Finance Committee on May 31st, 2024

[The Chair, Liberal, Peter Fonseca]

I call the meeting to order.

Welcome to meeting number 145 of the House of Commons Standing Committee on Finance.

Pursuant to the House of Commons order of reference adopted on Wednesday, May 22, 2024, and Standing Order 108(2), the committee is meeting to discuss Bill C-69, an act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.

Before we begin, I would like to ask the members and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents from occurring. Please take note that the following preventive measures are in place to protect the health and safety of all participants, including the interpreters.

Use only an approved black earpiece. The former grey earpieces must no longer be used.

Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face-down on the sticker on the table for this purpose.

Thank you all for your co-operation.

Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1 and in accordance with the committee's routine motion.

Concerning connection tests for witnesses, I'm informing the committee that all witnesses have completed the required connection tests. Everything is good with that.

I would like to make a few comments for the benefit of the members and witnesses.

Please wait until I recognize you by name before speaking. For members in the room, please raise your hand if you wish to speak. For members on Zoom, please use the “raise hand” function.

The clerk and I will manage the speaking order as best we can, and we appreciate your understanding in this regard.

I remind you that all comments should be addressed through the chair.

Before I welcome our witnesses, I want to thank our clerks, Alexandre and Ariane, for their great work. In really short order, they've been able to gather all the witnesses and bring them all before us. Thank you very much for your tremendous efforts.

Now I'll welcome our witnesses.

From the Desjardins Group, we have the vice-president of government relations, Bernard Brun. Welcome, Mr. Brun.

From the Canadian Health Food Association, we have the president and chief executive officer, Aaron Skelton, and Laura Gomez, lawyer and legal counsel. Welcome.

Also with us, from the Mining Association of Canada, is the president and chief executive officer, Pierre Gratton. Welcome, Mr. Gratton.

With that, we'll start with your opening statements. We'll start with Mr. Brun for up to five minutes.

Thank you.

[Bernard Brun, Vice-President, Government Relations, Desjardins Group]

Good morning, Mr. Chair.

Thank you, dear committee members, for this opportunity to speak with you today.

My name is Bernard Brun and I'm the head of government relations at the Desjardins Group.

With assets of over $420 billion, Desjardins is the largest co‑operative financial group in North America and the seventh-largest financial institution in Canada. To meet the diverse needs of our 7.7 million members and clients, our activities cover every aspect of the financial sector, including services to individuals, business services, wealth management, personal insurance and general insurance.

Desjardins supports initiatives that would enable it to provide enhanced financial services to its members and to Canadian citizens. The objectives of the consumer-driven banking framework, commonly known as the open banking framework, would appear to do just that. We therefore support the ultimate objective, which is the implementation of a framework to allow consumers to control the sharing of their data.

Unfortunately, the proposed framework has a major structural flaw. Our current concern stems from the fact that the proposed framework would do more than introduce a common technical standard for all of the country's financial institutions; it would also establish a separate mandatory framework for federal financial institutions, to which provincial institutions could adhere.

As this government admits, the field covered is one of shared or joint jurisdiction. Concretely, it would lead to a dual overlapping framework for the jurisdictions, which would certainly put provincial financial institutions, like caisses populaires and credit unions, at a disadvantage. Although adherence to the framework is theoretically voluntary, financial institutions would end up being required to adhere in order to remain competitive and provide proper services to members and citizens, and also because of risk management considerations.

As I was saying, the current bill has a structural flaw that would have a major impact. It needs to be corrected as soon as possible. The government must avoid a false start in terms of consumer-driven banking services to ensure that it covers the entire financial sector and all consumers.

As a systemically important financial institution nearly all of whose activities are subject to provincial regulation, we believe that the inevitable overlap between the federal framework being proposed and the existing provincial framework is counterproductive. It's a barrier to competitiveness.

The adoption of the bill in its current form would undermine consumer and user confidence, when this confidence is crucial to the concept underpinning the idea of open financial services.

A two-tier system would place consumers at a disadvantage and, more to the point, make a consistent consumer experience impossible, while ultimately reducing credibility and innovation.

The Desjardins Group is in favour of introducing a framework that would enable consumers to control how their data is shared. In order to do so, corrective action is immediately needed in terms of governance and structure, if we are to continue to benefit from current favourable conditions and avoid future delays.

Under the circumstances, dear committee members, we asked the government to remove division 16 of part 4 of Bill C‑69 and to make it a separate bill so that the proposed framework could be reviewed in depth to allow all of the entities affected and the public sectors, including provincial authorities and governments, to have the same view and understanding of the future system.

Thank you for listening. I'd be more than happy to answer your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Brun.

We'll now hear from the Canadian Health Food Association. I believe it's Mr. Skelton who will be delivering remarks.

Go ahead, please.

[Aaron Skelton, President and Chief Executive Officer, Canadian Health Food Association]

Good morning.

Thank you, Chair and members of this committee, for having me here today. My name is Aaron Skelton. I'm the president and CEO of the Canadian Health Food Association, a trade association representing natural health, organic and wellness products in Canada. I am grateful to have the opportunity to speak before you today on behalf of not just our member companies but also the 82% of Canadians who use natural health products as part of their health and well-being.

The core concern I am bringing to you today is regarding Health Canada’s continued abuse of the parliamentary process. Health Canada introduced significant amendments to the laws governing natural health products through budget omnibus bills in 2023 and 2024 rather than following the parliamentary process. This has undone the hard work of prior legislative reviews conducted by previous Parliaments and the House of Commons Standing Committee on Health.

In budget 2024, current amendments to the Food and Drugs Act, as included under division 31 of Bill C-69, has yet again caught an entire industry completely off guard. For the second time in as many years, Health Canada has attempted to evade proper parliamentary process, including scrutiny by the Standing Committee on Health and consultations with industry, to achieve their desired outcome with zero checks or balances. The amendments they seek as part of division 31 are extremely powerful. However altruistically the intentions behind it are framed, the implications of such broad, sweeping changes demand proper study and regulatory rigour.

As mentioned, this same approach was taken in 2023, when division 27 in part 4 of Bill C-47 shockingly changed the definition of “therapeutic products” to include natural health products—with no scrutiny, public analysis or industry consultation. The lack of transparency and the unintended consequences that came from a blatant disregard of due process resulted in a private member’s bill, Bill C-368, that just this week passed second reading with support from all opposition parties to repeal this amendment. While a step in the right direction to course-correct a sneaky tactic, once an amendment has passed, it is no easy feat to undo what was inappropriately done.

The need for industry and consumers to voice their concerns on important regulatory and legislative matters is paramount, a requirement that is crucial to the development of fair and appropriate regulations. The potential impact of unchecked powers is not a hypothetical one. The current cost recovery proposal for NHPs, the outcome of such ministerial powers, has already created a staggering and untenable situation for companies across our sector.

Today we are back to ask this committee to not let history repeat itself. To be clear, we represent the natural health products industry. We do not represent any smoking cessation or tobacco products. We are here because over the course of the past two years, our trust in Health Canada has been eroded. We have faced multiple regulatory and legislative changes that have serious consequences on an industry and on Canadians.

If Bill C-69 passes and this amendment goes through, health products, natural or otherwise, will be left to face broad, sweeping powers from a minister who will have the ability to issue orders without following the Statutory Instruments Act. As it is a first of its kind, we have no visibility into the evidence required to support an order, and we will be left in the dark as to whether or not these powers can override department-issued licences, such as those granted by the natural and non-prescription health products directorate.

As an industry, we continue to support regulation and legislation that protects Canadians and is developed in a transparent, responsible and appropriate manner. Regulatory amendments pushed through omnibus bills do not reflect this value.

Today we ask this committee to consider removing division 31 from this act. This committee amended the budget in 2017, and we urge you to consider this precedent here. The restrictions placed by division 31 on health products, including natural health products, have consequences beyond what the current Minister of Health has communicated. With the power of this and no due process, Health Canada has made itself the judge, the jury and potentially the executioner. We cannot overstate the need to approach regulatory changes of this nature and this magnitude in the proper way—with study, analysis and consultation.

I thank you again for your time and I am happy to answer any questions you may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Skelton.

Now we will now hear from Mr. Gratton from the Mining Association of Canada, please.

[Pierre Gratton, President and Chief Executive Officer, Mining Association of Canada]

Thank you, Mr. Chair.

I want to begin by acknowledging that we are gathered on the unceded territory of the Algonquin people.

I appeared before the Senate Energy, Environment and Natural Resources Committee on Tuesday as part of its prestudy of amendments to the Impact Assessment Act contained in this bill. The MAC's Senate committee brief has been submitted to your clerk for distribution, so expect that soon.

Today I will focus my remarks on two aspects. The first is the proposed clean technology manufacturing investment tax credit, which even as an acronym is a mouthful.

The mining sector welcomes the government's efforts to build a critical minerals value chain and sees what has been described as a generational opportunity for Canada. The tax credit, if expanded and implemented correctly, could secure Canada's place as a reliable, responsible critical minerals supplier to our trading partners and the North American supply chain that is a getting built.

In its current form, however, it falls short of properly tackling the major challenge facing industry, which is having enough critical mineral supply to feed the various supply chains. It will thus not achieve our national objectives to attract the necessary significant capital investment to support our energy transformation and security.

We have seen lots of news about new investments in battery plants and electric vehicles. We have read a lot about Canada's and the west's exposure to China's market dominance in metals and how critical minerals are needed to fight climate change and support the energy transition that is under way; however, unless we secure the right conditions to enable the industry to produce additional tonnages of nickel, cobalt, copper, lithium and rare earths, as well as find, permit and build new mines, we will fail to address both challenges.

In fact, the new automotive investments we have attracted to Canada will be forced to rely on foreign imported feed sources, leaving Canada at greater risk of increasing its dependence on China. The past two decades have seen a sharp decline—

[The Chair, Liberal, Peter Fonseca]

Mr. Gratton, the bells are ringing. We'll have to suspend for a few minutes.

[The Chair, Liberal, Peter Fonseca]

We're back.

I apologize, Mr. Gratton. Please continue if you want. Go back a little bit. We did stop time, and we'll even add time if needed.

Go ahead.

[Pierre Gratton]

Thank you.

I was just at the point of talking about what's happened over the last 20 years in the metals business.

I think it's important to note that we've seen sharp declines in Canadian production of key battery metals, including nickel and cobalt. Nickel is down 60% in the last 20 years. We used to be the one of the top two producers in the world, and we're at sixth.

Our only lithium mine is Chinese-owned, though we do have projects advancing in the country. New graphite projects are advancing as well, so there is new activity.

Our copper production has also dropped by 40% in the past 20 years. We clearly need to turn this around. The tax credit could help. My members, which include global leaders in critical mineral production with Canadian operations, are readying their respective project portfolios.

I would stress to the committee that it's a tax credit, not a subsidy. ITCs function like rebates and they apply only after investments have been made. These potential investments would create jobs and economic activity to benefit employees, communities and indigenous rights holders where they operate, as well as Canadian suppliers.

We have two concerns with the CTM-ITC as proposed. First, it's too narrow in scope. It will cover certain vehicles and equipment purchases, which on average only account for 10% to 15% of new mine expenditures. You have to keep in mind that where we need to increase production in the short term is at existing mine sites. They already have fleets of equipment in place, so the benefit of this tax credit in the short term is much reduced.

We encourage the Department of Finance Canada to expand the ITC to include all costs related to mine development. Mine development expenses are not a blank cheque; they are laid out specifically in the tax code. They require the private sector, not taxpayers, to invest billions to get more critical minerals out of the ground and then get a credit for it. This will help industry in Canada turn the dial and get the necessary critical minerals into our supply chains in the short term.

Just to illustrate, one of our members has said that it has three potential new nickel project expansions that, if built, would increase its total Canadian production by 60%, which is huge. One project is likely to proceed regardless. However, the value of having an enhanced tax credit would put the second and third projects into play.

We thus welcome the decision by the finance department to continue to consult on this proposed tax credit over the course of this summer. It's an indication, we hope, of some openness to get this right and make sure that the tax credit does the job it is intended to do, which is incentivize the development of not just equipment but of new and critical mineral mines.

Our second concern was an original proposal to limit eligibility to projects containing 90% or more of critical mineral production. Canada is blessed with polymetallic deposits, which means we typically find copper with molybdenum and gold. Neither of these metals is on the list of metals eligible for the tax credit. The vast majority of copper mines and projects, including some of the most advanced, like Galore Creek in British Columbia, have less than 90% copper.

Finance has listened to us and budget 2024 has proposed a change to eligibility to 50% or more of the financial value of the output that comes from critical minerals. We welcome this news.

Last, I want to comment on the renewal of the mineral exploration tax credit, the METC.

Unfortunately, while renewed in late March, the increase in the inclusion rate for capital gains in budget 2024 significantly weakened the value of the METC. I have a feeling many of you are not aware of that. The METC raises 83% of all equity for exploration and development. Charity flow-throughs represent 89% of that 83%, or $1.2 billion in 2021, most of which was directed towards critical mineral exploration. The junior exploration sector is thus almost entirely dependent today on the METC. If the rules introduced in the budget are not changed, we estimate a significant drop, possibly as high as 75%, in exploration and development investment, starting on June 25 when this comes into effect.

We have raised these concerns with the finance department and are providing them with the information they need to conduct an analysis of the impacts and possible remedies. We believe there are solutions, and conversations have been positive. We are hopeful that finance will act on this matter very soon, so we don't compromise this year's exploration season. If not, budget 2024 will deliver a major blow to mineral exploration at a time when we and our allies are counting on us to find more mines.

I hope we can count on this committee's support for the issues I've raised today.

Thank you. I'm happy to take any questions.

[The Chair, Liberal, Peter Fonseca]

Thank you very much, Mr. Gratton.

I'm sure the members have many questions for all of you.

For the first round, each party will have up to six minutes. We are starting with MP Calkins for the first six minutes, please.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Thank you, Chair.

My question is to the Health Food Association. Thank you for your presentation.

I just want to be clear about one part of your presentation. You said that Health Canada snuck these changes in Bill C-47 and Bill C-69. Actually, when officials from Health Canada appear at Parliament, they sit exactly where you're sitting right now. It would be the health minister advising the finance minister to put these changes into this piece of legislation. Health Canada wouldn't be able to table any legislation at all. It's MPs and ministers and the government that tables these things.

I want to talk a little bit about the health minister's defence of using Bill C-47 and now Bill C-69 and claiming that Health Canada needs powers to stop, I think, a particular example of a product that they're talking about. I want to go through the current set of powers that Health Canada has.

Does Health Canada currently have the power to issue a stop sale on any natural health product in Canada?

[Aaron Skelton]

Thank you, Chair, for the question. I will pass that to my colleague, Laura Gomez.

[Laura Gomez, Lawyer and Legal Counsel, Canadian Health Food Association]

Yes, Health Canada has the power—

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

I have a lot of these, so it's just yes or no. Do they already have the ability?

[Laura Gomez]

Yes.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Do they have the ability to stop personal use imports at the border if they want to, through CBSA?

[Laura Gomez]

Yes.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Do they have the ability to seize any product that they deem necessary in order to carry out their duties and functions?

[Laura Gomez]

Yes.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Do they have the ability to revoke a site licence for a manufacturer of natural health products?

[Laura Gomez]

Yes.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Do they have the ability to revoke a site licence for a packager or labeller of natural health products?

[Laura Gomez]

Yes. It can be a site licence for a packager or labeller.

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Do they have the ability to revoke a site licence for an importer such as a traditional Chinese medicine importer, or anybody else, for that matter?

[Laura Gomez]

Yes, they do.