Economic Relationship between Canada and the United States Committee on March 16th, 2021

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

Thank you very much. What a powerful conversation.

Scotty said it best by saying that self-interest is always a driving factor, but I think what we as Canadians need, even to look at this Line 5 situation, is to understand best what landscape the United States is looking at in terms of this self-interest.

I know we had steel and aluminum tariffs that in many respects resulted in a repatriation of those jobs and an increase in manufacturing jobs in those sectors in the United States. We've also recently seen the enactment of the Defense Production Act, whereby self-sufficiency around vaccines and PPE and what gets shipped out of the United States has been somewhat constrained.

Should we be looking at Line 5 in a similar way? Is this perhaps the beginning of a longer trend? As the U.S. becomes more self-sufficient and able to produce more in oil and gas, will it be able to repatriate that and be more self-sufficient on this front?

[Mark Agnew]

Aaron may want to come in after me with a bit more detail.

One of the things we've been looking at—hopefully, the committee can reflect this in its report—is that the Biden administration earlier last month gave an executive order on supply chain reviews, and energy was one of the sectors identified in that. We would encourage the government to work with industry to figure out how we can have a Canadian perspective articulated into these supply chain reviews, so that there's an understanding of the important role Canada plays in the American supply chain security landscape.

Aaron, I don't know if you have further comments on the energy pipeline specifically.

[Aaron Henry]

We need to understand, as Mark is alluding to, that supply chains are shifting. Those supply chains create opportunities for us in those new spaces, but we need to take a sustained view of the fact that the U.S., as an energy power, has also undergone a lot of changes.

There might be some more opportunities for Canadian oil and gas, given what's happened to shale production. That might be a shortage we can fill, but overall what you are seeing with the U.S. is an effort to greatly increase its energy sovereignty, both in terms of what it can export but also in its electricity markets.

We need to be very mindful of creating the opportunities—for instance, for our utility space to make those exports—but also think about ways in which we can continue to serve our own internal markets to make sure we're ahead of the long-term changes that probably we will see in the U.S. energy economy.

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

Further to that, when we're talking about self-interest and one aspect, it appears that the negotiation is never only on oil and gas. We've seen now, with the road map that Biden and Trudeau signed, that we're looking at defence, security and, like you said, security of supply chains. We're looking at critical minerals. We're looking at the Northwest Passage and at any number of things.

Should Canada be looking at understanding better that negotiating on one thing is never in isolation, but that other areas may also need to be looked at at the same time, and the leverage or conversation between that whole landscape and not just Line 5, as in this case?

[Maryscott Greenwood]

I have a slightly different approach. I don't think the U.S. could ever imagine going it alone on anything without Canada. We are so integrated. In the U.S., it's sometimes good politics, or it sounds good, to say “buy America”. It's not actually possible, especially when you're talking about Canada, and it's not desirable. The countries we're worried about from a manufacturing point of view are not in North America.

One of the things we are focused on is how to rebound together. We have an initiative, the North American rebound, that you can check out, where there are regular everyday Americans and Canadians saying that we actually are in this together.

To your direct question on whether Canada should leverage all of its different assets in the conversation, I would answer absolutely. Diplomats will tell you there are no linkages. Realists will tell you that of course in human nature everything is related. Canada has a huge number of natural assets and benefits and should be willing to tout them from the mountaintops, as it did during the NAFTA negotiations.

[The Chair, Liberal, Raj Saini]

Thank you, Ms. Alleslev.

Next we have Ms. Romanado, please, for five minutes.

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

Thank you very much, Mr. Chair, and thank you so much to the witnesses for being here today.

Our previous witness quantified Line 5 as “the most scrutinized piece of pipe in North America”. I want to get a better understanding of the urgency and the motivation behind the Michigan governor. Why now?

When I look at a quote she gave to Great Lakes Now in June 2019, she said that protracted litigation without the tunnel or another alternative would be the “worst case scenario”. I'm looking at the timeline. She said this in June 2019. She was elected in November 2018 and took office in January 2019. A third agreement between Enbridge and Michigan came to be in December.

I'm looking at this timeline. We see that there was a temporary restraining order in June 2020. It was then lifted to restart Line 5 in July and September. Then, on November 7, the media calls the election for President Biden and, six days later, the governor issues the order on its easement.

I'm trying to get an understanding of why now, when this tunnel is under construction and is due to be opened in 2024. Why now? Given the consequences on both sides of the border, whether it be access to crude or whether it be jobs, why now? It's helpful for us to understand this so that we can make sure we are conveying our position as well.

[Maryscott Greenwood]

You might have to have the governor here to ask that. I would point out that what's important is that at the same time she called for the pipeline easement to be ended, her government approved the process for the tunnel.

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

Exactly. I'm just trying to make sure I'm understanding you correctly, Ms. Greenwood, so thank you.

We have talked a bit about the treaty. I understand that then governor Biden voted in favour of the treaty in 1977. It's not something, obviously, we want to use. We hope we can get some diplomatic solution to this. Obviously, this is before the courts. We will be doing the team Canada approach, as you suggested, because we need to make sure that until that tunnel is built, we cannot have the flow stopping.

I want to pivot a bit now, Ms. Greenwood. You mentioned the North American rebound initiative, which I've been reading a bit about, and buy North American. I want to talk a little about opportunities. We see very clearly what we need to do with Line 5, but we also have economic recovery. Can you spend the next minute and a half talking about buy North American and why we need to be focusing on that?

[Maryscott Greenwood]

Buy North American makes sense only from a U.S. point of view. If you tell a U.S. supplier that we the government will tell them what their supply chain looks like, and we don't want their own efficiencies or their own relationships to matter, that's problematic. That's not really the way America works, typically, when it works well.

We know that buy North American, or buy Canada-U.S., works in the defence sector. We've had the defence production-sharing agreement since the 1960s. Canadian defence companies can bid on Pentagon projects as if they were American, so we have a good template for it. We also have all of those industries and sectors that get tariff-free access to the United States because of NAFTA.

When we're talking about buy American, what we're really talking about is government procurement really coming out of the stimulus that's about to happen, and you don't want to make that more expensive. A Canadian waiver, like we got in 2009 and like we got last year during the pandemic, on PPE.... There was a Canadian waiver that was not well publicized but that in fact happened in the federal Emergency Management Act regulation. That kind of thing makes eminent sense. It's in the U.S. interest to do so, so I think you have to just keep hammering away at it.

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

In my last 20 seconds, let me thank our witnesses. One of the things we've just heard is that we really don't have the capacity to transport crude, should Line 5 close. I want to thank you for highlighting the problems we would have with respect to truckers, access to truck drivers and also access to infrastructure with respect to rail.

Thank you so much.

[The Chair, Liberal, Raj Saini]

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.

From the outset, I have been missing something here.

First, there are environmental concerns. We heard the governor of Michigan say that some supports exceeded the 75-foot requirement, that the pipe wall was not thick enough, and that, in her view, Enbridge wasn't meeting all sorts of conditions. Enbridge responded that everything was fine.

Why has this not been resolved?

I'm missing something here. It's not up for debate. This is about science, not opinions.

Have certain conditions not been met, yes or no? This should not be up for debate, it should have been cleared up.

How is it that the issue has not yet been resolved?

How can there be a legal dispute over matters of fact and science?

[Aaron Henry]

There are a lot of variables in there, and I can't provide a line of sight on all of them. For a while the dialogue remained open with Governor Whitmer's office. However, given that now we're at the position where the courts have to make a decision on whether this is federal jurisdiction or state jurisdiction, those dialogues have shut down, simply because the governor is unwilling to make any comments on anything that is before the courts.

That is a moment of impasse, and in some respects, despite the fact that there have been these studies released and there has been an awful lot of movement by Enbridge to make good on a series of conditions, that is part of the reason things have not progressed. That's why it's imperative that as those courts make those decisions, the federal government and team Canada are able to put forward an amicus that basically states that this is in fact a federal issue and not something for Michigan to simply decide on its own.

[The Chair, Liberal, Raj Saini]

Mr. Savard-Tremblay, you have 15 seconds.

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

I don't have time for any more questions in 15 seconds. Thank you.

[The Chair, Liberal, Raj Saini]

Thank you.

For the last question today, Mr. Blaikie, you have two and a half minutes, please.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

In CUSMA, Canada continued to allow access to public contracts to United States contractors, without getting the same kind of reciprocal access. Again, I'm wondering about this, just on the theme of opportunities around a united front against climate change.

If Canada isn't able to get access to American public works projects in a blanket way, what do you think of some of the opportunities for companies that manufacture electric buses, say, or have different kinds of green technologies that would serve a public policy interest in many American municipalities or state governments, and using these as a way into certain kinds of U.S. procurement that Canadian companies might otherwise be blocked from accessing?

[Maryscott Greenwood]

Yes, it's an interesting point. I think you go in with your U.S. supply chain partner arm-in-arm, so that you don't come in as completely foreign. Also, you'd have to identify the relative cost benefit of partnering with a Canadian partner.

You know, Canada is closer to a lot of manufacturing places in the United States than places in the United States are, so when you make the case and you bring in your American partner, you have a pretty good chance at getting the waivers you need from the White House.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you for that perspective.

Mr. Agnew, do you have anything you'd like to add on the question?

[Mark Agnew]

Scotty summarized it quite well with regard to having an American partner working in lockstep with you, so that there again is that local narrative to tell.

I would just say, to go back to your original point on the CUSMA, that we're now in a state where there's no procurement coverage either way as a result of it. We are relying solely on the WTO government procurement agreement now for procurement access.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

That's all for me, Mr. Chair.

I see that Mr. Hoback has his hand up. I want to make sure there are a couple of minutes left in the meeting for him.

[The Chair, Liberal, Raj Saini]

Go ahead, Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

I have just one question.

Ms. Greenwood, maybe you can help me answer this question.

If Line 5 were shut down, how would the U.S. ever go it alone on buy America? How would they be able to accomplish that? It's going to be tough enough for them to accomplish it on their own with Line 5 operating, but if it's not operating, that whole area of the U.S. is not functioning. How can they move forward?

[The Chair, Liberal, Raj Saini]

You have 30 seconds or less, Ms. Greenwood. We're tight for time right now.