INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 5, 1997

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order pursuant to an order of reference of the House dated Tuesday, October 28, 1997, consideration of Bill C-11, the Customs Tariff Act. We're continuing from yesterday.

We have a number of witnesses before us today: Mr. Mark Nantais, Michael Sheridan, and Tayce Wakefield from the Canadian Vehicle Manufacturers' Association; Vaughn Hibbits from Honda of Canada Manufacturing; Adriaan Korstanje from Toyota Manufacturing Canada; David Worts from the Japan Automobile Manufacturers Association; and Ken MacDonald from the Automotive Parts Manufacturers' Association.

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There is something I would like from each of those associations. A number of you have prepared briefs. We will have each association make a presentation lasting no more than five minutes on behalf of the association, and then we will open up to questions. We have a number of members who want to ask questions, and that is the only way we are going to get through all the questions that are on the table today.

So with that, is Mr. Mark Nantais presenting?

Mr. Mark Nantais (President, Canadian Vehicle Manufacturers Association): Yes, thank you, Madam Chair, and good afternoon, members of the committee.

We are here today because buried in the administrative simplification bill is an issue of strategic importance to the half-million people employed in Canada's auto industry. Specifically the government has included clauses that will make more permanent the reduction of the original equipment manufacturer parts duty rate to zero.

We have three fundamental objections to this policy change.

First, we believe it is inappropriate for the government to take such a decisive action when Industry Canada is in the late stages of an extensive automotive competitiveness review, expected to be completed in early 1998. This comprehensive study is intended to include a review of all policies applicable to the trade of vehicles and vehicle parts. At a minimum, government action on duties applicable to OEM parts should be postponed until after the completion of the Industry Canada review, which is less than six months away.

Second, we are extremely disappointed that the government would choose to implement unilateral reductions of an auto parts duty when these goods are subject to so many tariff and non-tariff areas around the world. Canadian vehicle and parts manufacturers are prevented from further growing the Canadian economy and creating more jobs, because so many foreign export markets are effectively closed to Canadian trade.

Rather than confronting these countries and working to convince them to open their borders to trade, Canada is choosing to give away a bargaining chip by unilaterally reducing its customs duties. We strongly believe that Canada should not reduce its customs duties until other countries have both eliminated non-tariff areas to trade and agreed to reduce their tariffs to Canada's levels. Meaningful progress in terms of parts and vehicle sales into these closed markets must be the measure of such change.

Third, we believe that this proposed measure further undermines the 1965 Canada-United States automotive trade agreement, more commonly known as the Auto Pact. The Auto Pact is recognized as one of the most successful international trade agreements ever negotiated. It is the cornerstone of Canada's strategic automotive policy, and the Auto Pact has resulted in the explosive growth in jobs and investment in both vehicle parts and manufacturing in Canada over the last 30 years.

Permanently reducing the OEM parts tariff duty rate to zero, as proposed in Bill C-11, is a big step down the road to ending the Auto Pact and severely damaging the Canadian auto industry. Permanently reducing the OEM parts duty rate to zero is also a fundamental change in the rules governing auto investment in this country, the rules under which all our investments were made. In the mid-1980s the Government of Canada confirmed that the Auto Pact would be the strategic auto policy for Canada, that duty-free treatment for parts would be granted only to those companies that joined the auto pact.

Eliminating the OEM parts tariff would create a two-tier structure where companies who chose not to join the Auto Pact would get free treatment for nothing, but the companies who have long been committed to Canadian production and sourcing under the Auto Pact must continue to meet these obligations. We believe that such a two-tier structure is unfair, and we believe that for Canada to give away duty-free treatment for no production and sourcing obligations, and no reciprocal foreign market access, is unwise. I would submit that it makes little sense.

In essence, we do not think the policy of the government should be to provide favourable treatment for the companies that employ 3% of the workers in the auto manufacturing in Canada, at the expense of those companies who now employ 97%.

Madam Chair, the issues at stake in this bill are extremely important. The big three alone directly employ more than 65,000 Canadians whose jobs depend largely on exports. Our Canadian parts suppliers employ over 90,000 people in hundreds of facilities across Canada. The direct and indirect benefits to the Canadian economy of all this manufacturing activity are enormous. The auto industry is a major consumer of steel, plastic, aluminum and machinery of all sorts. The total economic impact of vehicle and parts manufacturing goes far beyond the 500,000 Canadians who work in the broader automotive sector.

And yet this industry is under severe international pressure. Global overcapacity is expected to reach 22 million units by the year 2001, and that is equivalent to about 88 assembly plants. In North America alone overcapacity will reach about 5.5 million units.

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It is by no means certain that in the face of this pressure, every auto plant in North America will continue to operate.

Canada currently produces almost twice as many vehicles as it sells in its home market. We are the most export-oriented vehicle-producing country in the world. At the same time we have one of the world's most open markets. Fully 75% of vehicles sold in Canada are imported, with almost 20% imported from overseas. This can be compared with sanctuary markets such as Korea, which has less than 1% imports, or Japan, which has only 6% imports.

We should also note that prices for cars and light-duty trucks in Canada are among the lowest in the world.

To continue this level of success, Canadian companies must fight for global market share. We must continue to efficiently produce high-quality vehicles and parts. At the moment, however, Canada and Japan are tied as the third most expensive places in the world to build cars, after the United States and Germany. Our success to date will come under increasing pressure from countries such as Korea, which is aggressively expanding its capacity to produce cars while continuing to protect its own domestic market. Korean auto makers will have no choice but to seek export markets, and Canada, with its open market, will be a key target.

In the face of the global reality of overcapacity and sanctuary foreign markets, Canada should focus its attention on opening up other markets to trade before embarking on any other policy change. Tariff barriers, which are common around the world, are a hindrance to trade. But more importantly, non-tariff barriers, which are usually defended as “domestic policies”, effectively close many markets to Canadian exports. Examples of non-tariff barriers include licensing, foreign exchange restrictions and manipulation, closed distribution and retail systems, discriminatory product standards, unduly rigorous and time-consuming inspection processes, and differential application of domestic law.

Addressing these non-tariff barriers should be the Government of Canada's first priority. Unless they are removed, Canadian companies will continue to be frozen out of many important markets, with the risk of job losses right here at home.

In this context the government has come forward with Bill C-11, which will further weaken Canada's negotiating position on vehicle and parts trade with other countries. Canada needs to bargain, and it needs to bargain hard, to have other countries remove their non-tariff barriers to trade. Giving away one of our bargaining chips by eliminating one of our few remaining customs duties is not a strong strategy.

Madam Chair and members of the committee, the initiative proposed in Bill C-11 is not only inadvisable; it could be extremely dangerous for Canada. The government is choosing to permanently remove one incentive to purchase Canadian-made vehicle parts without having won a single—not a single—concession from any other country in exchange for this duty elimination.

This policy step is being taken while a comprehensive review of the automotive industry is still under way, and it is being taken despite the objections of the organizations that employ 97% of the people who work in the Canadian vehicle and parts manufacturing industry.

Madam Chair, we respectfully respect that the committee amend Bill C-11 by deleting those sections that reduce the OEM parts duty rate to zero.

Having said that, Madam Chair, we are now open for questions. And we thank you for your attention.

The Chair: Thank you, Mr. Nantais. We're doing a roundtable. Everyone is going to make their presentation, and then we're going to go to questions.

Mr. Nantais: Very good. Thank you.

The Chair: Mr. MacDonald, perhaps you would like to proceed.

Mr. Ken MacDonald (Director, Policy Development, Automotive Parts Manufacturers' Association): Good afternoon. The Automotive Parts Manufacturers' Association welcomes this opportunity. So important is this auto parts issue to us that I'll try to give you our three, even four, cents' worth.

The presentation will have three parts: first, a quick overview of the importance of the industry; second, a quick explanation of the impact—and I'll try mainly to build upon what Mr. Nantais has said without repeating unduly—and third, the amendment we recommend.

Industry Canada figures show that the automotive parts manufacturing industry employs about 92,000 Canadians, which is up 7% from 1995. They produced about $20 billion worth of GDP last year. And our own figures show increases on both sides to 95,000 people and $25 billion in 1997. Spin-offs are on top of that.

The jobs are well paid. They are increasingly high-skilled as parts makers become more and more involved in R and D to increasingly make technologically sophisticated parts. That success of our industry's strength is largely attributable to trade agreements: the Auto Pact, the FTA, and NAFTA.

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Moving along to the impact of Bill C-11, I want to first build upon a comment Mr. Nantais made. Enshrining the zero rate in legislation sends a signal that this is a rate that will remain at zero for the long term. Before now, the tariff had been set in an instrument of finite duration—that order in council you have no doubt heard about. That choice of a cabinet order instead of legislation signalled an intent that the rate would be an interim rate only. Bill C-11 would suggest contrary. It would suggest a permanent rate now, and that has clear implications for bargaining strength down the road.

Let me very clear: we are not issuing today a call for protectionism. We want to make very clear the point that our experience has made us true believers in free trade, but trade is not free when concessions are not reciprocated. Free trade always comes in the form of an agreement.

The recommendation I want to skip down to is to have the parts tariff taken out of Bill C-11, and to set that tariff at 2.5% by way of an order in council. That's par with the American tariff on parts, and matching the American rate will keep Canada competitive in terms of attracting investment. Investors will be less concerned that they will face competition from overseas producers. At the same time, of course, it will encourage more purchasing.

We, of course, acknowledge that overseas manufacturers operating in Canada do buy substantial quantities of goods from Canadian parts makers. Nonetheless, for the reasons mentioned, we ask that the tariff be taken from Bill C-11 and instead be set at 2.5% in an order in council.

That's all I have to say. Thank you.

The Chair: Thank you, Mr. MacDonald.

Mr. Worts, do you have a written presentation, or is it all verbal?

Mr. David P. Worts (Executive Director, Japan Automobile Manufacturers Association of Canada): It's an oral presentation.

The Chair: Go ahead, then, Mr. Worts.

Mr. David Worts: Thank you very much, Madam Chair.

My name is David Worts, and I'm the executive director of the Japan Automobile Manufacturers Association of Canada. With me today are representatives from two of our members, Honda and Toyota, and they are also going to say a few remarks as well.

We did not expect to be here, but we appreciate the opportunity to give the committee a balanced point of view. We are here to support the Government of Canada's policy as embodied in Bill C-11, specifically the zero tariff for auto parts used in the production of vehicles.

As the committee heard yesterday from the Department of Finance, this is not a change but a continuation of a policy that we think is reasonable, fair and balanced. Then and now, the policy of the government was to create a uniform manufacturing environment for all auto makers. Clearly, the zero rate was not a temporary measure. Over $1 billion in new investment in Canada by Honda and Toyota was made with the understanding that this policy was permanent.

We support the concept of tariff simplification and the passage of Bill C-11 without change. Imposing a tariff would change the policy, and would be a regressive and punitive measure for non-Auto Pact auto makers in Canada.

I would now ask my colleague Vaughn Hibbits to say a few words.

Mr. Vaughn Hibbits (Senior Vice-President, Administration, Honda of Canada Manufacturing Inc.): Thank you for this opportunity to address the committee, Madam Chair. My name is Vaughn Hibbits, and I am vice-president of administration at Honda of Canada Manufacturing. I want to share with you the Honda manufacturing story from three perspectives: one is production, the second is associates, and the third is parts purchases in Canada.

From start-up in November 1986, we have grown and are now producing 160,000 vehicles a year in Canada. In December 1995 we announced our light truck plant. This is an important franchise plant within Honda, and we're very excited about its future prospects. It is the first light truck facility established by Honda anywhere in the world, and we are proud that Canada was selected for this important facility.

The second plant will bring our total production in Canada to about 280,000 units a year. This represents 30% of Honda's combined Canada and U.S. production capacity for light vehicles. That 30% is the highest in the industry and is well above the Canadian auto industry average.

From our start-up in late 1986, we have now over 2,000 associates. We are adding 1,200 more, which will bring our total to 3,200. We provide secure employment and have never used the unemployment insurance system.

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With respect to parts purchases, Honda has increased parts purchases in Canada every year since start-up. Since January 1996 Honda's parts purchases in Canada have increased significantly. On the other hand, parts purchases from Japan continue to decline rapidly. Our philosophy is to maximize localization. Total parts purchased in Canada will more than double with the plant expansion, and the number of Canadian parts suppliers will increase by 50%. The good-news growth story includes seven new parts suppliers locating in Canada as well as more volume for established suppliers.

As far as policy is concerned, Honda believes a country's policy environment is very important. The most important principle for Honda is fair and equal treatment. This is what we expect, and this is what we have relied upon. Applying this principle to parts, it is important to understand that Bill C-11 does not involve any policy change. It simply maintains the status quo on OEM parts as it has existed since our start-up in 1986.

We support the government position in this bill.

Thank you, Madam Chair.

The Chair: Thank you.

Mr. Korstanje.

Mr. Adriaan Korstanje (General Manager, General Affairs, Toyota Motor Manufacturing Canada Inc.): Thank you, Madam Chair and members of Parliament. My name is Adriaan Korstanje, and I'm general manager of Toyota Motor Manufacturing Canada.

When its expansion is complete in 1998, Toyota Motor Manufacturing Canada will have invested more than $2.2 billion in Canada and will have created 2,200 direct jobs for our Canadian team members. We will also meet all requirements for the Auto Pact. That means a one-to-one ratio for production to sales, and we will in fact build two vehicles in Canada for every one we sell here, with 60% Canadian value added.

For the past thirty years, Canada has offered auto makers duty relief measures designed to encourage production in Canada. The main tool was the Auto Pact, and duty remission and duty drawback programs were offered to makers like Toyota as stepping stones to Auto Pact status. The confirmation that these conditions would continue was a main basis of our original investment.

Since Toyota's original decision to invest in 1985, the environment has changed. The free trade agreement precluded additional companies from obtaining Auto Pact membership, and the NAFTA eliminated drawback and remission. Auto Pact members—the big three, plus Volvo and CAMI—continue to receive the same benefits of being able to bring parts and vehicles into Canada duty free, and from anywhere in the world. To limit the impact of the loss of duty drawback, the government rightly acted to maintain the status quo by eliminating the tariff on auto parts. Toyota has responded by investing over a billion additional dollars in Cambridge.

Toyota's Canadian parts purchases are up significantly, and purchases of Canadian-made parts will grow with Toyota production growth. Toyota Motor Manufacturing Canada will have the capacity to produce 200,000 vehicles in 1998, up from 100,000 in 1997. Toyota's commitment to the advancement of Canadian parts was recently demonstrated in the encouragement that we provided to Denso corporation to build in Guelph, Ontario.

Companies make investment decisions based on their own cost structure, not that of their competitors. The decision with respect to parts tariffs does not affect the cost structures of the big three. It does, however, have a major impact on Toyota. It's worth noting that Toyota Motor Manufacturing Canada competes for investment not with the big three but with other Toyota locations, especially those in the United States.

Toyota supports this bill. Companies doing business in Canada on the same basis should be treated the same. All car makers in Canada are foreign-owned. Investors like Toyota should be able to compete within a stable, fair and competitive auto policy.

Thank you, Madam Chair.

The Chair: Thank you very much.

I want to remind the witnesses and members around the table that if you have any specific questions that come up throughout the hearing, we do have officials with us from Revenue Canada and Finance.

With that, I'll start with Mr. Pankiw.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): Thank you, Madam Chair.

The first question I have.... I'm a little bit confused. I can understand the position of Mr. MacDonald, given that he represents the Automotive Parts Manufacturers' Association. But the other three gentlemen, Mr. Worts, Mr. Hibbits and Mr. Korstanje, represent vehicle manufacturers, and Mr. Nantais represents the Canadian Vehicle Manufacturers' Association. Yet you are on opposite sides of the issue. Am I missing something here?

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Mr. Mark Nantais: No.

Mr. Jim Pankiw: Are they not members of your association?

Mr. Mark Nantais: No, there's a big distinction here. CVMA member companies are essentially those companies that were members of the original Auto Pact, in other words, Chrysler, Ford, General Motors, as well as Volvo, and some of the truck makers, I might add. They are the ones who made commitments under the Auto Pact to invest and create jobs here in Canada in return for certain privileges. The privileges are those we mentioned in terms of the importation of the duty-free parts.

Ms. Tayce Wakefield (Canadian Vehicle Manufacturers' Association): The issue really between us, from our perspective—and I'm with General Motors; my colleague is with Ford of Canada—is in the narrow sense whether the parts tariff should be retained at the bound rate level. But in a larger sort of way, the issue is should the Auto Pact be maintained and should there be commitments required of manufacturers in order for them to get duty-free treatment, or will Canada now adopt a policy where duty-free treatment does not need to be earned?

Mr. Jim Pankiw: You said that Canadian manufacturers have a very large export market. But if you increase the tariffs, wouldn't that adversely affect your ability to export? Wouldn't that decrease your ability to compete internationally with the goods that you manufacture here in Canada?

The Chair: Mr. Worts.

Mr. David Worts: It certainly would raise costs for those who are affected by the tariff. As you heard, the Auto Pact companies are able to import duty-free parts and vehicles. But they're suggesting that a parts tariff be applied only to non-Auto Pact companies. The reality is that the free trade agreement in 1989 excluded anybody else from joining the Auto Pact.

Ms. Tayce Wakefield: Perhaps it would be helpful to give you a bit of a history lesson here.

The Auto Pact was negotiated in 1965. The car makers that were then in the country joined up, as well as some parts makers and heavy truck makers. In the 1980s when there were new investments from offshore, the Government of Canada then affirmed that the Auto Pact would be Canada's strategic auto policy. Of the new entrants, only CAMI made the commitment to Auto Pact to meet the required production to sales and sourcing requirements.

The government provided Honda and Toyota with a duty remission set of programs relief as a bridge to get them to the Auto Pact. They had the opportunity to join the Auto Pact and chose not to.

The government then chose to close membership in the Auto Pact under the Canada-U.S. Free Trade Agreement in 1989. Subsequently, in NAFTA, the Government of Canada agreed to eliminate the special duty relief schemes.

What happened at that point was that the tariff on parts for Honda and Toyota should have returned to the bound rate. However, they lobbied the government to do a couple of orders in council to first reduce the parts tariff and then to waive it with orders in council that expire at the end of this year, December 31, 1997.

In our view, what Honda and Toyota are now doing is saying this: We made a business error; we made a bad decision in the 1980s when we chose not to join the Auto Pact when we had the opportunity; and though the Auto Pact has been the strategic auto policy for Canada for over 30 years and has resulted in half a million jobs in this country, the Government of Canada should fix our business decision. They should fix our error by eliminating the tariff on parts and, in that way, remove an incentive on Honda and Toyota to source parts here, but of course continue the obligation on the big three, creating a two-tier structure.

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That's why we think this is an inappropriate action, that the government should allow the parts tariff to return to its bound level. The people who signed up and made the commitments earn the treatment. The people who chose not to sign up live with the results of their decision.

The Chair: Thank you, Mr. Pankiw. Thank you, Ms. Wakefield.

I want to point out to the committee members that we have a chart on automotive tariffs—you may find it in front of you—describing those that are Auto Pact and those that are non-Auto Pact and what has happened throughout....

Mr. Worts, would you speak directly to this?

Mr. David Worts: Yes, I would like to address the issue of the Auto Pact.

The Auto Pact was closed by the free trade agreement. This was done very abruptly. Honda and Toyota both expected that the Auto Pact would be open to them when they were able to meet its commitments. I think we heard yesterday from the officials from the Department of Finance that there's been a long-term policy in Canada to provide duty-free tariffs on parts for manufacturers in Canada.

The Chair: Thank you.

Mr. Bellemare.

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you, Madam Chair. My question is for Mr. Nantais.

[English]

You say, we're giving up our bargaining chips and we should give in only to those joining the Auto Pact. Are they refusing to join the Auto Pact, or are they being prevented from joining the Auto Pact? That would be my first question of a series of questions.

Mr. Mark Nantais: I think what we're talking about is that they missed their opportunity. They had the opportunity prior to NAFTA coming into place, and that's the point we've been trying to make. Now we're trying to correct a wrong perhaps. Does that answer your question, sir?

Mr. Eugène Bellemare: Yes, but I'm biting my tongue on a comment.

Mr. Mark Nantais: Go ahead.

The Chair: It's now closed, Mr. Bellemare.

Mr. Eugène Bellemare: My second question is this.

You say Canada should seek to open up markets in foreign countries before removing tariff barriers. If Japan, the United States, Canada, and other countries in Europe produce...I would expect there are a very limited number of countries that produce automobiles, trucks, or buses. Are you aware of countries that don't produce? Would they be the places where we would make these deals?

Mr. Mark Nantais: No, many countries around the world produce automobiles and other vehicles. In fact, many of those countries see the automotive industry as being a strategic part of their overall economy and are very protective of it. As an example, we cited Korea. Korea surpassed Canada as the number six producer around the world. We're now number seven.

By other trade tariffs or non-tariff barriers we are unable to gain access to those markets. We know that wherever there is a formal trade agreement in place, for instance, on a bilateral or multilateral basis, we are able to compete, and compete quite well, in those markets. In many cases they have certain instruments in place, whether it be tariffs or non-tariff barriers, that prevent us from accessing those markets. That's what we're talking about.

Why would Canada give away its bargaining chips in negotiating agreements with these countries? It makes absolutely no sense, because you would have nothing left to bargain with.

The Chair: Mr. Bellemare, Mr. MacDonald wishes to speak to that as well.

Mr. Ken MacDonald: I'll briefly build upon Mr. Nantais' comment. The government itself lists among the priorities for improving market access the MFN nations of Japan and the western European countries. The former non-tariff areas and the latter tariff barriers being of concern, I referred to the Department of Foreign Affairs and International Trade zone publications of 1997, Canada's international market access priorities, in support of that comment.

There may be issues on which we could use this tariff reduction possibility. We can keep it in our back pocket and use it in negotiations on issues that are, say, noted as priorities by the Government of Canada.

Mr. Eugène Bellemare: How many vehicles produced by the big three in Canada are sold outside Canada at the exclusion of the United States? For example, do we sell any big three automobiles produced here in Europe, for example, or South America?

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Mr. Michael Sheridan (Member, Canadian Vehicle Manufacturers' Association): The Ford Motor Company produces for the U.S. market. Primarily, 85% of its product produced in Canada goes to the U.S. market.

Mr. Eugène Bellemare: No, no, no, at the exclusion of the United States market.

Mr. Michael Sheridan: Beyond that, for instance, the Windstar, produced in Oakville, Ontario, is sold to 50 countries around the world. Last year we were able to sell 110 vehicles, the Windstar, into Korea. At the same time, Korea shipped 20,000 vehicles into Canada.

Mark Nantais made a comment here about the restrictive nature of that market. It is to be noted that 99 out of 100 vehicles sold in Korea are built in Korea and that 94 out of 100 vehicles sold in Japan are built in Japan. Here we're talking about a lever the Canadian government has with this parts tariff, which we can use to effectively open those markets to Canadian product—not just Canadian-built product, but also North American-built product, which has on average $1,500 worth of Canadian parts. That is what's at stake here.

The Department of Foreign Affairs and International Trade talks about the importance of trade and the effect of $1 billion of incremental trade supporting 11,000 jobs in Canada—high-paying jobs. This is a lever, again, that Canada can use to open up those markets.

If we look at the markets of Japan and Korea in total, it's a massive opportunity for North American product. If we were able to get 2% of that market, it would sustain an additional assembly plant in North America, either in Canada or in the U.S. If it's in the U.S., at least we get a chance to support the assembly plant with parts.

Mr. Eugène Bellemare: The answer is related to the production of automobiles—

The Chair: This is your last question, Mr. Bellemare.

Mr. Eugène Bellemare: —the whole thing going, all finished, the final product. Today we're talking about parts, though, auto parts.

Don't our parts manufacturers in Canada supply other companies in other countries, with the exception of the United States?

Mr. Michael Sheridan: It's very limited, actually, and I should let Mr. MacDonald talk about this.

If you look at the Canadian auto parts manufacturers, the primary customers are the North American big three. Of their sales, 93% go to the North American big three automotive companies. Very few sales of the Canadian parts manufacturers go offshore at present.

Ken, perhaps you can elaborate on that.

Mr. Ken MacDonald: That's quite true. We sell a small quantity to Japan. We sold about $45 million worth in 1995, the last year for which we compiled numbers. The association does a survey. We imported from the same country about $1.35 billion. There is a major trade deficit with Japan, but it's the only major market outside NAFTA countries for our parts. This is largely because of the distance.

The Chair: Thank you. Thank you, Mr. Bellemare.

[Translation]

Mr. Dubé.

Mr. Antoine Dubé (Lévis, BQ): Ms. Wakefield, you represent General Motors. What percentage of the cars manufactured in Canada are manufactured in Quebec?

Ms. Tayce Wakefield: Excuse me, but I'm going to answer you in English.

[English]

I think for us, in terms of capacity, it's roughly 20% to 25%. In terms of actual vehicle sales it's somewhat lower because the market for that particular product is a little soft. That is, by the way, a product we do sell outside Canada and the U.S. We sell in both Japan and Europe relatively small numbers, but it is truly an international product.

[Translation]

Mr. Antoine Dubé: Firebirds and Camaros.

Ms. Tayce Wakefield: Yes, that's correct.

Mr. Antoine Dubé: Thank you, Madam Chair.

[English]

The Chair: Thank you, Mr. Dubé.

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Madam Chair.

My question is for Mr. MacDonald. Are there any parts the big three manufactured outside Canada or the United States?

Mr. Ken MacDonald: Are the big three the manufacturers of the products you're asking about?

Mr. Janko Peric: Yes.

Mr. Ken MacDonald: I will refer the question to Tayce. She is with the company that did the actual manufacturing.

Ms. Tayce Wakefield: I would say yes. Beyond Canada and the U.S., the next largest source is Mexico. The NAFTA countries really are where the vast majority of parts are sourced.

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We do some sourcing from other countries, and it is a variety of countries around the globe. The proportion is quite small. Off the top of my head, I would say about 90% of the parts come from Canada, the U.S., and Mexico, with less than 10% from other countries.

Mr. Janko Peric: In your statement I heard there might be a loss of 500,000 jobs. Is that a threat to the government, that if we implement the tariff there is going to be a loss of jobs? What are you going to do? Are you going to move to Mexico, where the salaries are much, much lower than in Canada and the United States or even Japan or Korea?

Mr. Michael Sheridan: I don't think in Mark Nantais' presentation we threatened the loss of 500,000 jobs. We outlined the importance of the automotive industry to Canada and the fact that there are 500,000 people in Canada directly employed in this industry; one in seven is directly or indirectly involved.

What we're saying is that the automotive industry is very important to Canada. There's a growing overcapacity in the marketplace worldwide. By the end of the century there'll be 22 million units of overcapacity. Some will find their way to the Canadian shore. Most of those vehicles coming in from offshore will not have any Canadian content. To the extent to which they come into this marketplace and displace vehicles built in this marketplace with a lot of Canadian content, you will have job loss.

The Chair: Thank you.

Mr. Axworthy.

Mr. Chris Axworthy (Saskatoon—Rosetown—Biggar, NDP): I just have a couple of questions.

I have one question for the Japanese manufacturers representatives. If you were working for one of the big three, would you be making the same arguments? I also have the same question for those who are working for the big three. Would you be making the same arguments were you employed by Honda or Toyota?

Mr. Vaughan Hibbits: I will answer that.

I'd like to say I don't think I'd make the same argument, because I happen to believe in equality, fairness, and a level playing field. That's not the argument being made. It's called “punish your competitor for your own selfish advantage”. I don't think I'd make that argument.

Mr. Adriaan Korstanje: I certainly agree with Vaughan. Dave said don't have a two-tier system. I agree with that. One group should not be privileged as the big three would be if they convince you to protect them from competition.

Mr. Chris Axworthy: That means you'd never work for one of the big three.

I have another question for the Japanese manufacturers. Is it your view that these special privileges are not necessary, that you fulfilled a role in creating jobs and so on in Canada by producing more cars than you sold, as you indicated? Does that mean you don't think the tariffs are necessary for commercial reasons?

Mr. Adriaan Korstanje: In the case of parts tariffs, we're really not asking for a change. Because of duty remission and duty drawback, duty drawback specifically, there haven't been parts tariffs on local manufacturers. The OIC, when drawback was removed, maintained the status quo that's been in place for 30 years. That's the status quo under which we made our investment decisions, and we feel it's only fair and acting in good faith to continue that status quo as we have invested here.

Ms. Tayce Wakefield: May I just supplement that? I think there's an important perspective here. For the first 20 years and continuing to this day, for the people who employ 97% of the people in the industry the obligation is an overt obligation to meet sourcing commitments. It's an earned duty-free treatment.

I'm very encouraged that Honda and Toyota have said here today they are committed to increasing their sourcing in Canada. Unfortunately, they wouldn't sign up when the time was there to commit to it for real. What's at stake here is not assembly jobs but the multiplier effect.

There are three or four parts manufacturing jobs for every assembly job in our businesses here in Canada. The same multiplier is absolutely not true for Honda and Toyota. My interest in this issue is as as a Canadian as much as it is as a General Motors employee. Free trade is a privilege that you earn and negotiate. It comes with certain obligations to make commitments to sourcing and investment in a country. When companies elect not to make those commitments, it's not fair to go back 10 years later and say to the government: we made a bad business decision; now we'd like you to change your strategic auto policy to fix our mistake.

• 1620

Mr. Chris Axworthy: It does seem to me that it's a telling point that we shouldn't bargain away something for nothing. That's a concern to many people in any of these kinds of trade deals, whether or not you get a fair shake in return for what you give up, and sometimes only time will tell.

What does the government say to your arguments on that point about bargaining away for nothing in return? What does it say about the difficulty of ever getting something in return later from other competing countries? What does it say about this being a part of the beginning of the end of the Auto Pact?

Mr. Mark Nantais: Quite frankly, we have not received very much of a response from the government on this. We continue to be told that the automotive policy review is under way and that it will be completed early in 1998. So that's pretty much the extent of their response to us on this.

Ms. Tayce Wakefield: It really is a key focus. There are two elements here: one is domestic production and sourcing, but the other is certainly access to foreign markets. Frankly, we think the first priority of the government right now should be on getting access to those foreign markets before we completely open ourselves up and give away all the chips. So it's an order of ranking of the priorities with at least as much emphasis on access to foreign markets as on opening up your own home market.

The Chair: Thank you, Mr. Axworthy. Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): First of all, Mr. Hibbits, in your presentation you touched very briefly on employment insurance. Are you suggesting that the big three auto makers receive a subsidy from the government by virtue of accessing the employment insurance system?

Mr. Vaughn Hibbits: Yes. Indirectly that's what happens when somebody does use the fund and shuts down and lays people off for retooling or because the market's soft. As a matter of philosophy we haven't done that, and we don't plan to do it.

Mr. Alex Shepherd: I see. Okay.

I'd like to go back to Mr. Nantais. We seem to be making a big issue of this. As I understand it, these tariffs have never existed in Canada in the first place. You have duty drawbacks, remission orders, and so forth. How is the fact that the tariffs have not been imposed adversely affected your operations?

Mr. Mark Nantais: Perhaps I should let one of our companies respond to that. Obviously they're the ones who are affected by it.

Tayce, do you want to take a stab at it?

Ms. Tayce Wakefield: The fact that tariffs have not been imposed has been a series of one-off decisions and deals in succession from the government; it's not been a policy in our view. Initially they had the duty remission deals, which were intended to be a bridge to the Auto Pact. When the government decided that closing the admission to the Auto Pact was part of the policy, they continued the duty remission deals. Then finally under NAFTA, the end of the duty remission deals.... The government ran two tracks, frankly. There's the track with obligations, which we've been down, and then there's been the cutting them a break for no obligations, which the government continues to follow when it comes to parts tariffs for Honda and Toyota.

The marketplace is very complex and competitive for autos, as you're well aware. We all are fierce competitors around the table and we all have very good-quality products that we make available in the marketplace. When we displace sales of vehicles either produced in Canada or with substantial Canadian content with sales of vehicles either not produced in Canada or with relatively low Canadian content, that's lost to our companies. More to the point, it's lost in terms of jobs in the Canadian economy. And that's really where the fundamental concern ought to be.

Mr. Alex Shepherd: I can understand your having concerns with non-North American manufactured goods coming into Canada.

• 1625

Ms. Tayce Wakefield: It's hard to get really good data, but our year-to-date estimates show that in the Canadian marketplace this year imports by Honda and Toyota are up some 160%.

Mr. Alex Shepherd: Tell me just how pure your products are. I certainly recall Chrysler running around with Mitsubishi engines in them and so forth. Obviously you have a certain foreign component in them. Is that fair to say?

Ms. Tayce Wakefield: The measure is how much Canadian content we have in them. On that measure, when we source over $8 billion a year from Canadian parts manufacturers, collectively the three of us source 93% of all Canadian parts production in this country. Do the math. I'd say we're a whole lot purer.

Mr. Alex Shepherd: Relatively speaking.

The Chair: Thank you. Mr. Shepherd, are you finished?

Mr. Alex Shepherd: Yes, I am.

The Chair: Okay, thank you, Mr. Shepherd. Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you, Madam Chair. I'm sorry I was late in getting in and missed the presentation. Belatedly, it's nice to have the representatives of the business and the automobile manufacturers' association here.

There is a real concerted effort, a real opposition to the provisions in this legislation with regard to the reduction of tariffs. It seems to me that whether you were part of the Auto Pact or not part of the Auto Pact, in practice over the last number of years the tariff situation has been identical. So the opposition comes from those who are members of the Auto Pact against this legislation. What is the real reason behind that opposition?

Mr. Michael Sheridan: Speaking on behalf of those members who invested in Canada and earned the right to bring in product parts from offshore in terms of our investment in Canada, the major issue here is access to foreign markets. Canada has very limited tools to utilize in order to open up markets for the offshore.

I spoke earlier of the fact that although we have the world mandate for the Windstar produced in Oakville, and we sell it in 50 countries around the world, there are those countries around the world where we cannot get that product in. Canada should be focusing on opening up those markets before more fully opening up ours. It's a matter of fair and free trade. That's the issue here today.

Mr. Mark Nantais: If I might just supplement that, sir, we are not totally against this bill. There are some very good elements of this bill. You're addressing one aspect of it.

Mr. Werner Schmidt: No, I understand that. There's a part that you're opposed to. I want to really understand why it is that you're opposed to it. Are you opposed because it will restrict either yourselves or the parts suppliers to your operation and manufacturing in expanding their operation into export markets from Canada? Is that your concern?

Mr. Michael Sheridan: That is our prime concern. There are two concerns. One is we have earned the right under the Auto Pact in terms of the investment we've made.

Mr. Werner Schmidt: I understand that part.

Mr. Michael Sheridan: We feel there is an unearned right being provided to a competitor. Beyond that, and more importantly, is that access into foreign markets is being denied. Canada should use as its primary focus all the tools available to them. One of them is the parts tariff in terms of having that in place so we can use it as an instrument to open up markets offshore.

Mr. Werner Schmidt: I'm still not quite clear, Madam Chair, what exactly that resistance is. I can understand the reward for having done certain things here, but I don't quite understand what advantage it is to you to open up an export market for Canada.

Mr. Michael Sheridan: Opening up a market overseas would allow a Canadian-built product to flow into that market.

The impact on that would be on the direct assembly jobs, the direct engine jobs, the direct parts manufacturers in Canada. The product built in Canada would be provided access into those foreign markets. We're saying to the Canadian government, use whatever tools you have to work with other foreign governments to open up those markets so that Canadian-built products will be able to be shipped into that market. This will benefit the Canadians who work either directly or indirectly in the industry.

Mr. Werner Schmidt: I understand that. On the other hand, it strikes me that there is another way in which this very same thing can be accomplished. That is by putting up tariffs against the importation of fully constructed vehicles from elsewhere. This is a possibility. That doesn't exist at the present time, but surely the very same thing that exists elsewhere could also be introduced. Therefore the same event could be established, which you're now saying prevents us from exporting. That could be done in Canada as well.

Mr. Michael Sheridan: There is a variety of tools that Canada could use. The parts tool is one that is available to them.

• 1630

Ms. Tayce Wakefield: We would prefer that the government pursue a course that has reciprocal free and fair trade across all the producing and consuming nations, rather than create a lot of further barriers to trade. Canada already has one of the lowest automobile tariffs in the world, one of the lowest parts tariffs in the world at the bound rate level on vehicles—the effective rate level as well.

We would not argue for increasing those tariff rates. What we would say, though, is at least put half your effort on getting access to foreign markets, not just opening us up. Also, use your chips. Don't give them away.

Mr. Werner Schmidt: To follow your logical argument, though, you would now exclude the two other manufacturers in Canada from the same benefit you are getting under the Auto Pact. All you're doing at the moment is saying that you want the Auto Pact provision to exist in the future, and that what exists today is wrong.

Ms. Tayce Wakefield: Let's just be clear for a second. The other ones have duty-free access across North America under NAFTA, provided they can meet those content requirements. So there's a mix of trade agreements that govern some players and not all players in the industry.

On the Auto Pact side, we have an obligation. They're getting the same benefit for no obligation. I think it's nice that they say here that they need the—

Mr. Werner Schmidt: So that's wrong today, too.

Ms. Tayce Wakefield: Well, they say that they make the production-to-sales ratios and the content requirements, and that's encouraging. However, when they had the opportunity to say where it meant something, when it was legally binding, they chose not to.

Mr. Werner Schmidt: Okay. Thanks, Madam Chair.

The Chair: Thank you very much, Mr. Schmidt.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

I'd like to ask a few questions of the Automotive Parts Manufacturers' group, first.

You talked about a 7% increase in employment. I take it that would also mean that in 1995-96 you had a high value of parts being produced by your association. Is that correct?

Mr. Ken MacDonald: The value of overall production increased, and so did employment.

Mr. Walt Lastewka: All right. During that time we still had the duty remission and we had the order in council, and this bill doesn't change that, so I missed your point. First you say you've gone up on components and you've gone up on employment, but this bill doesn't change that at all.

Mr. Ken MacDonald: The increase in production and increase in employment is industry-wide. We're not speaking there of sales or increased employment attributable to the overseas-owned manufacturers. That's the first thing.

To clarify a bit, and our reason for being here—I wanted to answer the other gentleman's question at the same time—

Mr. Walt Lastewka: My point was that the ground rule is not changing for you, the parts manufacturers, in this bill.

Mr. Ken MacDonald: The zero tariff would be made permanent. That's our biggest concern: the rate. The rate doesn't change if this bill is enacted, but the permanence of that rate does. That's a key issue for us.

I wouldn't want to stop there, though. We would say that at this point, as we've noted, with increasing procurement by the companies represented on my right here, there comes a point when you can surmise considerable comfort level with Canadian parts makers—a comfort level that perhaps did not exist in 1988 and 1989.

Notwithstanding that, right now, if you look at total purchases of Canadian-made parts by these companies either for assembly of cars in Canada or assembly in the United States—we are not bringing Japan into it at this moment because of distance—they buy about $1.3 billion.

Put it this way, to make it very clear. The survey we did shows that they buy about $1.35 billion; these are the most recent numbers, from 1995. The big three, which produce admittedly 10 times the number of cars, buy about 13 times of the amount of parts. So we see some potential for upside growth.

Ms. Tayce Wakefield: If I could just add to that, though, Mr. Lastewka, I think we should note that most of the increase in growth in the auto parts manufacturing sector has been as a result of the big three. I know General Motors alone has added some $8 billion of net new business to Canada since 1992. I also note that the APMA survey indicated that in the year after the first parts tariff waiver the sourcing by the transplants from all the tiers of Canadian parts makers in Canada actually declined. So I think we need to be cautious.

• 1635

It's very positive that the Canadian parts manufacturing industry is growing so strongly, but it's really as a result of the big three.

The Chair: Mr. Worts, do you wish to reply?

Mr. David Worts: Yes, I would like to address that particular comment about the supposed decline in the parts purchased according to the survey. Apart from the fact that there was a major sampling problem in the survey from 1994 to 1995—they weren't the same companies responding to the survey—the survey also was very clear on the point that Honda and Toyota had been increasing their parts purchases all throughout that whole period and continue to do so and will do so as the plants double their capacity.

I would further note that in 1996 when the tariff went to zero under the order in council, non-Auto Pact imports of parts from Japan declined 15.4% and imports of parts by Auto Pact companies from Japan increased by around 52%.

The Chair: Thank you, Mr. Worts.

Mr. Sheridan, do you wish to reply to that?

Mr. Michael Sheridan: Further to that, I think if we look at the period 1994-96 and look at non-Auto Pact imports from Japan, the automotive trade balance on parts has deteriorated. If you look at it, there has been a drop in terms of parts sold to Japan over that period and there has been an increase since 1994-96. Instead of looking just at a one-year period, I would ask the committee here to look at a longer wheel base and perhaps go back to 1994 to look at the comparison.

The Chair: Thank you, Mr. Sheridan. Thank you, Mr. Lastewka.

Mr. Walt Lastewka: Is that it?

The Chair: That's it, sorry. I'll let you get in at the end.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé: Two or three days ago, a bill was put before me, and today we've been handed this pile of documents. I understand the opposition since they come from your area. To make the job easier for us, could you say exactly whether you want certain clauses of the bill to be amended? And if so, which ones? If you are already referring to them in the schedules, I would like someone to point them out to me because otherwise we could spend hours looking for them. Can you help us in that regard?

Mr. Eugène Bellemare: I think I can help him. In the text we've received, which contains more than 2,474 pages, Mr. Dubé could perhaps look at clause 9958 on page 2388. The issue is summed up quite well there.

An hon. member: It's the big one.

Mr. Eugène Bellemare: It's the last one.

[English]

The Chair: Thank you, Mr. Bellemare. Mr. Nantais.

Mr. Mark Nantais: What we're suggesting is that schedule clauses 9957 to 9963 be deleted from the bill. I hope that's helpful.

The Chair: Thank you, Mr. Nantais.

[Translation]

Mr. Dubé, do you have another question?

Mr. Antoine Dubé: No.

The Chair: No?

[English]

Thank you very much.

Mr. Provenzano.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Yes, I have one question, Madam Chairman, either to Mr. Nantais or Mr. MacDonald.

Am I to understand from either of your presentations that you were making the suggestion that the implementation of the new tariffs await the outcome of Industry Canada's current review of the automobile industry? If that's the case, is it because you feel that the review might lend a perspective to the concerns you're raising here today? If so, would care to elaborate on that aspect of it?

Mr. Mark Nantais: We're saying that contained in what we thought was a housekeeping bill is really an element of an overall strategic policy.

First, I think we made our position quite clear that we'd like to see deletion of those schedule clauses I just mentioned.

Secondly, we don't believe it's appropriate to take any sort of precipitous action at this point in time, that quite possibly, as part of the automotive policy review, everything should be looked at in the overall context of what is appropriate in terms of automotive policy for Canada and what is appropriate trade policy in terms of gaining access to these foreign markets.

• 1640

The Chair: Mr. Lastewka, do you wish to ask another question?

Mr. Walt Lastewka: Yes, I have two questions. I hope they don't take up all my time.

My number one question is, if the non-Auto Pact manufacturers fell in line with all those items you're bringing forward that you have had to fall in line with, would you accept them in the Auto Pact? Just answer me yes or no.

Mr. Michael Sheridan: As you know, Mr. Lastewka, the Auto Pact was closed in 1989. Prior to the closing of the Auto Pact, Toyota and Honda were provided the opportunity to join and chose not to make the commitment at that time.

The issue before us is broader than that. The issue is whether Canada is prepared to give up an instrument of trade that they have in their possession today and that they can utilize to open up foreign markets. It's an issue of international trade. It's a key issue for Canada.

Ms. Tayce Wakefield: Just to be clear, we encouraged them to join the Auto Pact when they made their investments here in the 1980s. Now it's a moot question because it's not an option.

Mr. Walt Lastewka: Okay.

To move on to the second question—

Mr. Tony Ianno (Trinity—Spadina, Lib.): On a point of information, is that a yes or a no? I didn't get it.

Mr. Walt Lastewka: I think it's a no.

In terms of your last remark, what you said about your action about the leading clauses 9957 up to 9963, personally, I am really surprised you're bringing that forward. I hope you realize what you have said.

My understanding is that you want to put 2.5% of tariff on everything non-Auto Pact and Auto Pact and you want to put 2.5% on steel; you want to do it on machinery; you want to do it on many other items. Is that what you're recommending?

Ms. Tayce Wakefield: Our recommendation is specific to OEM parts for assembly in motor vehicles. In trying to work through the detail of all this material, we would say that the most-favoured-nation tariff rate on OEM parts should be returned to the bound rate.

Mr. Ken MacDonald: Our position is that it should on a par with the American rate, which is an average of 2.5% for OEM parts.

Mr. Walt Lastewka: Is that for both non-Auto Pact and Auto Pact companies in the U.S.?

Mr. Ken MacDonald: What we're talking about is an MFN tariff, don't forget. So we're not talking about trade north and south of that border between Canada and the United Stated; we're talking about imports-exports between Japan or certain western European countries.

Mr. Walt Lastewka: Okay.

The Chair: Thank you, Mr. Lastewka. Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): I'd like to ask a question for clarification, Michael. As I understand it, you're not asking particularly for tariffs to be applied to the offshore manufacturers here. What you're really saying is, because that product is allowed to come into Canada tariff free, you would like the products of the big three to get into other markets, particularly maybe their markets, that you're somewhat restricted by due to tariffs today. Is that right?

Mr. Michael Sheridan: It is if included in that is... Look at the Japanese-Korean market, for instance. It's a massive market with very little...big three, North American product has virtually no access to that market. The benefits to Canada as a result of our being able to get into that market would be great. That's what we're hoping to achieve.

Mr. Eric Lowther: How are you restricted from that market today?

Mr. Michael Sheridan: If we look at it today, as I pointed out earlier, 99 out of 100 vehicles sold in Korea are built in Korea. That market is virtually closed to all manufacturers around the world.

Mr. Eric Lowther: Are there tariffs...?

Mr. Michael Sheridan: They have an 8% effective tariff rate coming into the country. They also have a bound rate of 80%. A variety of non-tariff barriers, however, are used by governments around the world to influence purchasing of product within their market.

As a result, although Canada produced last year 2.5 million units of production and shipped them to 50 countries around the world, collectively as an industry we were successful in getting 456 units of vehicles into the Korean market. It's a market that's effectively closed to us.

If we look at the Japanese market, it's 94 out of 100; again, very similar to the Korean market in that there are restrictions.

• 1645

As a country—Tayce talked about this earlier—it's not just an issue with respect to the big three, it's an issue with respect to Canada. We should be working as a country to open up those markets offshore and using whatever tools we have to help open up those markets.

The Chair: Mr. Lowther, just one moment. Mr. Worts wishes to reply as well.

Mr. Eric Lowther: I definitely want to hear that as well, but I just want to make sure we have this right. The group represented here would be somewhat satisfied, or largely satisfied, if there was no change to the Canadian tariff, but if they had greater access to some of these offshore markets that they're restricted from getting into today due to tariffs. If that could be negotiated down, that would be a good thing in the right direction, generally. Is that right?

Mr. Michael Sheridan: One of the measures we would use to help influence foreign countries around the world to open up their markets would be the use of this parts tariff. Beyond that, however, one has to look at the investment that has been made by the big three over the last 20 years, in fact, over the last 10 years.

My company alone has invested $6 billion in Canada since 1990. We added 2,000 jobs. We employ 17,000 Canadians. We purchase $5 billion worth of parts. We produce almost 1.5 million engines in Canada. We do that because we were living up to those rules outlined in the Auto Pact. Toyota and Honda had a choice back in 1989 to join the Auto Pact, and chose not to.

Mr. Eric Lowther: So in addition to what I said earlier, you would like to see some tariffs on this stuff that's coming in as well.

The Chair: Mr. Worts.

Mr. David Worts: I can't speak about Korea, but I know a little bit about the Japanese market. I can tell you that there are no tariffs on either vehicles or parts in the Japanese market. It is an open market.

It is, however, a very competitive market. There are 11 vehicle manufacturers in Japan. There are many auto parts companies that are very competitive. So it's not an easy thing to compete in the Japanese market, but it is open. Under the terms of the U.S.-Japan trade agreement, which was implemented multilaterally, this gives greater business opportunities for those companies who want to do more business in Japan. I think there's some evidence that U.S. auto makers are making some efforts. I'm not sure they're making enough, but at least their market share and their sales are going up.

The Chair: Thank you. Mr. Lowther, a final question.

Mr. Eric Lowther: Would you in general, though, be supportive of the concept that where there are tariffs for Canadian-manufactured product, if those are to be negotiated down and if they're not able to be negotiated down, that corresponding tariffs would be there to protect the Canadian imports from those same countries?

Mr. David Worts: I think this goes to the policy that the government has implemented for many, many years since the Auto Pact. For auto manufacturers in Canada, there has been a duty-free environment for automotive parts. I think that's a situation we're looking at today in the bill, and I don't think we're advocating any change to that.

The Chair: Mr. MacDonald, you wished to reply.

Mr. Ken MacDonald: Briefly, to add to that, certainly the tariff issue in Japan is not the concern, but rather non-tariff barriers, as your own government's documents indicate. Of course, there was that 1995 agreement between the United States and Japan, which as you recall was preceded by a stand-off. That illustrates, for our purposes, the non-tariff concerns that we alluded to.

Ms. Tayce Wakefield: If I can just add to that as well, I just note that coming up in November is the APEC leaders meeting in Vancouver. At that conference, there will be representatives of many auto-producing countries, such as Canada, U.S., and Japan, as well as some of the developing nations that are really the sanctuary markets of great concern.

Rather than today unilaterally passing this bill with these sections that give away the bargaining chip, we would suggest that Canada take that opportunity at APEC to ask that autos be a sector for specific negotiations between those countries, and then use the parts tariff there to get something, to get access to Korea, or any of the other very protectionist countries that are APEC member nations.

The Chair: Thank you, Ms. Wakefield. Thank you, Mr. Lowther.

Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Madam Chair.

My question is really for the big three representatives. I would like to continue on this question of market access.

• 1650

You're all American-owned companies. Mr. Worts touched on the agreement between the United States and Japan, and there's been some limited success, I believe, in opening up that market to American product. But when we start referring to a 2.5% tariff as our trump card, or the best thing we have to play in terms of trying to open up these markets, I'd like to come back into how successful the United States has been with their 2.5% tariff club to use for the same reason in gaining access to these closed markets.

Ms. Tayce Wakefield: To me an important dimension of looking at U.S.-Japan versus Canada-Japan in terms of trade, or how the U.S. conduct themselves generally, is they are as interested in access to foreign markets as they are in providing easier access to their own.

A 2.5% tariff isn't a huge club—we have no delusions—but it is a bargaining chip. And the U.S. has said very clearly that reciprocal trade is important to them. Canada has not taken a position strongly. They've been supportive.

I guess I'd also note that while it's true that we are subsidiaries of a global company registered in the U.S., we have shareholders here in Canada and we have a strong tradition in the Canadian auto industry.

Mr. Ian Murray: I wasn't challenging that at all; I was just suggesting that you would have a good understanding of what the situation is with your companies in the United States as they try to get into other markets.

Canada would be quite happy, I'm sure, with reciprocity as well in trade. My question really was what...? For example, we're familiar with the stand-off between the United States and Japan. What's the situation with Korea, then, if an American-based company, as opposed to say GM Canada or Ford of Canada, tries to penetrate that market? They have the 2.5% tariff. I'm just trying to get at whether this is really a reasonable argument in terms of market access.

Ms. Tayce Wakefield: I think it is. The ultimate forum I guess is the WTO for resolution of disputes.

In the Korea situation, the U.S. has been leading the charge to encourage Korea to be more open, and in that situation it's both non-tariff and tariff barriers they've gone after.

The Canadian government has been supportive, by the way, to some degree, of the U.S. efforts in terms of greater access to Korea.

In international negotiations, each country comes with a list of things it wants and a list of things it's willing to give up and the deal is done. What doesn't happen in international negotiations is one country says, well, we passed Bill C-11 and unilaterally gave up our tariff; why don't you give us something?

Mr. Ian Murray: But even with all the clout the U.S. has, you're saying still 99 out of every 100 cars sold in Korea are made in Korea. So I just come back again to this point that you're trying to make—

Ms. Tayce Wakefield: One of the reasons that in Korea the effective tariff is now 8%, down from the bound rate of 80%, is because of the pressure the U.S. has put on. In the U.S.-Japan talks, progress has been made in terms of access to the Japanese market because of pressure the U.S. applied, negotiations that took place between the two countries, a set of specific initiatives that were agreed to, and now a tracking process to ensure that in fact those agreements are being met. So it is fairly clear that if you do take a strong stand internationally, you can negotiate better access than prior.

Mr. Ian Murray: I would guess that the 2.5% tariff that the U.S. has never came into play in those negotiations.

All I'm trying to say is I find it's a bit of a spurious argument to suggest that a 2.5% tariff would open up markets for Canadian manufacturers abroad. I just don't follow the logic.

At 10 times the size of our market, any other country looking at potential trade partners would look at the U.S. first. Canada's a nice market to have, but they would look at the U.S. first, and if the U.S. hasn't been able to break into those so-called restricted or closed markets, what hope do we have of cracking those markets with our “best card” being a 2.5% tariff?

Mr. Ken MacDonald: So you'd agree that's not actually a reason to reduce the tariff to zero, right? Our point is that it's not by any means a trump card; it's just not good business—

Mr. Ian Murray: I'm just saying the argument is it would improve access and it's a card we have to play to try to open up markets. I'm probably using up my time here, Madam Chair. I'm just saying I don't buy it. That's the only point I was trying to make.

• 1655

Mr. Ken MacDonald: Our point is limited. It's not going to solve all our problems, but it makes no sense to give up even a small bargaining chip without anything in return.

Mr. Ian Murray: Okay, fair enough.

The Chair: Thank you, Mr. Murray.

Thank you, Mr. MacDonald.

Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

Those were very cogent observations.

I'd like to ask exactly how this could finally be resolved, if it can, because there's going to be a disagreement here, I have a hunch, unless some kind of meeting of the minds takes place. We're in a negotiation situation, it seems to me.

Would it be fair to suggest that the reason the non-Auto Pact automobile manufacturers here enjoy the same benefits tariff-wise as the Auto Pact companies do is that there was a reciprocal agreement that parts could go into those respective countries free of tariffs? Is that why that was done?

Mr. Michael Sheridan: Free of both tariff and non-tariff barriers.

Mr. Werner Schmidt: Exactly. If that could be maintained into the future, would you object?

Mr. Michael Sheridan: Which countries are you talking about?

Mr. Werner Schmidt: Canada and the United States, Japan in this case.

Mr. Michael Sheridan: For the free and fair access of our product, the key here would be for Canada to put in place metrics to determine how well we do in terms of gaining access to the market. Currently we're getting 5,000 to 6,000 pieces of product into that market—Japan I'm talking about—in 1995.

Mr. Werner Schmidt: But that's not as a result of tariffs.

Mr. Michael Sheridan: It's a result of a lot of non-tariff barriers.

Mr. Werner Schmidt: Oh, I see.

Mr. Michael Sheridan: The Canadian government has to be as vigilant on non-tariff barriers as they are on tariff barriers.

Mr. Werner Schmidt: So is that one of the reasons you believe—and we're getting into speculation now—the non-Auto Pact companies did not join Auto Pact?

Mr. Michael Sheridan: I can't speak for Honda and Toyota, but I would suspect that one of the reasons they did not join Auto Pact was there was a required commitment to invest in Canada at the time, and they chose not to make that commitment and make the investment.

Mr. Werner Schmidt: We all know about that part. It's these non-tariff barriers that you referred to.

Mr. Michael Sheridan: The non-tariff barrier would affect product leaving Canada and entering Japan, and what we're saying is open access should be provided to North American-built product into that marketplace.

Mr. Werner Schmidt: What are these other barriers that are not tariff barriers? Is there just a barrier that says you can't bring these in?

Mr. Michael Sheridan: There are subtle issues with respect to non-tariff barriers. There is speculation in certain countries around the world that if a customer were to choose a vehicle not purchased in that country, that person would find themselves being audited by the Revenue Canada of that country. Subtle pressures are put on people, consumers, in those countries not to purchase imported product.

Look at Korea. Korea today produces 2.6 million units of production. Their domestic economy can absorb 1.5 million units of production. They're planning by the end of the century to produce 5 million units of production. There is no way they're going to be opening up that market to offshore product. What they're going to be looking for is to get that product into countries around the world. Canada is a very nice country for them.

What we're saying is at this point we should be using whatever tool we have—and you're right; it's not a major club, but it is a bargaining chip, and we should be using whatever tool we have—working in concert with the U.S., which is trying to open up these markets, to try to make sure we get fair access into those markets before we more fully open our markets. It would just make sense to Canadians.

Mr. Werner Schmidt: So what you really want is as level a playing field as it's possible to achieve, both nationally and internationally.

Mr. Michael Sheridan: Yes.

Mr. Werner Schmidt: Thanks.

The Chair: Thank you, Mr. Schmidt.

Mr. Peric, you have one brief question?

Mr. Janko Peric: Yes.

In the last five years, did the price of your product—the new product, the new model—go up or down?

Mr. Michael Sheridan: Up.

Ms. Tayce Wakefield: In a general sense, up as the Canadian dollar has declined in value.

Mr. Vaughn Hibbits: Ours has gone up a bit.

Mr. Adriaan Korstanje: Also up a bit, but actually the Corolla this year is down from last year.

Mr. Janko Peric: By how much?

Ms. Tayce Wakefield: Just one model, he's saying.

Mr. Adriaan Korstanje: The Corolla, I said, yes.

Mr. Janko Peric: Yes, they are manufacturing just one model.

• 1700

Now, isn't it true that you are trying to punish the existing manufacturers, non-members of the pact, instead of punishing the manufacturers abroad by implementing the tariff on finished products?

Ms. Tayce Wakefield: Actually we are trying to encourage them to buy more Canada parts, but let's be clear that this tariff issue has very little to do with price. The president of Toyota Canada wouldn't commit to reducing prices if there were tariff reductions that came his way. That was on the vehicle side, but I think the connection to prices in not a direct one by a long shot.

Mr. Janko Peric: It's not. Okay.

The Chair: Mr. Peric, does that answer your question?

Mr. Janko Peric: Just the last one.

I'm somehow convinced you're trying to use any tool you can, and in the meantime you would punish the existing manufacturers here in Canada—the Canadian labour force.

Ms. Tayce Wakefield: No.

Mr. Janko Peric: If you don't know how to negotiate with Japan and Korea, then use that tool.

Ms. Tayce Wakefield: Our point is that fair is fair. We made the commitments and got the duty-free treatment. Honda and Toyota chose not to make the commitments and now they keep asking for special deals so they'd get duty-free treatment with no obligations and we'd still have to make it.

Ultimately what is at stake here is jobs in parts manufacturing in Canada. We think Canada should have a strategic auto policy that encourages people to source parts here.

The Chair: Mr. Peric, Mr. Worts would like to speak to that. Mr. Worts.

Mr. David Worts: On the issue of whether or not Honda and Toyota were willing to join the Auto Pact, my understanding is that they had a long-term expectation that the Auto Pact would be available when they were able to meet those commitments. I think that was their expectation all along.

You have to look at why the Auto Pact closed. If the Canadian government's policy was to have a single policy, why would it make it exclusive and not allow Honda and Toyota in the Auto Pact? It doesn't seem to make any sense in that respect. But what it did as a result of that was offer duty remission and drawback programs that gave a kind of equivalent status. Those programs were terminated under the terms of the free trade agreement and the NAFTA.

The Chair: Thank you, Mr. Worts. Thank you, Mr. Peric.

M. Dubé, one brief question.

[Translation]

Mr. Antoine Dubé: Perhaps this question has already been asked, but I would like to make sure I have properly understood your position. Is the United States in the same boat as regards all this? Are your position and what the bill proposes different from the known U.S. position to date?

[English]

The Chair: Mr. Worts.

Mr. David Worts: It is my understanding that all auto makers in the United States face the same duty. It is a 2.5% duty, but they face the same duty on non-NAFTA imports of auto parts. If you imposed a tariff in Canada on the non-Auto Pact makers, it would obviously be discriminatory. It would not be an equivalent situation.

The Chair: Yes.

[Translation]

Mr. Antoine Dubé: That's not my question. I want someone to tell me whether the U.S. government's position is the same as or different from what is stated in the bill. The departmental officials might be in a better position to answer me, but do we know the U.S. position on this matter?

[English]

The Chair: Mr. Nantais.

Mr. Mark Nantais: As far as we know, the United States has absolutely no intention of eliminating any of its tariffs. Certainly the objective, as in Canada, is to gain access to those foreign markets. In other words, the Americans are not reducing the arrows in their quiver; they are maintaining all of the arrows they have so they can make progress in gaining access to these foreign markets.

[Translation]

Mr. Antoine Dubé: So, if I understand you correctly, you don't understand that Canada's position can be different from that of the U.S. government.

[English]

The Chair: Thank you. Mr. Hibbits, do you wish to reply?

• 1705

Mr. Vaughn Hibbits: I think the situations are fairly similar. In the United States they're treating all manufacturers the same. They happened to impose a 2.5% duty on importing parts. The Canadian government through this bill will treat all auto manufacturers in Canada the same, which happens to be a zero duty on parts. They're the same in the sense they're treating people equally—one has a small tariff, the other's talking about zero.

The Chair: Thank you, Mr. Hibbits.

There's also a different clarification on vehicle tariffs, Monsieur Dubé. There are some differences.

Mr. Shepherd, one brief question.

Mr. Alex Shepherd: Aren't we talking about apples and oranges a little bit? We're talking about parts and then you turn around and talk about getting market access to Korea. You're talking about completed manufactured cars. Canada has a tariff against Korean vehicles coming into this country, does it not?

Mr. Mark Nantais: It does.

Mr. Alex Shepherd: Well, isn't that your hammer, isn't that your tool to use?

Mr. Michael Sheridan: It's one of the tools that are available to us.

Mr. Alex Shepherd: I think it's a better tool than this one.

Mr. Michael Sheridan: It's one of the tools. Currently Canada has two tools. It has a parts tool and a finished vehicle tool. Duty-free access into the Korean market is important for Canadian manufacturers as well as North American manufacturers, but access into the Japanese market is just as important.

Mr. Alex Shepherd: But you're not even shipping parts into Korea, because you don't have any cars there.

Mr. Michael Sheridan: We're talking about access of finished vehicles into Korea. Those finished vehicles getting into Korea will have Canadian-made parts in them. The Windstar, for instance, is made in Oakville. If we get access of that product into Korea it will have a large content of Canadian-made parts, both engine and auto body.

Mr. Alex Shepherd: The way they get you in there is by dealing with the tariffs on completed manufactured goods, isn't it?

Mr. Michael Sheridan: It's one of the benefits.

Mr. Ken MacDonald: I need you to clarify something here. Our manufacturing members manufacture the original parts that go into the original car. You seem to be thinking of parts that replace parts when they break down. That's not what we're talking about today at all. We're talking about the materials and the parts that go into the original vehicle.

Ms. Tayce Wakefield: This is about Canada's strategic auto policy. I think it's dangerous to separate different pieces and deal with them differently. The parts tariff is part of Canada's strategic auto policy. Every nation around the world looks at the policies and tools it has to encourage investment in assembly production and parts production. The two go together and you need to consider them together.

We're saying, don't take one and put it into this bill and hold all the rest of the decisions until the strategic auto review is completed. You've already kind of made a decision on half the policy, and as a result you don't have all the tools available to you. Hold this as part of the overall review, and when you set Canada's strategic auto policy to go forward, make it one of the key elements.

The Chair: Thank you, Mr. Shepherd.

I want to thank the witnesses for their presentations and for answering the questions today.

I'd like to ensure that everyone, including the witnesses and the members around the table, are aware of the letter from the Minister of Finance dated October 30. He specifically says on page 2:

The proposed Customs Tariff legislation (Bill C-11) ensures this policy objective is continued by maintaining the status quo on parts. Should there be any policy changes in the future that would warrant a change in the tariff on auto parts, the Government could always amend the legislation.

So anything that is passed into legislation or passed by Bill C-11 is always possible to be amended. I raise that to ensure that all witnesses are aware of that around the table.

I also would like to point out in that letter on page 2 he also says:

For the automotive industry alone, it contains several provisions that will provide unconditional duty-free entry for all materials for manufacturing vehicles, as well as all production machinery, precision instruments and apparatus.

So there are many changes in Bill C-11 apart from the auto parts that will benefit the industry in general. I just raise that so all witnesses are aware that the legislation can always be amended if it does pass as is.

I'd like to thank the witnesses for being with us. If they could please leave the table, I'm going to have the finance officials rejoin us. Thank you.

• 1710

Mr. Jim Pankiw: Madam Chair, I have a question for you based on what Ms. Wakefield said a couple of times, which seems like a fairly reasonable suggestion pending the results of that strategic review. What you're saying is that we can go ahead and pass it, and if that review comes back and recommends a change, then this can just be amended. So whether you withhold it now or amend it later it really doesn't matter. Is that what you're saying?

The Chair: What I'm saying is that presently the law in Canada by order in council is that there is zero tariff on auto parts. This Bill C-11 doesn't change that. All it does is put it into legislation. It's been passed by order in council and it could be passed by order in council again. However, we have legislation before us right now that makes that permanent. The government's position is that is policy and has been policy for two years.

What I was trying to draw to everyone's attention was that policy can change and legislation can change. If the review that's taking place right now through industry was to make a recommendation in the spring or later in the summer that there need to be major changes, this legislation can change if need be. That was my only point to committee members so that they're aware of the current policy, they're aware of what's before us, and they're aware of what can happen in the future.

A finance official is going to join the table just in case there are any questions as we move to the next section.

There's been a question as to why clause 1 would be postponed. It's the short title and will be passed at the end of the bill, if you follow down. Does everyone have in front of them their agenda for today? Consideration of clause 1 is postponed pursuant to Standing Order 75(1). As I just explained, it's the short title it will be passed at the end.

In the interest of efficiency, we have a number of clauses before us that do not have any amendments. What I'd like to do with unanimous consent is pass those clauses as a group until we get to the section where there are amendments and where there may be questions. Is everyone in favour of that? Mr. Schmidt.

Mr. Werner Schmidt: I have a question. We have our finance people here. They are here to ask questions of as we move along clause by clause?

The Chair: Yes.

Mr. Werner Schmidt: May I ask questions before we get into clauses? I'm not quite sure I understand fully what some of the implications are. I want to make absolutely sure before we say either yes or no to these clauses that we understand exactly what we're doing.

The question I would like to ask in particular was on the subject that was raised by the automobile manufacturers people. It strikes me that the provisions in the act that is before us deal with automobile parts only. The argument that I think was being advanced here in terms of trading with other nations had to do with a lot more than parts. It had to do with the whole vehicle and the imposition of tariffs there. So we were actually hearing an argument on a basis that was not necessarily the right basis. Is that correct?

The Chair: Perhaps Mr. Le Blanc would like to address that.

Mr. Werner Schmidt: That's a question for the Finance people.

• 1715

Mr. Gilles Le Blanc (Senior Chief, International Trade Policy Division, Department of Finance): Thank you, Madam Chair.

A lot of what we've heard relates to access to foreign markets for cars produced by Canadian vehicle manufacturers. Bill C-11 continues an existing provision providing duty-free entry on some inputs to manufacture cars in Canada. As we explained yesterday, that's to ensure manufacturers in Canada are treated in a uniform way as they produce vehicles in Canada.

The Chair: Does that answer your question, Mr. Schmidt?

Mr. Werner Schmidt: Partly. What I need to be absolutely clear on is that the people who manufacture this complete vehicle here now...when they export that vehicle to another country, is there a reciprocal agreement that is similar to the parts agreement when it comes to completed vehicles?

For example, Toyota manufactures a vehicle in Canada. It enjoys tariff-free parts and manufacture and whatever else is necessary. When it takes that vehicle and exports it to another country, what happens? Is a tariff imposed on that exported vehicle?

Mr. Gilles Le Blanc: It will face the tariff regime that exists in that export market.

Mr. Werner Schmidt: So if it exports that vehicle to Japan, what happens?

Mr. Gilles Le Blanc: That will be an exported vehicle and it will face the tariff regime that exists in Japan.

Perhaps Chris—

Mr. Werner Schmidt: I want to be sure that is exactly the way it is, because that's really what we're talking about.

Ms. Christine Wiecek (Tariff Policy Analyst, Domestic Tariff Affairs, Department of Finance): For example, when a car exported to Japan, right now there's a zero tariff. Japan has a zero tariff on vehicles. When we export a car to Europe, they have a 10% tariff. When we export to the U.S. under the free trade agreement, that's free. Going into Mexico, it's about—

Mr. Gilles Le Blanc: But you're asking whether, if it's a Toyota, it would be the same as if it were General Motors. Is that your question?

Mr. Werner Schmidt: That's really the question.

Mr. Gilles Le Blanc: Then the answer is yes.

Mr. Werner Schmidt: Thank you, Madam Chair. That clarifies it very well.

The Chair: Thank you, Mr. Schmidt.

Do I have unanimous consent, then, to put the clauses together? For clauses 2 through 129 there are no amendments. Would everyone be in agreement with that?

(Clauses 2 to 129 inclusive agreed to)

(On clause 130—Specified documentation)

The Chair: I need someone to move the amendment to clause 130. Mr. Lastewka.

Mr. Walt Lastewka: Does everybody have a copy of the amendment? They might just want to double check. There are two amendments. They should be here.

It basically affects clauses 130, 131 and 132.

The Chair: We have to move each amendment individually, Mr. Lastewka. Please move the amendment for clause 130.

Mr. Walt Lastewka: Okay, I move the amendment for clause 130.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 130 as amended agreed to)

(On clause 131—Administrative powers of Minister of National Revenue)

The Chair: I understand there's an amendment to clause 131. Did you want to move that amendment, Mr. Lastewka?

Mr. Walt Lastewka: Yes, Madam Chair. So moved.

• 1720

(Amendment agreed to—See Minutes of Proceedings)

(Clause 131 as amended agreed to)

(On clause 132—Regulations)

The Chair: We have an amendment to clause 132. Mr. Lastewka, did you want to move that amendment?

Mr. Walt Lastewka: I so move, Madam Chair.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 132 as amended agreed to)

The Chair: I have clauses 133 to 214. We'll lump those together.

(Clauses 133 to 214 inclusive agreed to)

The Chair: Shall the schedule carry?

Some hon. members: Agreed.

The Chair: Shall clause—

[Translation]

Mr. Antoine Dubé: All the schedules?

[English]

The Chair: There's only one schedule. There's actually one schedule and five volumes. That's one schedule, Mr. Dubé.

[Translation]

Mr. Antoine Dubé: I would agree on everything except the point we raised earlier. We should agree to clauses 9957 to 9963 separately and consider them specifically.

[English]

The Chair: Those are part of the schedule that we're talking about. The schedule is the five volumes in front of it, and that is part of the schedule.

Mr. Antoine Dubé: Oui, oui.

The Chair: If you're not in favour of the schedule, then you don't have to vote in favour of it, but that is part of the entire schedule. We don't usually pass individual clauses of the schedule separately.

Mr. Werner Schmidt: The schedule is part of the bill, isn't it?

The Chair: Yes. We've already passed all of the clauses in the bill. We're now passing the schedule, which is attached to the bill.

Mr. Axworthy.

Mr. Chris Axworthy: Maybe Mr. Dubé could move a motion to deal with parts of the schedule separately rather than all of a piece, and then have a motion on the schedule at the end. If he wanted to do that he could probably find a seconder.

The Chair: He doesn't need a seconder.

Mr. Dubé, did you want to move your motion?

[Translation]

Mr. Antoine Dubé: I move that we agree to them all except volume 5 or that we proceed specifically for tariff numbers 9957 to 9963.

[English]

The Chair: Mr. Dubé, we need a moment here to determine how we're going to deal with this.

Mr. Lastewka.

Mr. Walt Lastewka: Madam Chair, I brought that question up during the discussion because their request for that clause removes a pile of things other than components. I tried to alert them that I don't believe that's exactly what they meant. We were talking specifically on parts. That section covers a whole pile of other things like repair components, galvanized steel, steel products, textile products and the whole—

Mr. Antoine Dubé: No, that is not true.

Mr. Walt Lastewka: Oh, absolutely.

Mr. Antoine Dubé: I checked myself.

[Translation]

You can check yourselves.

[English]

The Chair: Mr. Le Blanc, could you clarify that for us? Do the sections identified during the hearings deal solely with automotive parts or do they cover much more in the schedule?

Mr. Gilles Le Blanc: It goes beyond original equipment parts, but I'll ask my colleague Chris Wiecek to address this issue.

Ms. Christine Wiecek: The first tariff provision, section 9957, provides duty-free entry for all parts used in vehicle assembly by Auto Pact companies. So deleting this provision would result in a tariff increase on parts imported by Auto Pact companies.

• 1725

Section 9958 provides duty-free entry for parts for non-auto pact companies; as well it provides duty-free entry for all parts used in parts. Revoking this clause would result in the tariff going up for parts being used by automotive parts manufacturers.

Section 9959 concerns materials used in vehicle assembly such as steel, paints, and textiles. Section 9960 covers machinery apparatus used in motor vehicle manufacturing. Sections 9961, 9962, and 9963 are all after-market parts provisions for repairs of semi trailers, tractors, firefighting vehicles, ambulances, and things like that.

The Chair: Mr. Dubé's motion is on removing an amendment so that we would consider sections 9957 to 9963 separately from the rest of the schedule. Is that the correct motion? We don't have it in writing. Mr. Dubé, do you want to clarify?

[Translation]

Mr. Antoine Dubé: Yes, I do.

[English]

The Chair: He didn't want to delete them. He wanted to consider them separately.

[Translation]

Mr. Antoine Dubé: Yes, that's correct.

[English]

Just examine.

The Chair: As it's been explained to me, we cannot separate parts of the schedule. The motion in front of us was to consider it separately, not to delete it. The clerk has explained to me that the motion would not be acceptable as it was presented. What would have to happen is that you would have to amend the schedule. We can discuss it separately, but what you'd like to do is to have a separate vote on it. Your amendment has to deal with deleting it or changing it or something for those sections.

How would you like to move that?

Mr. Janko Peric: I think Mr. Axworthy should move over there. He is confusing Monsieur Dubé.

[Translation]

Mr. Antoine Dubé: Madam Chair, none of us has any innate knowledge of all this. I would have liked us to vote on all the other aspects and to reserve this point for our meeting tomorrow morning, which would have enabled me to consult the members of my party and to examine the point. It seems to me that the people who have come to testify here this afternoon have proved that there were important aspects, in particular the strategic aspect, relating to a negotiation. It seems to me we have had them testify all afternoon, that their remarks have contributed nothing to our work and that we had no obligation to hear them for such a long time, preferring as we did to proceed in any old way and very quickly.

[English]

The Chair: Mr. Dubé, we cannot delete part from the schedule and consider it tomorrow. All we could do is cease consideration today and continue consideration tomorrow as a whole. The schedule has to carry or be defeated as a whole. You can't separate parts out of it.

I need to get some direction here from the members of the committee. Mr. Peric.

Mr. Janko Peric: Madame Chair, is there a motion from the Bloc member or not?

The Chair: The motion that Mr. Dubé originally put forward is out of order. So we have before us the schedule.

Mr. Janko Peric: What's the question?

The Chair: He now wants to propose another motion. Mr. Dubé.

[Translation]

Mr. Antoine Dubé: I move that the vote on the schedules be postponed until tomorrow morning and that we agree to all the rest today. That's what I move; I don't know whether you will second me.

[English]

The Chair: Mr. Dubé, the only motion we can really entertain that would be in order is to consider postponement of the rest of the bill until tomorrow. That would have to be your motion. If you'd like to make that motion, we can vote on that.

All those in favour of Mr. Dubé's motion that we postpone until tomorrow. Are you in favour of your motion, Mr. Dubé?

[Translation]

Mr. Antoine Dubé: A point of order, Madam Chair.

• 1730

[English]

The Chair: The motion is denied.

[Translation]

Mr. Antoine Dubé: A point of order, Madam Chair. I don't like anyone laughing because, as a Francophone, I have to wait for your remarks to be interpreted. So I would ask you to allow me the time to understand and not to make fun at my expense.

[English]

The Chair: Mr. Dubé, I apologize if there was some confusion here. We were voting on the motion before us, which was to postpone the consideration until tomorrow. When I asked for all those in favour, I had to wait for the translation. I apologize.

We'll do it again.

(Motion negatived)

The Chair: Shall the schedule carry?

Mr. Werner Schmidt: Madam Chair, before we cast the vote, I wonder if Mr. Dubé would have certain considerations. Obviously, he's concerned here. Is the concern one of discussing these particular lines in the tariff? If that's the case, then I would certainly think the committee would entertain his concern as he goes through these, if he has concern there. Other than that, I think we could go ahead now. But I think maybe that would satisfy Mr. Dubé.

The Chair: Mr. Schmidt, are you proposing that we go through each part of the schedule?

Mr. Werner Schmidt: No, just the ones he wanted excepted.

The Chair: Mr. Dubé, would you like to add to what you've already stated about those sections, 9957 to 9963? Is there anything further you would like to add?

[Translation]

Mr. Antoine Dubé: I appreciate the gentleman's help, but I believe we have just voted and agreed to them. So it's a bit late.

[English]

The Chair: I believe Mr. Schmidt was suggesting that Mr. Dubé might have had further comments he wished to make on those sections—

Mr. Werner Schmidt: That's what I wanted to do. That was all it was.

The Chair: —because of the fact that his motion was defeated.

Mr. Werner Schmidt: Exactly. I didn't want him to feel that we didn't want to listen to his concerns.

[Translation]

Mr. Antoine Dubé: I'll do it in the House of Commons.

[English]

The Chair: Okay. You can do that. Thank you.

Shall the schedule carry?

Some hon. members: Agreed.

The Chair: Shall clause 1 carry, the short title?

Some hon. members: Agreed.

The Chair: Shall the title carry?

Some hon. members: Agreed.

The Chair: Shall the bill carry?

Some hon. members: Agreed.

The Chair: Shall I report the bill as amended to the House?

Some hon. members: Agreed.

The Chair: Before we adjourn, I would like to make sure that everyone has Bill C-10 and the briefing package that was distributed at committee for tomorrow morning. There's been a bit of a change. We're doing Bill C-10 instead of Bill C-5. Okay?

We will meet again tomorrow morning. The meeting is adjourned.