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

[The Chair, Liberal, Raj Saini]

Welcome, everyone, to the 12th meeting of the Special Committee on the Economic Relationship between Canada and the United States.

Pursuant to the motion adopted by the House on February 16, 2021, the special committee is meeting to discuss the economic relationship between Canada and the United States. Today, we are continuing our examination of buy America procurement policies, and we will finish the meeting in camera in order to get some drafting instructions from the members.

I would now like to warmly welcome our witnesses for the first panel.

From AddÉnergie Technologies Inc., we have Travis Allan, vice-president, public affairs and general counsel.

From the Canadian Canola Growers Association, we have Dave Carey, vice-president, government and industry relations; and Janelle Whitley, manager, policy development.

From IPEX Management Inc., we have Veso Sobot, director, government affairs and public relations.

Mr. Allan, the floor is yours for five minutes, please.

[Travis Allan, Vice-President, Public Affairs and General Counsel, AddÉnergie Technologies Inc.]

Thank you very much, Mr. Chair.

Thank you to you and the committee members for this opportunity to contribute to your study on the recent U.S. executive order for more stringent buy America measures.

We sincerely appreciate the opportunity to share our observations on this topic.

AddÉnergie is a Quebec-based company and a North American leader in electric vehicle charging solutions. We are vertically integrated, manufacturing our stations at our plant in Shawinigan while also operating FLO, which is the network that connects our charging stations at our head office in Quebec City.

Our software and R and D operations are divided between Montreal and Quebec. Since 2009, we have grown to over 210 direct jobs, and we procure approximately 85% of our expenses from Canadian suppliers.

AddÉnergie is a proud Canadian clean-tech exporter as well. To support our growth and complement our production capacity in Quebec, it is our intention to build a plant in the United States.

We also plan to participate in what is likely to be the largest deployment of EV charging stations in North American history, namely 500,000 EV charging stations by 2030, as proposed under the American jobs plan.

We are concerned that current or potentially enhanced buy America measures may significantly hamper U.S. transportation electrification and impact Canadian companies working toward that goal if they are applied to Canadian-made EV charging stations.

For our American allies to reduce their greenhouse gas emissions by half by 2030, as President Biden has proposed, it is crucial that they have access as soon as possible to a highly competitive and reliable supply of clean technology and clean energy from trusted companies on both sides of the border.

We think AddÉnergie is one of these competitive and reliable companies. We deliver our high-quality charging solutions from the Yukon all the way to Los Angeles. With respect to our products, we sold over 40,000 charging stations that can handle extreme conditions from -40°C to +50°C, freezing rain and snowstorms. Our key suppliers are based in North America, which means a shorter supply chain that is better sheltered from global shocks.

Our concern with the application of the buy America regime is based first on its impact on the costs of production, and second on risks that it will be inconsistently applied or implemented too rapidly for us to fairly and effectively compete.

On the issue of cost, broader buy America rules, if applied to EV charging, could and will limit our ability to produce stations in an efficient and integrated way. Requiring all stations to be manufactured in the United States, for example, using 100% U.S. components, would likely duplicate production lines, hike production costs across the industry and ultimately increase the burden on U.S. taxpayers to achieve procurement goals.

We are concerned also about the timing and clarity of any changes proposed to current buy America rules. At this time we are unable to predict how buy America requirements will be applied by different departments and agencies as funding gets earmarked to support transportation electrification. Depending on how buy America is interpreted to apply to stations, it could take many months, if not years, to adjust our supply chain appropriately. Further, even once supply chain issues are addressed, we're likely to require recertification of our products, which adds still more time before we can get them to market.

In other words, hastier, overbroad implementation of enhanced buy America requirements is likely to increase costs, slow delivery and reduce the options available to U.S. purchasers, none of which helps the United States reduce emissions and all of which are negative for Canada's clean-tech export sector.

To be clear, we genuinely believe in free trade and the role competition plays in this space. What we're asking for is the same access to the U.S. market that Canada provides to our U.S. competitors, both to public procurement and to government incentives.

Canada is making efforts to expand its own greening government efforts, and just as we have welcomed U.S. competition in Canada, we hope the U.S. will welcome Canadian products in its market.

For these reasons, we hope the Canadian government will work closely with our American allies to address buy America measures with respect to clean-tech exports, including EV charging. This includes promoting Canada and its clean-tech exporters as trusted and reliable partners in support of U.S. climate objectives and infrastructure programs.

Ideally, the United States would not interpret buy America as applying to Canadian EV charging stations. If it's found to apply, an exemption or a waiver for Canadian stations would allow us to achieve maximum economies of scale and provide the best value for folks on both sides of the border.

AddÉnergie appreciates the opportunity to explain how an exemption from the buy America regime or a waiver could allow us to further contribute to the reduction of transportation emissions and to the clean-tech manufacturing sector on both sides of the border.

I look forward to answering any questions you may have.

Thank you.

[The Chair, Liberal, Raj Saini]

Thank you very much, Mr. Allan.

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

[Dave Carey, Vice-President, Government and Industry Relations, Canadian Canola Growers Association]

Thank you for the invitation to appear before this special committee.

As mentioned, my name is Dave Carey. I'm the Canadian Canola Growers Association's vice-president of government and industry relations, based here in Ottawa. I am joined by my colleague Janelle Whitley in Winnipeg, who leads our policy development on international trade. We're the national association of Canada’s 43,000 canola farmers, representing them on issues, policies and programs that impact their farms' success.

Developed in Canada, canola is a staple of Canadian agriculture, as well as Canadian science and innovation. Today it is Canada’s most widely planted crop and is the largest farm cash receipt of any agricultural commodity, earning Canadian farmers over $10.2 billion in 2020. Annually, the canola sector contributes $29.9 billion to the Canadian economy and provides for 207,000 jobs. The U.S. is our largest export market, accounting for roughly 30% of our seed, oil and meal exports in 2020.

Canola is harvested for its seed, which is then processed into oil and meal. In 2020, Canada sold $3.7 billion in canola to the United States: $2 billion in oil and $1.3 billion in meal. The U.S. purchases 50% and 70% of our total oil and meal exports respectively.

North America is an integrated agriculture market, with many of our industry partners operating in both Canada and the United States. Canola products are critical inputs into U.S. food and feed supply chains. For example, canola’s heart healthy oil is an important ingredient in consumer food products. The geographic proximity of our markets and the vertically integrated North American agribusiness sector is well positioned to serve our respective markets.

Underpinning our economic relationship is the CUSMA. We were encouraged by its implementation in July 2020, as it preserved our market access and restored predictability and certainty.

At present, canola faces little in the way of barriers. Since NAFTA’s implementation, canola sales to the U.S. have grown, significantly driving development of our sector here in Canada. Strong U.S. canola oil and meal demand supports our value-added sector. Today a network of 14 oilseed facilities processes seed here at home. Maintaining value added in Canada is an integral component of canola's $29.9-billion contribution to the Canadian economy. Furthermore, many of these processing facilities are in rural Canada, supporting local communities, sustaining rural employment and providing sales opportunities for our farmers.

I appreciate that this study is focused on buy America and other associated issues. Buy America and President Biden’s plan to tighten requirements have not yet impacted our farmers. Canola is sold into the private market, and our larger sector has no direct involvement with government procurement or assistance.

That said, farmers require stable and understood rules of trade. They establish certainty in markets and the requirements for doing business, enable investment and reduce risk as well as cost. Stable market access also includes streamlined and aligned regulatory processes, particularly for crop protection products and seed varieties enhanced through biotechnology.

An increasing market of interest for canola farmers is biodiesel. Canola is a high-quality feedstock. As both of our countries seek a cleaner energy future, farmers can help meet the growing need for low-carbon biofuels on the continent. The free flow of biofuels, their feedstocks and finished fuels is thus important.

As both of our countries develop and implement strengthened policies targeting the environmental profile of liquid fuels, we cannot imperil this trade environment. The forthcoming Canadian clean fuel regulation needs to ensure that it does not negatively impact the free trade we currently enjoy.

Recently announced major investments in increasing canola crushing capacity and the potential for large-scale investment in diesel biofuel production in Canada will be used by commercial parties not only to satisfy their regulatory obligations in Canada, but to provide feedstock and biofuels to U.S. customers as well.

We look forward to your questions today.

Thank you.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Carey.

Now we will go to Mr. Sobot for five minutes, please.

[Veso Sobot, Director, Government Affairs and Public Relations, IPEX Management Inc.]

I'm an engineer with IPEX. We're based in Oakville, Ontario. We make the black plumbing pipe under your sink, the grey pipe that brings power to your house, the blue pipe that brings clean water to your tap, the green pipe that takes your sewage away, as well as many other pipes that are used in hospitals and in commercial and industrial construction.

We were founded in 1949 by a fearless Estonian. He rented a house in downtown Toronto, started making hula hoops at night and selling them during the day, and by 1953 hula hoops were everywhere. Always innovating, sensing the hula hoop might be a fad, he straightened out the hula hoop, and that's how he got into the pipe business. By the way, he also invented those red gas cans you see absolutely everywhere.

Today IPEX exports to 66 countries from our 15 plants in Canada and our 10 plants in the United States, with thousands of dedicated team members.

Growth for us in America has been very robust. USMCA, or CUSMA as we call it, has been very helpful in many respects, but contrary to common belief, it does not protect us from buy America. Canadian companies continue to be blocked on U.S. federal-funded infrastructure projects, while American firms have unfettered access to Canada.

Ironically, IPEX buys American all day long. Our products are made from American resin. Natural gas, often from Canada, makes it down to the U.S., where it's cracked into ethylene and combined with chlorine from salts. The pellets come back to Canada, where they're used to make long-life products such as siding, windows, soffits, decking, fencing, and of course in our case, pipes.

Last year 18% of all U.S. vinyl resin production came to Canada. China was its second biggest customer at 10.1%, and Mexico was its third biggest customer at 10%. This year it's expected that Canada will be bigger than China and Mexico combined.

We are America's biggest customer, and yet we are being prevented from shipping finished goods back into the United States, even though there's a shortage in the U.S. currently.

Prime Minister Harper successfully secured an exemption to buy America in February 2010, with President Obama. We think the time is right for Prime Minister Trudeau to do the same with President Biden. It's in America's best interests to use Canadian vinyl products rather than Chinese. We share similar laws, regulations, business practices and environmental protections. More importantly, we are allies.

The focus on green infrastructure in both countries is another reason Canadian products should qualify for an exemption to buy America.

An example of the beneficial Canada-U.S. trade relationship can be found in Burton, Michigan, just outside of Flint. Over the last six years, Burton has worked to remove lead in their water supply. After careful due diligence, Burton embarked on a 19-mile water main replacement program using a Canadian innovation: biaxially oriented lead-free vinyl pipe. It conserves resources by using significantly less material and reducing its environmental footprint while providing high strength.

The pipe was made in Saint-Laurent, Quebec, just outside of Montreal using Unifor union labour and was installed by LiUNA members on the opposite side of the border.

Burton now has cleaner water, has minimized its environmental footprint and has saved $2.1 million using a Canadian-innovated product. Indeed, a 2018 Utah State University study confirmed Burton's prudent decision. The study showed that break rates for Canadian vinyl pipe are best in class, inferring that there's a great benefit for American municipalities in using innovative Canadian technology for infrastructure renewal.

We also make a seismic pipe used in earthquake-prone zones. It was developed and tested with the help of Cornell University's seismic lab in Ithaca, New York. The pipes are now used all along the U.S. west coast.

I've shared just two examples this evening, but as you can appreciate, I could have shared hundreds, had we had time.

In conclusion, we urge the committee to work for an exemption to buy America so that the benefits of free and fair trade can be mutually maximized for both countries post-COVID.

Thank you very much,. I look forward to your questions.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Sobot.

We will start the questioning round with Mr. Lewis for six minutes, please.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Chair, I appreciate it.

Thank you to all the witnesses for the excellent testimony this evening.

Mr. Sobot, that was pretty remarkable—seismic pipe. That's something that just blows my mind. It's fantastic.

I'll go, sir, to you first—but of course through our chair.

You mentioned bringing in little pellets from the United States. In essence, does it make sense that in order to buy American we'd have to buy American first to bring it to Canada in order to turn around and sell it back to the United States? Does that make sense?

[Veso Sobot]

Absolutely. That's why I said that we feel we buy American all day long. Most of the pellets come from the United States. What we do is convert them into useful construction materials.

It would seem to me that Canada should have an exemption to buy America, like we had back in 2010. I figure if Harper could do it with Obama, Trudeau should be able to do it with Biden. They're more ideologically congruent. It's in America's best interest. If they were not to give us an exemption, it would be terrible to have to look elsewhere for our raw materials.

[Chris Lewis, Conservative, Essex, ON]

I understand.

Through you, again, Mr. Chair, I will go back to the same witness, please.

I think that most of us around this table will agree that the chance for recovery—COVID-19 recovery specifically—is going to be through infrastructure. The one thing we know for sure is that our sewers, our drinking water and all of the things that require pipe are not going away. As a matter of fact, we're going to need more and more of it all the time.

The opportunity here to really work with our greatest trading partner, the United States of America.... What kind of an impact would there be on our United States friends if your company couldn't export to them under fair trading role models?

[Veso Sobot]

They'd lose business, quite frankly.

There is a shortage of pipe in the United States right now. Historically, Canada has always served as a relief valve for their economy when it got too hot. We've always served a useful purpose in that regard. If we cannot ship the finished pipe back into the United States, they will have to buy it from somewhere else. They'll probably be buying it from China, and I can't see how that's better for them.

[Chris Lewis, Conservative, Essex, ON]

Thank you.

Mr. Chair, through you, again, I will go to the same witness.

I'm sorry to pick on you, sir, but you really intrigued me there.

What specifically can this committee do to help your industry but also to help Canada and this whole relationship? Is there something very specific you could share with this committee?

[Veso Sobot]

I think what we really should be doing is talking with the USTR and making sure the lines of communication are open.

Back in 2009-10, when we were cut out the first time, then-prime minister Harper invited all U.S. manufacturers that had plants in Canada to the Canadian embassy, and he had a little discussion with them. They, by the way, were having a difficult time shipping their product, which they made in Canada, back into the United States. He made it clear that this was an unintended consequence of buy America. He asked them all to go back to President Obama and tell him about the unintended consequences and the damage it was doing to American companies. That was very effective.

A lot of American companies ship into Canada. If we were to start doing to them what they did to us, I think they'd run back to their members of Congress and senators right away and say, “Hey, we have to fix this problem.” Quite frankly, they need our markets, they want our markets, and reciprocal trade is the core of free and fair trade.

[Chris Lewis, Conservative, Essex, ON]

Mr. Chair, I'll go back to the same witness, please.

Mr. Sobot, I'm intrigued with those little pellets. Is there any opportunity to purchase them from a Canadian supplier, or do they have to be purchased through United States suppliers?

[Veso Sobot]

In the past, we have bought from a Canadian supplier based in Niagara Falls, Ontario. There are only four or five major resin suppliers in North America. It's just over the last 30 years that our supply chains have evolved in such a way that we're buying from the Americans right now.

Quite frankly, there is a shortage of pellets in the marketplace right now. Our existing supply chains are very important. We're stuck with them right now. Certainly, if we were ever to develop some of our resources here in Canada, we'd be very amenable to buying more Canadian goods. In the meantime, we have to resort to alternate suppliers, even in Europe, for example.

[The Chair, Liberal, Raj Saini]

You have 30 seconds, Mr. Lewis, for the question and answer, please.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Chair.

As a final thought, I was really intrigued when you mentioned removing lead from our waterlines. I know that in Flint, Michigan, it was a major issue. It continues to be an issue. I believe, sir, that you had mentioned it was Canadian technology. I'm just wondering what this relationship continues to be for the United States.

[The Chair, Liberal, Raj Saini]

Give a short answer, Mr. Sobot, please.

[Veso Sobot]

The mayor of Burton, Paula Zelenko, a great lady, did extraordinary research on what was the best option for them moving forward. Flint has moved in this direction, too. If you'll recall, years ago they had a lead problem. They're going this way, too. I think that's a great example of Canadian solutions for American problems.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Lewis.

We'll now go to Mr. McKay for six minutes, please.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Last night I was on House duty. As long as you don't tell anybody, Mr. Chair, I didn't entirely participate in House duty; rather, I watched President Biden make his speech. If there was any doubt about the intentions of the American president, he certainly laid them to rest last night when he said the phrase that he'd be telling his secretaries not to be granting any exemptions. I think we're in a very difficult situation.

Mr. Sobot, you seem to be a very popular witness today, so I'll direct the question first to you and then to Mr. Allan.

I once sat at a breakfast with possibly one of your competitors, who was selling PVC pipe into the United States to an American military installation. Under that particular exercise, where we have an exemption for military goods, somebody got the idea this was Canadian pipe and after it was already installed, it got ripped up.

If, in fact, no exemption is granted, what is plan B for your company?

[Veso Sobot]

First off, John, I want to say hello. I lived on 2 South Marine Drive for many, many years. You would knock on my door frequently and we'd chat. We had long chats about the issue of the day. It's great to see you.

[John McKay, Liberal, Scarborough—Guildwood, ON]

My goodness. I'm sorry I didn't recognize you. Were you the guy I had breakfast with?

[Veso Sobot]

Yes.