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Deputy Ambassador Kirsten Hillman at Public Hearing on Section 232 – Full Statement

July 19, 2018

Thank you Madam Chairperson.

My name is Kirsten Hillman, Canada’s Deputy Ambassador to the United States.

I am here today on behalf of the Government of Canada to underline the benefits of our integrated auto sector and to emphasize the exceptional nature of our enduring national security partnership.  In times of peace and through wars, our reliance on each other has made us stronger.

Today as we examine whether imports of autos and auto parts from Canada are a threat to U.S. national security, let me be clear:  Rather than potentially strengthening U.S. national security, imposing tariffs on automotive imports from Canada would undermine U.S. national security and would have a devastating impact on U.S. competitiveness in the auto sector.

Let me turn to the economic case against new trade barriers between our two countries.  For over 50 years, the United States has had tariff-free access to Canada for vehicle exports.

In 2017, Canada bought $26.2 billion of U.S. auto exports and a further $26.7 billion in auto parts, comprising 37.5% of U.S. automotive exports. Canada is by far the top destination for the U.S. automotive sector.

Canadian cars are U.S. cars. Auto parts and components cross the border multiple times before a car leaves the assembly line, and, as a consequence, assembled vehicles exported from Canada to the United States contain more than 50% U.S. content.

Allow me to repeat that: Canadian-made vehicles exported to the United States contain more than 50% U.S. content.

This integrated supply chain ensures Canada-U.S. auto production can out-compete any other auto producing region. We have always stood together, as was the case during the 2008 economic downturn, where the Canadian and U.S. governments collaborated to ensure the Canada-U.S. auto sector could weather the uncertain economic environment.

Together, jobs were protected.

The Peterson Institute has projected that if the United States moves forward with auto tariffs, 195,000 American jobs will be lost.

This would reverse the current trend that has seen U.S. auto industry employment increase 6 percent annually. A further sign that the United States is not facing any national security threat to its auto sector.

In your investigation, you are being asked to examine a specific industrial sector:  automobiles and auto parts.  Not tanks.  Not battleships.  Civilian passenger vehicles and parts.  The U.S. Department of Defence does purchase such vehicles, but U.S. military demand is a tiny fraction of U.S. auto production, by all estimates a de minimis portion of domestic output.

So where is the necessary nexus between civilian vehicles and national security?  It simply does not exist, and there is no credible basis upon which to conclude that it does.

In contrast, America’s enduring alliances are a strong support to U.S. national security. Canada is one of three foreign countries that are members of the U.S. National Technology and Industrial Base. U.S. contingency planners have long concluded that industrial centers in Canada are an important reserve capacity for the United States in the event of attacks on U.S. cities.

On this basis alone, this investigation must conclude that Canada could not conceivably represent any risk to U.S. national security and – by extension – Canada-U.S. auto trade does not pose a security risk.

Canada continues to urge the United States to recognize the wide range of benefits of an integrated North American economy, and to remove steel and aluminum tariffs on Canada. These tariffs are already having a detrimental impact on the North American auto sector. Canada was forced to respond to this unilateral action by applying commensurate counter-tariffs. Should this investigation ultimately result in the application of tariffs on autos, Canada will once again be forced to respond in a proportional manner.

Today, you are hearing not only from Canada, but from other allies, that have similarly been forced to respond to steel and aluminum tariffs with counter-measures of their own.

If similar counter-measures were to be imposed by your allies in the context of the automotive sector, the Peterson Institute projection of U.S. jobs lost cited earlier increases from 195,000 to 624,000.

These are high-paying manufacturing jobs that could be lost to the U.S. forever.

Let me be clear, countermeasures are not our preferred approach. Canada’s priority is, and always has been, to work with our American friends to strengthen the integrated Canada-U.S. economy, and to ensure our auto sectors flourish together.

No country is more invested in a prosperous United States than Canada and we have committed to strengthening our partnership in a modernized NAFTA.

Maintaining open trade in autos and auto parts between our countries is crucial to the economic well-being of companies, communities and workers, which, in turn, supports our collective security. We urge you to reflect on these matters as you prepare your recommendations.

Thank you.