Industry Committee on Feb. 24th, 2020

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Poirier.

I may have enough time to ask a second question quickly.

Mr. Cassidy, I know that the Unifor union also handles the forest industry. I know your presentation was not about that, but do you feel that this agreement will address the timber crisis?

[The Chair, Liberal, Sherry Romanado]

Be very quick.

[David Cassidy]

I'd have to defer that question. I'm not well enough versed in softwood lumber. Auto is my baby.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Okay. I tried my luck, as I am interested in this.

Thank you, Mr. Cassidy.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

The next round of questions will go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair, and thanks to our guests for being here.

Quickly, this is for Mr. Azzopardi and Mr. Cassidy.

There have been a lot of auto investments in the last 20 years, just not in Canada. Detroit is up to $16 billion with the recent investments in the last five years. In Ontario it was $6 billion for the last five years. I just want to give a chance for you to highlight some things.

I know, Mr. Azzopardi, you mentioned a couple of things, but what more can be done? I'm fearful that the impression is that if we just sign this agreement, there will be labour and environmental improvements that will allow our workers to compete more fairly than before. However, if we just leave that for this agreement, I'm concerned about our future. Perhaps you could outline a couple of things that we might need to do.

Speaking of reciprocity, Mr. Cassidy, you might want to raise the issue with regard to Michigan and the United States' single-events sports betting whereby thousands of jobs are at risk as well, because we won't have reciprocity with the products that they have over there.

Mr. Azzopardi, could you answer first, please?

[Jonathon Azzopardi]

For a long time I've tried to answer that question from both sides: from the OEM and from the tier-one, tier-two and tier-three levels. Recently, I've changed my viewpoint. I think they actually have to be broken apart because they're two different strategies entirely.

Tier ones, tier twos and tier threes need to adopt more advanced manufacturing, which means they need to compete. That will help to grow that sector. I believe this agreement will actually help us to be able to strengthen those relationships because of the supply-chain integration we already have. Parts—and this is no joke—will cross that border seven times between the tier ones, tier twos and tier threes before they even get to an OEM.

The investment you make in that lower tier is actually exponentially growing, because we have access to all the OEMs. I believe this is the area that Canada can grow the most. The effect of a dollar from the government dropping into these lower sectors is actually multiplied due to the fact that we have access to all of these investments in the United States.

Investing in an OEM is good and shouldn't be abandoned—don't get me wrong—but they're only one brand. I have access to 44 different brands. It's a huge opportunity in that lower sector, so the strategy needs to be different. We've been trying to attack the strategy in the same way for both, but they're actually different. We need to adopt more advanced manufacturing to make us more competitive. We need to adopt more manufacturing foreign trade policies so that we can take advantage of more markets using the U.S. as a springboard. That's how you grow manufacturing in Canada in those lower tiers.

OEMs are actually a simpler but more complicated solution. They're looking for at least good fair-market access, which means more trade agreements, but they're also very cost-sensitive and there are some more difficult questions, which I don't think this committee is prepared to answer, in order to be able to make those decisions. I believe that at some point adopting a manufacturing policy that includes all aspects—advanced manufacturing, energy, labour, trade—is the way to attract OEMs.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Mr. Cassidy, that sounds to me like pushing a national auto strategy.

[David Cassidy]

When the announcement came relative to General Motors and there we were with General Motors beefing up in Mexico at the same time, with the trade.... You know, when you go to the cheapest facility or place that you can.... Right across the ditch from us in Windsor, there are 5,000 jobs being added to FCA today. In my facility, the Windsor Assembly Plant, we're potentially losing 1,500 OEM jobs, which obviously would be devastating to Windsor and Essex County and to our auto parts and so on and so forth. As I said, with one auto job there are 10 jobs in the economy.

It's very important that we do the investing and continue to do it. With CUSMA, even if you look at the yellow unions in Mexico, it's an opportunity where you can bring up that skilled labour and bring up where that number is. That $16 an hour they talk about in the trade agreement is a little fictitious in terms of their going from $2.25 to $16 an hour. In fact, there will at least be provisions there so that they'll be able to check on it. The old NAFTA didn't have that opportunity.

It's so important that we get into the technology that can be done around autonomous vehicles and obviously the R and D and the batteries. Our facility builds the only Canadian-made minivan that there is as far as the hybrid goes. Here we are, with a Canadian-made hybrid vehicle, and we can't get batteries. We have to reach out and get batteries from China, if you can believe it. That's a problem.

You mentioned one last thing, Brian, on the single sports betting, if I could just...?

[Brian Masse, NDP, Windsor West, ON]

Yes.

[David Cassidy]

That has been around for a decade. For us, relative to jobs in Windsor and Essex, I represent the Caesars Windsor folks. There are 2,600 members there. Just in that facility, this will add 150 jobs, which is important. We're missing the boat again, because Michigan, New York and other states have already moved this forward. If we can get the single sports betting....

It's very important for all of us in Canada. Fingers crossed, I hope this government.... I know that we're not talking about this here today, but I had to make sure that I.... Thank you for lobbing that one out there and me hitting the ball out of the park. Thanks, Brian.

[Brian Masse, NDP, Windsor West, ON]

It actually is important because we are talking about equality and reciprocity. The United States is moving ahead with single sports betting while around $10 billion goes into the underground economy in Canada. That means thousands of jobs, not only in our district but across this country. It's tens of millions of dollars for provinces on a monthly basis right now. We're hoping to get that changed.

Thank you, Madam Chair.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

That completes our first round of questions. We do have some time to move into the second round of questions, at five minutes each.

To begin, we will have Mr. Dreeshen from the Conservative Party.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Madam Chair.

One of the things we're talking about, of course, when we're talking about Canada as a country, is that Quebec is really pushing the fact that it has the green aluminum and so on. Those are the concerns and issues that we've talked about. One of the things we've looked at is the Chinese aluminum being stockpiled in Mexico and the issue about what that is. I think that's been a really critical component of this.

I believe, Mr. Azzopardi, that you were talking about whether it is molded and what percentage is coming in and in what area. I think that's really an important issue. Also mentioned was the 25% U.S. tariff on China and the effects that had and how that pushed us into a situation where we all had to pay attention to what was taking place.

I want to take it in a different direction for a moment. We produce a lot of coal in western Canada and the northwest U.S. It goes through the Port of Vancouver and then heads over to Asia, where it is being used to create steel, which then comes back and becomes part of this problem that we have. There's no carbon tax associated with that, although we see our problems as far as dumping is concerned. I think that really becomes a critical aspect of this. How do we ever expect, then, that we are going to be competitive under those circumstances?

We see some of the other things that are happening with some of the review provisions that we have. How can we be expecting that we are going to be able to have an easier time to get foreign direct investment coming here into Canada unless we're paying attention to all of those micro-issues I've just mentioned?

[Jonathon Azzopardi]

I'm glad you brought that up, because we're seeing it as well. We've been seeing it for steel for many years. Aluminum is obviously becoming more popular, so we're seeing it more on aluminum. If this were a panel of Mexican government officials, I'd be saying exactly the same thing. Unless you start to pick up the protectionist measures that the United States is picking up, you will also be the weak link in North America. You have to be. You have no choice. Unless you want to let the erosion continue, you must take on the same policies as the U.S. It's so important. We see it on the ground level all the time.

China has the ability to move product inside Canada through investments. I'll be totally honest with you. Since the agreement has been under question, and then negotiated and ratified, we've actually had more investment opportunities in Canada. The problem now is that you need to filter out those opportunities. Are they going to benefit Canada, or are they going to hurt Canada?

A lot of the opportunities are just so they have drop zones, and we're watching those very closely. Those should go away.

On the other hand, I've also had investments from other countries that want access to the United States through Canada. We obviously want more of those investments.

The way we filter those out.... We can only do so much at the ground level, and we're trying, but the government has to give us the teeth, to arm us with the ability to stop those. It is critical. This is nothing new, I'll be honest with you. It's not new but it will continue, and actually this is where the provisions in the agreement can hurt us or help us. Right now they will help us if we can stop it from happening.

If we don't put those measures in, those RVC increases that Mr. David Cassidy talked about will start to play against us very quickly. Once they're in place, it will be very hard for us to change them. I actually have a grave concern that if this doesn't happen quickly, they will already be in place and then you'll be trying to push them out instead of stopping them from getting in.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much. Of course, that's one of the key parts, as I've mentioned before, about the Quebec green aluminum, because of the way in which they are able to use their electricity. Of course, if they tried to build a dam now, I think it would be a little trickier.

That's my other concern as far as our oil and gas industry is concerned. We have sections of this country that talk about how great they are doing, but there are also some amazing things happening in our oil and gas industry. Unfortunately, we don't seem to be able to move that forward, so my concern is that when you're talking about foreign direct investment, it's going to find its place, but I really believe that when you have the best technology in the world, that should be the one that is being used.

Mr. Poirier, we have only a few seconds left. Could you perhaps comment on the aluminum portion I mentioned before?

[Matthew Poirier]

Just in the sense of investment, we can control trade, and that would be good, but we have a lot of other problems to fix in terms of making Canada a competitive jurisdiction to do business in.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

The next round of five-minute questions will go to Ms. Lambropoulos.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Chair.

I'd like first to thank all of the witnesses for being here on such short notice and for providing us with their testimony today.

While I have questions for all of you, obviously due to time constraints, I'm going to stick to some of the most important ones.

Mr. Azzopardi, you stressed the importance of ratifying this agreement as soon as possible and you stated there would be grave consequences, and that every single day we don't ratify this agreement, there are consequences. Can you speak a little more about this?

[Jonathon Azzopardi]

Yes. What I'm trying to highlight there is that we're not the kind of manufacturer that has a purchase order agreement for something that we produce and then it leaves. We have five-year agreements, so if one of my members receives a purchase order from the United States, it's for five years. If somebody in the United States receives that same purchase order, it's also for five years, so that opportunity will not come back to a Canadian supplier or manufacturer for at least five more years. Every day that we wait, that five-year clock doesn't start counting.

We've already lost many opportunities over the last five years. Those are already gone. That's water under the bridge, but if we continue to lose these opportunities.... There are great opportunities that are happening in the automotive space alone with autonomous vehicles and electrification and the structure that supports those opportunities. If we're not in place now, we will have to wait five years before we get a shot at it again.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you very much.

Mr. Cassidy, you spoke about how the NAFTA—

[The Chair, Liberal, Sherry Romanado]

That is all the time we have today for our first panel, but we'll make sure that in the next panel we'll be able to get some more time there for you.

I want to thank the witnesses again for their time here today.

Thank you so much for being here this morning and for your testimony.

With that I will suspend so that we can bring in the second panel of witnesses.

Thank you so much. Merci.

[The Chair, Liberal, Sherry Romanado]

We will begin the second panel of the Standing Committee on Industry, Science and Technology. The subject matter is to study clauses 22 to 38 and 108 to 122 of Bill C-4.

With us today we have Roger Boivin, president, Groupe Performance Stratégique. We also have Mr. Scott Smith from Honey Bee Manufacturing, and Mr. Mark Nantais from the Canadian Vehicle Manufacturers' Association. By video conference, we have Jennifer Mitchell, president of Red Brick Songs, for Casablanca Media Publishing.

Welcome. Each witness will have five minutes to present, after which we will move into questions. When you see the little paper move up, that means you have thirty seconds left to kindly wrap up your remarks. I will try to allow as much time as possible but our time is tight this morning.

With that, we will begin with Mr. Roger Boivin for five minutes.

[Roger Boivin, President, Groupe Performance Stratégique]

Good morning, Madam Chair. Thank you for inviting us.

Good morning, ladies and gentlemen members of the Canadian Parliament. Thank you for your interest in our aluminum industry. I am here to talk to you about it.

I am from Saguenay—Lac-Saint-Jean and I am the president of an economic research firm. Saguenay has the largest concentration of aluminum plants in the world. In a 50-kilometre radius, we have five aluminum plants, and they produce more than 1 million of the 3 million tonnes of aluminum produced by Canada. Canada is third globally among aluminum producers. In addition, our aluminum is the best, the cheapest, and it has the smallest carbon footprint in the world.

We have a large corporation, Rio Tinto, Alcan's successor. In 2007, Rio Tinto purchased Alcan, which had projects in Saguenay—Lac-Saint-Jean, including project AP-60 and the one focusing on completing the construction of an aluminum plant in Alma. Rio Tinto, as a trustee, is continuing the work in terms of commitments to carry out those projects. In July 2019, as the agreement with Alcan was to expire in 2020, Rio Tinto extended the agreement to 2025, giving itself until then to carry out those two projects. In fact, the corporation announced $300 million in investments related to those two projects—the one in Alma and the AP-60 plant. However, three months later, in October, in a dramatic turn of events, Rio Tinto told us that, in light of the new free trade agreement and the new provisions on aluminum, it would put those $300-million projects on hold.

We are working on this, but we are not alone. Rio Tinto and engineers are also working on it. These are large, high-quality projects that were developed over several years. Hundreds of millions of dollars have been invested in them to produce the best aluminum possible. However, owing to a CUSMA provision you are familiar with—the one on rules of origin, which means that aluminum is not treated the same as steel—we are losing our access to the U.S. market.

There are aluminum plants in the city of Saguenay. In the town of Alma, aluminum workers from Unifor and from the United Steelworkers, which represent plant workers, as well as Aluminium Valley Society, which represents the 4,000 individuals working in some 100 businesses involved in the broader aluminum industry, came together to fund a study to assess what would happen if CUSMA remained in its current form. The result is that it would put on hold the development of projects that could produce 850,000 tonnes of new aluminum that would be extremely beneficial in terms of greenhouse gas emissions.

The production of one tonne of Quebec or Canadian aluminum generates two tonnes of greenhouse gas, compared with 18 tonnes of greenhouse gas for each tonne of Chinese aluminum. Our aluminum production generates the lowest gas emissions in the world, as it is based on hydroelectricity in British Columbia and in Quebec.

The projects I mentioned would produce 850,000 tonnes of aluminum and would generate $6.2 billion in investment in Quebec in previously announced projects. An expansion project is planned at Aluminerie Alouette, which has invested $50 million in a prefeasibility study, but the study has been put on hold because of the new provision. The two projects that were already announced in Saguenay have been put on hold. The industry is very worried by that.

The world is complex—I don't have to explain this to you, as you work on complex files—and this industry is capable of managing the complex world it is part of. However, this new provision creates complete uncertainty in terms of the entry of any aluminum into the world going through Mexico. In fact, the current provision enables any aluminum to enter Mexico and to be considered as North American aluminum.

We already have an industry that employs 80,000 people in Quebec, and the projects underway could generate $1 billion in additional spending per year, without taking into account the $6 billion for the construction. They would generate 3,000 new entry-level jobs at an annual salary of about $80,000 each. This is an extremely important industry. So here is the straw that will break the camel's back.

The association president came here and told you that he supported the agreement reluctantly. He was saying that, at least, there was an agreement. Afterwards, he told you about a dozen elements that were missing from the agreement. They are extremely worried and they are putting projects on hold. So it is in the national interest to resolve this issue and to close this door.

Believe me, we are open to the world. We are a country that is involved in trade; that is clear. Our trade with the French, the British and the Americans has enriched us. We are for trade, but for fair trade. We are from North America, where there are companies. Let's take aluminum for example. Alcoa, the oldest aluminum company in the world is a company. Rio Tinto is a company. However, in the rest of the world, aluminum is not produced by companies, but rather by governments with legitimate political interests.

In Brazil, in India and in China, governments are using aluminum to create jobs, and they are dropping prices. They are dumping. We have affordable aluminum; they have political aluminum. If you let that aluminum in, there is no doubt that our industry will be unable to compete with a government like that of Dubai that will reduce prices.

That is why it is in the national interest to regulate the access of illegitimate aluminum to the North American market, as stated by the president of the Aluminum Association of Canada. We also support that proposal.