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

[Mary Ng, Liberal, Markham—Thornhill, ON]

You're absolutely right; Canada has made a commitment to net zero by 2050, and signed on and made a commitment to achieving the Paris Agreement. Our commitment is a shared one with the United States on tackling climate change. The opportunities for Canada in building back better on this road map between Canada and the U.S. are abundant, particularly in the area of fighting climate change. You're absolutely right; we have the cleanest energy and electric systems, many of them in Quebec.

Canadian manufacturers are highly efficient. I can point out a few examples of what we are already doing in clean tech. There are many, but one that comes to mind—I keep speaking about them, only because I met them just the other day—is CarbonCure. This a Canadian company that in building, in the use of cement, is decarbonizing. It's a green input into construction projects in the U.S., but when you look at cars or buses or trains or trolleys or ferry boats or vehicles, that's Canada's rolling stock. We have expertise here around green transportation. We are an input into the American transit system.

Look at a company like New Flyer and their electric buses. They're building buses and parts in Alabama, Minnesota, New York and Canada. Canada ranks number four around the lithium battery supply chain. We have one of the lowest carbon footprints for this battery production. The U.S. is making a commitment for an entire infrastructure around e-vehicles.

So there are many inputs, from forestry to aluminum to steel to construction to wood. These are the integration between Canada and the U.S. We're already building together. We're innovating together. There's the Canadian technology accelerator, for which we have presence in Boston and San Francisco and New York. These are opportunities where we are going to work together. We're going to keep working together, because it's going to benefit Canadian workers and Canadian businesses. It's going to benefit American workers and American businesses. And guess what? We're going to fight climate change together.

[The Chair, Liberal, Raj Saini]

Ms. Romanado, you have 20 seconds.

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

That's fine.

Thank you very much, Minister.

[The Chair, Liberal, Raj Saini]

That brings our first hour to a close.

Thank you so much, Minister Ng, for taking the time. I know you're very busy, as we all are. Thank you very much for taking the time and giving us your perspective on this very important issue that's coming forward.

I understand that the officials will be here for the next hour. We can go right into questions, as they don't have any opening statements.

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

[Mary Ng, Liberal, Markham—Thornhill, ON]

Goodbye, everybody. Thank you.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Minister. It's great to see you here this afternoon.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Goodbye, Randy.

[Randy Hoback, Conservative, Prince Albert, SK]

I'll start off with Mr. Verheul. I think we're following each other around; we've been meeting so much over the last two months, whether it's trade committee or now this committee. We should just maybe rent an apartment together or something, I would say. I appreciate your being here again today with your colleagues.

Mr. Verheul, the situation I'm really concerned about with buy America is the unintended consequences of it, plus the other things we're hearing. What I mean by that is we see a scenario where a U.S. company makes the exact same widget as a Canadian company, but because it's American-based it gets to take advantage of buy America and create a very healthy balance sheet. That same U.S. company goes in and competes with the Canadian company in Canada and around the world.

Is there anything in our trade agreements that allows us to say to that company in the U.S., “No, you've been subsidized unfairly through buy America, so you can't now dump products into Canada”?

[Steve Verheul, Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development]

I'm sorry. I was offline for a second there. If you could repeat the question, that would be great.

[Randy Hoback, Conservative, Prince Albert, SK]

What I was basically saying, Mr. Verheul, is that you see companies in the U.S. that take advantage of buy America, and that props up their balance sheets to such a degree that they're just so much stronger than a Canadian company that makes the exact same widget.

Is there anything in our trade agreements that says, “You took advantage of buy America; you were unfairly subsidized; you can't just dump product into Canada or anywhere else around the world”? Is there anything in our trade agreements or the WTO that would prevent that?

[Steve Verheul]

Certainly, if the U.S. is using buy America programs to produce products at non-competitive prices and trying to provide those products in the Canadian market, we have recourse for that.

Under the government procurement agreement we have at the WTO, while we are exempted under buy American as I think you have heard, the U.S. has carved out protection for buy America, so there's no direct way we can [Technical difficulty—Editor].

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Verheul, you had started to explain the difference between buy American and buy America, and where there are exemptions and carve-outs for the U.S.

I think you froze again. Did you hear me?

[Steve Verheul]

Yes, I did.

With respect to buy American, we have an exemption under the government procurement agreement at the WTO. With buy America the U.S. has never made any commitments at the government procurement agreement to capture those kinds of programs, so it is within its rights to use those programs.

Just to finish off here, in response to your question, Randy, if the U.S. is using those projects to then produce products that would be exported to Canada, we have recourse if those products are being unfairly subsidized or dumped in our market.

[Randy Hoback, Conservative, Prince Albert, SK]

It would be similar to a scenario where the U.S. would be subsidizing not only the company but also the R and D of that company, and giving it an unfair advantage versus competitors in Canada that wouldn't have that wallet in their back pocket.

[Steve Verheul]

Yes. When it comes to research and development, that's a bit more open. You can certainly spend on research and development if it's not tied directly to a specific product. If it's more general research and development, then there's no real restriction on that. It would depend on the extent to which the U.S. is applying this directly to products that would be potentially exported to Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

The last time we faced this type of scenario, we actually had an exemption with the federal part of it, but we lost out on the state and municipal side.

Are we able to carve out anything there now, and has anything we have today changed since the last time we faced buy America, with Obama?

[Steve Verheul]

Yes, I think the difference this time around is that we've had a number of conversations with the Biden administration since they came into office. There's an openness and a willingness to discuss what kind of potential impact some of these policies could have on Canada, and a willingness to try to ensure that there's not the kind of negative implications we might have seen in the past. I think that's an important consideration. We have an open door for that kind of dialogue and that gives us the window to make the arguments we need to make about how we're both far better off if we maintain our integrated economy.

[The Chair, Liberal, Raj Saini]

Mr. Hoback, I will add one more minute to your time because of the technical difficulties.

[Randy Hoback, Conservative, Prince Albert, SK]

I appreciate that, Chair.

I guess it's fair to say, then, in the contracts that the U.S. government, the federal government, would have with the state level or municipal level, it would be stipulated in those contracts then that, wait a minute, Canada has to be exempted because it's federal dollars being utilized for that infrastructure project, even though it's maybe being administered at the municipal level or the state level. Is that fair to say?

[Steve Verheul]

That would be our argument, that if the U.S. is going to provide those funds to state-level governments and lower, in order to have the best kind of outcome, we should not have a result where there are restrictions on Canadian input into those projects. That's what we'd be looking at.

Strictly speaking, at least from a government procurement obligation point of view, there are no restrictions on those federal funds that are handed down to states and municipalities in the U.S..

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Verheul.

[The Chair, Liberal, Raj Saini]

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

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you, Chair, and thank you, witnesses.

I won't go into the legal aspects. I think many of my colleagues have already asked what the legal ramifications are. Others have asked how our conversations with the Americans have been going and about the dialogue between two governments and two executive branches.

Mr. Verheul, you can probably direct this to whomever. What is the percentage of American companies that procure in Canada? What's the GDP, or how much of Canadian procurement is American?

Where I'm going, I'll lead you to that, too, so you can answer it in one answer. If in fact our discussions of a friendly nature currently being worked on with the U.S. do not coincide with a “buy North America” attitude, or “buy Canadian and American”, what is the percentage of goods being procured by the Canadian government that could be at risk for Americans to lose? Do we have a number like that?

[Steve Verheul]

I'll turn to one of my colleagues to see if he has a number offhand, but I would say that our procurement system is quite different from that of the U.S. We have an open procurement system. We don't have a lot of restrictions because we've been looking more for value for money. We have provided, in particular, clear procurement opportunities to the European Union under CETA, for example, and that is at a greater level than what the U.S. has in our market.

We do have different treatments, but by and large our procurement market is open. The U.S., as our closest neighbour and market, does participate in those markets on an ongoing basis.

I don't know, Doug, whether you have anything you want to add to that.

[Doug Forsyth, Director General, Market Access, Department of Foreign Affairs, Trade and Development]

No I don't, Steve. The only thing I would say to add to that is that, as you noted, the procurement market is a little bit opaque in terms of exact numbers—what we have at the federal, provincial and municipal levels—so we'd have to dig around a bit to see exactly what kind of information we have that we could provide to the committee.