International Trade Committee on May 2nd, 2024

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call this meeting to order.

Welcome, everybody. This is meeting 103 of the Standing Committee on International Trade.

Before we begin, I have to remind all members and other meeting participants in the room about important preventive measures.

To prevent disruptive and potentially harmful audio feedback incidents that can cause injuries, all in-person participants are reminded to keep their earpieces away from all microphones at all times. As indicated in the communiqué from the Speaker to all members on Monday, April 29, the following measures have been taken to help prevent audio feedback incidents.

All earpieces have been replaced by a model that greatly reduces the probability of audio feedback. New earpieces are black, whereas the former earpieces were grey. By default, all unused earpieces are unplugged at the start of a meeting. When you are not using your earpiece, please place it face down on the middle of the sticker you see in front of you for this purpose. That's the reason for the sticker. Please consult the cards on the table for guidelines.

The room layout has been adjusted to increase the distance between microphones and reduce the chance of feedback. These measures are in place to allow us to conduct our business without interruption and to protect the health and safety of all participants, including our interpreters.

Thank you all very much for your co-operation.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, October 17, the committee is resuming its study of Canadian businesses in supply chains and global markets.

On our first panel, we have, from the Arctic Gateway Group, Michael Woelcke, chief executive officer, and Cory Young, vice-president, corporate services.

From the Canadian Northern Economic Development Agency, we have Jimi Onalik, president, and Michael Walsh, director general, policy and planning.

From the Federal Economic Development Agency for Northern Ontario, we have Lucie Perreault, executive director.

Welcome to you all.

The format is a bit different because there have been changes. Our microphones were giving us too much feedback. You're a little farther away from us. It's not that we want you to be so far away. I've said that pretty soon we'll need binoculars to see who is down at the end of the table.

Thank you all for being here.

Mr. Woelcke, I invite you to make an opening statement of up to five minutes.

[Michael Woelcke, Chief Executive Officer, Arctic Gateway Group]

Thank you, Chair.

Good afternoon, honourable members of the House of Commons Standing Committee on International Trade.

My name is Michael Woelcke. I'm the chief executive officer of the Arctic Gateway Group. I am accompanied today by Cory Young, vice-president of corporate services.

Before I go any further, I would like to acknowledge and honour the peoples and the lands on which we operate and are currently on. Arctic Gateway operates on Treaty 5 and Treaty 1 territories. Our shareholder member communities reside throughout Treaty 1, Treaty 6 and Treaty 10 territories, the original lands of the Cree, Dene, Ojibway and Oji-Cree, and the homeland of the Métis nation and the ancestral territory of the Inuit.

We are currently located on the unceded, unsurrendered territory of the Algonquin Anishinabe Nation, whose presence here reaches back to time immemorial.

Working with our indigenous allies is a priority for Arctic Gateway Group. We recognize these acknowledgements are only the beginning of reconciliation and cultivating strong relationships with the nations of these lands. Arctic Gateway Group aims to continue its efforts to actively partner with our indigenous allies across the lands we operate on and furthermore across Canada.

I'll provide you with a brief overview.

The Arctic Gateway Group is a highly unique consortium ownership model consisting of 26 first nations, six northern Manitoba municipalities and four provincial Northern Affairs communities, which are primarily indigenous. Additionally, ownership shares have been set aside for the Inuit of the Kivalliq region of Nunavut.

Our shareholders commit to a vision of maximizing the economic potential of the Arctic trade corridor to create prosperity and opportunity for the people and communities of the region while providing sustainable, safe and efficient transportation services to a broad range of customers.

Collectively, we are dedicated to indigenous reconciliation by realizing the north's vast economic resources and human potential and revitalizing the northern economy through investments in the legacy infrastructure that we refer to as the Arctic trade corridor. Our vision is to leverage the unique geographic advantage inherent in the Port of Churchill and the Hudson Bay Railway to unlock economic opportunities and strengthen Canada's connections to global markets while supporting Canada's Arctic sovereignty.

Canada's visionary leadership and support has led to essential infrastructure investments that will enhance the future of the Arctic trade corridor for generations to come. PrairiesCan has been an essential force in assisting AGG, the Arctic Gateway Group, through their coordination with various stakeholders. They are to be congratulated for their leadership in articulating Canada's vision of a diversified prairie and northern economy. While these investments are greatly appreciated and have led to significant improvements in rail performance, additional investment is essential if Canada is to fully leverage this corridor to support Canadian businesses with a reliable Arctic trade corridor.

The Port of Churchill's strategic location can be traced back to pre-contact, where for generations indigenous peoples would gather from all directions to trade. Post-contact saw European exploration, and with the onset of the fur trade, the construction of the Prince of Wales fort in the early 1700s, demonstrating that local and international trade has been occurring in the Arctic for over 300 years.

We have a number of points I would like to raise.

First is the geographic advantage.

The Port of Churchill, located on the southwestern shores of the Hudson Bay, is Canada's only deep-water Arctic seaport with ground access to southern Canada. Coupled with the Hudson Bay Railway, the Port of Churchill is connected to the North American class I rail network. This rail network provides a direct and efficient route to and from international markets, including within North America. It becomes increasingly strategic as the northern terminus of the mid-continent trade corridor from Mexico to Churchill through the Arctic, to and from international markets.

Number two is the accessibility to Arctic regions.

The Port of Churchill's strategic location serves as a critical gateway to Arctic regions, offering a shorter and more cost-effective route for shipping goods to and from northern communities and industries. The reduced distance means greater resupply frequencies, enabling Nunavut to continue its economic growth without sailing frequency limitations from southern Canada.

Air connections from Churchill are also shorter and provide for cost and emission savings when compared to locations further south. The airport's legacy infrastructure and a 9,200-foot runway create these economic opportunities. Additionally, AGG, Nukik Corporation and the Town of Churchill recently signed an MOU to mutually collaborate on this exciting nation-building project.

As for diversification of supply chains, utilizing the Port of Churchill can play a significant role in diversifying and de-risking Canada's supply chain options, reducing dependence on traditional southern ports and providing a more resilient network for international trade—

[The Chair, Liberal, Judy Sgro]

I'm sorry, sir. The time is up. Could you do your closing quickly, please?

[Michael Woelcke]

I'm sorry. I guess I should have read faster. I'll go straight to our closing remarks.

We believe that increased infrastructure investment is necessary. We are optimistic about the future of the Port of Churchill. We believe that the port and the Hudson Bay Railway present a unique opportunity to strengthen Canada's role in global supply chains and, by extension, Canada's Arctic sovereignty.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Onalik, please, for up to five minutes.

[Jimi Onalik, President, Canadian Northern Economic Development Agency]

Thank you. Merci. Qujannamiik.

[Witness spoke in Inuktitut and provided the following translation:]

My name is Jimi Onalik. I'm the president of the Canadian Northern Economic Development Agency, or CanNor.

I would like to thank you for inviting me. I have recently completed my six-month anniversary in the federal system, and this is my first opportunity to appear before the committee. I'm incredibly honoured to be here.

I'll start by giving a brief introduction on the mandate of CanNor and its role in the north, on this, our really important 15th anniversary as an organization.

Like other regional development agencies, CanNor is responsible for promoting economic development within a distinct region of Canada—in this case, Canada's three beautiful territories. Through the delivery of targeted funding, CanNor is working to enhance the resiliency of the territorial supply chain and create conditions for growth and job creation.

The north represents 40% of Canada's land mass and is significantly distanced from the normal supply chains that support businesses and trade in southern Canada. Northern communities and remote resource projects are serviced principally by long-haul air transportation year-round and a short ship-based sealift season during the open water months. While the Yukon and the Northwest Territories do have a road network, it is limited and costly to haul goods long distances, especially in regard to resource sector products such as mineral ore.

Economic development in the north is further challenged by a sparse and widely distributed population, significant infrastructure deficits and high operational and energy costs. Headquartered in Iqaluit, Nunavut, CanNor's core responsibility is to support the conditions for a sustainable, diversified and innovative economy in collaboration with northern and indigenous partners.

With a portfolio in 2023-24 of over $77 million, CanNor has a strong suite of funding programs, such as inclusive diversification and economic advancement in the north, or, as we call it, IDEANorth, which will distribute over $29 million this year to projects that bring strategic support to small-scale infrastructure as well as sector development and business scale-up.

Much like the broader economic contributors in our respective regions, the projects supported by IDEANorth can vary dramatically in scope and size, such as CanNor's investment of close to $500,000 for the Town of Hay River in the Northwest Territories to plan and design a new business park to provide needed space for business. This project is leveraging Hay River as a transportation hub for critical minerals and freshwater fish available from the nearby Great Slave Lake fisheries.

Targeted CanNor investments helped northern businesses weather the pandemic impacts on our supply chains while maintaining or increasing our export potential. For example, CanNor provided funding to the Yukon free shipping initiative alongside the Yukon Chamber of Commerce, which offered free shipping for Yukon products to make their way to markets within Canada and overseas.

CanNor can also play a role as a ground-level investor for generational infrastructure projects. We have contributed over $4.5 million since 2019 to support feasibility studies of the Kivalliq hydro-fibre link.

CanNor's northern project management office, or NPMO, is similarly unique among our colleagues in the RDAs, the regional development agencies, in its role of supporting efficient environmental review processes for proposed resource development and infrastructure projects in the territories. Much of Canada's mineral resource potential lies in the territories, including critical minerals essential to Canada's economic and Arctic security and the transition to a low-carbon economy. This is primarily driven by the mining sector, which is the largest private sector contributor to the territories' economies, accounting for 23% of GDP in 2020 and increasing to well over 28% this year.

The north has a lot to offer our Canadian economy. The north is open for business and eager to break into new markets, both domestically and abroad.

I'm very happy to address any questions you have.

Thank you. Qujannamiik. Merci.

[The Chair, Liberal, Judy Sgro]

Next is Ms. Perreault, please.

[Lucie Perreault, Executive Director, Programs, Federal Economic Development Agency for Northern Ontario]

Thank you, Madam Chair and honourable members.

My name is Lucie Perreault, and I'm the executive director of programs with the Federal Economic Development Agency for Northern Ontario, better known as FedNor.

I am pleased to join you here and respectfully acknowledge that we're on the traditional territory of the Algonquin Anishinabe nation.

I welcome the opportunity today to discuss how FedNor supports businesses through the various stages of the trade continuum. Our mandate is the promotion of economic growth and diversification and the creation of jobs and sustainable communities in northern Ontario.

Our region is home to roughly 856,000 residents, including 24% of the province's francophones. Northern Ontario is home to 105 first nations communities and 150 municipalities, the majority with a population of 2,000 or less. There are approximately 72,000 businesses across our region, most of which are small. Only 71 companies, or less than 0.001%, have more than 500 employees.

During the COVID-19 pandemic, exports in northern Ontario experienced a notable decline, with a $2.5-billion decrease observed between 2019 and 2020. However, by 2022, the region showcased its ability to recover, with export values surpassing prepandemic levels.

In 2022, the value of goods exported from northern Ontario was $11 billion, marking a substantial 45% increase over the previous years. This milestone represents the highest export value the region has seen in the past 12 years, highlighting a significant upturn and demonstrating northern Ontario's resilience and growth potential.

Some of northern Ontario's primary exports include manufacturing, mining, agriculture and forest products. Recognizing the potential for trade to increase employment and wealth, FedNor supports not-for-profit organizations. One example is MineConnect. MineConnect represents the mining supply and services sector of northern Ontario and helps businesses grow by improving access to trade and export-related information through services, website conferences and trade missions, for example.

FedNor has also funded the northern Ontario exports program through the City of Greater Sudbury, and in partnership with other communities in northern Ontario, including Sault Ste. Marie and Thunder Bay, it has supported 700 export-building initiatives. The program provides financial assistance and targeted training to help export-ready small and medium-sized businesses, industry associations and not-for-profit organizations from northern Ontario access new markets.

FedNor plays a key role in supporting marquee events, such as the Northern Ontario Mining Showcase at the Prospectors and Developers Association of Canada's international convention. The event provides participating northern Ontario firms with an opportunity to network, make key connections and promote their products and services to an international market.

In addition to working with third party organizations to support the trade ecosystem, FedNor targets its support to help trade-oriented businesses directly with the adoption and adaptation of new innovative technologies that support scale-up, increased productivity and market expansion.

Since April 2019, FedNor has approved more than $29 million in support of 34 projects to help companies become more competitive in both domestic and global markets. SafeSight Exploration is an example that benefited from direct funding to commercialize innovative technology to increase its manufacturing capacity, enhance its productivity and increase its exports.

Another example is Beam Paint and Colour. It's an indigenous-owned company on Manitoulin Island that does watercolour paints. With the support it received, it expanded and purchased new equipment to increase productivity in order to meet domestic and international demand for their product.

As convenor and pathfinder, we assist communities to strengthen their position in the global supply chain. We work with federal partners such as Global Affairs Canada, Innovation, Science and Economic Development Canada, Export Development Canada and the BDC in support of our efforts to grow northern Ontario exports.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Now we'll move on to the members.

Mr. Seeback, go ahead for six minutes, please.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thanks very much, Madam Chair.

I was very interested to hear from the Arctic Gateway Group. I'm bullish on the Port of Churchill. I think there's enormous potential there.

One of the things we've talked about at this committee is the necessary investments in infrastructure, particularly transportation infrastructure, when it comes to trade. The government's own national supply chain task force report in 2022 said that between 2020 and 2070, there will need to be 4.4 trillion dollars' worth of investments, which works out to be $88 billion per year.

I'm seeing investments from this government in the range of $3 billion to $4 billion per year, which seems like nowhere near enough, and we're a trading country. Sixty per cent to 70% of our GDP comes from trade, depending on the year.

I took a quick look at the budget. I don't see any money in the budget allocated for anything with respect to the Port of Churchill. Am I wrong in that? What are your infrastructure needs to expand, and are they being met?

[Michael Woelcke]

I can't speak to the entire budget, but we are not aware of any direct financial support in the budget for the Port of Churchill.

Arctic Gateway has benefited from significant support through PrairiesCan and through the Province of Manitoba for a number of years. We are currently requesting additional funding through PrairiesCan, through government, to support us for what we call bridge financing. We believe that as we develop the port, we're going to look for equity partners or debt financing to become independent, and we believe that we can get to that point in less than five years.

The port needs significant investment. We've just invested almost $150 million to upgrade the rail system, to stabilize and secure it. That project will come to an end at the end of this year, the end of the 2024 construction season.

The next step is the development of the port, and it will require significant funding. We estimate that probably over.... If you look at a 20-year development plan for the port, you'll see that it will require probably half a billion dollars—in that order of magnitude—but as I—

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Do you mean half a billion dollars? It sounded like you said half a million.

[Michael Woelcke]

It's $500 million.

Again, we are not looking for government to support us with that kind of investment. We believe that we'll be able to attract equity partners. However, in the interim, we require government assistance to get us to a certain level so that we can do so.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thanks very much.

What are the other infrastructure needs? You talked about connection to a class I railway. How's that? How's road transportation? How are all of the things that would make the Port of Churchill more viable and a more attractive place to attract trade?

[Michael Woelcke]

Well, Churchill is a multimodal facility, but it has no road link to southern Manitoba. It's landlocked, so to speak.

It has, as I said, a 9,200-foot-long runway. It can land anything, including the space shuttle. It was an alternate landing site. It's a very well-established runway. It has railway infrastructure through the Hudson Bay Railway, which we operate, which connects directly to CN at The Pas, Manitoba. That's how we connect directly to the class I network.

We have a trade corridor that goes north-south from southern Manitoba directly to Churchill, and you can enhance it so that you have air, shipping and rail.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Are there any options for road transportation?

[Michael Woelcke]

At this time, no. One would have to construct an all-weather road. There have been multiple studies done in that regard. I can't speak to them. We're the Arctic Gateway Group. We're the railroad and the port.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Right.

[Michael Woelcke]

I know that studies have been done in that regard. I'm not sure of the cost.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Do you have any idea of what the investment would be for rail to improve rail capacity at the port?

[Michael Woelcke]

Well, we're currently in the midst of concluding the capital work. We'll have spent almost $150 million to stabilize the rail line over the last three years. We need to continue to spend approximately $25 million in capital annually, and that is consistent with class I railways like CPKC or CN. When you consider that we're operating about 600 miles of track, the number I'm quoting you—$25 million—is approximately what they would spend on a similar amount of track, and that's just normal annual capital maintenance of a rail line.

However, we believe that by the end of this year, we will have taken ourselves back to a good base level from which we can then do what we call the annual maintenance program.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Okay. Those are all of my questions.

Thanks.

[The Chair, Liberal, Judy Sgro]

Mr. Sheehan, go ahead for six minutes, please.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you, Chair, and thank you very much to all our presenters on this very important study that we're undertaking on Canadian supply chains and trade diversification.

Lucie, I'm very glad to see you here today, and thank you for presenting on behalf of FedNor.

Lucie, recently I had the pleasure of being parliamentary secretary for FedNor. One of the things that I heard loud and clear from the mayors, communities, indigenous groups, private businesses and not-for-profits was that FedNor, they felt, was not on a playing field that was level with the rest of the regional economic development agencies, FedNor having been created in 1987. The reason for that was independence.

Recently the government changed that and gave FedNor independence. Could you update this committee about what that means? How is it going and what does it mean for those folks who were lobbying so hard, and not just recently, but I think since 1987?

[Lucie Perreault]

It has been an interesting transition, for sure, for the agency. We do see the benefits of the agency for sure, so thank you for lobbying for that. It brought a louder voice for northern Ontario at a table where northern Ontario been before, but in a really small way.

In general, I think that becoming an agency has been really good for northern Ontario. It gave us the ability to be able to participate in a different way. We would have liked more money, of course, but I think that the transition has gone well, and we're no longer saying that we are in transition. Actually, right now we're saying we are a full-fledged agency. Our staffing has been completed. Our capacity is in place in the most part, so we're content.