Economic Relationship between Canada and the United States Committee on April 15th, 2021

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses.

My questions are for Mr. McSweeney from the Cement Association of Canada and Ms. Cobden from the Canadian Steel Producers Association.

You described your respective products and sectors as very innovation-oriented industries at the forefront of green research and development. This aspect is very necessary in this era of climate change. There was also talk of Quebec's aluminum, which is one of the greenest in the world.

Ms. Cobden, you talked about ways to get around pricing requirements at customs. Have you seen any specific instances involving insufficient regulations or pricing, or blatant circumvention?

In other words, are there any attempts to slip through the cracks of the safety net by using semantics or the way in which the regulations are written, or is there simply no safety net?

[Catherine Cobden]

Sorry, I'm going to answer in English.

We have a very good trade remedy system. I don't want you to think of my remarks as being about a porous border where problems are taking place. I really want to stress that we have a very good trade remedy system.

That said, it is just a fact that certain types of importers trying to get their products into our country will use all sorts of tactics to avoid paying the required duties on their products. This could include things like a dutied country sending steel to another country that's not duty-bound, doing some slight transformation to it and then bringing it into our country. We have no capacity in Canada to see the visibility of that transformation and to understand that the steel is actually coming from a country that should have a tariff applied to it.

While I do feel that we have a good system, it must continue to move forward, and we are seeing the Americans do that. I appreciate the discussion around reciprocity and retaliation and all of that—as an industry, we have been there for sure—but what we'd prefer to see is that we're actually linking arms with the Americans on this challenge and turning our attention outwards against those areas of concern.

[Michael McSweeney]

From our perspective, there is no greater societal challenge after COVID than climate change. I can give you an example of where American companies will bring cement from Korea and China into the U.S.—the Pacific northwest—and then put it on a truck and bring it into British Columbia. We know that British Columbia has had a carbon tax since 2008. The carbon tax is only applied to fuels used to make cement or to make any other product in British Columbia, so this cement that comes from Asia by boat, causing 25% more greenhouse gases as it's shipped across the Pacific into Washington state, then by truck into B.C., avoids our carbon pricing system. They avoid the carbon tax. From 2009 to 2014, 42% of the cement used in British Columbia came into British Columbia with no carbon tax because it came through Asia via America. That's why we really do need a mechanism like a border carbon adjustment to protect our domestic industry, our union jobs and the way our plants operate.

[Catherine Cobden]

Mr. Chair, am I able to comment as well on the border carbon adjustment, or do you need to move on?

[The Chair, Liberal, Raj Saini]

You can continue for a minute and a half.

[Catherine Cobden]

Okay.

I would just say that I think the idea of a border carbon adjustment is quite important moving forward, but it should be done entirely in lockstep with our largest trading partner. I took that from Mr. McSweeney's remarks, but I just wanted to underscore that. It is not something we would do against our major trading partners, but, again, together.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you for your very thorough answers.

Mr. McSweeney said that there was a transition, a form of dumping of products from Asia.

In terms of steel, is Asia also the disputed region, the region that produces the steel that manages to be portrayed as North American steel?

[Catherine Cobden]

Yes. In fact, there is a global record. The OECD has a steel committee that tracks various developments, and there's a G20 committee as well on overcapacity. You will see that this is the overcapacity that leads to dumping, and there is a challenge not just in China—certainly China's quite egregious in this area—but also Iran, Turkey and some other areas like the ASEAN region, for example.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

We will now go to Mr. Blaikie for six minutes, please.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

One thing I'm hearing this evening is that one of the ways we could help Canadian industry increase its access to certain kinds of American contracts under the new administration would be to do a better job at greening Canadian industry, and also at documenting the extent to which Canadian industry is already green. Some of that is because we don't have environmental standards or criteria built into our own public bidding here in Canada, which we've heard is one of the reasons our documentation system lags behind that of others. I also appreciate that it's not a system you can build overnight, which I think is all the more reason to get started sooner rather than later.

I am wondering if each of you could provide some perspective, from your own industry, on what the beginning of that process looks like. What are some of the things you would like to see Canada start to do, not just in terms of the criteria that it sets for its own bids—although certainly if you have any commentary on that, that would be great—but also what that process of documentation would begin to look like for Canadian businesses, and a pathway to getting to where we have the kind of documentation we need to be competitive in other international markets where governments are bullish on wanting their public projects to meet stringent environmental criteria?

I'll maybe start with Ms. Cobden from the Steel Producers Association.

[Catherine Cobden]

Thank you very much for the question.

Indeed, as I tried to make reference in my remarks, I think that's an important area for us to be pursuing with the United States. We have the credentials, and granted, they're going to get even better in terms of the industry's performance over the long run.

I suggest that we don't want to make perfection the enemy of the good. I think we can start with some interim steps to start documenting, as you say, that performance.

In the steel industry, we happen to have international benchmarks now, which are starting to show some of that....

Obviously, ideally over the long run, we'd go to life-cycle carbon analysis—the full footprint—but I don't know that we need to have all of that in place before we get started.

I think you raised a very important point. This is an aspect we need to move forward on, and I don't think we want to wait until we have spent 10 years perfecting the life-cycle analysis approach.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much for that.

Mr. McSweeney.

[Michael McSweeney]

Along the same lines, Mr. Blaikie, a lot can be done from the procurement side.

We should be talking about always conducting a life-cycle assessment, using the building materials that give you the longest life cycle. Secondly, choose building materials that give you the lowest carbon footprint, and finally, use the best available technologies. We have a raft of those in Canada, from Svante to CarbonCure, to Solidia.

In our industry specifically, we have a new cement. It's called Portland limestone cement. It costs the same as regular cement. When you use this cement, it reduces greenhouse gases by 10%, at no cost to the customer. We've been trying for five years now to get this new cement mandated by the federal government, and by provincial governments and municipal governments. Imagine this: I don't say, “build with concrete”. I'd like you to build with concrete, but I don't say “build with concrete”. I say that if you build with concrete, use the cement that's going to give you the lowest carbon footprint at no cost to the taxpayer.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

Mr. Wilson, from the manufacturers' point of view, what are some of the things that we might be doing?

[Mathew Wilson]

First, I agree with my counterparts, Catherine and Michael. They're certainly looking at it from a very specific sector's perspective.

I'll maybe take a step back, though. We've been working on procurement policy with Canadian governments for as long as I can remember. We can't even get governments to look at economic analysis.

I just want to take a little step back here. I agree 100% with where you're going on this, but we also need to have the economic analysis as part of that. The two go together. It has to be an economic and an environmental analysis. None of that really takes place in any government anywhere in the country. There is some of that with infrastructure projects in Ontario and Quebec, but that's pretty much about it right now.

All of that is really important, and this is why we've really been pushing for an overall examination of Canada's procurement policies as part of the recovery action the government is taking. It should be looking at environmental issues and seeing how we can green supply chains and have low carbon input into it, and we also need to look at the overall economic impact, which includes the environment as part of that.

I agree with everything they were saying. I just want to add that little element on top of it, to take a bigger picture look as well.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

This seems to me to be something that our trading partners are doing. Do you have a sense of why it is that there's been a reticence at both federal and provincial levels in Canada to engage in that kind of analysis?

[Mathew Wilson]

I think it comes back to a misunderstanding of taxpayer value. There was a really big push for a long time in this country to make sure that we were not wasting money when we were buying things. The private sector does a lot of the same stuff, so this isn't pointing a finger at just the public sector on this, but what ends up happening in a lot of cases, Mr. Blaikie, is that the government looks only at initial purchase price. It does not look at—to take Mr. McSweeney's comment, for example—the life cycle, install price or operational performance. It looks only at the initial purchase price because that's what government procurement is reviewed in terms of, and that is how the government looks at things. It's not looking at the longer-term impacts of these things.

[The Chair, Liberal, Raj Saini]

Thank you.

[Michael McSweeney]

We're seeing some change. Mississauga, for example, is now doing this. British Columbia Finance Minister Carole James moved away from the lowest-cost bid to the best bid wins, because we all know that when you have lowest cost, you have lowest value.

I'm sorry, Mr. Chair.

[The Chair, Liberal, Raj Saini]

That's okay.

Thank you, Mr. Blaikie.

We'll now go to the second round, which will begin with five minutes for Mr. Hoback.

Go ahead, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, witnesses, for being here.

One of the questions I have with buy America is about the size. We still don't know the exact size, but we know it's a big number. Is it big enough to bring new capacity into the steel sector and the cement sector in the U.S.?

[Michael McSweeney]

Could you expand on that, Mr. Hoback?

[Randy Hoback, Conservative, Prince Albert, SK]

Right now they're running at no excess capacity, so they're basically importing products from somewhere else, whether it's Canada or the U.S.

With buy American policies in place, if they insist on having American product, is it big enough for a company to say, “You know what? This is big enough that I'm actually going to spend x number of dollars to build a new cement facility or steel facility”.

[Michael McSweeney]

The cement industry really is a closely controlled industry. There are about 25 major cement companies globally, so the five cement companies that are in Canada are the same five companies that are in the U.S., plus there are another five or seven on top of that. They make decisions regarding where to locate their cement plants in Canada and the U.S. If you take Lafarge or Lehigh Hanson —

[Randy Hoback, Conservative, Prince Albert, SK]

I have only five minutes, so I have to go fast. Is it big enough?