Economic Relationship between Canada and the United States Committee on April 29th, 2021

[The Chair, Liberal, Raj Saini]

You have 20 seconds, Ms. Romanado.

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

Ottawa and Quebec made a recent historical announcement with respect to electric vehicles, so we do support that.

Mr. Sobot, I don't want to forget you. I want to let you know—full disclosure—my brother worked at IPEX at one point.

Thank you very much for presenting tonight.

Thank you, Mr. Chair.

[The Chair, Liberal, Raj Saini]

Thank you, Ms. Romanado.

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

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

Thank you.

I'll turn to Mr. Allan from AddÉnergie Technologies Inc.

I want to know whether you can confirm a figure that I saw.

Did your company send 2,000 electric charging stations to the United States?

[Travis Allan]

I'm sorry, I want to make sure I answer the right question.

Are you asking how many stations are in the Biden plan?

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

How many stations has your company delivered to the United States?

[Travis Allan]

That's understood. Thank you.

That's a great question. I think we're still in the hundreds right now. We have stations all over the city of Los Angeles, which were a modification of the ones we designed for the city of Montreal, and LA especially asked if we could convert them for their street posts.

We will also be deploying hundreds of stations in New York City in partnership with Con Ed as well as many stations in the Midwest, so we anticipate big growth in the future.

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

The Biden administration has announced that 645,000 vehicles will be converted. In your opinion, would this be a good business opportunity?

Does the Buy American Act ruin our chances of success?

[Travis Allan]

That is exactly our concern. The number of stations the government has announced, in their intention to build by 2030, is 500,000 stations. The economic value of that is approximately $15 billion. Just to put it in perspective for a company like ours, that is literally the greatest opportunity in the history of North America for our industry. That's what's at stake here in getting this right. That's why we're so hopeful that a solution can be found on buy America.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

Mr. Cannings, you have two and a half minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Mr. Allan, Ms. Romanado was complaining that everybody was taking her questions, and then she took mine. I was going to ask you basically the same question.

First of all, it's been very exciting here in British Columbia to see the rollout of charging stations. Some of that is due to the federal supports, but I see your charging stations popping up around my riding with great regularity. I appreciate that. Five years ago I couldn't possibly have imagined buying an electric car in my riding, because it's an 11-hour drive and there were hardly any charging stations. Now there's one in every little village. Thank you for being part of that.

I'd like to get back to the value chain and what Ms. Romanado was saying about making the EVs themselves and the batteries. I have a graphite mine in my riding. We heard at the natural resources committee that China controls much of the whole battery system. They don't have the minerals, but they buy the minerals and create batteries. They control everything in the middle.

I'm wondering what you see as the danger in terms of even your end of the business and having a North American value chain that we have to create to get China out of the equation.

[Travis Allan]

The biggest risk that we see is inaction. That's number one. The biggest problem was allowing other countries and continents to move faster than Canada and the United States, because at a certain point you get a technological lead and a production-scaling lead that is just unbeatable.

We're very fortunate to see that the Government of Canada, British Columbia, Quebec, California and now, luckily, the U.S. federal government have started to realize that in order to have the industry, you have to get the deployments going. You have to make people feel comfortable in adopting EVs in a North American driving context. I think your example was perfect. If you don't see charging stations where you want to go, it's really tough to make the decision to adopt an EV.

I think urgent action is probably the biggest issue that we face.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Cannings.

I want to thank warmly all the witnesses for coming today and for contributing to the progress of this study. It was very informative.

Thank you very much. Have a great weekend.

We will suspend for a few moments to allow the next panel to onboard.

[The Chair, Liberal, Raj Saini]

Welcome back, everyone. We are resuming the meeting.

I would like now to welcome each of the witnesses to the committee.

From the Aluminium Association of Canada, we have Jean Simard, president and chief executive officer. From the Business Council of Canada, we have Trevor Kennedy, director, trade and international policy.

Mr. Simard, you have the floor for five minutes.

[Jean Simard, President and Chief Executive Officer, Aluminium Association of Canada]

Thank you, Mr. Chair.

I'd like to express our appreciation for this invitation to share our industry's perspective on the buy America program.

Critical materials, secure supply chains, strategic needs for continental defence, green recovery and transport electrification: Our metal, produced responsibly, with the lowest carbon footprint in the world, is at the forefront of solutions to the problems of today and tomorrow.

The U.S. market, to which nearly 80% of our aluminum is exported, is one of the major import markets in the world. Currently, smelters in the U.S. produce about one million tonnes annually, while the demand for primary metal is about 4.5 million tonnes annually. By 2030, that demand is expected to grow to about seven million tonnes annually, while forecasts for primary production stall at about a million tonnes. This will increase the U.S. supply gap and create more dependence on imports of primary metal. The 2.2 million tonnes that we ship each year will continue to find buyers, despite the buy America policy.

We believe, however, that responsibly produced low-carbon aluminum should be the preferred choice in a green recovery. Indeed, a green recovery of the economy following the pandemic must be done by using responsibly produced materials and solutions, with a low-carbon footprint as much as possible. Otherwise, we'll find ourselves exporting jobs in return for carbon imports.

For example, our competition in the U.S. market comes mainly from the Middle East, Russia and India. We believe that it's not in the interests of either the U.S. or Canada to anchor stimulus programs on supply chains from politically unstable regions of the world and with a carbon footprint disproportionately larger than ours. Canada's less than two tonnes of CO2 per tonne of aluminum draws the line easily, compared to 7.5 in the Middle East and as much as 17 in China.

While the challenges of energy, environmental protection and the fight against climate change are at the heart of the American recovery plan, Canada must show the U.S. the contribution they can make as an allied country by supplying eco-responsible materials and solutions, while setting an example through its own procurement policies.

We must grow back the integrated North American economy together, through investing in technology and partnering in the adoption of new green technologies. The signal must come through government procurement. We must be consistent with our reduction targets and leverage the recovery efforts and public spending to redirect the economy in the right direction.

Beyond its traditional manufacturing base, the industry is poised to be an even more critical source of material for a range of future uses in a low-carbon world.

In transport, because aluminum is lightweight, strong and corrosion resistant, it's used in aircraft manufacturing. It allows planes to be more fuel efficient and to carry more weight safely. NASA's Orion spacecraft structures are made from an aluminum-lithium alloy, as will be Orion's next generation multi-purpose crew vehicles.

Electric-powered vehicles need to be lightweight. By 2030, combustion cars are expected to be no more than 5% of the new vehicle market. Already today, aluminum in vehicles has reduced the carbon footprint by 20%.

In renewables, the metal is a key material in a wide range of renewable energy systems, all the way from solar thermal collectors and power plants to wind turbines and photovoltaic systems.

The U.S. and Canada, amongst other governments, are working independently and together to ensure access to a reliable future supply of critical materials. This is a direct response to China's increasingly dominant state-funded presence in supply chains for critical minerals that are key to strategic industries such as defence, aerospace and communications.

Again, aluminum is one such material. Further, the processing of bauxite into the aluminum required for aluminum production generates residual minerals, including magnesium and silicon dioxide, as well as titanium oxide and gallium nitride. Both are on the list of critical minerals as established by the U.S. and Canada.

While we fully recognize the importance of economic recovery plans here and in the U.S., that opportunity is at risk from less sustainable sources of supply driven by very high levels of state support, particularly in China. The consequences of not addressing international market distortion should be clear.

Subsidized aluminum from high CO2-emitting production systems will increasingly spill over into national and international markets, replacing well-paid jobs in often rural areas with higher CO2 emissions abroad, eroding robust industrial ecosystems and driving out sustainable domestic capacity and resilient supply chains in the U.S. and Canada.

In closing, Mr. Chair, I would like to remind you that the real issue we all share is that of Chinese domination and its effect on our markets. This hyper-subsidized production, as demonstrated by the OECD, is crushing our markets and decimating large industrial sectors such as aluminum, magnesium, semi-conductors and many others.

We do have an enabling framework, CUSMA, and a context that should rally us to North American recovery. With companies and well-paid middle-class workers whose footprint extends on both sides of our borders all facing the same unfair competition—China—now more than ever allied countries with integrated economies, such as Canada and the U.S., must work together to rebuild their economies with resilient, competitive and sustainable continental strategic supply chains.

Thank you.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Simard.

We'll now go to Mr. Kennedy for five minutes, please.

[Trevor Kennedy, Director, Trade and International Policy, Business Council of Canada]

Mr. Chair and committee members, thank you for the invitation to take part in your meeting on buy American and the economic relationship between Canada and the United States.

The Business Council of Canada is composed of 150 chief executives and entrepreneurs of Canada's leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses. Representing different industries and regions, these men and women are united in their commitment to improve the quality of life for all Canadians.

We know that Canada is a trading nation. Our prosperity and living standards rely upon it. Sixty-five per cent of our GDP is tied directly to trade. The bulk of this trade is with the United States. As of 2020 it accounted for 73% of Canada's merchandise exports and 53% of our services exports. Two million Canadian jobs are related to exports with the United States.

This relationship is mutually beneficial. Nearly nine million jobs in the United States depend on cross-border trade and investment with Canada, and we're the largest or among the largest export partners for most states.

Given the importance of this relationship for our shared prosperity, during CUSMA negotiations the business community on both sides of the border advocated for a “do no harm” approach and for modernizing certain elements of the 25-year-old NAFTA, the basis for most of our bilateral trade.

The council and many of our American counterparts were pleased with the new agreement, both in its substance and because it was able to bring a wider range of stakeholders on board. The level of bipartisan and key stakeholder support for this agreement in the U.S. right now is remarkable, especially given the current political circumstances south of the border.

While CUSMA's government procurement chapter does not apply to Canada-U.S. trade, the overarching goal of the agreement was to enhance North American competitiveness in manufacturing, among other areas, while supporting well-paying jobs. We believe the direction taken on buy American by the new administration, which happens to broadly support CUSMA and its objectives, undermines the success of this critical agreement.

Bilateral challenges related to buy American are certainly not new. However, the timing and approach of the latest proposed actions in the executive order and in the American jobs plan go against the spirit of CUSMA as well as many of the shared objectives for bilateral co-operation, including that in the road map for a renewed U.S.-Canada partnership and priorities outlined in the U.S.-Canada high-level ministerial dialogue on climate ambition.

It's critical that Canada secure an exemption or a clear carve-out. Tighter application of buy American rules and restrictions related to the American jobs plan will not only harm Canadian but also American workers.

CUSMA created a strong, resilient and competitive regional supply chain. Proposed changes could harm trade and investment in Canada and fragment American supply chains at a time when we need to work together to address economic resiliency and environmental challenges. Canada faced a formidable challenge at the outset of CUSMA negotiations, but with a proactive and coordinated team Canada approach that involved the business community and labour, among others, we were able to overcome and emerge with an outcome that benefited people on both sides of the border.

If we're to be successful this time around, we need to take a similar approach and to do so with urgency. This effort should be directed at the White House, Congress and state and municipal officials. Most importantly, it should be in alignment with U.S. stakeholders in business and labour.

Canada should not challenge buy American as a concept. We'll lose that argument. Rather, we need to make the case that working with Canada, given the unique integrated nature of our economies, is key to achieving the procurement policies goal of ensuring strong and resilient supply chains as well as well-paying jobs. The Business Council of Canada and its members stand ready to support a team Canada approach.

I thank you for this opportunity and look forward to answering your questions.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Kennedy.

We will go directly to questions.

For the first round, we have Ms. Alleslev for six minutes please.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you very much to both the witnesses for their very important and enlightening testimony.

I would like to start with Mr. Simard.

During COVID, we have certainly seen that there's a predisposition to self-sufficiency and the need for a domestic capability during times of challenge. You, Mr. Simard, have effectively outlined why aluminum is critical and perhaps why the United States recently put national security tariffs on aluminum. I'm wondering if you could give us some insight into the impact of those national security tariffs on the aluminum industry.

[Jean Simard]

Thank you for this question.

First of all, I must say that due to all the efforts undertaken by the Government of Canada and Ms. Freeland when she was responsible for the file, those tariffs are now off for Canada. We are in a tariff-free situation. Basically, the impact of tariffs was mostly on the U.S. side.

It's the law of unintended consequences, but economic history has shown that most of the time the impact of tariffs are on the imposing party. In this case, that meant the U.S. was the most expensive place in the world to buy aluminum.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

My research, though, shows that a significant number of manufacturing jobs in the aluminum industry were actually created in the United States as a result of those national security tariffs. I wonder if that was not a precursor in many ways to showing where the Americans were wanting to go on this. While you say there is that gap—between one million, I think you said, and possibly the growth to seven million requirement for it domestically—they're looking to put some of that capability back in the U.S.

Would you have a feel for how much of Canada's domestic aluminum requirements are met by Canadian manufacturers?

[Jean Simard]

It's a complex question—although it doesn't sound like it—because it's a complex market. We're primary producers. We produce aluminum from alumina through the electrolytic process. Aluminum is then reprocessed and ends up in cars, planes and consumer goods. As a country, on a yearly basis, Canada probably consumes about 700,000 tonnes of metal. It doesn't mean that metal is produced in Canada. It's primary metal that is consumed in Canada in terms of reprocessing through the value chain.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

Would we have the potential to be self-sufficient in aluminum if we required it?

[Jean Simard]

We're not a market. We're too small. It's all a matter of critical mass. That's why we're producing primary metal that we're shipping to where the market is, where it's reprocessed. The jobs created in the United States are created in the downstream part of the value chain, not as much in the upstream where we are.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

In this committee, and obviously in this study, we're not talking about buy America writ large. We're talking about federal infrastructure projects for the most part. You listed a bunch of other things, like aerospace and all those critical things, but those won't necessarily be affected.

Do you have a feel for what percentage of the 2.2 million tonnes that we export goes to those federal infrastructure projects? In other words, what is really at risk in terms of that 2.2 million tonnes, if we're not successful in achieving an exemption?