Finance Committee on May 18th, 2017

[Leo Hindery Jr.]

It would be rude for me to suggest, sir. I was simply asked to convey an alternative to what you were considering. It's not for me to comment on Canadian government practices. It's just not, sir. My role here was to give you an alternative that I think is attractive, that doesn't burden the Canadian taxpayer, as is being suggested.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I want to ask the tourism folks, if there were one thing that could have been in this budget, that would move Canada back from 18th to 8th, what would it be?

[Charlotte Bell]

Oh, my goodness. We would have to bring in another 16 million travellers internationally in order to get back into the top 10.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I'll just throw out this idea—

[Charlotte Bell]

There's also the cost of airfare.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Right.

As an example, one of the promises in the last election campaign was a reduction of the small business tax from 10% to 9%.

[Charlotte Bell]

Yes.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

What would that impact be? You're basically small business, right?

[Charlotte Bell]

Lots of our members are small businesses, but I don't know how that would grow tourism in Canada. I think the small businesses would be in better financial shape, but—

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

They could spend more money on marketing instead of paying government.

[Charlotte Bell]

They might, yes. But definitely, if I had to give off the top of my head one thing we could do to increase the number of tourists, it would be to reduce the price of airfare. Because of the taxes and levies, we're about 40% higher than most places in the world.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Sheehan, you have five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much, Mr. Chair.

I'll be directing some of my question to you, Henry. You mentioned that there were 122,000 direct and indirect jobs in the steel industry. Well, 14,000 of those direct and indirect jobs are in Sault Ste. Marie at Essar Steel and Tenaris tubes, and 8,000 other pensioners live in the area as well.

I wanted to ask you about budget 2016, which you alluded to, in terms of the modernization and the trade remedies that were put in there. Have they been successful? Perhaps you could describe what they did for the industry before I go on to 2017.

[Henry Wegiel]

With regard to the changes in 2016, the major one was that the initial trade remedies, which previous to that were five years, will now be for almost six years. That's in line with what the United States and other major countries throughout the world have. The new cases we've had—we just had another rebar case, and we have some OCTG cases—will now have the brand new six-year time frame associated with them, which will help the industry.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

That's very good.

Moving on, part of the 2016 budget was the consultation process that you and your association, along with the unions and many other stakeholders, vigorously participated in. It was great. In my opinion, there were four key recommendations that came forward in the 2017 budget—on the particular market situation, on anti-circumvention, on scope rulings, and of course on the union participation that you talked about.

Could you please describe to us how those four particular items will work within the industry and how we'll benefit?

[Henry Wegiel]

The biggest change we were after was with regard to, as you mentioned, the particular market situation. The companies outside of North America offshore are getting really smart at trying to circumvent anti-dumping duty orders. They will do things in order to have their costs and prices not reflect market realities, thereby reducing their dumping margins and hurting Canadian steel producers. This now gives Canadian government officials within CBSA the ability to tell them, “Hey, your prices and costs aren't actually market-based. There is something happening in your market that is distorting it. We're going to adjust for those factors to bring it up to a market-based price or cost, and therefore have the appropriate dumping margin.”

The second one is around scope rulings, involving an increase in transparency of the process. Let's say a producer here in Canada or someone from offshore wanted to know whether a product was within scope or not in scope of a ruling. Previously that would have been done without everybody knowing about it. Now it will be a transparent process. Companies can participate and determine whether the product is within or without scope, and provide arguments either way, which is similar to how it is done in other countries at this time.

Another big area is around anti-circumvention. There will be a formal process now where, if countries outside of Canada try to cheat the system through either mislabelling or transshipment of products, we are able to have a process that provides dumping duties on those products that try to cheat the Canadian system and the Canadian government and its people.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

As you mentioned, the union participation allows them to contribute in saying how this could hurt their membership and their pensioners, etc.

The other thing that you mentioned was the section 232 investigation the United States is undergoing. We were in Washington with the industry committee not too long ago, and it was an opportunity for us to remind them that we have the longest unprotected border in the world and we have a shared defence in NORAD. It's one of those things that I know is worrisome because of the opportunity for them to use the sort of back door on steel. But we also have trade balance, both in dollars and in tonnage, and the supply chain for the auto sector, for the products that we use in making steel here is fall through. I commend you on pointing that out. It is important. It's actually, in my opinion, a place where the North American Free Trade Agreement works quite well.

Going on to some of the changes that we've made, I'm going to ask you this question. Does it bring us closer and more aligned with the United States as it relates to what they're doing with trade?

[Henry Wegiel]

It absolutely does. As you mentioned, we're in an integrated market with Canada, the U.S., and Mexico. Whether we produce automobiles or energy pipes or construction goods, there is no border from a commercial perspective. We all make things together. In that regard, when we get unfair trade in Canada, the U.S. suffers because it ships six million tonnes of steel to Canada. When the U.S. has unfair trade, we suffer because we ship six million tonnes to the United States. We all have to build up our defences in alignment; otherwise, we all suffer. That's why in my remarks I mentioned Canada now putting in the trade remedies, modernization, which we have proposed in the bill, has sent a really big signal to the U.S. that we are there also in terms of looking at it as a NAFTA perimeter to protect from unfair trade and protect our integrated supply chains and economic activity.

[The Chair, Liberal, Wayne Easter]

We'll have to cut the discussion there.

Ms. Shanahan, please hold it to three or four minutes.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Excellent. Thank you, Chair.

Thank you very much to everyone, all the witnesses who are here with us today. It is my first time on the finance committee. I had the pleasure, though, of sitting on our government operations committee, as well as our public accounts committee, and I can say with great certainty that, if we don't pay now, we will pay later.

That's what really brings me to the Canada infrastructure bank. It's something that I have been looking forward to hearing about. I wanted to validate and clarify a few things for my understanding. As I say, it's the first time I'm on the finance committee, but I had a chance to look at the Canada infrastructure provisions that we put forward and the $35 billion that the government intends to put into the infrastructure bank: in fact $15 billion from the already-announced infrastructure investments that we're making in public transit, green infrastructure, and social infrastructure; and the other $20 billion for assets. I think that's important to underline because that's important, I think, to Canadians to know that we're not just spending money: not only will the infrastructure serve Canadians on a day-to-day basis, but also Canadians will be part owners of these infrastructure projects.

I'll get back to the cost of capital and why it's so important to have this financing option available for the infrastructure needs that we have. Really the difference when we're looking at investing is that it's so important to have the proper allocation, isn't it? All of you are financial people, so you know what I'm talking about: cash for security, fixed income to have that regular payment stream coming in, and then, of course, equity to take advantage of growth situations. With the size of pension funds and the importance of the demographics that we have now—the demographic pyramid now is inverse—it's important to shift and have that steady stream of pension income coming in to meet pension payments.

I'd like to hear a little bit of Mr. Hindery's thoughts on that, and also Mr. Kingston's.

[Leo Hindery Jr.]

I have two quick comments, ma'am.

Whether it be here in Canada or in the United States, federal investments in infrastructure will continue through the federal budgetary process. The projects that I'm mostly alluding to are what are called revenue-generating projects, which are the purview of our governors and our mayors, our large municipalities. These are the ones that we've been ignoring. It's the bridge in New York. It's the throughway in Pennsylvania. However, our federal government will continue to make investments on federally owned infrastructure. They don't come to the bank for those.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

If I can clarify, we are talking about public use infrastructure, not private, yes?

[Leo Hindery Jr.]

It's public use infrastructure, but again, it's not the federal portion in that, the Department of Defense portion. What I find gratifying about your comments about your own fiduciaries, your own pensioners, is that there has been some criticism by people who are not in these plans that these plans are overly beneficial.

We have found in discussions with the fiduciaries in the United States that they would find it gratifying to be able to say to the states that the money they have accumulated on behalf of their pensioners is going back into the states, back into these projects. As I said to your chair when we first met in DC where I was speaking to the National Governors Association, it's not you, the women and men in this room. You're the deciders. You're not the beneficiaries. It's your provincial leadership and your city leadership. I think it's a tremendous advantage to the pension community to be part of the solution.

Mr. Liepert was very correct in saying there's a sharp line between the federal side—whether it be my federal or your federal—and the provincial, state, municipal side.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I thank you for that.

Mr. Kingston, from the private sector side, tell us why the private sector would be welcoming this type of infrastructure bank.