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

[Michael McSweeney]

It's probably not, because they can choose to get their products made in Canada and use the advantage of our water system and rail system and ship them.

[Catherine Cobden]

Can I add, though, that I think there's no question that it will drive investment to the U.S. steel mills, which will then disrupt our competitive position. It will affect our competitiveness by driving.... Whether it takes us out.... I really understand your question. I can't really answer it, but I can say it's going to have a competitiveness effect on us for sure.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

I'll go to Mr. Wilson. I'm worried about this for our small and medium-sized enterprises. When we had steel tariffs and then counter-tariffs, they were complaining about the cost of steel in Canada getting so high they couldn't compete or get supply. In this scenario now, in this situation, where the U.S. is just sucking up all this amount of cement, steel and other raw goods, what's left for the manufacturers here in Canada and how do we keep them here when we don't have a competitive platform to begin with when compared with the U.S.?

[Mathew Wilson]

I'd say that the U.S. and Canada are facing similar price issues with steel. I don't think that's just a Canadian issue, Mr. Hoback. Certainly with the way it's looking in the U.S., if there's no new capacity brought on, I would expect the supply to get tighter, and we know that when that happens, either the prices are going to go up or more stuff will get dumped in from offshore, which is actually the worst-case scenario. We should be looking at how we can incentivize more production, more supply and manufacturing in Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

That's the concern I have. You have a blip, something like this that goes on for five or maybe 10 years at the most, and then all of a sudden you have this capacity sitting in the marketplace. What happens then? All of a sudden we have too much capacity and we go down that road again.

That's one of the concerns I have. How do you find a balance here, and how does the U.S. find a balance here such that it doesn't create this huge amount of demand all at once and then suddenly have all these facilities left over at the end of the day, which now dump everything else into the world market, similar to what China and other countries are doing?

[Mathew Wilson]

Mr. Hoback, is that aimed at me generally or at Catherine more specifically?

[Randy Hoback, Conservative, Prince Albert, SK]

It's to you.

[Mathew Wilson]

It's hard to tell. It's a lot easier in person.

Markets tend to work themselves out, but when governments overcook a market, there can actually be those longer-term impacts. We saw that in Ontario with the Green Energy Act. A whole bunch of production was brought on board for producing certain products to feed into it, and then it all disappeared overnight. We need to make sure we don't overcook it and that we're leveraging the assets we have in existence across North America, which is why buy Can-Am is so important.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

To go back to the steel sector, then, how do we more efficiently manage a scenario like the one we had two years ago so that we don't end up short-changing suppliers or manufacturers here in Canada with steel? It's still a push-back on having steel dumped into our markets and making sure that we have a balance there. Is there a better way to do that than the way we did it last time?

[Catherine Cobden]

I'm not sure if you're referring to the Canada-U.S. dynamic on steel or—

[Randy Hoback, Conservative, Prince Albert, SK]

It has an international dynamic, unfortunately. It always does, right?

[Catherine Cobden]

Yes, it does, and I can speak to that for sure. The challenge is that there is this global overcapacity of steel and it is looking for a home. It's about 40 times the entire Canadian production. This is just the overcapacity. There is this massive glut looking for a home, and they want to come in and pour it into our market place and disturb our pricing scheme. Also, right now the prices are decent, so there's more and more risk every day that this keeps going on.

Yes, this is a very big area of concern for us, but we share the same concern with the United States. Part of my point is that I think we need to do some things on the home front, Mr. Hoback, to improve our trade remedy system, as I've mentioned, and then we need to work with the United States in lockstep to deal with this global challenge.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Hoback.

We will now split the time between Ms. Bendayan and Ms. Romanado.

Why don't you begin, Ms. Romanado?

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you very much, and I'd like to thank the witnesses for being here.

Mr. Wilson, you said two words that really piqued my interest, and I'm sure some of my colleagues' ears perked up: “defence” and “procurement”. In “Strong, Secure, Engaged”, the government committed to increasing our defence budget by 70% over the next 10 years to $32.7 billion. As you know, these funds are already booked in our fiscal framework. The president and CEO of CADSI testified before the industry, science and technology committee that an opportunity for cheap stimulus for our economic recovery is to pull forward some of these projects that are already booked in there.

Given that defence trade is exempt from most international trade agreements and that we could technically use some existing policy, whether it be industrial and technological benefits or national security exemptions, what are your thoughts on this as part of the larger conversation with the United States in terms of our NORAD agreement?

[Mathew Wilson]

Do it sooner rather than later. I think I completely agree with the comment made by the president of CADSI—absolutely. We certainly have worked with Canada's regional economic development agencies for a long time to make sure that things like the regional trade benefits are fully taken advantage of in that defence procurement as well.

Whether it's planes, ships or anything else that the government is buying, we have a really big and really important defence industry and manufacturing industry in the country, and we should be accelerating parts of those things to help with the economic recovery—no doubt.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Perfect. Thank you so much.

I'm going to turn the rest of my time over to my colleague, MP Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, colleague.

I too would like to thank all of the witnesses for joining us on a Thursday night to talk buy America and trade.

I don't think I have much time, so I'll address this question to Ms. Cobden and Mr. McSweeney. Let me begin by thanking both of you and your industries for the incredible work you do here in Canada, and rest assured that every minister is raising buy America with every counterpart in the United States. We are on this file, but we also want the help of industry.

Ms. Cobden, you mentioned that there isn't enough of a supply of steel in the United States.

Mr. McSweeney, you mentioned that the U.S. imports 16 tonnes of cement from Canada. I assume that's on a yearly basis.

We know that what President Biden is proposing is a $2.3-trillion plan, so it seems to me that there might be opportunities for you to be discussing this with the industry in the United States and with your clients to see what their plans are in order to meet the demands they will soon face. Is there opportunity from the industry perspective to have some pressure put on the United States so that we can all work together towards this one goal of ensuring that we continue to have access to this important market?

[Michael McSweeney]

I'd like to compliment Minister Ng, as well as Brian Clow in the Prime Minister's Office and other officials at Global Affairs Canada whom we've been working with. They're clearly on top of the file. They're dealing with the USTR and other representatives.

I want to correct that we export six million tonnes a year or 16% to the U.S. It's a large amount.

We know that the Americans don't really want to argue this over the longest undefended border, and we're best friends. It's all about jobs and jobs for Americans. We're having our American counterparts from the same multinational companies talk to their senators and House of Representatives, the border state governors and the border caucus. They're making the case on why they need to buy cement, in this case. I'm sure the steel industry is doing similar lobbying efforts as well.

It's much cheaper. The supply chain will be met when you're starting a trillion-dollar infrastructure plan in the U.S. It's massive. You need the supplies. You want to get the supplies as cheaply as possible, as quickly as possible, and now you want to make sure that you're buying clean. I think both from the steel and cement perspectives, you are buying clean products.

[Rachel Bendayan, Liberal, Outremont, QC]

Ms. Cobden, do you want to jump in quickly?

[The Chair, Liberal, Raj Saini]

Be really quick, please.

[Catherine Cobden]

I do, to also thank all the good work that's going on in getting the message out to Americans. We are doing the same. We keep in touch on this. It's important. We work across party lines and jurisdictions. We absolutely promote the benefits of the existing supply chain between Canada and the United States. It's sound, reliable, built on good neighbour and environmental practices, etc.

[The Chair, Liberal, Raj Saini]

Thank you very much.

Mr. Savard-Tremblay, you have the floor for two and a half minutes.

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

Thank you, Mr. Chair.

I'd like to follow up with Ms. Cobden and Mr. McSweeney.

In trade agreements, there are more and more protections when it comes to rules of origin. For example, there's a desire to avoid dumping by saying, for example, that steel or aluminum parts must come from the area covered by the new free trade area.

We often see that one strategy involves aluminum being cast and melted in Asia and then portrayed as North American parts, when in fact the parts are mostly produced in Mexico. We saw this in our discussion on aluminum under CUSMA.

Have you also seen shortcomings when it comes to protecting the rules of origin in your respective sectors?

[Catherine Cobden]

From a Canada-U.S. perspective there shouldn't be space for any restrictions between friends and allies.

I think, first of all, on the topic of Canada-U.S., they shouldn't exist. We had them exist in the past and they won't exist again, hopefully. To ensure they don't is a very important task.

In terms of dumping, I've tried to address that already. Yes, there is a lot of dumping. We are subject. The risk of dumping changes over time, depending on the conditions of the given market.

I haven't talked about this yet, but we are very engaged in trade cases. It's going after those organizations.

You ask if we see it, and I say yes, we have multiple trade cases going on. We continue to use that trade remedy system to do so.

You can all help us by doing more on the types of measures I've already discussed in improving our ability to see even more clearly the situation that you're painting.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

We will now go to the final questioner for two and half minutes. Mr. Blaikie, please.