Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 3 - Evidence, June 2, 2010


OTTAWA, Wednesday, June 2, 2010

The Standing Senate Committee on Transport and Communications met this day at 6:45 p.m., to study Bill S-5, An Act to amend the Motor Vehicle Safety Act and the Canadian Environmental Protection Act, 1999.

Senator Dennis Dawson (Chair) in the chair.

[Translation]

The Chair: Honourable senators, I call the meeting of the Standing Senate Committee on Transport and Communications to order. Thank you all for being here.

This evening, we are going to continue our study of Bill S-5, An Act to amend the Motor Vehicle Safety Act and the Canadian Environmental Protection Act, 1999, which was referred to our committee.

We are happy to welcome Mr. Dale Leier, Managing Director of the Canadian Association of Vehicle Importers, and Mr. Mark Nantais, President of the Canadian Vehicle Manufacturers' Association.

[English]

Mr. Leier, the floor is yours. We will then hear from Mr. Nantais and move on to questions.

Dale Leier, Managing Director, Canadian Association of Vehicle Importers: Honourable senators, I am pleased to be invited to appear before you today to provide comments on behalf of the Canadian Association of Vehicle Importers, a not-for-profit organization representing the interests of the hundreds of businesses and thousands of individuals who import vehicles into Canada for profit and pleasure. I have shared my comments with the Imported Vehicle Owners Association of Canada who have approved of what I have to say here today.

For too many years, the Motor Vehicle Safety Act has, despite the best of intentions, failed to accomplish the objectives of ensuring that Canadians have the safest, most cost efficient and effective vehicle transportation among developed countries. Instead, we have lived with unintended consequences that the proposed amendments in this bill will help to address in some measure. We could go much further to ensure that Canadians have the types of vehicles we need the fill the various roles required to meet the needs of our lives and businesses.

According to the OECD's, Organisation for Economic Co-operation and Development's, international road traffic and accident database, Canada ranks behind France, Austria, Germany, Norway, Finland, Great Britain, Sweden and Switzerland for the number of road deaths per billion kilometres travelled. Also, a recent United Nations Economic Commission for Europe, UNECE, study ranked Canada eleventh and the U.S.A. twelfth in terms of the number of accidents per 100,000 miles traveled.

It is interesting that countries with lower accident, injury and death rates than Canada's also have high-speed autobahns and a greater mix of vehicles combining both left- and right-hand steering.

Clearly, therefore, rather than increasing vehicle safety, the current legislation has merely served to create a barrier to international trade behind which domestic manufacturers have worked for decades. The auto industry's current malaise is a product of their making. Sadly, had the auto companies been more innovative and creative at building the kinds of vehicles business and private consumers need, that industry might well have been able to absorb much of the economic downturn brought about by the collapse of the housing sector. Instead, their failures became yet another drag on the public purse as they lined up for corporate welfare.

By easing the restrictions on imported vehicles, we take another step toward true free trade and allowing market forces to dictate what manufacturers should be building, rather than manufacturers dictating to consumers what they should be driving. If ever there was doubt about the beneficial effects of imported vehicles on the marketplace, imagine what you might be driving today had Volkswagen not introduced small fuel-efficient vehicles in the 1960s, or if Honda had not introduced affordable fuel-efficient vehicles, or if Toyota had not set the standard for reliable fuel-efficient vehicles.

If you are having trouble imagining that world, you might take note of today's Globe and Mail, which reports that truck sales are what are driving Ford and Chrysler gains as Hyundai has broken into the top six in Canadian sales for the first time. To be sure, there are many reasons for this, but opening up trade to imported vehicles should encourage manufacturers to be more responsive to the needs of the marketplace.

Improvements to road safety are readily achievable, but the focus needs to be shifted away from what we drive to where we drive and how we drive. Roadways that are better marked, better lighted and better maintained with better signage will help drivers and passengers remain safer regardless of the kinds of vehicles they operate. Meanwhile, better driver training will teach drivers to operate more safely in all types of weather and traffic conditions. By segregating different types of vehicles, wider diversities of transportation can safely share our transportation infrastructure with more efficiency, reduced fuel consumption, lower emissions and greater safety. Finally, if the various jurisdictions in Canada were really serious about vehicle safety, they would adopt policies found in many of the other G8 countries that require regular vehicle safety inspections.

By allowing importers far wider latitude with regard to the kinds of vehicles they bring into Canada, domestic producers would more likely be compelled to respond to market forces. Everyone is concerned about the environment and our reliance on fossil fuels for transportation. There is a very close correlation between vehicle size, fuel consumption and emissions. European nations have recognized this for years and, as a result, have led the world in designing small, attractive, comfortable, safe, fuel efficient, practical and fun vehicles that take up less of the roadway and emit fewer pollutants.

If Canadians are being forced to pay world prices for oil, why are we to be denied world-class vehicles?

To be sure, Bill S-5 is a welcome step in the right direction. In the opinion of the members of the Canadian Association of Vehicle Importers, however, these amendments do not go far enough toward addressing the needs of Canadian motorists in allowing them to exercise the rights and freedoms that should be accorded them. Canadians should be free to import any vehicle manufactured in the world that complies with the UNECE world forum for harmonization of vehicle regulations. It is time we stopped force-feeding taxpayers with undesirable products while sheltering unsuccessful enterprises from the real world. Let us get with the program and start trusting Canadian consumers who wish to step away from mediocre and lacklustre products. Let Canadians have the vehicles they choose to drive rather than what those who are well intentioned but overly protective would prefer for them.

Speaking specifically on the items addressed by Bill S-5, the bill, if implemented, will address an existing inequity that prevents Canadians from importing vehicles that are perfectly safe and completely legal to be operated in the U.S.A. One of my members recently attempted to purchase a Roush-modified Mustang Cobra. For those of you who are not aware, Roush is a licensed manufacturer that receives vehicles directly from the Ford factory for specific performance and appearance modifications. Modifications made by Roush to these vehicles do not void either the manufacturer's warranty or the U.S. Motor Vehicle Safety Act with which the Canadian Motor Vehicle Safety Act is being harmonized. While Canadian dealers have been purchasing and importing these Roush vehicles for resale to Canadians, my member was prohibited from doing so himself despite the fact that no modifications were made after the vehicle left the factory.

It is refreshing to see this that legislation would finally accord Canadian citizens the same legal rights as Canadian businesses in this regard.

If there is a concern about the legislation beyond those mentioned previously, it is simply that it does not go far enough. Bill S-5 seeks to limit application to vehicles sold at the retail level. What does that mean? Without a definition of what constitutes "retail," there is the risk that importers could become trapped in another round of red tape when vehicles are purchased privately, at auction, or in volume from one seller or any other number of purchases from other manufacturers.

Indeed, there is not any particularly good reason to limit importation to vehicles sold at the retail level. If a Canadian importer plans to purchase vehicles at the wholesale level and have them modified to meet the relevant Canadian regulations using Canadian parts, labour and inspectors, it seems to me that the intent of the Motor Vehicle Safety Act standards are preserved and that taxable Canadian profits are preserved along with it.

In conclusion, I applaud the committee for its work. However, let this not be the end but a new beginning. Let this be the first step of unshackling Canadians and freeing them to exercise their full rights and privileges as citizens of this great country. Let us accord Canadians the same respect and privileges accorded to people living in democratic countries around the world who are allowed to own and operate the kinds of vehicles that best suit their individual needs as determined by them.

Mark Nantais, President, Canadian Vehicle Manufacturers' Association: Thank you for this opportunity to appear before you. My remarks will be focused on Bill S-5 and the associated issues in terms of meeting our obligations under NAFTA, North American free trade agreement. The Canadian Vehicle Manufacturers' Association, CVMA, is the national organization which, for over 40 years, has represented the interests of Canada's leading auto manufacturers and wholesalers of light and heavy duty trucks. Our membership currently includes Chrysler, Ford, General Motors and Navistar International Corporation. Collectively, these companies manufacture 74 per cent of all vehicles produced in Canada, and 45 per cent of all vehicles sold to Canadian consumers, with over 100,000 current and retired employees.

These companies are also part of larger global corporate entities. Specifically for this evening's discussion, it is notable that these companies also have manufacturing and sales operations throughout North America, including in Mexico.

Under the NAFTA, Canada, Mexico and the United States all agreed to measures to loosen import restrictions on used vehicles. As the U.S. and Mexico have already made the necessary regulatory changes, Canada must now fulfill its commitments under NAFTA. While the CVMA supports this step, there are a few concerns and practical aspects that require consideration.

First, CVMA and its member companies are supporters of both fair and free trade. While we are supportive of allowing U.S. and Mexican used vehicle imports, we are not supportive of a wholesale change in requirements to allow nearly-new vehicle imports into Canada from other jurisdictions.

Loosening of Canada's used vehicle importation restrictions began under the terms of the Canada-U.S. FTA, free trade agreement, which saw Canada gradually allow used vehicle imports from the United States from roughly 1989 until the restrictions were eliminated in 1993. This measure was agreed to by the industry and governments in both Canada and the United States because of the high integration of the industry, which resulted in largely identical vehicles for sale in both countries. More important, there was also a high level of cooperation and regulatory alignment between these countries on vehicle safety and environmental regulations, which meant that the vehicles on the road were largely, again, identical.

It should be noted that alignment of Canada's vehicle and safety regulations with the U.S. has resulted in Canadians receiving vehicles with the most stringent safety and environmental regulations in the world. It has taken us to the highest common denominator rather than the lowest common denominator in a manner that has become more affordable for Canadians.

With the high level of integration achieved across the NAFTA region for vehicle manufacturing, we are now in a position with Mexico similar to, but not identical to, the position we were in 20 years ago with the United States. While the vehicles being produced in each jurisdiction are also largely being sold across the NAFTA region, consumer demand in Mexico has resulted in a slightly different makeup of the vehicle fleet due to differences in the regulatory environment.

As referenced in Bill S-5, we must ensure that used vehicles imported into Canada from Mexico are fully compliant with Canadian regulations for both environmental and safety reasons.

In the future, moving outside of the NAFTA zone to allow for importation of nearly-new vehicles should not be considered due to significant differences in the regulations governing vehicle safety and vehicle emissions found elsewhere in the world.

Older vehicles are much less environmentally friendly than current model years. In fact, a 1993 model-year vehicle is 17 times more polluting than today's current model year. While Canada introduced `soft' measures, such as consumer rebates for trading in older vehicles, some countries have introduced aggressive programs to remove older vehicles from their roads early in their lifespan because new vehicles are so much cleaner, and more fuel efficient. In Japan, as one example, once a vehicle reaches its fifth year in operation, consumers are forced to make expensive upgrades and repairs to their vehicles, and vehicle registration fees escalate dramatically to the point where it becomes cost prohibitive for consumers to keep the older vehicles on the road.

These types of policies create large volumes of used vehicles that need to be disposed of and, as a consequence, significant volumes of these cheap used vehicles are exported to various countries around the globe.

If Canada lifts its current restrictions on the importations of used vehicles, it will become an export target for these older, less environmentally friendly vehicles with outdated safety equipment. Used car imports as such could represent a serious form of `environmental dumping'. When one country is able to ship millions of used vehicles to another country, the issue of end-use disposal, as well as a poor performing on-road fleet in terms of environmental and safety performance, becomes the other country's problem. This is a policy that appears to be untenable given current federal and provincial government direction and intent, and will have a significant impact on Canada's domestic industry, with consumers ultimately paying the price.

As such, while the CVMA supports Canada fulfilling its obligations under NAFTA due to the similarities in primarily the Canada-U.S. market, we would strongly oppose the expansion of this policy to include other jurisdictions in the future as part of any bilateral trade arrangement into which Canada may contemplate entering.

The second issue of concern is that while manufacturers certify vehicles that are assembled in Mexico and imported for sale in Canada — such as the Dodge Journey, the Ford Fusion or Chevrolet Avalanche — vehicle manufacturers cannot be held in any way responsible for certifying that used vehicles originally sold in another country meet the necessary Canadian safety and environmental standards to allow their importation, nor are they in a position to supply information respecting modifications of imported vehicles to make them compliant with Canadian safety and emissions requirements. Certification responsibility must be left with the individual or company who is importing the vehicle.

Third, following passage of the bill, the regulators must work closely with the industry to ensure all regulatory changes that are made do not unnecessarily burden vehicle manufacturers with obligations or requirements that are rightly placed with the importer of the used vehicles. At the same time, the government must effectively and publicly communicate which vehicles qualify for importation.

We would like to promote the need for Canada to alter its used vehicle importation restrictions to be more in line with that of the United States. We understand that Transport Canada has considered taking steps to harmonize a portion of its treatment of used vehicle imports with the U.S. While vehicles older than 15 years need not meet the regulatory standards in place in Canada at the time of manufacture, in the U.S. vehicles must be older than 25 years to avoid compliance with vehicle safety and environmental standards.

Canada's requirement was put in place when relatively few vehicles remained on the road longer than 15 years, and the primary reason for the allowance was to facilitate the importation of collector and antique vehicles. Improvements in vehicle durability have substantially increased the availability of vehicles older than 15 years on the global market. Not addressing the potential influx of vehicles that were not designed for a market like Canada's — for example, right-hand drive vehicles and those that meet few or very different safety standards — is not good public policy. As with all vehicle safety and environmental regulations between Canada and the U.S., we would strongly support harmonization of these requirements as well.

That concludes my remarks, and I would be glad to answer any questions you have.

The Chair: Thank you to both witnesses.

Before giving the floor to senators to ask questions, as mentioned yesterday at the committee, we would normally, after a question-and-answer period, go to clause by clause on the bill. After that, we will go in camera on our report on telecommunications.

Senator Mercer: Thank you, gentlemen, for being here. You have made this sound more complicated than we thought it was.

Mr. Leier, I am a little confused. We have been told by others that, while we are harmonizing the rules to comply with our NAFTA agreement with our partner, Mexico, there will not be many vehicles that will be coming under this category. The suggestion was made that perhaps Canadians who winter in Mexico might want to bring home a vehicle they purchased there, and, of course, the rules state in the bill — and I am defending the bill now — that the vehicles have to meet the standards of where they are being imported. If they are imported to Ontario, they follow Ontario rules, for example, likewise for Nova Scotia and so forth.

How many automobiles or vehicles do you think we are talking about here?

Mr. Leier: I do not see a huge influx of vehicles coming from Mexico. This is a qualitative as opposed to a quantitative discussion. My esteemed friend here paints a picture of hoards of poorly built, emission-spewing vehicles pouring over the borders.

In fact, there are only two reasons to import a vehicle. One is for economic reasons and the other is for other qualities. It is the collector or unique cars, the type of vehicles not generally available to Canadians, that people tend to import. There are some attractive European models sold into the Mexican market that may be attractive to Canadians in small numbers. The Mexican road system is not kind to vehicles, so I do not see a lot of vehicles. If it was several thousand a year, that would probably be the sum total of it, which, as a measure of the entire Canadian vehicle fleet, is a drop in the bucket.

Senator Mercer: You made reference to our mediocre products versus imported vehicles from Mexico. I am having a hard time comparing vehicles from Mexico with products that are manufactured by not just the big three but also by Toyota, Honda and Hyundai that may be manufactured in this country.

Other than the Mustang that you referred to, are there other vehicles in Mexico that we cannot currently import into Canada or the United States?

Mr. Leier: Absolutely. There are Alfa Romeos, Fiats, Peugots, Citroens and any number of European vehicles available in Mexico. I was speaking in a wider context of vehicles available in the world market that Canadians are being denied.

Senator Mercer: You can buy Fiats and Alfa Romeos here.

Mr. Leier: There might be one or two models you can get, but Peugots or Citroens are simply not available here.

Senator Mercer: Mr. Nantais, you made a reference to environmental dumping.

Obviously, that was one of my concerns when I first saw the legislation. In his answers to my questions yesterday, the minister assured us that the rules are clear that they have to meet the standards of the provinces of the local regulator, which, in the Canadian context, are the provinces. In Nova Scotia and Ontario, the environmental standards are reasonably high, so why are you concerned about "environmental dumping"?

Mr. Nantais: My remarks are relating, when we talk about environmental dumping, to the high-volume vehicles that come from countries that have lesser environmental standards than ours.

For instance, one thing that is not commonly known is that in North America, Canada and the United States, we have adopted the most stringent national smog-related standards in the world.

Europe is not there. In fact, they are a couple of generations behind and probably will not catch up until at least 2016. By that time, we will have moved on to another more stringent level of standards. When I said we have the most stringent standards in the world, we really do — even on safety issues, on safety-related equipment, standards and performance.

In many cases, yes, people would like to see more European vehicles come into Canada. The fact of the matter is that, on several fronts, they either do not have similar standards, in terms of safety, or the standards they do have are not quite the same as ours.

I will give an example: One of the most critical is high-speed rear-impact standards, what you call fuel-integrity standards. They do not have them. Roof intrusion, they do not have them. Side impact, they have a lesser standard. We say yes, it is good to have a lot of choice for consumers, but if you are bringing in a vehicle that meets a lesser standard that is not good public policy. That is what I am referring to in terms of dumping.

In Japan, for instance, many of these literally hundreds of thousands of vehicles, nearly-new vehicles, have been exported to other markets like New Zealand, and it completely destroyed the market in New Zealand in terms of the industry there.

This is an example of what potentially could happen. We are saying let us be prudent about it; when we pursue free trade agreements, let us be balanced about it and realize what potentially we could face here. We know governments are moving to extended producer responsibility end-of-life vehicles and so forth, but those vehicles now add to the problem we already have here.

That was in reference to my remarks.

Senator Mercer: Let us pursue the New Zealand argument for a moment. Are you saying that, because New Zealand has signed a free trade agreement with five other countries in Asia, including China, obviously Australia, I believe Vietnam and maybe Japan, their domestic production has been wiped out?

Mr. Nantais: It is gone. That was an event several years ago.

Senator Mercer: My final question, chair, is back to Mr. Leier. I know who Mr. Nantais represents. He outlined a number of companies. I did not hear it, but that may not be because you did not say it, I just did not hear it.

Who and how many people does your association represent?

Mr. Leier: I represent approximately 40 businesses that import vehicles into Canada, speciality vehicles that meet needs that for whatever reason the domestic manufacturers have chosen not to address. They, in turn, employ hundreds of mechanics and salespeople. It is a micro-industry and, again, it is a speciality niche business.

Senator Mercer: Where are you located?

Mr. Leier: I am in Victoria.

Senator Zimmer: Thank you for your presentations.

Can you guys see my notes over here? You answered my first question and you asked my second, so chair, I have no questions.

Senator Merchant: I have had a little experience with driving an older Jaguar a few years ago and I could not get anybody to get any parts or give me any service. I live in Regina so my car was mostly in the garage. Is there going to be a problem with servicing these vehicles and having parts for them?

Mr. Leier: With all due respect, there is a problem in Europe getting Jaguars fixed as well. With regard to getting parts and so forth, there is a ready supply of parts. One of the interesting things about the Japanese vehicles, the same skills and tools that are used on the models that are made available here work equally well on the imported vehicles. We have not seen any problem with regard to maintaining our specialty fleets.

Senator Merchant: You did not speak of Japanese vehicles, you were speaking of European vehicles such as Fiats, and you get all the parts and services for that.

Mr. Leier: That is correct. There are also Japanese vehicles sold in Mexico that have not been available in Canada. Again, overall, it is the speciality vehicles that Canadians are mostly interested in importing. I would just comment on the fact that these foreign vehicles tend to be smaller and more fuel efficient. There is a correlation between fuel consumption and emissions, and these are the needs that Canadians seek to address.

Senator Merchant: Will there be a necessity to train inspectors at the borders?

Mr. Leier: No, there does not seem to be. The system in place now seems to be working very effectively, where private businesses are doing inspections on behalf of the various regulatory authorities.

Senator Housakos: My question will be more simple and precise than that of my colleague Senator Mercer, who asked a lot more complex questions.

First, I would like to thank you for supporting the bill and recognizing it as the first step forward.

The question I have is: Once that bill is implemented, what effect will it have on your industry? Will we see an enhancement of cars coming over the Canadian border from Mexico? Will we see a diminishing number of cars going over, or will we see the status quo? Generally, what is the impact to your industry once this bill is implemented?

Mr. Leier: We expect to see a small increase. Again, a few number of vehicles are ones that were never made available for sale in Canada, vehicles that have unique aesthetic and performance qualities, and handling qualities. Those are the kind of characteristics that our members tend to prize, so there will be a slight increase in imports in that regard. In terms of the total Canadian vehicle fleet, it will have a minimal impact.

Senator Fox: As I understand your presentation, Mr. Nantais, you are not against this bill, so basically this bill should go through as is, but you are concerned with the regulations down the road, so I assume you will be actively involved in speaking with the government on the type of regulations that should evolve out of this.

Mr. Nantais: We will be very involved with the regulation development, but we have no problem with the bill whatsoever. We foresee a process very similar to the process that is in place now with U.S. used vehicles. No, we have no real problems with the bill whatsoever as it stands.

If I may point out though, on the issue of standards and what standards these vehicles would have to meet, it is not so much the provincial standards but the federal standards that are in place with respect to these vehicles. Federal standards are the ones that virtually cover every aspect of the vehicle from a safety and environmental standpoint. In the provinces, it tends to be standards that apply after the sale, if you will. I just provide that clarification if that helps.

Senator Zimmer: Mr. Leier, you mentioned Mustangs coming over.

The Chair: Sorry to interrupt; it is a fire alarm. They will tell us in 30 seconds if we have to leave. If that is the case, is there a timeline that you want to respect in terms of the time we come back in? Let us say we are outside until 8 p.m., do we continue or do we stop and come back next week? I am at your disposal.

Some Hon. Senators: Stop and come back.

Senator Comeau: May I suggest, if in fact it is a fire alarm and that we do have to move out, I think we have probably wrapped up most of the questions, if these gentlemen would agree, so that if we do come back we go direct to —

The Chair: Clause by clause?

Senator Comeau: Yes.

The Chair: Ask your questions, Senator Comeau and Senator Zimmer, and we will ask the witnesses to terminate on that.

Senator Comeau: Mr. Nantais, would you agree with Mr. Leier that you would not expect that the vehicles that would be imported in the future would be more or less speciality vehicles?

Mr. Nantais: As he points out, there is certain demand for certain vehicles and, therefore, certain profits associated with those, but we do not anticipate that the flow of vehicles would be very significant.

Senator Comeau: Thank you. That answers my question.

Senator Zimmer: Mr. Leier, you indicated Mustangs but, if I am correct, they are made in Detroit, as GMs are made in Oshawa. If the cars come in here, you can get the parts in Detroit, right?

The Chair: Sorry, Senator Zimmer, talk to them on the way out. I would like to thank the witnesses. Once this is finished, we will come back in and go to clause by clause. If everyone agrees, we will go to room 257, East Block and continue.

(The committee suspended.)

(The committee resumed.)

The Chair: Is it agreed that the committee proceed to clause-by-clause consideration of Bill S-5?

Hon. Senators: Agreed.

The Chair: Shall the title stand postponed?

Hon. Senators: Agreed.

The Chair: Shall clause 1, which contains the short title, stand postponed?

Hon. Senators: Agreed.

The Chair: Shall clause 2 carry?

Hon. Senators: Agreed.

The Chair: Shall clause 3 carry?

Hon. Senators: Agreed.

The Chair: Shall clause 4 carry?

Hon. Senators: Agreed.

The Chair: Shall clause 5 carry?

Hon. Senators: Agreed.

The Chair: Shall clause 6 carry?

Hon. Senators: Agreed.

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

Hon. Senators: Agreed.

The Chair: Shall the title carry?

Hon. Senators: Agreed.

The Chair: Shall the bill carry?

Hon. Senators: Agreed.

The Chair: Does the committee wish to consider appending observations to the report?

Hon. Senators: No.

The Chair: Is it agreed that I report the bill to the Senate?

Hon. Senators: Agreed.

The Chair: We will now go in camera.

(The committee continued in camera.)