CME’s remarks at the House of Commons Standing Committee on Foreign Affairs (FAAE) on the “United States and Canadian Foreign Policy”
May 30, 2017
Good morning Mr. Chair and members of the Committee.
Thank you for inviting me here to speak on behalf of Canada’s 90,000 manufacturers and exporters and our association’s 2,500 direct members to discuss Canada’s relationship with the United States.
CME is Canada’s largest industry and trade association with offices in every province, and is the chair of the Canadian Manufacturing Coalition, which represents 55 sectoral manufacturing associations. More than 85% of our members are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Manufacturing is the single largest business sector in Canada. In 2016, manufacturing sales surpassed $600 billion for the third consecutive year directly accounting for 11% of Canada’s total economic output, while directly employing over 1.7 million Canadians in highly productive, value added, high paying jobs. With the base in the NAFTA region, manufacturers are also directly responsible for the majority of Canada’s exports. In 2015 and 2016 manufactured goods exports reached nearly $350 billion, an all time record high, accounting for almost 70 per cent of all Canadian exports. Nearly 75 per cent of these exports go to the US.
Much of this trade is due to the deep integration of manufacturing operations across the NAFTA region and in particular between Canada and the US. This integration has created a unique relationship for our countries globally; we do not simply trade goods with each other, we build things together, we innovate together, we compete with the world together.
Canada’s relationship with the US in most ways is a model for which all relationships, especially trade relationships, should be judged. It has helped increase the standard of living of participants. It has strengthened industry by combining the talents and expertise of each market, creating bigger markets at home and strengthening our combined competitiveness globally. No other relationship that Canada has can compare to the historical, current and future importance for our economy or our citizens.
Securing and expanding this relationship must remain single most important priority for Canada in dealing with the new administration. And while there are many uncertainties in this regard moving forward – not the least of which are potential border taxes, increased protectionism, and NAFTA renegotiation – we also believe there is great opportunity for Canada, for Canadian industry if efficiently handled.
Since the signing of the NAFTA nearly 25 years ago the business world has changed dramatically. NAFTA itself created much more competitive and global industries and spawned almost unimaginable levels of integration and flows of people, services and goods. China rose from almost nothing to an industrial powerhouse competing for customers, investment and market share against Canadian and US companies. New technologies have emerged that have reshaped the way we live and work. Almost none of this was contemplated when NAFTA was signed.
These changing realities are why CME has been working constructively with the federal government for years on avenues to improve the NAFTA framework. Efforts like the Border Action Plans of the 2000’s and the Regulatory Cooperation Council and the Beyond the Border agreements of the 2010’s were aimed directly at improving our common manufacturing platform because NAFTA modernization was not an option.
Now that opening the agreement is a political reality, we should look for ways to cement improvements that support the economic base of NAFTA. To help prioritize, CME is surveying our members to identify priorities for NAFTA modernization and improvement. While our surveying is still ongoing, I can give you an overview of the responses as they currently stand.
As a starting point, the overwhelming priority is for Canada to maintain market access and uninterrupted supply changes with the US. While companies want improvements, they are also very concerned about a renegotiation that leads to a worse economic outcome through more restrictions, barriers and protectionism on imports and exports of people, goods and services.
On specific measures for improvement, the priorities mainly stem from the deep level of integration and the volume and value of the trade. Improved customs processes to speed border transactions and eliminating uncertainty through reduced red-tape for both people and goods ranks as the top priority. Following that, companies are looking for maintaining effective dispute settlement processes, improved regulatory cooperation and alignment, and coordinated trade action on dumping of goods from other markets.
Many of these priorities are already included in the existing Canada-Europe Comprehensive Economic and Trade Agreement (CETA) framework, were being negotiated as part of the TPP, and we believe could create a framework for a modernized NAFTA.
At the same time, the relationship between Canada, the US and Mexico are fundamentally different than those represented in those other trade agreements. We believe that if Canada can come to agreement on these priority areas with other, largely new trading partners, we should be looking to go beyond those commitments with our NAFTA partners, and especially the US. For example, expanding the RCC to implement a Mutual Recognition Agreement on regulations or strengthened perimeter coordination of trade rules, such as illegal dumping.
In summary and conclusion, our economic relationship with the US is paramount and we must work aggressively to strengthen and grow integration while there is an opportunity. We don’t simply trade goods with the US, but rather build goods together, innovate together, and compete with the world together. And while there are significant uncertainties and concerns, we believe with the right approach, our integrated economies can be strengthened and increase global competitiveness to drive job creation and economic growth.
Thank you again for inviting CME to participate in your study. I look forward to the discussion.
ABOUT CANADIAN MANUFACTURERS & EXPORTERS
Since 1871, Canadian Manufacturers & Exporters has been helping manufacturers grow at home and, compete around the world. Our focus is to ensure manufacturers are recognized as engines for growth in the economy, with Canada acknowledged as both a global leader and innovator in advanced manufacturing and a global leader in exporting. CME is a member-driven association that directly represents more than 2,500 leading companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.
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