Finance Committee on Feb. 3rd, 2020

[Catherine Cobden]

I can't comment on rare earths specifically, but as an industry, we are under intense pressure from unfairly traded imports from around the world. It is something that we must remain vigilant on, and we must ensure that we have all of the trade mechanisms as sufficiently as possible to deal with those unfairly traded imports.

Overall, are we suffering from this? Yes, we are. The entire North American market is suffering from this challenge, and now that we are out of the tariff situation, we're happy to be working with our U.S. counterparts as well on ensuring that we create this North American perimeter to allow our industries the conditions of success for competitiveness.

When you have other governments elsewhere in the world propping up their steel sectors through heavy subsidization and unfair practices, that creates a tremendously difficult challenge for the Canadian and, frankly, North American steel industry to compete.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Would it be feasible and realistic to implement a low-carbon procurement policy that applies to all three countries, namely, Mexico, Canada and the United States?

[Catherine Cobden]

Yes. As I tried to allude to in my remarks, we think that's an excellent opportunity, and it's one that can be managed because we know that when we use Canadian steel in Canadian projects, we have a very significantly reduced carbon footprint compared with some of those foreign imports from faraway places. The transportation alone means that we have about one-third of their emissions, right? We have a very significant opportunity to demonstrate that we have a lower carbon footprint and, therefore, that we can help.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Could we implement a procurement policy that applies to all three countries? I know that there are lower carbon footprints, but I want to know whether the three countries could agree to adopt a low-carbon procurement policy for either aluminum or steel.

Would this be possible?

[Catherine Cobden]

Yes, I think we should be looking at our own domestic procurement policy as a starting point to show how it can be done and to show how it's supportive of lower-carbon-footprint steel in our marketplace. Then we can pursue discussions with others—that's fine—but I think we should start at home.

[The Chair, Liberal, Wayne Easter]

We'll have to cut it there, Mr. Martel.

Madam Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

My question is for Catherine Cobden.

Thank you very much, all three of you, for being here today and addressing what is important to each of your sectors. I'm a new member of the finance committee, so please indulge me.

I have two questions, Catherine. First, I'll continue in the vein of the U.S. tariffs being lifted. What type of growth can we expect to see in the steel sector as a result of the removal of the tariffs?

[Catherine Cobden]

The removal of the tariffs was a very important step for the Canadian steel industry, as you can well appreciate. They really eroded our competitive position. As I mentioned already, that saw a lack of investments coming into the industry.

Now that they've been removed, we've addressed a significant part of our problem in the United States, so that's good, but overall we still have the import problem to address. I would not be doing my job well if I painted the portrait that things are rosy now that we have solved the tariff crisis. While we're very grateful for that, we still have these crazy challenges.

The good news is that we can now work together with the United States to solve some of these issues. That really points to truly seeing investment start to roll significantly in the sector and seeing the competitive position come forward. I think it really points to continuing to take a look at the trade remedies system and continuing to make sure that we're treating imports well, that we know what's coming into our country, and that we know how it's being handled, especially in steel.

I mentioned earlier the overcapacity. It's about 36 times the entire Canadian production, the steel out there trying to get in. These are forces that are well outside of all our control, yet it is very necessary for us to be aware of them and to ensure we're doing what we can to avert the dramatic impacts that they're having on the sector.

[Annie Koutrakis, Liberal, Vimy, QC]

Okay.

If this were Christmas all over again and you could give us, maybe, one or two recommendations that you would like this government to see in the next budget, what would they be?

[Catherine Cobden]

Well, I've mentioned the trade remedies, and I'm going to say that they will continue to always be there, given the situation. Then I also talked about—and I hope you took note of it—our interest in generating solutions to reduce our carbon footprint. We are a large emitter, but we have the will and the interest to collaborate, to do more. The problem is, as you know, a lack of options.

If I had a Christmas wish, it would be that we have a lot more technologies available to drop our emissions fast because we know. The reason for doing that.... Government signals are one thing, but there are also signals in the marketplace with regard to this. There are also signals in civil society and from our bankers. This is an important issue for the industry to address at a business level.

Thank you.

[Annie Koutrakis, Liberal, Vimy, QC]

Sean?

[Sean Fraser, Liberal, Central Nova, NS]

Sure.

How much time is left, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

We'll give you two minutes.

[Sean Fraser, Liberal, Central Nova, NS]

Okay. Thanks very much.

Dr. Bechard, thank you very much for being here.

Obviously, on the heels of Dr. Hoskins' report, tackling national pharmacare has to be a priority. I think there are some jurisdictional things that need to be sorted out and that I hope won't get in the way. You did an excellent job, I thought, of summarizing the fact that this can actually pass on a cost savings to the taxpayer and also increase social good. I'm curious as to whether you've identified a certain sector of society that will be the primary beneficiary of taking on this kind of approach.

[Dr. Melanie Bechard]

I think it's an excellent question. Truly it benefits society at multiple levels: of course, the end-users, the patients, each of us who will be taking prescription medication in order to stay healthy.

I think businesses, particularly small businesses, are often forgotten when we discuss the potential benefits of a pharmacare program. They are paying for increasingly expensive and unsustainable private drug insurance plans, especially as medications become evermore expensive. We know that drug costs are particularly high in Canada. We are getting to the point where we almost cannot afford not to have a universal pharmacare program.

Definitely there are health benefits to each individual Canadian, but I think the economic benefits to small businesses are really undersold.

[Sean Fraser, Liberal, Central Nova, NS]

In the 30 seconds I have remaining here, I'm trying to wrap my mind around a cost to implementing a system. The savings may be across society, but somebody will pay that cost.

If we were to essentially say that tomorrow we have a single-payer system and the government, through a national formulary, is going to organize and bulk purchase, then we may see systemic savings. That cost savings, as you pointed out, would be passed on largely to the private sector employers who are currently paying for these plans.

I want to ensure that we're not accidentally enriching private sector companies if the end game is to save taxpayers' money.

You're not going to have time to answer this, but if you have feedback to point us in the right direction as to how we can make sure the systemic savings are passed on to the taxpayer and not just private sector companies, I would welcome a follow-up through the clerk of our committee on the heels of this meeting.

[The Chair, Liberal, Wayne Easter]

Do you want to add something quickly, Melanie?

[Dr. Melanie Bechard]

Absolutely.

As you're probably aware, the Hoskins report anticipates an average savings of $350 per year for the average Canadian family, and about $700 per employee for Canadian businesses offering private drug plans. That's what we can anticipate at the end-user level, but I would be happy to talk offline, or online rather, with more details.

Thank you.

[The Chair, Liberal, Wayne Easter]

Okay.

Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I want to thank the three witnesses for joining us and for giving their presentation.

My first question is for Mr. Sanger.

I'm particularly interested in the fight against tax avoidance, meaning the practice of large companies using tax havens to avoid paying their taxes. I suppose that we share this concern. When we look at the work done by the OECD, we can see that, compared to other OECD countries, Canada is always slow to implement measures to address both tax evasion and tax avoidance.

However, to my great surprise, the mandate letter sent by the Prime Minister to the Minister of Finance seems to contain a number of components indicating a desire to fight tax avoidance. The letter specifically states the following:

Modernize anti-avoidance rules to stop large multinational companies from being able to shop for lower tax rates by constructing complex schemes between countries.

Close corporate tax loopholes that allow companies to excessively deduct debt to artificially reduce the tax that they pay.

You spoke about this matter earlier. In your opinion, what additional measures could be adopted quickly?

[Toby Sanger]

You talked about—and I hope I got the questions correctly—there being a large amount. I've been surprised in my experience of how many taxes are avoided through international corporate profit shifting. One company, Cameco, of course, was in court for over $2 billion. Internationally, the OECD estimates that approximately 1% of the GDP of OECD nations is lost to tax shifting. These tend to be larger corporations, so there's an unfairness there. The parliamentary budget office also came out with some estimates on that.

A couple of the ways that corporations avoid taxes and shift are, one, the interest deductibility rule. The OECD has proposed some measures to limit that to 10% to 30% of profits. I was glad to see this included in the Liberal government's platform. Another one is through intellectual property. These are a number of the different measures that are used.

The thing is that the the international corporate tax system is based on the arm's-length rule and also on transfer pricing. We should be moving to a system that is similar to what we have in Canada, which allows formulary apportionment—sorry, “formulary apportionment” is not a sexy term—basically allocating the profit between countries, as we do provincially, according to real economic factors. So there's another provision that can also be used in that way, namely, economic substance or unitary taxation of multinational corporations.

Does that help?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Yes, indeed. Thank you.

[Toby Sanger]

Okay.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

My next question is for Ms. Cobden.

After the incident involving the illegal taxes imposed by the Americans on our steel and aluminum industry, we're now faced with a new agreement between Canada, the United States and Mexico. In your opinion, are there sufficient protections provided for your industry in the new agreement?

[Catherine Cobden]

Yes, I must say that we are very happy with the outcome of the CUSMA, with what it looks like. In fact, I've been on the public record on several occasions now to say that the Canadian Steel Producers urge the swift passage of CUSMA. It is a very good deal for the steel sector. I believe it moves the needle significantly for the metals industry overall. We really now have to get the job done, please.