Economic Relationship between Canada and the United States Committee on March 2nd, 2021

[Michael Grant]

Steve, would you like to take that?

[Steve Verheul]

Well, I haven't been directly involved in a lot of that. I think what we have been looking at is that the U.S. has indicated an openness to have further discussions in that direction. When we look back at what we did on PPE and ventilators early in all of this, we did succeed in making sure we had a consistent supply from the U.S., despite some concerns at the time. We did get that supply. There are ways for us to work this out, but I think it will involve further conversations.

As to what we can produce at home, I think most governments around the world are now looking at what they consider to be essential in terms of domestic production, to avoid some of the complications we found during this crisis. Obviously, that exploration will continue, and it will continue in Canada as well, but that's a bit more of a long-term issue.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Blaikie.

We will go to Mr. Strahl for five minutes, please.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you, Mr. Chair.

My question is regarding the softwood lumber agreement. Prime Minister Trudeau has now been Prime Minister under three different U.S. administrations. I think, certainly from our perspective, he missed a great opportunity to negotiate a softwood lumber agreement with President Obama. The last four years have obviously been more challenging in terms of trade, but now with this reset, as was mentioned, or the new road map, I don't see anything in the road map about softwood lumber.

Are we once again putting that on the back burner, or do you have a mandate to negotiate a new softwood lumber agreement for Canadians?

[Steve Verheul]

We are certainly prepared to enter into negotiations with the U.S. on a new softwood lumber agreement at any point in time. The challenge we have is that we don't have a willing partner on the other side. That may change as the U.S. administration gets more up to speed and as we have the new USTR confirmed and she starts to take on a lot of these files, but over the last number of years there has been no appetite on the part of the U.S. to enter into a negotiation. The U.S. industry continues to press them not to enter into such negotiations.

That's the reason we have been taking the approach of continually challenging U.S. decisions on softwood lumber duties and largely winning in most of those cases. We now have six cases under way, both at the WTO and under our CUSMA agreement. We're building up pressure to try to convince the U.S. to re-enter a negotiation, but so far we have not had a willing partner on that side.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Are either of you aware of whether the Prime Minister raised the issue of softwood lumber with President Biden on either his initial call or during the bilateral meetings?

[Steve Verheul]

I'm certainly aware that it was raised. I'm not sure in which context. I think it was raised in more than one context. I wouldn't want to state definitively whether the Prime Minister himself raised it or not. I would expect so, but I'm not entirely sure.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Okay. I didn't see it in either one of the readouts or in the reporting on it from the Prime Minister's Office. Perhaps it was raised and just not reported.

I have seen some analysis that says the “America first” procurement policies of President Biden could hit us harder than the provisions in Trump's renegotiated NAFTA. Do you agree that if they were to shut down or severely limit the ability of Canadian products or producers to engage in U.S. infrastructure, it could have an even greater impact than some of the trade actions taken by the previous administration?

[Steve Verheul]

We don't really know yet, because we haven't seen any kind of details around what they might intend to do on infrastructure. I think what's important, and what we're taking as a positive signal, is that the U.S. administration has said that they want to consult with Canada as they move towards designing and implementing that particular program.

They are looking at the North American market as well. They are very much aware of the integration of our economies and that if they did have a strict buy America kind of approach, it would be costly, because we supply a lot of the goods that go into the products they are looking for.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Briefly, have you been given a mandate to fight back against buy America at the officials' level, or would it be similar to Keystone XL, where, once the U.S. administration makes a decision, the Canadian government just throws in the towel and accepts that result?

[Steve Verheul]

Well, I'm not going to comment on that, but I will say that what we're trying to do on buy America and buy American is make sure that we have the proper kinds of relationships with the new U.S. administration, so that we can have these kinds of conversations. They have opened that door, so we're starting to have them, and there's an openness to make sure they don't take actions that are going to cause damage to us in ways that we would certainly have difficulty with.

There is an open door to try to work this out the best way we can, and that's what we're focused on, trying to make sure that we do not face the kinds of damages that we could potentially face if the U.S. were to go it entirely alone.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Strahl.

For the final questions, we'll go to Mr. McKay for five minutes.

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

Thank you, Chair.

Thank you, Mr. Grant and Mr. Verheul. Both of you are outstanding civil servants, and we deeply appreciate the work you put in.

I wanted to link two ideas and get your comments. The first idea has been rightly discussed here, namely, buy American. The second idea hasn't been discussed as much, and that is the security exemption we have, primarily for defence.

I want to ask the question in the context of a conversation I had earlier today with a representative of Boeing. That representative pointed out that Boeing has been in Canada for 107 years. He considers Boeing to be a Canadian company. Everyone on this call has seen the massive amounts of business that Boeing does, both back and forth. Some of Boeing's products, of course, fall within the security exemption of defence, but many of them don't fall within the exemption.

My first question is, are we defining, for the purposes of the trade arrangements between Canada and the U.S., security in too narrow a fashion, in that in fact our economies are so intimately integrated that the security exemption should not merely be related to items that are clearly defence-oriented?

Let me give you an example. Those of us who live in southern Ontario a few years ago had a huge blackout that lasted two or three days, primarily because of a failure of infrastructure in the United States. Now, that is a security failure, and of course, with the advances of cyber and artificial intelligence and things of that nature, this becomes a far greater risk to all of us and to our well-being.

I'm wondering whether there are areas of discussion that could be entered into, as you gentlemen sit at the table with your American counterparts, in that security is at this point too narrowly defined and it is continually bumping up against the risk to both of our nations.

[Steve Verheul]

Do you want me to start, Michael?

[Michael Grant]

Yes, please.

[Steve Verheul]

Yes, I think that certainly is a point we've been thinking about quite a bit, because clearly on the defence side there are arrangements in place, and there is a much clearer kind of situation that exists there, but what we've been looking at most recently—and we've been having discussions with the U.S. about this—is the whole notion of security in a different sense: when we talk about supply chain security, when we talk about supply chain resiliency and when we talk about critical minerals we might supply to the U.S. and important imports we get from them.

It is security in a different kind of sense, but it is something that we're spending much more time on, because we both want to have secure sources of supply that would allow our economies to function without getting into some of the difficulties we've seen, and supply chain security can lead to that. With Canada and the U.S. being such long-standing, secure economic partners, it's ideal for the kinds of products we trade back and forth to have that kind of situation exist, where we're doing this on a security basis. It's definitely something that we've been talking about.

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

Mr. Grant, do you have anything to offer?

[Michael Grant]

I would just add a thank you for the suggestion. I think it's creative thinking. As we begin what is clearly a new direction with the United States, looking at virtually all aspects of our relationship with a fairly high ambition level, that's certainly a creative idea that we can inject into the discussions going forward.

There are a lot of interrelated aspects to what you've put forward, including that we will soon be embarking on a review of NORAD and a modernization of NORAD, which will demonstrate the importance of our collective security. Again, it's a little bit apples and oranges, but I think it's a very interesting idea. Thank you.

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

I understand that the negotiations with respect to NORAD and what—

[The Chair, Liberal, Raj Saini]

Make it a quick question, Mr. McKay.

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

Okay. If I have an autonomous car, and there's a breakdown in a U.S. electricity grid and I end up in the ditch, that's a pretty major security concern that I have. If my water system is poisoned by a cyber-switch, that's a pretty serious concern, and it's a concern on both sides of the Great Lakes. I leave those as examples, real examples, for both of you.

Thank you, Mr. Chair.

[The Chair, Liberal, Raj Saini]

If I may have the indulgence of the committee, I would like to ask one question. It's more of a technical question to either witness.

One dispute with Line 5 is that the government revoked the licence for Line 5 in association with their department of resources. One argument that has been put forward by Enbridge is that they're regulated by a federal regulator, the Pipeline and Hazardous Materials Safety Administration.

Obviously, this has to play out in their internal courts system. I'm just wondering what we can do in the interim to support the process while this is going through the legal process. Could you give me a short answer to that?

[Michael Grant]

It's a very good question. I apologize, but I don't think I have the expertise to answer it specifically. I will only say that as we move forward, there is a process going on in the state court in Michigan as well as processes in the federal court. We look at this very much as a state-to-state issue and will continue to do so. We'll continue to work with Enbridge very closely going forward.

I think, on that particular issue, I'll have to defer a specific response. I know you'll be having other witnesses soon who may be able to provide that to you.

[The Chair, Liberal, Raj Saini]

On behalf of the committee, I want to thank both of you.

Mr. Strahl?

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Forgive me. I think we all want to thank the witnesses.

On a point of order or clarification, the email notice we received indicated that the witnesses would be here till 5:10 eastern time. Then I noticed perhaps a different notice. I just want to get some clarification.

Obviously, we have two or three members who haven't had an opportunity to ask a question. If the witnesses have to go, they have to go. If there were time to go for at least one more round so Mr. Lewis from our side.... I see Mr. Housefather and Ms. Romanado. I think we could easily do five minutes for each. Then everyone would have had an opportunity to participate.

Again, depending on the availability of the witnesses, I would seek the unanimous consent of the committee to allow for those three members to have a five-minute round each.