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WHO WE ARE:

The Japan Automobile Manufacturers Association of Canada is a non-profit
trade association established in 1984 to promote greater understanding
on economic and trade matters pertaining to the motor vehicle industry
and to encourage closer cooperation between Canada and Japan. JAMA
Canada’s members include the following companies who import, distribute,
manufacture and export automotive products:

Hino Diesel Trucks (Canada) Ltd., Honda Canada Inc.,
Honda of Canada Manufacturing, Mazda Canada Inc.,
Nissan Canada Inc., Subaru Canada Inc., Suzuki
Canada Inc., Toyota Canada Inc., and Toyota Motor Manufacturing
Canada Inc.

The Japanese auto industry in Canada has grown and changed a great
deal over the last decade. In 1986, Honda
of Canada Manufacturing started vehicle production at their plant
in Alliston, Ontario. In 1988, Toyota
Motor Manufacturing Canada began making cars in Cambridge, Ontario.
And in 1989, CAMI Automotive, a joint
venture between General Motors of Canada and Suzuki Motor Corp.,
opened their plant in Ingersoll, Ontario. In 1997, current output
is forecast at these three plants to be about 375,000 units. However,
due to expansions at both Honda and Toyota, total capacity will
rise to about 730,000 units over the next few years, more than double
the level of all JAMA Canada members’ vehicle sales in 1997.

In addition to producing more than one vehicle in Canada for every
one sold, Canada has been a net exporter of Japanese badged vehicles
since 1994, as exports from Canadian plants have exceeded imports
from Japan, the U.S. and Mexico. What’s more, Japanese automakers
have been increasing their purchases from Canadian suppliers, and
with current expansions substantial new business opportunities will
likely more than double current levels of activity.

Furthermore, these expanding operations in Canada have encouraged
more auto parts investment from Japan. Over the past year, eight
companies have announced new auto parts plants in Canada.* Also,
NAFTA content levels have been increasing as a result of continuing
localization of suppliers. At the same time, imports of auto parts
from Japan by non-Auto Pact companies dropped 15.4% in 1996 over
the previous year, in spite of the fact that tariffs on imported
auto parts were reduced to zero at the beginning of 1996 by the
Government of Canada. In a nutshell, all these changes mean more
investment and more jobs for Canada and Canadians.

OUR CONTRIBUTION TO CANADA:

As a group, JAMA Canada members are an integral part of the Canadian
auto industry that makes a significant contribution to Canada in
a variety of ways:

• Through an extensive distribution, sales and service network
  employing over 25,000 Canadians from Newfoundland to British Columbia,
  about a third of which are in Ontario;
  
  
  
• Through several billions of dollars in direct investment, joint
  ventures and industrial cooperation in vehicle and parts manufacturing;
  
  
  
• Japanese vehicle and auto parts manufacturing operations are
  currently employing 14,000 Canadians. Current vehicle assembly
  expansions and new auto parts plants will add over twenty-five
  hundred new jobs over the next few years.
  
  
  
• Manufacturing activities are adding to Canada’s trade balance
  by exporting about 75% of total production, primarily to the U.S.
  It is widely acknowledged that Japanese automakers presence in
  the Canadian market stimulates competition which ultimately benefits
  consumers.
  
  
  
• At the same time, Japanese vehicle and parts makers are adapting
  Japanese manufacturing technologies to the Canadian business and
  industrial culture, and establishing a growing array of supplier
  relationships which helps Canadian industry be globally competitive
  through the diffusion of both product and process technologies.
  
  
  
  
  * For further details, please refer to the
  attached information sheets on Japanese automakers and Japanese
  affiliated parts makers’ activities in Canada.

AUTOMOTIVE TRADE POLICY REVIEW – The Tariff Issue
in Context

The review is timely, as auto trade policy in Canada is in need
of repair. While considerable attention has been given to the matter
of MFN tariffs on finished vehicles, the focus on tariffs some times
obscures the underlying problem with current policies. While lowering
tariffs can alleviate the problem, the key concern is to have an
auto trade policy that is fair and non-discriminatory, applied equitably
to all foreign owned automakers in Canada consistent with international
trade rules. To be sure, differential tariffs on finished vehicles
are a major symptom of the problem, but the heart of the issue is
more precisely the principle of having a fair and equitable trade
policy. The two-tiered industry, established under the Auto Pact
in 1965, has been fragmented by changes in the Auto Pact through
both the FTA and NAFTA trade agreements.

In 1989, the Auto Pact abruptly changed and became exclusionary
as a direct result of the FTA negotiations with the U.S. What’s
more, over the last fifteen years or so, internationalization of
the auto industry also changed both the competitive environment
and the opportunities for cooperation and strategic alliances among
globally-focused automakers and parts makers.

As a result, there are now four tiers reflecting different treatments
in the Canadian market, keeping in mind that overall 80% of all
vehicles produced in Canada are exported and 70% of all vehicles
sold in Canada are imported.

• Auto Pact importers that are eligible to import finished vehicles
  duty free from any country;
  
  
  
• non-Auto Pact importers that pay applicable MFN duties on vehicle
  imports;
  
  
  
• non-Auto Pact importers that do not pay MFN duties on imported
  vehicles due to business affiliations with an Auto Pact company;
  
  
  
  
• and non-Auto Pact importers that qualify for (currently or in
  the near future) but are denied Auto Pact benefits due to a provision
  in the FTA, and therefore also pay applicable MFN duties on vehicle
  imports.

This differential treatment fosters confusion and distortions in
the market, and sends negative signals to current or potential investors.
Moreover, it raises questions about consistency of Canada’s trade
policies with international trade rules. Given that the stated goal
of the Canadian Government’s Automotive Competitiveness Review is
to create a favourable environment for investment and jobs in Canada,
both a re-balanced trade policy that is equitable and non-discriminatory,
and lower tariffs are important elements in achieving this goal.

Economic analysis, together with the experience under successive
GATT rounds, demonstrate that lower tariffs lead to expanded international
trade and greater economic benefits for countries adopting open
trade policies. Because tariffs add non-manufacturing costs to traded
goods, generally both consumers and producers benefit from lower
tariffs. This is particularly relevant in Canada where vehicle production
and consumption are fundamentally disconnected. As a result of various
trade policies and key competitiveness factors, Canada produces
twice as many vehicles as it consumes. At the same time, 70% of
all light vehicles sold in Canada are imported, while over 80% of
Canadian production is exported. Currently, Canada’s MFN passenger
vehicle tariff, while fairly modest by international comparison,
is higher at 6.7% than either the U.S. at 2.5% or Japan at 0%.

OUR POSITION: Fair Treatment/Lower Tariffs

In simple terms, JAMA Canada is seeking fair and equal treatment
for all automakers in Canada through open, transparent and non-discriminatory
trade policies consistent with the GATT/WTO, as well as reduced
tariffs on finished vehicles, a measure that will benefit Canadian
consumers.

The members of JAMA Canada acknowledge that the need for changes
in policy is often driven by dramatic and continuous changes not
just in the auto industry, both globally and locally, but also in
the broader context of liberalization of the global trading system.
In the words of the Honourable Roy MacLaren, the former Minister
for International Trade:

The continued existence of low tariffs,
coupled with rules of origin, imposes a transaction cost on cross-border
trade that is out of all proportion to the purported benefits
to protected industries. It is time to acknowledge that the era
of the tariff is finally over, and to get on with other, more
pressing and difficult issues.

In this context, and in any event, JAMA Canada supports the ongoing
effort to liberalize international trade through the GATT/WTO by
reducing tariff and non-tariff barriers, thereby creating export
opportunities for Canadian manufacturers. At the same time, we are
prepared to work with the Canadian government to help increase the
acceptability of necessary changes to Canada’s automotive tariffs
and trade policies with the Canadian public.

For More Information Contact:

JAMA Canada

Suite 460, 151 Bloor Street West,

Toronto, Ontario,

Canada M5S 1S4

Tel: 416-968-0150

FAX: 416-968-7095

Email: [email protected]