Evidence of meeting #10 for Economic Relationship between Canada and the United States in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was steel.
A video is available from Parliament.
Distinguished Professor of Law, Loyola Marymount University, As an Individual
My short answer would be that I believe that you have tried in the past to rehabilitate the term “industrial policy”, and I think going forward the term “industrial policy” is not a dirty word.
Liberal
The Chair Liberal Raj Saini
Thank you very much, Mr. Blaikie. We really appreciate the comments.
I want to really thank all of the witnesses for taking the time to enlighten us and giving us their perspective. This has been an excellent committee. Thank you very much, to all of you. I wish you all a happy weekend.
We will suspend now for a few moments to allow the other witnesses to come in.
Liberal
The Chair Liberal Raj Saini
Thank you very much.
Welcome back, everyone.
I would like to welcome the panellists to the committee. From the Canadian Manufacturers & Exporters, we have Mr. Matthew Wilson, senior vice-president, policy and government relations; from the Canadian Steel Association, Catherine Cobden, president and chief executive officer; and from the Cement Association of Canada, Michael McSweeney, president and chief executive officer.
Mr. Wilson, I will open the floor to you for five minutes for your opening comments, please.
Mathew Wilson Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
Good evening and thank you, Mr. Chair, and members of the committee.
Thank you very much for inviting me to participate in today's discussion. It is my pleasure to be here on behalf of our association's 2,500 direct members, and 90,000 manufacturers and exporters across the country to discuss buy America policies.
My comments today will aim to reinforce CME's long-standing ask that governments fight buy American policies, and push for the implementation of buy Can-Am policies instead.
It goes without saying that the work of the special committee is timely and of great importance to Canadian manufacturers, not just on today's subject of buy American, but all aspects concerning our special relationship with the United States.
Canada's trade partnership with the U.S. is a core component of our economies and the very lifeblood of manufacturing. Goods manufactured in Canada or the U.S. can cross our shared borders several times during the production process. The majority of trade between our countries are subcomponents that go into making finished goods. As a result, Canadians and Americans don't simply trade with each other, from steel to cars, from computers to robots, from chemicals to medical devices, but also make goods together, and we compete with the world together. In many sectors and with many goods, there is no distinction made between Canadian or American goods. This is the way our trade rules have been developed over decades.
Buy American-style policies create a distinction between locally produced and foreign produced goods for government contracts, and make huge amounts of political and practical sense. The theory is that if government is spending taxpayers' dollars on goods, those goods should stay within the local economy. In addition, in some sectors, procurement can significantly strengthen and develop essential industries.
Politically, the narrative is that these policies are used to protect local jobs and industry against bad, and in some cases illegal, activities from foreign competition. In general, the CME agrees with the theory of this approach and has long argued that the Canadian government should place a higher priority on domestic sourcing of goods through procurement policies. However, not many of the buy American policies have been implemented historically. Rather, we believe that you can take into consideration the economic upside of procurement while recognizing and supporting regional supply chains, and ensuring that taxpayers get good value for their money.
The challenge with buy American as currently implemented is that it tends to be a blunt instrument that doesn't differentiate between integrated supply chains and imported or finished goods, therefore undermining regional supply chains.
Here's an example. During the implementation of the American Recovery and Reinvestment Act in 2008-09, the U.S. implemented a range of buy American policies. A large well-known U.S. manufacturer bid on a contract to supply water pumps as part of municipal infrastructure projects. That company's bid was rejected. Why? Because one simple component, not the finished product, was manufactured in its plant in Oakville, Ontario. This not only hurt its Canadian operations, but the U.S. company's operations as well.
CME has worked on this file with our member companies for a long time. We've researched and have analyzed surveys and written papers on the subject. We have worked with governments on solutions and options including through the ARRA and, more recently, through the renegotiation of NAFTA.
Based on our work, there are generally three options that CME believes are most important in Canada's approach to buy American policies. First, push for buy Canadian procurement policies in the U.S. and implement similar measures here. Second, reciprocity is a must, and must be a fundamental principle in any trade relationship, including with the United States. Canada must not be afraid of implementing retaliatory measures. Third, Canada and the United States should build from existing areas of procurement where domestic production capabilities are needed, especially as it relates to COVID-19 recovery and future preparedness.
In fact, these approaches are all used today in various ways, and they work. The Gordie Howe International Bridge that will connect Ontario to Michigan uses a buy Can-Am procurement model. The Province of Ontario implemented a reciprocal procurement market access provision when faced with the U.S. states threatening to block sales of Ontario-made goods into their markets, and those states backed down. Canada itself implemented similar provisions last year in steel aluminum tariffs. We have seen for over 50 years a joint defence procurement agreement that supports integrated production and procurement in defence industries.
Given the current executive order on expanding buy American policies and the current administration's historical connection to using these policies, CME believes that it is essential for the Canadian government to aggressively push for a bilateral and permanent buy Can-Am deal.
CME understands that this ask comes with significant challenges, but believes the timing is right. The new administration is much more aligned to international co-operation and, in general, to Canadian views on politics and policies.
We are in the process of implementing a new free trade deal. It lacks a modernized procurement chapter for governments on both sides of the border in implementing economic recovery packages that heavily feature procurement spending as a key tool in that recovery.
Thank you again for inviting me to discuss this, and I look forward to the discussion.
Liberal
The Chair Liberal Raj Saini
Thank you very much, Mr. Wilson.
We'll now go to Ms. Cobden, for five minutes.
Catherine Cobden President and Chief Executive Officer, Canadian Steel Producers Association
Good evening, everyone.
Thank you very much, Mr. Chair.
My name is Catherine Cobden, I am the president and CEO of the Canadian Steel Producers Association. I thank you for the opportunity to appear here today to share the perspective of the domestic steel industry on the important economic relationship between Canada and the United States as you deliberate on buy American and the American jobs plan.
Our member companies produce approximately 15 million tonnes of steel and products annually, and support about 123,000 direct and indirect jobs in over five provinces. Our industry plays a strategically important role in the economy as a critical supplier to the North American automotive, energy, construction and manufacturing sectors. We send approximately 40% of our total production to the United States every year, and we meet about 5% of their market needs. In turn, we are a very important customer to them, with U.S. steel making up about 25% of all steel used in Canada. We also benefit from strong and integrated supply chains and markets, and indeed, steel may pass over the border multiple times as it is transformed into specific products required by the marketplace.
While we've had our share of challenges in Canada and U.S. steel trade over the last years, we remain steadfast in our view that we're stronger together than divided. We welcome the renewed collaboration agenda that we have been hearing out of the different bilateral meetings our government has been holding with the United States. Undoubtedly, there are challenges ahead, however, we believe it's crucial to take hold of the opportunity of this goodwill to ensure we maintain and even strengthen access to the United States.
While buy American's damage has been done to steel in previous versions of that program, we are concerned about how things may play out, given changes proposed in the new made-in-America economic plan and the potential implications for its American jobs plan. Our real-life experience is that exclusions or not, customers are driven away from using Canadian steel due to the market chill created by these policies and very practical considerations, such as things like needing to carry different inventories, buy American inventories and non-buy American inventories. We certainly appreciate the efforts and thoughts around seeking exclusions, but we are concerned that this would not at all be a sufficient approach to this challenge.
We would suggest a broad approach in our response to the buy American plan, built upon this collaboration of key priorities and the ability to demonstrate our commitment to make similar efforts in Canada. We have four specific suggestions for your consideration.
Number one, promote Canada as a reliable supplier of green materials in support of the U.S. climate objectives and build back better with their infrastructure programs. The U.S. does not have sufficient supply of its own domestic steel, so it will need trading partners that share common vision and objectives on many fronts. On climate in particular, I'm proud to say that Canadian steel producers are among the greenest in the world. A recent global benchmarking study reports that Canadian steel is number one and number two in the world, depending on production methodology, for the lowest carbon intensity when compared to other major steel jurisdictions around the world.
Number two, demonstrate our commitment to green procurement in our own infrastructure program. This is an important area that continues to be overlooked in Canada's climate and net-zero plans. Canada's steel sector has the green credentials, and I know other sectors do as well, to support this important objective, and we feel it is a bit of a credibility issue to expect this within a U.S. infrastructure program while not pursuing this explicitly in Canada.
Number three, position Canada as an equal partner with the United States in our fight against unfair steel traders through explicit changes to our trade remedy system. Canadian and U.S. steel industries share a deep concern with the growing and significant global overcapacity from China, Iran, Turkey and other areas in the ASEAN region, for example. The U.S. has made significant changes to its trade monitoring and enforcement system to catch and penalize unfair traders, and we simply must keep pace.
CSPA members have made a range of recommended changes, including identifying where steel is melted and poured, improving our monitoring system at the border and addressing the pressing need for an anti-circumvention framework similar to the United States.
Our final suggestion is to continue to support the full implementation of CUSMA. This agreement has been very good for the steel industry. It recognizes the deep integration of our economies and strengthens the competitiveness of the North American industry and our supply chains.
Thank you, Mr. Chair, for the opportunity to provide these comments.
Liberal
The Chair Liberal Raj Saini
Thank you, Ms. Cobden.
We will now go to Mr. McSweeney for five minutes, please.
Michael McSweeney President and Chief Executive Officer, Cement Association of Canada
Thank you, Chair and committee members, for inviting me to speak here tonight.
My name's Michael McSweeney and I'm president and CEO of the Cement Association of Canada.
We represent five cement companies with cement manufacturing facilities across Canada. Our members are Ash Grove, Federal White, Lafarge, Lehigh Hanson and St Marys Cement. Our mission is to promote and advocate for the environmental, economic and social benefits of building with cement and concrete.
Our industry constitutes, literally, the foundation of economic growth and infrastructure. Virtually all construction across Canada—above ground or below ground—needs concrete. Twice as much concrete as any other building material combined is used. Behind water, concrete is the second most consumed commodity. For every woman, man and child globally, three tonnes of concrete are consumed each and every year.
Throughout COVID, our industry was recognized as essential as provincial officials strived to maintain the construction of infrastructure like hospitals, schools, waste water treatment facilities and public transportation networks.
Over the past five years, Canada’s economy has used approximately 45 million tonnes of cement. In the next five years, it's forecasted that Canada will consume 55 million tonnes of cement. This will yield 400 million tonnes of concrete, which is enough to fill 24 million concrete trucks. Parked bumper to bumper, those trucks would circle the globe four and a half times.
In addition to concrete and cement being indispensable, we are truly the cornerstone of Canada's economy. We have concrete plants right across Canada and in every political riding. There are 1,000 ready-mixed concrete plants, 35 concrete pipe plants, 15 cement plants, 56 precast plants, 12 insulated concrete form plants and 35 concrete block plants. Combined, cement and concrete operations generate over $76 billion in annual economic activity and employ over 158,000 Canadians.
The economic impact of our industry cannot be underestimated, particularly given the role that Canadian cement plays as a strategic export to the United States. It might come as a surprise, but 40% of all of Canada’s cement is exported to the U.S. across the Great Lakes, down the Atlantic seaboard and down the Pacific northwest coast.
All of this brings me to today's topic, which is buy America, buy American and made in America.
The U.S. and Canada have long maintained a mutually beneficial, tariff-free relationship when it comes to trading in cement. The U.S. cannot produce enough cement domestically to meet its demand. To address this gap, the U.S. imports over 16 million tonnes of cement annually, with 35% of that—almost 6 million tonnes—coming from Canada. Our two markets are completely integrated, allowing cement to move back and forth across the border to reach key markets across the U.S. Restrictions to this trade flow, in the form of buy America and buy American policies, risk damaging that long-standing integrated supply chain. With 40% of Canadian cement exported each year, a failure to exempt Canada from rising trade protectionism will result in increased costs and delayed infrastructure projects for the U.S., as well as a loss of Canadian jobs here in Canada.
This would also work against the U.S.'s buy clean agenda. If the U.S. displaces Canada's imports with imports from Asia and eastern Europe, we'll see an increased GHG emission profile of approximately 25% from the transportation of cement alone.
Given that cement is part of the integrated Canada-U.S. market that optimizes manufacturing logistics and regional demand, Canadian exports to the U.S. reduce shipping costs and greenhouse gas emissions. Canada produces one of the lowest carbon-emission cements globally and continues to pursue deeper emission reductions through many new innovations. I might add that the Canadian cement industry can easily reduce five to six megatonnes of GHGs over the next five years.
It's important that Canada make the case to the Biden administration to issue a waiver for Canadian cements as it develops its buy America/buy American plan. Canadian officials must highlight the mutually economic benefits of maintaining a free flow of trade and the importance of available and increasingly lower carbon cement, to buy clean and build back better agendas in both Canada and the United States.
Thank you very much.
Liberal
The Chair Liberal Raj Saini
Thank you very much, Mr. McSweeney.
We will now go to questions.
For the first round, it will be Mr. Lewis for six minutes, please.
Conservative
Chris Lewis Conservative Essex, ON
Thank you very much, Chair, and to the witnesses. It's certainly incredibly awesome testimony. I appreciate it.
I was so happy that all three of you brought up the border issue, which is where my questions will be geared to tonight.
I'd like to start with Mr. Wilson.
I spoke yesterday, Mr. Wilson, to the union president of the CBSA in Windsor, the busiest international border in all of North America. He represents 540 union employees—300 frontline and 240 support services. They don't have vaccines in their arms. Sarnia's employees have vaccines in their arms. Norfolk does. Windsor doesn't.
My first question for you, sir, is this. In the event, and I really hope it doesn't happen, that our CBSA officers, our frontline officers, were to be infected with COVID-19 and we had to shut the border down, what would that do to the manufacturing industry?
Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
Well, it would very quickly stop most production in most sectors. To be very blunt, Mr. Lewis, if stuff can't move back and forth across the border, the manufacturing sector can't operate. There's almost no part of the supply chain that doesn't have linkages either going out of or coming into the U.S. That border crossing is essential. A lot of this is discussed in terms of the automotive sector, but, actually, the second-largest volume going across the border is foodstuffs. Not only would it impact manufacturing, but it would impact what you and I eat on a daily basis and what we'd be able to buy from grocery stores. The impact wouldn't just be on the manufacturing sector; it would be pretty big and pretty wide pretty quickly.
Yes, you could reroute and go through, say, the Niagara frontier or through Sarnia, as you mentioned. It's not very convenient, but it can be worked around.
Look, we've been advocating a long time for better testing and better vaccines for all essential workers, and that includes our border guards. Certainly we're coming at it from a manufacturing perspective, but that's a really key part. They're just as important as the truck drivers themselves who would moving the goods back and forth.
Yes, it's fundamentally important that that gets taken care of.
Conservative
Chris Lewis Conservative Essex, ON
Thank you.
Mr. Wilson, this is a Canadian aspect. It's not only about my backyard of Essex and Windsor, although it's very near and dear to my heart. Essex and Windsor probably has some of the greatest and most advanced manufacturing assembly that happens across our incredible country called Canada, but I do realize that not only is it more countrywide, it's global.
Sir, I believe you mentioned in your opening statement that there are some 90,000 exporters. That one really caught my attention as something crazy. I would also suggest, sir, that I do know there's a major issue with.... Many people think about commerce as a good, as a piece of paper, as a carrot, but people are commerce. I've been speaking to so many people on both sides of the border, the Canada and U.S. sides, in Michigan, Ohio, Pennsylvania—Mexico. I know a lot of the people you represent, sir, bring in thick stacks of paper to go across the border to show the CBSA officers, the border guards on the U.S. side, that they indeed are an essential service.
This question, quite frankly, can go to all of our witnesses. Would it be beneficial to the exporters, to our manufacturing, to our advanced manufacturing and assembly, if we had one page—one page—that shows people have been vaccinated within the last two hours, that they are an essential service? They show it to the border guards, and they're not tying up our border guards. They're not tying up commerce. Does that make sense?
I'm trying to get creative here so we can move past this and actually have the discussion to open up our economy.
Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
Very quickly, companies can do paperwork. They may not like it. Small companies have a hard time with it, but they can deal with it. What they can't deal with is uncertainty, and that's really the situation we're into now with most of the movement of people. I think you captured it very well in terms of its not being just about the goods, but about the people and ideas that go back and forth. They're essential for making sure manufacturing works.
We'd all be in favour of anything that could be done to make it more consistent and simplified. I'm not exactly sure about one form versus five forms That can be up for negotiation. It just has to be consistent between border crossings every time of day, between border guards. It shouldn't matter when someone shows up or where they show up: The rules need to be applied in the same way.
Conservative
Conservative
Chris Lewis Conservative Essex, ON
Thank you, Mr. Chair.
My last question is for Ms. Cobden, from the steel industry.
We have the Gordie Howe bridge slowly being built, and you know, I have a monster steel industry right here, literally about 10 kilometres from me, one of the largest steel industries that go back and forth.
What can we do as a committee to promote this, from our side to the United States, to not bring in Chinese steel or Turkish steel, to use our own steel?
President and Chief Executive Officer, Canadian Steel Producers Association
Yes, Mr. Lewis, I really appreciate that question. Thank you very much.
I was trying to point that out in my remarks. I think there is absolutely a need to do more to promote the use of both Canadian, and on their side, American steel. I'm not saying that all importers are unfairly trading, but we are at very high risk. We are a very intriguing market for unfair-traded importers, and when they pour into a market, they really disturb it.
In terms of what we can do to prompt that, we're trying to give you some sense of our advantages. We're very green. We obviously create high employment in the area, and we have good labour practices that would also appeal to the United States. There are lots of places where we're commonly aligned, so we need to continue to pursue that.
Also, don't forget the trade remedies that I've mentioned. We must do more at our border to prevent those importers. Man, those unfair traders are very sophisticated in how they figure out ways around the tariffs that are in place.
Liberal
The Chair Liberal Raj Saini
Thank you, Ms. Cobden; and thank you, Mr. Lewis.
We'll now go to Mr. Sarai for six minutes, please.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
Thank you, Chair.
Although this study is more about buy America, buy American and those trade policies, I want to thank my colleague Mr. Lewis who has highlighted the vaccination issues. I hope somebody from Premier Ford's cabinet is listening to this to make sure there is vaccination at the border crossings. While others are and his aren't, I think that's a problem that the Premier of Ontario and the health authority of Ontario need to take very seriously. We should maybe point that to the health committee to facilitate that.
In this, I want to thank, first of all, Mr. Wilson, Ms. Cobden and Mr. McSweeney for their testimony. It's very important.
You have emphasized what we all see every day: goods going back and forth. I have AI industries in my riding that fabricate steel, and I remember when the tariffs were put on, we had interesting dilemmas happening where their steel was being tariffed by the U.S., who were saying that it's unsafe, and on the same side we were countervailing and hitting steel where certain parts were coming from the U.S.
With the schools being built in Seattle, some of the steel is coming from the U.S., some is coming from Quebec, and some is fabricated here in British Columbia and then assembled down in Seattle. Therefore, you can see the intricacies of the steel going back and forth, and parts going back and forth. That has really shown it.
Mr. McSweeney, you've talked about it in terms of concrete. Every day we see Lafarge and others shipping cement, going back and forth. Some products made on the other side of the border come over this way. I think it's almost impossible to separate that type of ingredient in it.
What I would like to know, and anyone can feel free to elaborate on this, is if they were to effectively stop Canadian products from being able to be bought in procurement under the U.S. federal plan, what is the dollar value that would be at risk that falls below the 50% American input threshold? What would we be at risk of losing? Does anyone have an idea?
Mr. Wilson, perhaps you might elaborate, as you're kind of the collective on it. I've been trying to get this from many industries and haven't got that number.
Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
Here's the problem. I think in the last panel someone mentioned $600 billion in procurement markets in the United States. It's a huge number. We only make about that much in manufactured goods in Canada on an annual basis across all industries, so it's a massive number.
I don't want to put an exact dollar number on it. What I will say is that, whatever you think it is, it's going to be bigger. The reason I say that is that economists will come out and study and say, "In this sector, in this sector and in this sector, this will be what the impact is", and they'll give you a nice round number. Maybe it's a $100 billion, maybe it's $50 billion; I don't know. What you can never calculate is the chilling effect on everything else that you never see.
What we end up seeing is that, when the government starts promoting buy American policies mostly as a way to be against dumped stuff coming in from offshore, they almost always say, "Oh, we don't mean Canada", even though it spills over into every procurement decision that any company and the government make on anything. You can set all the benchmarks in the world—50%, $50,000, $2 million—but whatever number you want to throw out there is completely irrelevant, because what ends up happening at the end of the day is that it spills over into every single transaction that takes place in every single sector, both in the public and private sectors.
There are no easy solutions. We've even had member companies of ours who were involved in this actually buy American companies themselves to get around the buy American restrictions and continue to manufacture the goods in the United States to supply U.S. government contracts, only to be told they weren't allowed to bid on American contracts because they weren't an American company.
President and Chief Executive Officer, Cement Association of Canada
I think it would be fair to say that it's hard to put an exact cost on it. It would be billions and billions of dollars between steel and cement, for sure, but it's about jobs, union jobs. It's about food on people's tables.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
I completely agree, and that's why I think it's very important to remind the Americans of the amount or extent to which they participate in our procurement and our industries. Whenever a trade war happens, it's tit for tat, but Canada is not just going to sit idly on this. The cost at the end of the day goes to the consumer, and the consumer, whether it's a school board or a home builder—which is is going to get a foundation from you, Mr. McSweeney, one way or another—they're going to pay extra dollars for it. I think the reminder from that is going to be key. Our trade commissioners and embassy staff have been doing a great job. We've asked them about this, and they'll continue to do it.
You want to say something.
President and Chief Executive Officer, Cement Association of Canada
As Catherine Cobden said, these are green materials. Canada is noted for its green materials. As with steel, we have the cleanest fleet of cement plants in the world right here in Canada. That should be of interest to the American administration.
Going to Mr. Lewis' point, I think one thing you could do—and I heard Minister Wilkinson talk a little bit about it today—is the border carbon adjustment. We have a very strong carbon pricing system here that is pricing pollution. If companies are trying to export into Canada or the United States, there should be a border carbon adjustment to try to foster the buying of green products between Canada and the United States, with our good, clean, sustainable carbon pricing policies that we all live by, rather than jurisdictions like eastern Europe, China or other areas that do not have strong policies when it comes to carbon.
Liberal
The Chair Liberal Raj Saini
Thank you, Mr. Sarai.
We'll now go to Ms. Savard-Tremblay.
Mr. Savard-Tremblay, you have the floor for six minutes.