I think there's a skilled labour shortage in Canada, but there's a skilled labour shortage in all of the other developed countries involved in TPP, and it's worse just about everywhere else. One reason it's a great opportunity to expand trade relations with Japan is that Japan is a very sophisticated country that is facing the most severe labour shortage of any developed country probably in history, because of their demographic situation.

Canada, having a labour force that has skills and education levels comparable to those of the Japanese labour force, could be very complementary to them. If anything, this is a comparative advantage that Canada has, which may also contribute to more Japanese investment in Canada, because that situation is a tough situation here but a terrible situation in Japan. Ms.

Karen Ludwig : When Canadians decide to travel internationally for work, particularly, let's say, in an environment like Japan's, what are the opportunities and the risks they might bring back to Canada as employees and contributors or non-contributors to competitiveness? Mr. William Anderson : I want to quickly make sure of what I just said. I wasn't saying it's an opportunity for us to send our people to Japan. It's an opportunity for the Japanese to send their production here, where they can take advantage of the availability. Ms. Karen Ludwig : Okay; it does go both ways. Mr.

William Anderson : Yes, that's right. Ms. Karen Ludwig : I'll just share, as an example, as an international business educator, that I have found over the years the tremendous benefits to my students of travelling internationally and bringing back the social and cultural experience, but certainly the technical expertise back to Canadian companies, and of having that experience internationally. From many standpoints, I don't see that as negative. I see it as quite positive. I'd also like to hear from— The Chair : Your time is up. We're going to have to move over to Mr. Ritz.

You also have only four minutes, so that we can tidy up the panel. Hon. Gerry Ritz : I can talk fast. Thank you so much for your presentations today. It was very interesting stuff. On PACA, Matt, most certainly we were addressing that as quickly as we could. I had actually made an offer to the horticultural industry that if we were to do a check-off, I would match what they put in and we would build our own body to facilitate it. There's a misunderstanding in the horticultural council that somehow it covers it for bankruptcies only.

About $7 million has been used over 20 years, so it's not an insurmountable amount, which could be addressed, but it's not about no or slow pay at all, as some in the hort industry think. I know they're here later, so we'll have that discussion. It can be fixed fairly readily without getting into bankruptcy and insolvency and so on. Mr. Matt Marchand : That's a priority we're hearing. Thank you for addressing that. Hon. Gerry Ritz : Yes, absolutely. Linda, thank you for your presentation.

On content rules, I would think you would be apoplectic seeing the content rules go down in the TPP, being a Canadian innovator. Or do you see it more as an opportunity to join the global supply chains? Ms. Linda Hasenfratz : As I was mentioning earlier, if you look at Canadian content requirements under NAFTA, they're zero. There is no requirement for this work to come to Canada. Admittedly, it's a bigger bucket with smaller players. You can leap to the conclusion that you're going to get more, but really there's no requirement for that work to come here, and there isn't any requirement for it to come in TPP.

That's why I believe that we compete by being innovative, and efficient, and a great solution for our customers. I'm not worried about the content rules, because the content rules aren't how I'm winning business. That's not how I won those billions of dollars of business, and it's not how I'm going to win business in the future. Hon. Gerry Ritz : Bill, you also made the point about Japan's building platforms here to make use of our skilled workers. I absolutely agree with you. We're actually seeing that happen already with the investments from Honda and Toyota to address the CETA opportunities that are coming.

Honda is going to build the CR-V here simply because of that. Again, it creates those opportunities for Linamar to take

part in that supply line as well. I wanted to reinforce that point. Again, to Linamar, being global as you are, you must have IP concerns, you must have proprietary products, and the way that you do things. There have been a lot of concerns raised about the ISDS chapter, that it's terrible, that we're giving up our sovereignty and all that. Do you see that as a help or a hindrance in dealing with other countries where you actually have an appellate body and a set of rules that you can actually go to as an investor? Ms. Linda Hasenfratz : Are you talking about in terms of protecting IP? Hon.

Gerry Ritz : Well, protecting you as a business in other jurisdictions, including IP. You have the ISDS clauses, which some people say are terrible, that we're giving up our sovereignty, but I see them more as rules-based adjudication when a government changes the way that they would allow you to operate. Ms. Linda Hasenfratz : Exactly. I think the other benefit is that if you have harmony in terms of rules, then you have fewer individual rules to follow and requirements to meet.

Not having harmonious regulation adds costs to a whole bunch of different industries where they have to follow these rules, follow these rules, and follow these rules. If we have a common set of rules, then that does help to improve efficiency. Hon. Gerry Ritz : Okay. Great. Thank you. There is also talk that the phase-in period is too short. When you look at global investors, and I have a country that's going to hold the line for 25 years, and I have another one that is going to make changes in five years, where are you going to put your money?

(1115) Ms. Linda Hasenfratz : I'm all in favour of moving quickly. I think that's another key way that we compete, by being able to move fast, to be nimble, and make things happen quickly. I would always prefer to move quickly. The Chair : We're ending our panel here right now. I thank the witnesses for coming. We had a very lively exchange. Can I ask the MPs to stay at the table for a minute because we have some media here and they want to take some shots of all of us at the table? We will suspend the meeting.

(1130) The Chair : We're going to start our third panel this morning and continue our dialogue on the TPP. Welcome, folks. For this panel we have the Ontario Greenhouse Vegetable Growers, the Lambton Federation of Agriculture, and the Windsor-Essex Economic Development Corporation. This is the sixth province we've visited, and we've g