Industry Committee on June 14th, 2016

[The Chair, Liberal, Dan Ruimy]

Go ahead, Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Mr. Chair, I would normally have supported a motion like this, but not when we have guests here. I want to get back to my witness questions, and I would call for a vote now, please.

[The Chair, Liberal, Dan Ruimy]

Okay.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

To Mr. Longfield, yes, they said they couldn't come in June. I spoke to them numerous times afterwards and they said they are willing to come after June, which is why the motion says that, if they are unable to meet, name a time in the summer and we'll be here. If the committee doesn't want to, then if we don't have them in, that's fine; you'll have to explain that position, because we've already invited them prior to this.

[The Chair, Liberal, Dan Ruimy]

If there is no other debate, we will call the question.

Just so I'm clear, from my understanding, we did extend the invitation and you were there with us, and we've asked them numerous times. My understanding is they were suggesting perhaps sometime in September when we reconvene. For this motion, what you're suggesting is to convene a special meeting during the summer months.

Mr. Lobb.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I didn't know we were going to debate this motion per se during this meeting, but seeing as we're having a debate on this motion at this meeting, I guess I'll add my two cents, in case anybody else has anything to add.

We've heard what Jerry had so say. I think it's important that we have Bombardier appear before this committee. It would be great if they could appear before the committee sooner rather than later. I think it would be great for them to explain many things, about all the jobs they create in this country, the great product that they create in this country, and also make a case to this committee in an open, public, and transparent way as to why future assistance would benefit their continuing on as a great company, a great Canadian company.

It's not uncommon for committees to meet after the House has recessed for the summer. It would be appropriate. Considering the dollar amount that's been asked, or allegedly asked, of the government, I think it would be great to have Bombardier appear for one, two, or three meetings so they can lay it out and explain their point of view and the benefits of the dollars they're asking for from the federal government.

[The Chair, Liberal, Dan Ruimy]

Just to recap, as Mr. Longfield has stated, we did go to Bombardier. They did open up their doors. They had their top executives. You were given more than adequate time to ask questions. That's Mr. Longfield's statement. That's where we stand right now.

If there's no further debate, I will call the vote.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Mr. Chair, that 12 minutes, you were very kind. It was supposed to be five and you gave me 12. I have to be fair with that. Twelve minutes does not constitute adequate time to discuss the effect of not having a bailout, not just on Bombardier, but on the entire aerospace industry and the manufacturing jobs that are tied to that. Twelve minutes does not constitute enough time.

Also, saying they opened up their books.... I don't want to go into it because it was a confidential meeting, and I'm not going to talk about that publicly. But I think maybe we were at two different meetings in terms of what I would have been looking for on the subject.

[The Chair, Liberal, Dan Ruimy]

Okay. Are there any other comments?

[Chandra Arya, Liberal, Nepean, ON]

Chair, I agree with Mr. Masse. I think we are wasting our time. Please put it to a vote.

[The Chair, Liberal, Dan Ruimy]

The motion is debatable, so that's what we're doing.

If there are no other comments, we will call the vote.

(Motion negatived)

We're going to move to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here today. One of the things you notice on the current list of automotive production is that Canada has slipped. If you look at the nations that are gaining, most of them have either a state-funded intervention, or they have questionable labour practices, or they have questionable environmental practices as a nation-state. What I'm a bit worried about is the fact that we don't concentrate when we do trade agreements, or when we do get into importing and exporting of goods and services.

I would open this to our friend in Vancouver as well to quickly note, what do your companies do to advocate for fair trade—I will include Mr. Dias, as well—with regard to the so-called labour gap?

I've worked at Chrysler. My father worked at Chrysler, and my grandfather worked at Ford. I've heard in not only just my time here as a member of Parliament, but basically since I was in the plant shop at plant three and plant six at Chrysler, that the labour cost was a disadvantage to their doing business.

I've seen Canada go from number two in auto manufacturing and assembly to number ten. To combat that, I believe it has to be more than just complaining about the labour disadvantage. It's about what companies do to talk about fairer trade versus the importation of materials, goods, and labour practices that are used to subsidize those imports.

I would close with the simple fact that asbestos is still being imported into Canada and used for brake pads. That's a classic example. That subsidized, harmful environmentally degrading product is being put by Canadians onto vehicles that are driven around on our streets, to be ground down onto the street elements, and to be washed away. Why are we even allowing that to be part of our importation process? It doesn't make any sense.

Maybe we'll let our friend from Vancouver start, and then I'd like to hear from our witnesses here with regard to what suggestions they have and what everybody is doing to improve fair trade that are true comparatives.

[Jerry Kroll]

The fair trade question is a good one. It's a comment and it's not just the fair trade. That's one component of it, but it's the entire footprint of the products that are being imported. Asbestos in brake pads is a legitimate claim.

How are the vehicles being produced? How are the raw materials being sourced? These are all things we have to look back to. Are the vehicles being produced in a way that's harmful for the people putting them together and the people sourcing the materials? This is something that's new to the automotive sector, and it's something that you can see reflected in what people are looking at for the ongoing carbon contribution of a vehicle as well. That explains the rise of products like the Tesla, where people realize that in the day-to-day usage of the vehicle they're having a far less adversarial effect on the environment.

That is something that has to be put in for ISO certification for environmentally friendly manufacturing practices during the manufacturing and also for the products or components.

It goes right down to animal products being used in the car. Leather and things like that also have to be looked at. There are so many layers that need to be peeled back on the industry to make sure that Canadian products lead not just in the product themselves, but in the thoughts behind them. It's an opportunity. It's not an expense. It's a fantastic opportunity for us to seize. That's innovation, because you thought about the innovation. Applying that innovation is where the real profit is going forward in the next 10 or 20 years.

Today's consumer loves that idea, and that's what has to be addressed.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Ms. Craig.

[Dianne Craig]

Thank you for the question. I would answer it in two ways.

First of all, we're a company that's over 100 years old, and Henry Ford was all about protecting the environment. When it comes to sustainability, whether it's how we manufacture our cars, how we build our cars, or the materials that go into our cars, for every component there's a strong thought process around making sure we're not doing anything that would be harmful to the environment. I can't speak to any component that I am aware of that is harmful to the environment that Ford Motor Company builds or produces in any of our manufacturing plants.

When you mention fair trade, I might look at it a little differently. I hadn't thought about it in the context that you mentioned. As I mentioned in my remarks, we're all about fair trade. When you take countries that we've been trying to work with in the TPP or the South Korea-Canada free trade agreement, those countries are closed markets.

When you look at Japan, 94% of what was built in that country was sold in that country. They only had 6% of the vehicles imported, which is wildly different from most of the other economically developed countries. In South Korea, 87% of the vehicles sold there are produced in South Korea. That's why they're closed markets. That's why no matter what we do, whether it's tariff phase-outs or trying to make sure we have currency manipulation disciplines in the agreements, they're still closed markets. Will they ever be truly open?

That's our definition of free trade in making sure that there are the same opportunities.

[Jerry Dias]

Trade is a great question. If you go back 15 years ago, Canada had about a $20-billion trade surplus. Today, we have a trade deficit. I will argue that has happened as a result of choices, poor choices.

If you take a look at the recent trade deals, Korea came into effect in January 2015. Since then, trade exports from Korea to Canada have gone up 8%, and those from Canada to Korea are almost down 4%.

Our big winner was beef. They found one cow in Alberta with mad cow disease a month into the trade deal, and we haven't shipped beef since. That's who we're dealing with. We get to play nice on the global scene while others mess around.

Korea exports over 100,000 vehicles a year to Canada, and we ship about 100. That deal is not going to change, and yet this is Canada's number one export. With the TPP, the Japanese ship 159,000 vehicles a year to Canada, and we ship about 500 back. They have no tariff for vehicles coming into Japan, but they have a closed market, and the TPP deal obviously is going to make it even worse.

We have to take advantage of Canada's assets, and what's our biggest thing? We have a skilled workforce. Why? We have high education, medicare, and we have so much going for us that we need to take advantage of it.

One of the issues that was raised, and that I want to finish on, is the whole issue of labour costs. Five per cent of the cost of a car is labour.

[The Chair, Liberal, Dan Ruimy]

Thank you. Sorry, but we're over.

Mr. Arya, you have seven minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Dias, I agree with you that there's a role for the government to play to promote the manufacturing sector.

In the written brief that you have submitted, you mentioned aluminum. After I became an MP, I looked at aluminum manufacturing, and realized that during the last 15 years, we have set up one tiny aluminum smelter in Canada. During the same time frame, the oil rich Arab countries, in one 1,000 kilometre radius, have set up five world-class aluminum smelters.

You also mentioned a passing remark mostly on the small manufacturers in Canada. There's absolutely no funding available to new manufacturing start-ups in Canada.

The regional development agencies, in fact the western development agency clearly said flat out that they don't finance new start-ups. Who would finance then? They said BDC, and BDC has a $1-billion portfolio on secured loans. They have hundreds of millions of dollars to invest, but in their answer, they said they have prorated during the last year only $23 million to new manufacturing start-ups.

I fully agree with you that we need a manufacturing policy in India. In the oil rich Arab countries, they're adding value to the oil and natural gas. Every single industry and the development department in all these six countries have various charts. With all the blocks that are coming down from oil and natural gas, one colour, white, means the plant has already been set up. Green means a plant is being formed. Yellow means there is something that needs to be planned. We don't have any new manufacturing set up to be coming here.

What they have though is a clear industrial development policy that is also backed by the state institutions. The Arabian will start up a titanium dioxide plant costing $50 million, and if I have $40,000 of it, then the government is ready to step in with $60,000 of funding to promote that manufacturing.

Can you kindly expand in one minute the manufacturing policy you'd like to see in Canada?

[Jerry Dias]

You touched on so much of it. I talked about the ore and energy industry. We've closed 10 refineries in Canada, but the debate in Canada is about pipelines to get our unrefined bitumen to Texas for refining, or to get into pipelines and put into vessels to ship overseas for processing.

I understand that it's an expensive investment to reopen a refinery, but is it not worth the investment to sell a finished product overseas? I don't have a quarrel with pipelines. We need more pipelines. It will put my members to work in General Electric in Peterborough, and also my members that make pipelines, but should it not go to a refinery, finished off, have value added, and then be moved forward? With the manufacturing sector, aside from what I just talked about, you need to take a look at the key industries that you want to be leading in, the ones that create the jobs and the ones that developed the technoloy. A car today is as sophisticated a vehicle as there exists anywhere in the world. The automotive industry is high tech like the aerospace industry, and those are the ones that you want to plan.

[Chandra Arya, Liberal, Nepean, ON]

The only point where I wish to disagree with you is that you said we have a skilled workforce. In Ottawa, we have 1,700 knowledge-based companies, and the CEO of Invest Ottawa tells me that there is zero per cent unemployment because we don't have the talent that is required.

However, I have only one and a half minutes, and I want to go to Mr. Jerry Kroll.

Mr. Kroll, can you tell us very briefly of your experience in trying to obtain financing, especially the debt financing in Canada, for your venture?

[Jerry Kroll]

Certainly. It's been quite frustrating. Through global warming and seeing petroleum products and pipelines proliferating, it's an area of the world that everybody, the average person, understands is unsustainable and wants to move forward on. We have largely funded our company through private equity, through people investing, through individuals and all of that.

In speaking to government organizations, to cities, to provinces, and federally, there has been a lot of interest, but really no action. In talking to people, this area, the clean tech industry, is something that is going to be the next platform going forward.

[Chandra Arya, Liberal, Nepean, ON]

Have you approached the commercial banks and/or the BDC?

[Jerry Kroll]

Yes, we've approached the BDC and got nowhere there. We've approached private banks and got nowhere there.

[Chandra Arya, Liberal, Nepean, ON]

I'll go to Ford.

You mentioned that manufacturing is the cornerstone for any healthy economy, and of course I agree with you. You did touch on the two recommendations on the AIF and the trade policy matters, but could you go beyond the automotive sector and tell us what exactly is required to advance the manufacturing sector in Canada?

[Dianne Craig]

Thanks for the question.

I've had the real privilege of leading the Canadian business for four years. We are losing the battle. We are losing the conversation about Canadian manufacturing in Canada. What I am concerned about in terms of the last four years is that we continue to have the same conversation about where the gaps exist, whether it's how the AFA is treated, whether it's challenges we've had with TPP or other messages it sends that our industry is an important one—you have tariff phase-outs that are five years versus the U.S. at 25 and 30 years—or whether it's conversations around electricity.

Harmonization and regulation, we continue to make good progress on, and as Jerry mentioned, we continue to make sure that we have a competitive labour agreement, so that is not really going to be the issue that will prevent manufacturing from happening in Canada, but we have to change the trajectory. I would say that we know what the gaps are, but we need to do something.