Economic Relationship between Canada and the United States Committee on April 1st, 2021

[Randeep Sarai, Liberal, Surrey Centre, BC]

I would like that. If you could provide that to the committee that would be very informative. I think it would be good for the Americans to know what could be potentially at risk for them if they put protectionist measures such as buy America in the U.S., which would prohibit Canadian goods. Regarding the reciprocal treatment, if we had to choose that—not saying we would—they would know which of their industries and how many of their industries would be affected. Hopefully, it never reaches that level. We all know that.

My second question is along those lines. You recently just renegotiated CUSMA, NAFTA 3.0 if you want to call it that. What provisions do you think CUSMA has to protect our bilateral trade with the U.S. and any restrictions the Biden government might impose with buy America? Do you think CUSMA protects us in that regard, even though that may be a route that may be longer to proceed with? Does it protect us?

[Steve Verheul]

When we did the negotiations on the government procurement issues with the U.S. and the new NAFTA, the U.S. was making us very unattractive offers for how we could conclude an agreement on market access under government procurement. We do have some rules under government procurement, but most of what we have in terms of protection in that area is through the WTO agreement on government procurement. Through that, we do have [Technical difficulty—Editor] and we do have good access to any kind of federal-level U.S. procurement through the WTO.

Under CUSMA, we have much more limited avenues we could pursue on the procurement side. It's more at the WTO that we would pursue those.

[Randeep Sarai, Liberal, Surrey Centre, BC]

In your talks with your counterparts in the U.S., do you see this buy American as a provision more to protect against global imports off the continental imports or is it intended purely for American only and to exclude Canadian interests? In other words, are we kind of victim to a government agenda or government policy to protect the flooding of products coming, say, from China, Asia or other parts?

[Steve Verheul]

We have no indication from the U.S. side that we are the target at all. I think the target is overseas. I think there is a considerable degree of concern about China and some other countries outside North America that are exporting to the U.S.

As I said earlier on, the U.S. has made it very clear that it wants to enter into discussions with us on trying to avoid any kind of negative implications on our integrated economy between Canada and the U.S. because that serves both of us. I think that the U.S. recognizes the damages it could incur in its own market if it were to introduce artificial barriers that would disrupt that integrated economy.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Quickly on softwood lumber, do you think trade commissioner services might be able to assist our current forestry sector to diversify in markets outside the U.S. even though it is enjoying a healthy price and therefore decent margins despite the tariffs? Can more be done so that the lumber industry is not susceptible to only one buyer, the U.S.?

[Steve Verheul]

Absolutely. We're putting quite a bit of effort into doing exactly that, diversifying our market. We have opportunities into the European Union. We have opportunities into Japan and many other countries around the world. I think it certainly serves us well to start to diversify our market, when it comes to softwood lumber, away from the U.S., to some degree at least, because we've had this long experience of having difficulties with the U.S. in this market.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Sarai.

Mr. Savard-Tremblay, you have six minutes.

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

Thank you.

Mr. Verheul, as we know, the Fixing America's Surface Transportation Act, or the FAST Act, which governs U.S. government spending on transportation, expires in September. Do you think it will be renewed?

If it isn't, will another similar bill be introduced?

I'm going to ask the counter question right now: if there is a renewal of the law or a new bill, are the Buy America provisions or the Buy American Act likely to apply to this issue?

[Steve Verheul]

I would be surprised if buy America and buy American were caught up in a lot of those kinds of discussions. I think that the U.S. has made it clear that it wants to continue to pursue those policies of buy America and buy American and will make every effort to protect those.

I think that what we can do most effectively on our side is continue and enhance our discussions with the U.S. about how Canada could be treated within those kinds of policies, rather than through any more formal kind of negotiation or arrangement.

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

In other words, you don't think it should apply.

I asked the minister a question earlier about the U.S. government's infrastructure plan. I'd also like to ask you if any steps have been taken to have Canada exempted from this plan.

I would remind you that President Biden said yesterday that the first $2 trillion would be used entirely for American companies and American products, so that American workers would benefit.

Is Canada working to obtain exemptions in this regard?

[Steve Verheul]

Yes, what we saw in the infrastructure plan announced yesterday by the Biden administration was that there are no real details about how they would factor in buy America. It certainly reaffirmed that they would intend to have the buy America approach apply, but there are no details, no specifics associated with that, so that gives us a window to continue our efforts with the U.S. to emphasize that, if we work together on this, if we continue with our integrated economy, then we can actually provide benefits to the U.S.

There are fewer efficiencies that are going to be put at threat if we maintain the integrated economy. We can help them with their environmental objectives by the kinds of products we produce, so there is a lot of value to continuing to allow us to participate in those kinds of programs.

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

Still on the subject of this plan, I'd like to ask you the question that I put to the minister earlier and that she didn't really answer, unfortunately.

Will there be new requirements for American content? Can this be considered? Will it be iron, steel or aluminum, for example, or will there simply be no new requirements?

[Steve Verheul]

The U.S. has made it clear, or at least President Biden has made it clear, that they are looking at potentially expanding the coverage of buy America in this infrastructure package. As of now, there are no details, as I said, in the package announced yesterday. This is going to have to go through the congressional process so it may change in many different ways. Eventually they will have to specify what the requirements would be, but we do anticipate that we're going to have to make the argument that further products that could be considered should still allow for Canadian participation in those types of supply.

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

I'll ask you another question I asked the minister earlier.

Is there an ongoing discussion with the provinces as part of the strategy planning?

[Steve Verheul]

Yes, provinces and territories are being closely consulted as this goes along. We have had regular calls with them already. Clearly, they have a very large stake in all of this, so we will be involving them very closely at every stage of this process.

[The Chair, Liberal, Raj Saini]

You have 15 seconds left.

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

Are they currently being consulted or will they be?

[Steve Verheul]

They are now being consulted. We have already talked to them about these issues and have set up a mechanism to continue talking to them throughout this process.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

Mr. Cannings, you have six minutes, please.

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

Thank you.

Under the previous American president, during that time, there was a lot of concern in Canada from industries and manufacturers that were energy-intensive and trade-exposed about facing competition in the United States from companies that didn't have to factor in things like carbon pricing. I and others suggested that we perhaps should have considered border adjustments to try to level the playing field there. Now we have President Biden talking about levying border adjustments similar to that.

I'm just wondering what the present situation is between Canada and the United States, or what Canada is considering along the lines of possible border adjustments to try to level the playing field with countries that don't have the climate action that our government is putting forward, the carbon pricing that our companies are facing, so that we can fight climate change and remain competitive on the world stage.

[Steve Verheul]

We are doing a lot of work on that front. We're doing a lot of analysis, along with other departments, on carbon border adjustment, trying to figure out exactly how that might work and what its implications could be. The European Union is also well advanced in looking at carbon border adjustments.

I think the challenge we have is that while we've indicated to the U.S. that we have an interest in this issue, and they have responded by saying they want to engage with us to discuss this further, they are further behind than we are and the European Union in looking at this issue. They're also in a different place when it comes to what they've done domestically with respect to carbon pricing. Therefore, I don't think that we'll see a definitive view from the U.S. for a little while until they get their internal thinking sorted out, but we are very much eager to work with them in exploring these issues, along with others.

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

Are are you considering it with regards to trade with other countries?

[Steve Verheul]

Absolutely, yes.

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

Okay, I'll move to an entirely different topic. As I was saying before, my riding has five different border crossings, and one relatively small but very hard-hit sector during the pandemic from the border closures has been the duty-free stores. These stores relied entirely on traffic across the border, and that traffic has essentially stopped. I think the duty-free store nearest me in Osoyoos has suffered a 99% drop in trade.

The duty-free stores were asking for some sector-specific supports and I'm just wondering if the government had considered that, and what it might be able to provide.

[Steve Verheul]

I'm afraid I'm not in a position to give you any kind of clear response on that. I'm not involved in those particular discussions about potential assistance because of the border closure. I apologize for that, but that's not my responsibility.