THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Thursday, October 9, 2025
The Standing Senate Committee on Foreign Affairs and International Trade met with videoconference this day at 11:30 a.m. [ET] to examine and report on such issues as may arise from time to time relating to foreign relations and international trade generally.
Senator Peter M. Boehm(Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Peter Boehm. I am a senator from Ontario and the chair of the Standing Senate Committee on Foreign Affairs and International Trade.
[English]
I wish to invite committee members participating in today’s meeting to introduce themselves.
Senator Adler: Charles Adler, Manitoba.
Senator MacDonald: Michael MacDonald, Cape Breton, Nova Scotia.
Senator Ravalia: Mohamed Ravalia, Newfoundland and Labrador.
Senator Coyle: Mary Coyle, Antigonish, Nova Scotia.
Senator Dean: Tony Dean, Ontario.
Senator Harder: Peter Harder, Ontario.
[Translation]
Senator Hébert: Martine Hébert from Quebec.
[English]
The Chair: I would like to welcome all senators as well as those across the country, our fellow citizens, who may be watching us on today on Senate ParlVU.
Today, we are meeting under the general order of reference to discuss the Canada-United States-Mexico Agreement, or CUSMA, and Canada’s trade relationship with the United States. We will have only one panel today. We are pleased to welcome in the room, from the Canadian Vehicle Manufacturers’ Association, Brian Kingston, President and Chief Executive Officer; and virtually, from the Automotive Parts Manufacturers’ Association, Flavio Volpe, President. Welcome.
I know we were all looking forward to hearing today as well from Canada’s ambassador to the United States, Kirsten Hillman. It won’t come as a surprise to any of you that she was needed in Washington after the Prime Minister’s visit with President Trump earlier this week. She is very keen to appear, and we will welcome her at another time.
Before we hear your opening statements and proceed to questions and answers, I would ask everyone present to please mute notifications on their devices. Also, keep your earpieces away from the microphone because we want to ensure that there is clarity in what you say and how you enunciate it, but also for the safety of our interpreters, who are always doing the good job that they do.
I want to acknowledge that Senators Woo and Wilson of British Columbia have joined us since I began my remarks, as well as Senator Al Zaibak of Ontario.
We will begin with opening remarks by our two witnesses. Then we’ll move into questions.
Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers’ Association: Thank you, Mr. Chair and honourable senators. I appreciate the invitation to appear here today as part of your study on CUSMA and Canada’s trade relationship with the U.S. and Mexico.
The Canadian Vehicle Manufacturers’ Association, or CVMA, represents Canada’s leading manufacturers of light- and heavy-duty motor vehicles. Our membership includes Ford Motor Company of Canada; General Motors of Canada; and Stellantis, FCA Canada.
Since the Canada-US Auto Pact of 1965, we have reaped enormous economic and social benefits by being part of an integrated North American auto sector. We have common regulations and competitive supports, and this has enabled us to manufacture and sell into a market that accounts for annual sales of nearly 20 million vehicles. It is this integration that has allowed Ford, GM and Stellantis to make historic job-creating investments in Canada over the past five years.
The CUSMA is the foundation for the integrated North American auto industry. This agreement provides certainty, reinforces long-established integration of the supply chain necessary for our competitiveness and facilitates regulatory alignment of vehicle technical regulations with the United States. This gives Canadian consumers access to leading vehicle safety emissions in fuel efficiency technologies at the lowest possible cost.
The CUSMA also provides Canadian manufacturers with duty-free access to the much larger U.S. market. Last year, $46.5 billion worth of vehicles were exported, and 92% went to the United States.
With the upcoming review of the CUSMA, Canada must do everything possible to renew the agreement, protect our preferential access to the United States and support the integrated automotive supply chain. We’ve identified the following priorities that we think the government should focus on as we prepare for this review.
First, of course, is the removal of tariffs on the automotive industry. U.S. Section 232 tariffs on the auto industry and Canada’s retaliatory measures are doing enormous damage to the integrated North American supply chain. According to the Center for Automotive Research, U.S. tariffs alone are going to cost the U.S. industry US$188 billion over the next three years. This has weakened the competitiveness of the industry in North America to the benefit of competitors abroad. In fact, it is more cost-effective today to manufacture a vehicle in Japan or Germany and export it to the United States than to build a vehicle in North America for the U.S. market. This makes no sense and must be corrected.
Second, eliminate the federal EV mandate. The federal government’s EV mandate, known as the Electric Vehicle Availability Standard, prioritizes EV sales over the development of a North American supply chain. This is a direct challenge to our integration with the U.S. through CUSMA and the competitiveness of our sector due to punitive costs levied on companies that cannot meet arbitrary EV sales targets. This has to be repealed before the CUSMA review process commences. To be very blunt here, the EV mandate effectively makes it illegal for automakers to sell the very vehicles they are building in Canada today. Negotiating a trade agreement with the Americans to support an industry that is being eliminated by federal regulations is nonsensical.
Third, we need to align with the U.S. on the approach to China. Maintaining alignment with the U.S. on China is fundamental to the review of CUSMA and ultimately to its renewal. We support the China Surtax Order that put a 100% tariff on Chinese manufactured vehicles. We simply cannot be out of step with the Americans on the approach to China as we get into the CUSMA review.
Surtaxes on Chinese EVs should also be accompanied by a ban on Chinese-connected vehicle software, as the Americans have pursued. We should also strengthen our trade policy and investment authorities to ensure that we address any gaps in national security with respect to Chinese investment in the Canadian automotive supply chain.
It goes without saying that regardless of the outcome of the CUSMA review, the federal government should be moving quickly now to implement policies to enhance our tax and regulatory competitiveness. This is needed to secure our automotive footprint as well as the research operations that we have here. The U.S. One Big Beautiful Bill has taken a number of aggressive actions meant to attract investment, and we must ensure that we are competitive and countering those actions.
With that, I thank you for the opportunity and look forward to any questions.
The Chair: Thank you very much, Mr. Kingston.
I’d like to acknowledge that Senator Ataullahjan of Ontario has joined the committee since you began your remarks.
Mr. Volpe, you have the floor.
Flavio Volpe, President, Automotive Parts Manufacturers’ Association: Thank you, chair and members of this committee, for the invitation. It is great to be on with my colleague Brian. It’s always difficult to follow him, but I’m going to give it a shot.
The Automotive Parts Manufacturers’ Association, or APMA, represents over 200 Canadian companies that design, engineer and manufacture components for almost every vehicle built and sold in North America. Collectively, we employ approximately 100,000 Canadians directly and support another 400,000 jobs across logistics, tooling, technology and advanced materials.
Automotive manufacturing is not only a source of pride, but also Canada’s number one manufactured goods export sector. We account for about $82 billion in annual exports.
Roughly 85% of all the vehicles built and assembled in this country go to the United States. Nearly every single vehicle on American roads has some Canadian content in it. This is what integration looks like.
When we talk about CUSMA review, we’re really talking about the foundation of our joint economic security. CUSMA didn’t just replace NAFTA; it modernized it for an economy built on the cars of the future, semi-conductors, digital trade and zero-emission innovation. It reinforced a core principle that we’ve proven over seven decades: that North America wins together or we lose separately.
That’s not just rhetoric. The auto sector proves it every day. A car assembled in Ontario includes parts that cross the Canada-U.S. border up to seven times before they end up in a customer’s hand.
Today, they typically contain about 50% U.S. content and parts and often Mexican parts and raw materials. We’re one production ecosystem, not three competing jurisdictions.
As we prepare for this review, we must protect integration from the forces of political short-termism. We heard Secretary of Commerce Howard Lutnik say candidly in a session in Toronto that America will make the cars and there is nothing Canada can do about it. I think there is something we should do about it.
First, many of us remember in 2018 when the Section 232 national security tariffs blindsided the industry. They were put on steel and aluminum, and Canadian firms paid hundreds of millions of dollars in duties on parts that were made in North America. These duties didn’t protect anybody. They just punished the most integrated supply chain in the world.
Today, we see echoes of that rhetorical form in Washington. There are new duties on vehicles, unilateral reviews of the agreement and a lot of new national security investigations on different Canadian components. Let’s be clear: You can’t have a continental supply chain if one partner keeps threatening the other. Canada must make the case, directly and publicly, that North American manufacturing is part of their national security.
We build the systems that keep our economies and militaries moving, from drive trains to armoured vehicles to energy storage for EV drive trains. It’s not the place to play tariff games.
When CUSMA raised the original value content to 75%, Canadian suppliers invested accordingly. We expanded domestic capacity in stampings, castings, steel and aluminum, and now battery-grade critical minerals and cathode materials, but we also invested heavily in the U.S., expanding operations by 10% to 176 Canadian-owned auto parts plants employing 48,000 American workers.
These investments were made in good faith under the assumption that rules would be applied consistently, but we’ve seen attempts by the U.S. to reinterpret those rules in ways that weaken the incentives to buy Canadian. That uncertainty is corrosive for investors deciding where to put the next gigafactory. Predictability matters more than subsidies. We need rules-based renewal, not a renegotiation by press release or Truth Social post.
The review is also an opportunity for Canada, which has a generational opening to become the preferred supplier of clean tech components to the entire continent. We have the minerals, talent and reputation for reliability. What we lack is speed.
Our U.S. partners moved first with the Inflation Reduction Act, and Mexico moved last with new policies on domestic energy control. Canada has to move now, not just with promises, but with industrial trade policy that tells our customers in the U.S., Mexico and abroad when they can have access to the quantities of the critical minerals they need that will power the transition.
We need to invest in value-added processing. All of the processing in critical minerals is in China. We have to ensure that our supplier base can transition to battery, hydrogen, lightweight and the automation that keeps us going.
Lastly, in 2018, when we faced the 25% tariff threat, the auto sector stood shoulder to shoulder with both levels of government, labour and consumers. We spoke with one voice and stayed calm. We won that fight. We proved that coalitions work in Canada when they’re confident and persuasive. We need that for 2026.
The Americans will come with domestic political pressure. Mexico will come with energy grievances. We should come with a simple message: Canada is the reliable partner that keeps North America building.
When I travel across North America and meet with suppliers in Windsor, Detroit or Monterrey, they don’t see borders; they just see production schedules. They don’t ask, “Is it Canadian or American?” They ask, “Can we ship it by Tuesday?” That’s the reality this policy must reflect. Let’s make this review a chance to strengthen, not strain, the North American economy.
Thank you, chair. I look forward to your questions.
The Chair: Thank you very much, Mr. Volpe.
Senator MacDonald: Thank you to the witnesses. This question is for both of you and your organizations. I’m under the impression that the American manufacturers of automobiles and parts are of the same mindset we are on this side of the border in terms of the industry itself and how it should operate. What sort of feedback are you getting from your counterparts in the U.S. on this? What efforts are they making to level this playing field and get rid of these tariffs?
Mr. Kingston: Thank you, senator. I appreciate the question. They are actively working to try to have the Section 232 tariffs removed. My counterpart in the United States has made the case consistently to the administration that the USMCA is a high-quality trade agreement. It increased the rules of origin stringency so there was more North American content and labour value content rules, and that agreement required manufacturers like Ford, General Motors and Stellantis to make big investments in their North American supply chain to be compliant.
To now turn on that deal and put tariffs on the very companies that have invested — largely in America, but also Canada and Mexico — is a huge challenge. They are the making the case for the USMCA.
The area where the most traction has been made is with the U.S. striking deals with Japan, the U.K. and South Korea. They’ve created this very bizarre situation where it is more effective to build cars outside of America than inside America. That is gaining some traction because there is an understanding that policy ultimately doesn’t support the manufacturing sector. The arguments are being made, but as you can see from the fact that the tariffs are still in place, we have work to do.
Mr. Volpe: The USMCA had as its main objective to raise local content. For American auto parts manufacturers, there is a boom in business, just like for Canadian ones — about 10% more American content in U.S. cars from Canadian-built cars from U.S. origins from 2019 to 2025. The American auto parts industry continues to appeal, although privately rather than terribly publicly, to the White House to say, “Those Canadian assembly plants buy $25 billion worth of parts from our factories every year, and you’re hurting us.”
The problem is that advocating privately during the second Trump presidency has little to no effect. What we’re seeing is a reluctance to take on the administration publicly in the clippings, in committees or other ways that we might do here.
The Chair: Thank you, Mr. Volpe.
Senator Ravalia: Thank you very much to our witnesses. Given the dramatic shift in the ground rules, do you envisage pressure on a bilateral versus a trilateral agreement? How would that impact us if CUSMA were modified into a Canada-U.S. agreement and a separate Canada-Mexico agreement?
Mr. Volpe: Canadian companies are heavily invested in Mexico. There are 120 Canadian-owned parts plants that employ 60,000 Mexican workers to supply USMCA-supported compliant assembly in Mexico. Canadian companies invested there because that’s where the growth in the market was and that’s where their original equipment manufacturer, or OEM, customers asked them to go.
We have been saying loudly, in all three capitals and as publicly as possible, that the USMCA for automotive is very important to keep trilateral. What we’re hearing publicly — as well as privately in meetings in Washington — is that the Americans are increasingly looking at the fact that the trade issues and dynamics between the U.S. and Mexico and the U.S. and Canada are different and that they’d really like to do bilateral deals.
I worry and have expressed to the Prime Minister and everybody on down that this would cut off very profitable and very important Canadian operating assets in that country, and we shouldn’t go down that path.
Mr. Kingston: I fully agree with what Flavio has just laid out. The industry has been founded on this trilateral framework, and that has been fundamental to the success of the sector, so we should continue to strive to make sure that any agreement is trilateral in nature. If the Americans pursue bilateral agreements and that’s the only option, then we will have to work within that framework. There are things you can do in trade deals like, for example, accumulation of rules of origin to allow for content in Mexico or Canada to ultimately qualify as a North American vehicle. There are things we could explore, but the preference is absolutely for a trilateral agreement. That is the most efficient and the most cost-effective.
The Chair: Thank you very much.
Senator Woo: Thank you, Mr. Kingston and Mr. Volpe.
Mr. Kingston, you’ve expressed your position to the EV mandate as well as support for full alignment with the United States on Chinese automotive imports and the use of all Chinese technology. Where are we on our own EV development strategy? How do you see Canada becoming a player in EVs, looking forward 10 or 20 years?
Mr. Kingston: Thank you, senator. We are behind the Chinese on the development of our strategy. Made in China 2025, which was released in 2015, laid out a very clear Chinese industrial strategy. Part of that was to be a dominant player in electrification. It’s safe to say that perhaps not enough attention was paid to how quickly the Chinese were going to move. They are now ahead in terms of the technology as well as locking up investments in battery supply chains. The Chinese have the lead.
That said, Canada has made big strides. We’ve seen $46 billion in new investment over the past five years. The first full-scale battery plant is operational now. Stellantis is investing in Windsor and the LG plant NextStar. So we are making progress, but we have a lot of work to do, particularly on the critical-mineral supply chain.
China controls about 80% of the global EV supply chain. Canada is the only country in the western hemisphere with the full suite of minerals required for next-generation EV batteries. We must develop that, mine those minerals and put in place processing capacity if we want to have a role in the future.
Senator Woo: This strategy that you’re proposing is based on protection behind a high tariff wall. Essentially, that’s what you’re saying. Jim Farley has said that Chinese EVs are the best in the world by a long shot. You expect that the Canadian and American industries will be able to develop world-class, world-beating EVs without competition, essentially, from the best cars in the world.
If the Americans change track, and it wouldn’t surprise me if they did, to actually allow some Chinese EV investment — under strict conditions, of course, with transfer of technology and employment of American workers and so on — would that change your view on how we approach the Chinese market?
Mr. Kingston: Competition with China must be fair. That is the fundamental principle by which we abide. We need a level playing field with the Chinese.
I can give you an example of why that is not the case right now: China has put about US$237 billion of direct subsidization into their industry. They have enough capacity to satisfy domestic demand twice over. That would be equivalent to North America building 30 million vehicles a year and exporting the surplus. This Chinese economic model is export-oriented, and they build huge overcapacity and then dump product into other markets. We’ve seen it in steel and in solar panels. We cannot allow that to happen here or we will have no EV industry and no automotive industry. On a level playing field, we can compete.
The Chair: Thank you.
Senator Hébert: Thank you, Mr. Volpe and Mr. Kingston.
Mr. Volpe, you talked about what we must say and the messages we must send. I totally agree with you. As a former Quebec delegate in Chicago, I was covering the Midwest. Those are exactly the same arguments we had the last time, in 2019-20, when we had tariffs on aluminum, et cetera.
But as you mentioned, the industry and the business community at that time were very vocal on the public plays. With the help of many government officials also, whether at the state level or elsewhere, we were able to see some gains. This time, as you pointed out, the situation is different.
Some experts are betting on the fact that the effects of this situation on the population, such as increases in vehicle prices and so on, will eventually have an echo at the White House. Considering what we’ve been saying, how confident are you that this will be the case?
Mr. Volpe: I’m not. The White House continues to talk about the fact that GDP growth this year is 3.8%, which is not anything that any of us modelled or that analysts had hoped for. Analysts had at least hoped for the message to get to the White House. It’s a different grind.
I’ll use a very specific example. We have an exemption for tariffs on auto parts going into the U.S., when they were threatened from day one. What we did there, and the work that we need to do this time versus last time, is that we went on a massive advocacy campaign throughout the United States, everywhere where there was investment, to say that if they put a tariff on auto parts, they would end up shuttering their own industry within a week because of the dynamics of who the importer of record is and why that will leave out people at home in Alabama and Tennessee whom you count on.
They quietly took those tariffs off the table in an update to Customs and Border Protection guidelines. That was a small victory for a different path forward. Certainly, we must do everything we can in Canada-U.S. negotiations, but I just came from meetings at Commerce. They don’t want to hear about Canada. But we talked about just how close you’re going to bring Ford Motor Company or General Motors to a major loss of market share or to threaten bankruptcy if you keep going. Those are different conversations.
The Chair: Thank you, Mr. Volpe.
Senator Al Zaibak: Thank you, Mr. Kingston and Mr. Volpe, for being with us today. The Canadian Chamber of Commerce has called the 2026 CUSMA review critical to North America’s prosperity and security. From your perspective, what outcomes would define a successful review for Canada’s auto industry and auto parts sector?
Mr. Kingston: First, with respect to a successful outcome, is restoring certainty to the North American trade environment. I can’t emphasize this enough. The amount of trade turbulence that the industry has had to navigate over the past few years is so damaging to investment. Auto is a long-lead-time industry. Decisions are made on production schedules that can go out years in advance. Right now, trade rules aren’t just changing weekly; sometimes we see multiple changes in the course of a day and different guidance from USCBP on a new tariff. That cannot continue.
Success, from my perspective, would be a renewed agreement — renewed for 10 years, so we don’t have to continue to go through this on an annual basis.
Mr. Volpe: I would echo that. In automotive, I like to say that the assets, the factories, are long-term bearers of fruit, not unlike an apple orchard. Once the tree is of a certain maturity, it provides fruit, and that fruit provides nourishment and economic activity for the farmer.
If you’re going through a year of storms and drought, trees that bear fruit will be affected, but it will very specifically affect your ability and desire to plant new trees in the same territory. Seedlings get washed out, and trees that don’t bear fruit make a farmer poor. Maybe she doesn’t have the money and resources to put in new ones.
We’re all in the same “apple orchard business” here in North America. We’re all as interconnected in the automotive business. We need the sun to rise and set on a schedule that is predictable. We need to understand that the climate will be how it has been for the past 20 years.
Senator Coyle: Thank you, witnesses. Some of my questions have been asked, but I have a quick question for each of you. Welcome back, Mr. Volpe. I know we’ll be talking again and again.
You talked about critical minerals and the supply chain; actually, both of you have. It’s something that Canada has. I don’t remember from the last CUSMA and discussions at this table where we were, if anywhere, on critical minerals in that agreement. Regardless, you’ve talked about both the supply of critical minerals being critical and also value-added industry here in Canada.
Could you speak a little more about how you see that in terms of CUSMA itself?
Mr. Volpe: Sure. The BloombergNEF says that Canada has the largest resource of critical minerals required for the auto sector. That means that if you’re going to make an EV and a $25,000 battery, you need lithium, graphite, cobalt, nickel, et cetera. We have it; we know we have proven resources in the ground.
However, where we compare to the Chinese is that a lot of these projects still need approval and extraction. We have no processing in Canada, so you have to work through the economics of the processing. Also, we think we can make them available to the market 8, 10 or 15 years from now.
While all of the jurisdictions push vehicle makers into that market right now, the Chinese have it, and they have all the processing capacity. If Ford Motor Company needs 1 million tonnes of lithium, they know they can get in Shanghai; they don’t know they can get it from Canada. We need to answer that question for our American and Mexican partners and our Canadian investments.
Senator Coyle: I have a slightly different question. I know you’re not anti-EV; you just don’t like the mandate. In fact, you have talked about stimulating consumer demand through an EV charging network.
Please speak about that and your position on that.
Mr. Kingston: Absolutely.
And yes, for the record, I’m very pro-EV. In fact, the leading sales of EVs right now in Canada are from Ford and General Motors, so we’re making huge progress in terms of EV sales. I simply don’t like the tool of the mandate and mandating that Canadians go down that route.
We have called upon government to put in place proactive policies to help bolster demand. We see again and again that charging infrastructure is a huge challenge. As someone who drives an EV between Ottawa and Windsor all the time, it is not fun driving on the highway network in Canada with an electric vehicle, given our current infrastructure layout. We have 45,000 chargers today; we need 600,000 in the next 10 years. That is a huge gap that has to close.
Senator Coyle: So domestically, to support the industry that we want to thrive under CUSMA. Thank you.
Senator Harder: I want to follow up on the question that was just asked.
I took it from your comments at the beginning that you don’t view this as a positive policy. Could you expand beyond the charging stations? What policies or frameworks ought the government put in place that would allow the industry to respond with serious investments and commitments to zero-emission vehicles, or ZEVs, that would demonstrate that the sector and manufacturers you represent are putting their futures on the line as well?
Mr. Kingston: We don’t like the mandate because, at a time when the companies are under great pressure from tariffs and everything else, the mandate requires that if you can’t hit the targets, companies either have to restrict their gas-powered vehicle sales or pay Tesla for credits. We’re estimating that $3.6 billion will go to Tesla over the next five years in order to comply with this mandate. That is very hard to comprehend in this current environment. Or we have to restrict vehicle sales — 700 to 900 gas vehicles pulled from Canada every single year — to hit the government’s targets. That is devastating for manufacturers and dealers.
The mandate is not a good policy or tool, and it needs to be repealed.
We would like to see the government come forward and work with auto manufacturers on a strategy to help more Canadians switch to electric. All of the early adopters have bought an EV. They are typically higher-income households, and it is the second or third vehicle. We need to move to mass market: someone with a limited budget and one vehicle.
That is not easy to do, so we need charging infrastructure, purchase incentives and other incentives like access to high-frequency lanes and free municipal parking. There is a range of things you can do to help convince someone to shift to an EV.
Senator Harder: What percentage of Tesla’s profits do those payments represent?
Mr. Kingston: That’s a great question. I don’t have the percentage, but in their second-quarter report, they had about US$411 million in what they call regulatory revenue. Since 2020, it’s been about US$12 billion. It is a part of their business, and they benefit when governments put in place these mandates that force other companies to send them credit.
The Chair: We don’t have more time in that segment, so we’ll move on.
Senator Adler: The question is for Mr. Volpe. If Mr. Kingston wants to add something, that is terrific.
I want to start with Mr. Volpe by simply acknowledging what those of us who pay attention to American messaging know: The President’s favourite two words begin with “T” — one is “tariff” and the other is “trillion.” It was heartening to see our Prime Minister say that the CPP is investing trillions in the United States. That made Mr. Trump smile. The question is this: With all of the investment we are making in auto parts in America, is there a way to come up with messaging that gets us to that “T” word?
Mr. Volpe: Unfortunately, no, but our message has been that there is $10 million of new operating capital in auto parts in the U.S. that goes directly to benefit local U.S. economies and hire, train and support U.S. workers. As a percentage of what we do here in Canada, we’re getting very close in terms of numbers. There are 48,000 U.S. employees of Canadian auto parts plants. Of the 100,000 who are in Canada, about 60,000 are employed by the Canadians. So our message is that Canadian auto parts companies are increasingly employing more Americans, and at some point, we’ll pass the number of Canadians. If that doesn’t look like a partnership, I don’t really know what else would.
Senator Adler: Mr. Kingston, would you like to add to that?
Mr. Kingston: Yes.
I will note quickly that if you look at the investment trends in the industry, both manufacturing and parts since 2020, we have seen a big string of successes in Canada. However, on a comparative basis, the U.S. is still, hands down, the primary beneficiary of new automotive investment. Well over 80% went into the U.S., followed by a mix of Canadian and Mexican.
So it’s not as though the table is tilted in favour of Canada or Mexico; the U.S. continues to be the centre of the industry, with Canada and Mexico playing roles.
Senator Adler: Does anybody in the world invest more in United States manufacturing, including auto parts, than Canada?
Mr. Volpe: The trend is obvious and well supported by data. The Americans continue to win, and that was during the Biden administration as well as the current one. It is that the current administration are not persuaded by data. They have other objectives that are different than the objectives of return on investment, so it’s hard to break through the din or to make that argument to the President. He said in an Oval Office meeting that there was $17 trillion in new investment in the U.S. this year, which I think we all know is not true, but he has a different relationship with numbers. It’s difficult to give him wins that they have earned when he has a portfolio of wins that he imagines.
The Chair: Thank you very much, and congratulations, Mr. Volpe, on your use of diplomatic language in your last response.
Mr. Volpe: For once.
Senator Ataullahjan: What is missing from CUSMA that your organizations would like to see incorporated in the joint review? Do the automobile associations have any influence on the upcoming joint review?
Mr. Kingston: Yes. With respect to what’s missing, given that it’s a relatively new agreement, there isn’t much that needs to be done in terms of modernization for automotive. The only area where additional work could be done is in the EV supply chain and battery space. It is only five years old, but if you think about how far the technology has advanced in that period of time, I don’t think it was fully comprehended when this was negotiated. So there is some work that can be done there.
With respect to the auto voice in this, absolutely. Our counterpart in the U.S. is working very closely with Commerce and the Office of the U.S. Trade Representative, or USTR. They are taking part in the consultation right now on the Federal Register notice. So they are there.
The question is this: Does that ultimately make its way to the White House?
Mr. Volpe: The CUSMA/USMCA works. The problem is that they have circumvented it with the imposition of national security tariffs and declaring economic emergencies and many other things.
The agreement could be refined to include more things. One of the things we introduced for the first time, in 2019, was local content requirements in steel and aluminum. I think that was designed to say, “Okay, let’s get off the oversupply of Chinese steel and aluminum.”
We can look at doing that for other materials. Doing so would be to the advantage of the U.S., Canada and Mexico. It would really work for us on critical minerals. But frankly, the most important thing about the USMCA is that, if it survives, it is the basis of our relationship and can’t be circumvented. I’m not sure we can accomplish that with this administration at this time in the USMCA review. Unfortunately, it is an investment freeze and really a source of anxiety for everyday manufacturers and their employees, who show up and who are not politicians. They just want to go to work and then go home and pursue their lives.
The Chair: Thank you very much. That brings us to the end of the first round. I would like to ask a question of both our witnesses.
I’m just back from a couple of days in Mexico City, where I participated in a big forum on North American relations and then met with senior officials in the Mexican government and fellow parliamentarians. I came away with a real sense that Mexico wants to intensify the relationship with Canada as quickly and as deeply as they possibly can. This reflects the visits of the Prime Minister and ministers since and all kinds of other discussions.
My other takeaway is that they are very worried about the auto sector. I would ask each of you this: Are you in regular touch with your Mexican counterparts? Is this interaction increasing? What are your impressions? We’ll start with Mr. Kingston.
Mr. Kingston: Yes, we are in very close touch with our Mexican counterpart. In fact, we engage weekly and exchange information on what’s happening in the sector and how we should be approaching these negotiations. So there is a very good, constructive relationship there with the Mexicans, and our U.S. counterparts are part of that as well. The industry is very well aligned, and everyone has the same objective, which is renewing this agreement and ensuring that automotive trade continues to be duty-free across North America.
But I hear the same concerns, and there are some differences between the Canadian and Mexican markets. There is a lot more Chinese investment and influence in Mexico, which has caused concern in the United States, so there are differences. But broadly, we all support the agreement and the framework and the need for an integrated North American supply chain.
Mr. Volpe: I was scheduled to speak at that conference, chair, and I had to stay here to welcome the governor from Michigan and attend meetings instead. It’s the kind of trade-off that we have to make on a day-to-day basis. The fire is in the U.S. and the water is sometimes in Mexico, and you have to jump between them.
We speak with our Mexican counterparts and senior Mexican officials all the time. We are heavily invested. When we speak to people in Mexico, we speak as investors and employers and implore the government there to help protect the return on our investment.
The one difference that I keep bringing up with our Mexican partners and counterparts is that Canada and Canadian entities are heavily invested in operating assets in Mexico, and there are as yet no Mexican companies invested in plants in Canada and few in the U.S. I just say that for context on why Washington might view Mexico City differently than Ottawa.
The Chair: Thank you very much.
Senator Hébert: I have a quick question. Mr. Kingston, you mentioned that we have to rapidly improve our tax and regulatory environment to face the situation and also when we look at what is going on in the United States in those two fields. You have talked about the EV mandate, which is one regulatory burden that you would like to see the industry relieved of. But we have other obstacles, if I may say. I’m thinking some are maybe less damaging to the industry, like the luxury tax, but these are still obstacles that we are putting in front of our own industry internally in Canada.
I would like to hear from you on what the top priorities for the industry would be, apart from EVs. What would be the top priority for the industry in terms of tax relief and regulatory relief?
Mr. Kingston: I have a very long list here in a letter that I sent to Minister Champagne, so I won’t walk you through everything.
Senator Hébert: Is it possible to have this list?
Mr. Kingston: Yes, absolutely.
Senator Hébert: Thank you.
Mr. Kingston: Yes, we can share it.
I feel like Canada is constantly in a reactive mode with respect to U.S. policy, and I wish we could find ourselves on the front foot and be more proactive. I will never forget when, during the first Trump administration, we had to respond to U.S. tax cuts. Then we had President Biden and the Inflation Reduction Act, which caused panic in Canada and in the automotive industry. We had to respond to that and did so effectively, but again, it was reactive.
Now we have the One Big Beautiful Bill, which has again put us on the back foot, and we are trying to find ways to be competitive. We have to be more forward-thinking in managing this and not just responding to the United States.
I have a couple of ideas. Things like a luxury tax are just damaging, and they’re not achieving anything with respect to EVs. From a regulatory framework perspective, imagine this: Auto companies not only comply with the federal EV mandate, but we have greenhouse gas, or GHG, regulations on tailpipes. Also, in Quebec and B.C., they have put in place their own mandates, so there is no one Canadian economy. You have to comply with all of these regulations that are constantly changing. So a common regulatory environment would be extremely helpful.
If we could do that, plus some project approval improvements for critical minerals, we would be in a much better place. But I will gladly send you the list.
Senator Hébert: Mr. Volpe?
The Chair: I’m afraid there isn’t time for Mr. Volpe. We might come back to that.
On the question of your list and document, if you could, please provide that to the clerk. If you have it in both languages, fine; if not, we’ll translate it and circulate it around to the committee.
Senator Hébert: Is it possible to ask Mr. Volpe to send us an answer to that question after?
The Chair: Well, we ran out of time, senator, but I know Mr. Volpe was listening carefully and might want to send something to us. Of course, he is always welcome to do so.
Senator Hébert: That would be appreciated.
Senator Woo: Mr. Volpe, you sound quite pessimistic about the prospects of the USMCA review. On the current trajectory, if the U.S. really is determined to corner the automotive market and maintain tariffs on Canadian automotives going to the U.S., it would seem to me that our auto parts manufacturers and other auto companies will seek to relocate to the United States. Are you seeing that happen already?
Mr. Volpe: I don’t see that happening yet. “Pessimistic” is your word, but “realistic” is mine. The domestic political realities of the way that administration is running that country have lent a posture to the USMCA renegotiations.
We are seeing lower volumes and really unfortunate pressure to reduce jobs capacity here, but nobody is moving. In reality, especially for second- and third-tier suppliers, that just means that you go out of business. You can’t say, “Hey, by the way, I have $50 million to go and invest in North Carolina and hire people there.” That is not how it works.
Senator Woo: Would that be the longer-term trajectory, though, if the pressure keeps up in this direction?
Mr. Volpe: I think the way that the industry actually works is, for example, what is happening now is just depressing production volumes everywhere. If some of that rose in the U.S., then those automakers in the U.S. could go out to bid to find suppliers who can meet their specs, usually within one hour’s drive or one day’s drive. It would be other companies that would get the opportunity to do that.
Some of those are Canadian auto parts plants owned by Magna, Linamar and Martinrea, Woodbridge, et cetera, but for the most part, it would be somebody else.
Senator Woo: Thank you.
Senator Coyle: Again, my question has been asked, but I’ll ask a different one. This may be a bit off base; I’m not sure.
A boost is expected in military spending. From your points of view, or in the views of those you represent or to whom you are related, are there some possibilities for growth in our domestic market?
Mr. Volpe: Let me jump in before Brian says what I was going to say, so I’ll get some credit for saying it first. Those are new volumes. NATO countries have committed to 5% spending of GDP — 3.5% on hard defence spending and 1.5% on economic resiliency. That means a lot of things that roll on wheels, whether on- or off-road, will have to be purchased by Canada. The Prime Minister said we will give preference to Canada, and we will codify a preference for sourcing in Canada. But, as well, if we build local solutions that are good enough for the Canadian military, I think they would be good enough for the Danes, the Swedes, the Germans and everybody else.
That is a rare opportunity for a new market segment for the types of goods that we make. I’ve been talking a lot about whether we should have a Canadian car company. One of the biggest issues with that is that if you build a competitive Canadian car company, you may cannibalize the sales of the companies that are invested here. Well, in the space that you’re talking about, those are new volumes.
We should absolutely be drilling down as far as we can to see if that’s an opportunity for the people and companies that are in automotive right now to get into new production lines.
Mr. Kingston: Defence spending can be helpful but it will never replace the rest of the market. We have companies that are exploring defence contracts, but you’re talking about a few hundred vehicles. In a typical plant, you would be building anywhere from 150,000 to 300,000 vehicles. It is helpful, but it is not sufficient.
Senator Harder: My question is for Mr. Volpe. You referenced a visit to Ontario by Governor Whitmer. Could you share some of the insights from that meeting and the extent to which the subnational level in the United States is our ally in advancing our collective interests?
Mr. Volpe: Governor Whitmer is a fan of a lot of things, including data. The data from Michigan is that Michigan’s and Ontario’s manufacturing economies are interwoven. We use the same brain trust. She talked about how the same companies are invested on both sides of the border, whether they are American, like Ford and General Motors, or Magna and Linamar in the other direction. She understands the threat of some of the product from China that Senator Woo is talking about. A different business model brings a different product that is low-cost and a threat to both of those two economies. Let’s work together. She talked about how the rhetoric and — in her words, not mine — the insults that have come from the White House to Canadians and Canadian interests are not just unnecessary but not based in fact.
It was a good meeting and a follow-up on other meetings that we had with her in the U.S. That is typical of state-level representation in manufacturing states. They know that in Tennessee, Alabama, Illinois and Indiana. We always try to talk in a non-political manner, because math doesn’t have a colour — unless it’s red, and none of us want to be in it.
Senator MacDonald: Mr. Volpe touched upon this, but I would like opinions from both of you on this. Canada’s history in the automobile industry is probably as old as that of any other country. We’ve paralleled with the U.S. industry for over a century. We have a lot of expertise in automobiles, both in building automobiles and parts. I know it’s been a long time since the McLaughlin was on the road, but are we capable of having stand-alone American and Canadian industries? The industries in South Korea and Japan are all post-war. They had nothing 50 years ago, and look at them today. Do we have the capability and the capacity?
Mr. Kingston: Yes, absolutely. Manufacturers have been here for 120 years, if you look at the history of Ford, GM and Chrysler. The CVMA, or Canadian Vehicle Manufacturers’ Association, just a humble association, has been around for 100 years because this industry has such a long history.
We will continue to have an automotive industry. If the U.S. pursues this policy to the fullest extent, it takes us to a pre-Auto Pact environment with local production to access local markets. That is not efficient, very costly and deeply uncompetitive, but that’s where this ultimately ends up if this is pursued. It is not an ideal outcome, but we will have an industry.
Mr. Volpe: This is an historic moment, Senator MacDonald, where the two of us are looking at something in the same way. We don’t have to go back as far as the McLaughlin. Many different successes have occurred in Canada’s automotive sector.
Could we or should we create a Canadian car? Everyone talks about Malcolm Bricklin’s attempt in the mid-1970s to launch a Canadian car company as a failure. But I see it as a learning moment. He was able to put together capital, to put together a product that was certified and went out to market. Unfortunately, in the mid-1970s, a sports car wasn’t that market niche.
We are doing a very deep study into the segments. Like the previous conversation, we can ask if there is a defence segment and a type of vehicle that could and should be Canadian. Yes. We have made 120 million cars in this country, every single part of them. We have assembled them. We have the workforce to be able to do our own. But I’ve said this off the top: We shouldn’t do a sort of “Federal Government Motors Inc.” It should be a sustainable business model, and there’s a role for government to play.
Maybe it’s procurement and maybe it’s regulatory, but, Senator MacDonald, we are absolutely looking very hard to see if we can’t build some of our own insurance by building something domestic here.
The Chair: Thank you very much. This was a very rich discussion. I would only want to add that, if memory serves, in the movie Back to the Future, the car was the Bricklin, and we’re back to the future.
I thank our two witnesses, Brian Kingston and Flavio Volpe, for being with us today. I dare say, since this issue is very much top of mind across the country and of concern, of course, to many Canadians who are in fear of losing their jobs, that we will be returning, and we would like to have you back to impart your analyses and wisdom. Senator MacDonald, do you have a question?
Senator MacDonald: I want to make one statement before we run out of time. Speaking of the Bricklin, when my children were younger and I had much less cash at my disposal, my next-door neighbour had a Bricklin. He had many children and had to sell it; he was selling it for next to nothing. It was all redone; all the fibreglass was redone and it worked perfectly. It has always been my biggest regret that I did not buy that Bricklin 20 years ago.
The Chair: Colleagues, that ends our meeting. I wish everyone a very happy and safe Thanksgiving. Thank you very much.
(The committee adjourned.)