Industry Committee on Nov. 19th, 2018

[Dan Albas]

How do we know that? I'd like to know if there are protocols.

Is there anything you could table with the committee to indicate that this is a priority for you?

[Lisa Setlakwe]

There are protocols. I cannot tell you what they are. I don't know them myself personally.

[Dan Albas]

Would you be able to supply that to this committee so that we know? Are there any plans in future supplementary estimates (B) or (C) to fund any of these initiatives to make sure Canadians can be assured that your department is looking after this?

[John Knubley]

Public security would be in the lead in terms of the critical infrastructure activity.

We participate in interdepartmental meetings on a regular basis in terms of emergency preparedness. It would be in that context that there would be a request—

[Dan Albas]

Who does the review? Does Public Safety review, or does your department monitor—

[The Chair, Liberal, Dan Ruimy]

Sorry, the time is up.

[John Knubley]

We look at the telecom elements and participate in emergency preparedness.

[The Chair, Liberal, Dan Ruimy]

Okay, we're going to move on. We have to monitor our time and make sure everybody gets their time in.

Mr. Sheehan, you have five minutes.

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

Thank you very much, Mr. Chair.

Thank you to our presenters for this important update. I was there when the announcement was made by Minister Bains in Hamilton on support for steel and aluminum. Many of the officials from here were there.

I was glad to see the response, as the co-chair of the all-party steel caucus, and it was a multi-ministerial response. There was $2 billion in aid that was put forward, and ISED with the $250 million, and the $1.7 million from EDC and BDC. Minister Hajdu has extended the EI benefits and made them more generous. The $1.6 billion in retaliatory tariffs was also announced.

This is one of the questions I have. I also sit on the trade committee, and the Algoma steel company has testified in the open that they have applied for SIF funding. They put their application in not too long ago.

I know you can't share company-specific applications, but have there been announcements on SIF funding for the steel and aluminum industries, and who would that be? That would be public.

[Paul Halucha]

The only announcement so far has been about ArcelorMittal.

However, as I noted, we have a number of proposals that we've been working on with companies. We have probably about seven or eight that are close, by which I mean they could be ready in the next six weeks or so.

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

On the $125 million, how is that different?

The SIF funding was there in budget 2018. How is the $250 million different from the regular SIF funding? Is it a specific carve-out?

[Paul Halucha]

Exactly. It was a specific carve-out.

Obviously, with the duties being put in place against Canada, we knew the immediate impacts were going to be on the large steel producers in particular and aluminum companies as well. The price of aluminum has gone up considerably, but it's a continental price so the effect has not been as significant on the large primary producers, but on steel companies the effect has been in the millions of dollars per day.

The first issue we were aware of that was going to happen was that many of them would be put in a situation where they would be either cancelling or pushing forward their investment plans, and that's a recipe to have firms become less competitive over time. The SIF program, the new allocation of $250 million, was put in place to support investment plans and investments in capital infrastructure by those large producers, recognizing they were going to be the most impacted.

We set a couple of parameters: that the companies had to have at least 200 employees and that they had to have capital investment plans of at least $10 million. That was done—to the point that was raised earlier—to enable us to act more quickly with the largest companies that were going to be the most affected.

We know from past practice that, in the absence of some parameters for programs, what happens is that you can get inundated by requests from everybody. We looked very carefully at who was going to be in the field of the most impacted and made sure we were scoping them in, in an effort to ensure we were not effectively paralyzed by an endless number of requests. I think our own analysis, as the deputy alluded to earlier, is that there are about 7,000 or 8,000 other companies that are downstream users of steel and aluminum that have been impacted in one way or another.

The $2 billion that you identified.... That was why there were allocations within BDC and EDC to ensure they were in a position to respond. Some of the data I have is that BDC so far has more than 267 clients that have been impacted for over $100 million, and EDC has done roughly $60 million for 25 clients. Those numbers are up to the end of October.

That was the intention, to have the smaller and medium-sized companies go there, in addition to being able to do things like use the duty drawback initiative, and then also apply for remissions where either they were contractually obligated to continue to purchase, so they had no ability to change suppliers, or there was no steel supply that was Canadian in source. So in instances where you couldn't move within the Canadian marketplace, we have identified a remissions process through the Department of Finance, and they have already begun to provide relief to companies through that.

They deal with all of the elements working together. It would provide a comprehensive response, in addition to, obviously, the retaliation package, where the government responded dollar for dollar to what had been done out of the United States.

The point, too, is that one of those programs is retroactive.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move to Mr. Albas.

You have five minutes.

[Dan Albas]

Thank you again.

Keeping on the topic of steel and aluminum tariffs and whatnot, one comment I have is that some firms have been very upfront, wanting to be very productive. They have invested into their mills and into their operations, so they have already put in the hard work, and they are seeing the strain under the tariffs. Now you will have other ones that may not have done the same. For them there's an unlevel playing field for looking for project-based funding.

Is this a concern? Have you come across this in your work on the SIF?

[Paul Halucha]

To understand better, are you asking about a situation where a company has already made an investment, and therefore has paid for it?

In our experience, there are tips that innovation and keeping an enterprise competitive are not a one-off step, so we have expectations that companies are going to continue to invest. I think that's normal. They have maintenance capital, and they have other forms of capital that they regularly need to do.

We have been pretty flexible within our program parameters, and under the strategic innovation fund, we have an ability to.... We don't have a one-size-fits-all where only one type of project can come forward. As the projects are announced, you will start to see that they have in common objectives of increasing the competitiveness of the company, upskilling the workers, increasing the use of technology, accessing new markets. Those are the kinds of parameters we look at as policy objectives. Then behind that, we're able to fund quite a broad set of activities in order to reach those.

[Dan Albas]

Recently it was declared that the B.C. LNG project is going to be moving forward, but only with severe reductions in terms of future carbon tax increases, waiving of the PST, and also waiving of steel tariffs—and I believe some aluminum tariffs, but mainly steel tariffs—that will allow foreign steel to come in.

Many British Columbians have asked, why are we continuing to rely on steel from outside of Canada? Are any of the funds that you're talking about through SIF used to see if we can improve things, improve the supply chains or market operations on the west coast, so we're not being forced to build these large projects utilizing out-of-country steel?

[Paul Halucha]

I'll just make two comments. I won't comment on the LNG decision, because I think you would need to be within all of the aspects that are required in order to successfully attract what is one of the largest investments—if not the largest—in Canadian history to British Columbia.

On your second point, could you be a bit more precise about exactly what you're asking?

[Dan Albas]

Sure. The point is that, rather than just working on existing mills and their productivity—although I'd still contend that many will not proceed because they've already put money into their operations to be productive—I'm talking about a structural change in how that market operates by encouraging development of that market on the western side of Canada.

[Paul Halucha]

I'll make two comments on that.

If you look at trade flows between Canada and the United States—and as in so many areas, we are each other's largest importers and exporters of steel and products—it's very much a north-south flow on each of the coasts, because of the costs of transporting steel from one coast to the other. By the time our product gets from Ontario or Quebec out to British Columbia, there's a significant cost. That becomes a prohibitive issue.

[Dan Albas]

I recognize that, but the question was this. Are you making sure there are SIF funds available to actually change the structure of that market, if a market participant says that they want to do it out in B.C.? I will tell you that it's Turkish, Korean, Chinese rebar and all that. We've had issues with this before, and the costs just keep going up.

[Paul Halucha]

The answer is yes. That would be an eligible expense, and we would be excited to see such a project. The challenge would be that, commercially, it would need to not only be viable during the period of tariffs but be able to survive the removal of those tariffs in the future. That is a key condition. There are a lot of things.... If the tariffs are still in place in two or three years, commercially you could imagine this kind of a venture.

But the trade flows exist because there is a strong logic to them. In normal circumstances, we want to see that free flow of goods across those borders. It would be challenging to imagine rebuilding all of that capacity in eastern Canada to service western Canada, not knowing when the tariffs are going to be removed. We continue to have that as a major policy focus of our government.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move to Mr. Jowhari.

You have five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to the department officials for coming today.

I want to probe further into the $15-million funding for the strategic innovation fund under the innovation and skills plan. Back in May 2017, our committee put out a report with the name, “The Canadian Manufacturing Sector: Urgent Need to Adapt”. One of the recommendations we made was to suggest that “the federal government improve the labour market information it produces, notably connecting jobs in occupations in demand...with skills available with job seekers”.

We've been very successful. The economy has created more than 500,000 jobs, yet we still have labour shortages. We still have skills shortages. We need to enable job seekers with the opportunities. Is any of this $15 million going into helping to bring that match of supply and demand? If not, what have we done on it, if anything?

I recall you mentioned that they are reprofiling certain programs. That's what the $15 million was. Can you explain where the $15 million is going, and are we addressing the concern that I raised?

[John Knubley]

The $15 million is strictly related to projects that have been approved, and they are changing the rate at which they are spending their money. We have had to reprofile, to a later year, the dollars for those projects.

In terms of skills, a big component of the innovation and skills plan is the skills side of things. In comparison to previous competitive programming, what is very interesting is that, when you sit down with firms, they talk about two issues on the skills side, and they do it almost immediately. The first is where there are challenges in terms of skills shortages currently, as well as the question of what the workplace of the future will be as many of these technologies are introduced, such as the Internet of things, artificial intelligence and quantum. What kind of workforce will they need for the future?

The government has put a great deal of emphasis on the skills side of things, including changing course requirements in terms of bringing in....

[Majid Jowhari, Liberal, Richmond Hill, ON]

If my constituents are asking me where the government is going, where the focus is, how they can get retrained, and where they would be able to find that information, what should I answer?