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Speech by JAMA Vice-Chairman Takao Suzuki
| Speaking Notes for Y. Nakatani |
Notes for a Speech to the Canada US Business Association
JAMA Canada Reception
Westin Prince Hotel, Monday, October 23, 2000
Good evening, ladies and gentlemen. Thank you for the kind introduction. It
is my great honour to be present at this reception with Ontario Deputy Minister
Barbara Miller and Consul General Hara, as well as many other distinguished
guests.
At the same time, it provides an opportunity I’ve long awaited, to speak
briefly about the globalization of the automobile industry and JAMA’s overseas
activities.
First, I will talk about the advancing globalization of the automobile
industry.
When one examines closely recent movements in the world automobile industry,
one thing stands out clearly. That is the ongoing spread of international
tie-ups and alliances among automakers. And the membership of JAMA is no
exception to this trend. In fact, I think the keywords that best express the
current trend in the automobile industry is "International
Realignment." International realignments seem to be the main factor
generating the need for vast investments by the automobile industry for the
development of new technologies, such as fuel cells and other projects. I
believe that international realignments are propelling the globalization of the
industry.
The Japanese automobile industry commenced local production in North America
in the mid-1980s. This marked the real beginning of globalization. At present,
the industry is carrying out local production in North America, the EU, Asia,
and other regions worldwide. Last year, overseas production by Japanese
automakers amounted to six-point-five-million (6.5 million) units. I believe
that level of overseas production is comparable in scale to production in Japan,
which is around 10 million units. As such overseas activities increase, Japanese
automakers are working to move ahead with localization everywhere, including the
fostering of industry, the creation of jobs, and technology transfer.
As Chairman Nakatani mentioned in his remarks, local production is expanding
job opportunities in Canada. Since NAFTA took effect in 1994, Canada has been
gaining importance as a production base for the North American market. And
Japanese automakers are expected to contribute further to the Canadian economy
in the future.
Secondly, I would like to touch on JAMA’s overseas activities.
In view of the ongoing globalization of the automobile industry, JAMA has
been increasingly engaged in the key issue of encouraging interchange with the
automobile and parts industries of countries around the world. Among JAMA’s
international activities, technical standards related to safety and the
environment, and the international harmonization of certification will play a
great role in benefiting consumers. JAMA is currently participating vigorously
in activities leading to the international harmonization of automobile technical
standards and certification at important forums such as the OICA and the WP29.
At the same time, regulations and regulatory frameworks are not uniform
throughout the world in regard to environmental issues. Here I refer to issues
such as reductions of CO2 as a means of addressing global warming, diesel
emissions with the objective of reducing particulates, and end-of-life vehicle
recycling. It will be important to ensure the international compatibility of
such regulations and regulatory frameworks, and I believe that doing so will
require a fair amount of interchange between the automobile industries of
countries worldwide.
I am aware that the Canadian economy is performing well, and there are signs
that the Japanese economy is coming out of a long slowdown and gradually
recovering.
In closing, I would like to say that this is an era that requires
ever-greater international coordination within the world automobile industry.
Centered on the activities of JAMA Canada, we at JAMA look forward to continuing
our interchange with the Canadian government and automobile industry. Please
accept my best wishes for a mutually beneficial relationship.
JAMA Canada Reception
North York Room, Westin Prince Hotel
October 23, 2000
Good evening, ladies and gentlemen. As Chairman of JAMA
Canada, I would like to welcome you and to thank you for taking time from your
busy schedules to be with us here today.
Our main purpose in holding this reception is to introduce
the President & Vice Chairman of JAMA in Tokyo, who is here in Canada on his
first official visit. But before we ask Mr Suzuki to say a few words, I wanted
to make some observations about the state of the industry in Canada.
This is certainly an auspicious time for the Canadian auto
industry. At the same time, we are participants in a rapidly changing global
industry that, daunting as it may seem, creates a host of new challenges and
opportunities for automakers, suppliers, governments, workers and consumers.
Take for example: the impact of information technology (IT),
wireless communications and the internet; traffic congestion in urban centres
and the promise of ITS (intelligent transportation systems); globalization and
international harmonization of standards and regulations; environmental issues
including global warming, rising oil prices, and alternative fuel technologies,
to name a few of the complex issues that we face.
As I think everyone here is aware, the auto sector is a key
driver of the Canadian economy in terms of jobs, investment, trade and
technology. Production, exports, sales, and employment are as high as they have
ever been.
Altogether, Canada accounts for about 18% of North American
output, while we consume less than 10% of annual North American sales. No wonder
Canada’s auto trade surplus stands at more than $8 billion in the first half
of 2000.
Companies continue to invest and plants are expanding. Honda
in Alliston officially began producing the Acura MDX earlier this month, and
TMMC in Cambridge will be the first plant outside of Japan to build the Lexus
RX300 in 2003.
At the same time, Canadian auto parts companies like The
Woodbridge Group and ABC Group have established plants in Japan. In fact,
Woodbridge recently opened its third plant in Japan with its partner Inoac.
And more Japanese auto parts investments are coming to
Canada. In August, Ube Manufacturing Canada became the 40th Japanese
affiliated parts plant to be established here. And just last week, Toyoda Gosei
broke ground for its new plant in Palmerston, Ontario.
With growing auto investments in North America, all JAMA
Canada members are sourcing more locally. Currently about 3 of every 5 vehicles
sold are built within NAFTA. Annual production capacity in Canada is 750,000
units, more than twice our sales last year. Altogether about 50,000 Canadians
are employed manufacturing, selling, servicing, exporting and importing vehicles
and parts.
The strength of the sector in Canada depends to a great
extent on a well-educated and dedicated workforce, positive economic factors
including low inflation, low interest rates, balanced budgets and reduced
government debt, as well as the strong confidence of the Canadian consumer.
Open trade and access to other markets is also critical to
sustain the level of production and export of parts and vehicles. While the
majority of Canadian-built vehicles are shipped to the US, almost 6,300 Odyssey
minivans have been exported from Ontario to Japan over the past 12 months.
Finally, a word about tariffs and trade. A few weeks ago, the
Canadian Government accepted the decision of the WTO to finally end the Auto
Pact by February 19, 2001. This change will establish equal treatment and open
competition for all automakers in Canada. At the same
time, we agree with Simon Reisman, the Canadian trade negotiator of the Auto
Pact and the FTA, that the 6.1% MFN tariff should be eliminated on all vehicle
imports. While there is a good case for unilateral reduction, we would also
support tariff cuts in the next round of multilateral trade negotiations.
In short, it is astonishing how much the industry has changed
and grown over the last twenty years. Of particular note is how much the
relationship between the auto industries in our two countries has deepened and
matured. It’s hard to say what will happen over the next 20 years, but I
expect the trend toward closer international cooperation and integration will
continue even as global competition gets tougher. I thank
you again for being with us today.
David Worts, Executive Director
Japan Automobile Manufacturers Association of Canada
Detroit Athletic Club, Detroit
November 16, 1999
First let me say that I am here representing Japanese affiliated automakers
in Canada. My remarks today reflect my own views, as well as the views of our
association.
To start, allow me to briefly outline some of the remarkable changes in the
Japanese auto industry in Canada over the last 15 years.
In 1985, there were no Japanese automakers building cars in Canada. Four
years later, three assembly plants had been opened. Last year, these three
operations produced almost 400,000 units, of which a little over 300,000 were
exported, all of which qualified under NAFTA. 1998 was our best year ever for
sales, which totalled about 330,000 units. Currently, about three of every five
of our sales in Canada are models built in North America.
Employment in Canada among Japanese affiliated companies in parts and vehicle
manufacturing, distribution, dealers sales and service stands at about 50,000 –
about 18,000 in manufacturing and 32,000 in sales and service.
In autos, as well as trade in general, Canada clearly relies heavily on
access to the large US market. The Auto Pact set the tone for this development
in 1965, and the trend was accelerated by the FTA and NAFTA agreements.
Today, the auto industry in Canada is at record levels of performance.
Contributing factors include strong economic indicators (including low interest
rates, low inflation, declining unemployment, Federal Budget surplus, and strong
consumer confidence), a continuing focus on innovation, new technology, and cost
reduction, as well as a skilled workforce and a stable business environment.
So, with things so good, why are we concerned about tariffs and trade policy,
particularly when about 85% of all vehicles sold in Canada are already duty
free?
The short answer is that it’s a matter of principle. The principle is
simply fair and equal treatment. We don’t think it makes sense for Canada to
maintain automotive policies that treat some automakers more favourably than
others.
In many respects, we would have preferred that this auto tariff and trade
issue would have been settled in Canada. In our view, it was a domestic issue
from the moment the FTA was implemented in 1989.
Our concerns were heard in Ottawa, and in the ensuing years a number of
measures were introduced to address them. However by 1998, with only the issue
of auto parts tariffs resolved, the Government decided to abandon any further
unilateral action on finished vehicle tariffs, and the matter was subsequently
taken up in the WTO.
As the WTO dispute is still ‘before the court’, and as the final report
of the panel will not be released publicly for awhile, I am not going to comment
specifically about the case. But let me elaborate on a few key points that I
think are crucial in understanding our position in this policy debate.
First, the context – what this is and what it is not. The core of this issue
is the differential treatment of finished vehicles imported from outside NAFTA.
It does not affect free trade in parts or vehicles between the US and Canada.
Nor is it about the Auto Pact in the US. In fact, there is no Auto Pact in the
US – it has been replaced by NAFTA.
What we are concerned about is the fact that some companies, who do not have
any manufacturing operations in Canada, can import vehicles duty free from
offshore because of an alliance with an Auto Pact company.
At the same time, other companies, who have set up extensive and integrated
manufacturing in Canada, are not eligible for similar benefits. We think auto
trade policy should be open, equal, transparent and non-discriminatory.
Secondly, the background of trade policy in Canada – from the Auto Pact to
NAFTA.
Non-discrimination is a pillar of the GATT and the WTO, and a foundation for
the establishment of the rules-based international trade system.
The 1965 Auto Pact was a sectoral free trade agreement that was implemented
in fundamentally different ways by the US and Canada.
For the US, the Auto Pact was a bilateral trade treaty that allowed duty free
entry of parts and vehicles from Canada, providing those goods contained at
least 50% North American content. Because this preferential treatment applied
only to Canada, the US was obliged to seek a waiver in the GATT.
Canada, on the other hand, decided they would implement the agreement
multilaterally. Qualifying manufacturers could import parts and vehicles duty
free from any GATT country as long as they agreed to meet certain minimum levels
of production and Canadian value added in their operations in Canada.
These so-called safeguards were somewhat controversial for two reasons:
first, because Canada’s performance requirements were seen as promoting
managed rather than free trade; and secondly, while the US viewed the safeguards
as temporary, they have been maintained by Canada on a more or less permanent
basis.
In 1965, while the US obtained a GATT waiver, Canada argued that the
multilateral Canadian Auto Pact was GATT consistent. Moreover, there was no
intent to discriminate against any other automaker that might want to
participate under similar conditions.
There were only five major automakers active in Canada at the time of the
Auto Pact ( the Big 4 US automakers including American Motors, and Volvo).
Due to the restrictive base year conditions in the Auto Pact, numerous other
companies were offered similar treatment over the following two decades through
Special Remission Orders, which contained similar conditions and benefits.
Fast forward to the time of the FTA in 1989, there were some 190 companies
named in an FTA annex that were eligible for Auto Pact, or Auto Pact-like
preferential treatment. However, Honda, Toyota and Hyundai were excluded.
Suddenly automotive policy direction made a dramatic turn. In particular:
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The Auto Pact was closed to new entrants. |
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Remission programs for non-Auto Pact companies were to be eliminated. |
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At the same time, Auto Pact and other related Special Remission Orders
would continue indefinitely. |
Obviously, Japanese automakers were very concerned about these sudden
developments, particularly the closure of the Auto Pact, the termination of
their remission programs and the tougher rule of origin for trade with the US.
Clearly there was a different agenda in the negotiations with the US, because
prior to the FTA, the Big 3 in Canada, along with the Auto Parts Manufacturers
Association, took the position that the Auto Pact should apply to everyone.
While the FTA remission and drawback programs were in effect, non-Auto Pact
companies were given Auto Pact-like remission benefits, which allowed them to
bring in OE parts and vehicles duty free. Our concern was that these benefits
were only temporary and would end in 1996.
Since 1965, no automaker in Canada had paid any tariff on imported parts for
assembly , and the Government was adamant that they would continue this policy
by simply eliminating tariffs on auto parts used in manufacturing.
However, rather than deal with tariffs on parts and finished vehicles
together (an approach we preferred given that remission and drawback applied to
both), the Government moved forward on auto parts.
This separate treatment of parts and vehicles reinforced the fact that the
auto industry in Canada is fundamentally decoupled. What I mean by decoupled is
that the vast majority of vehicles made in Canada are exported, while the
majority of vehicles sold in Canada are imported.
For the Canadian Government, eliminating tariffs on OE parts levelled the
playing field for all automakers, and also maintained duty free vehicles for
Auto Pact companies. This was clearly an important step, but fell short of a
complete solution. In general, tariff reduction as a replacement for duty
remission was both effective and practical.
However, in my view, eliminating tariffs on the small percentage of vehicles
that were not already duty free made sense for two reasons:
First, Canadian consumers would benefit, particularly in those segments where
imports compete largely with other imports. And secondly, the impact on Canadian
jobs and manufacturing among Auto Pact companies would be negligible as the vast
majority of production is exported, and those products already benefit from duty
free treatment for OE parts.
The debate over vehicle tariffs was taken up during a two year government led
review of the industry. The Automotive Competitiveness Review Report was issued
in June 1998 by Industry Canada. After two years of sometimes heated debate, the
Government concluded that there would be no unilateral changes to finished
vehicle tariffs, although vehicle tariffs could be reduced through multilateral
negotiations. It was this result that prompted the Governments of Japan and the
European Community to seek consultations at the WTO.
Just a couple of observations and I will conclude my remarks. In spite of the
many similarities between the US and Canada, the auto sector in Canada stands
apart in two respects: first, all automakers are foreign-owned; and second,
production and consumption are decoupled.
For the past decade or more, we have been vexed by the references to the US
Big 3 as domestics and all the other foreign automakers as imports and
transplants.
The fact is that Japanese automakers, through their investments in
manufacturing, import and export distribution, national sales and service have
established a significant local presence in Canada and have become an integral
part of the North American auto industry.
Finally, to recap, this issue for us is a matter of principle – simply fair
and equal treatment. As it stands today, the problem arises from the
discriminatory application of tariffs on imports of motor vehicles from non-NAFTA
countries.
The bottom line is the auto industry in Canada is healthy, competitive and
profitable. At the same time, it is also dependent on open trade and foreign
direct investment. That is why we support transparent, non-discriminatory trade
policies, as well as tariff elimination.
I hope my remarks have been helpful. Thank you. |
