Thank you for the opportunity to speak to you on CETA, the Canada-European Union comprehensive economic and trade agreement.
My name is Steve Ross, and I'm the general manager of the Cherubini Group of Companies. We are a Nova Scotia based operation, and all our plants and facilities are here in Nova Scotia. The company was formed in 1971 by some Italian immigrants, and they continue to own and operate the company today. Through constant improvement and investment, we've become Atlantic Canada's largest steel fabricator, employing over 400 people in our group of companies.
Our focus of work is primarily bridges, buildings, and infrastructure projects throughout Atlantic Canada. We also carry out work in Ontario and the United States. From 1998 to 2008, approximately 50% of our sales were in fact export work to the United States. However, our U.S. sales dropped dramatically due to three factors, one being the strong Canadian dollar, another the U.S. recession, and the other the 2009 buy American steel provisions for procurement on infrastructure.
In 2009 we saw a dramatic reduction in overall sales. However, with the Canadian government funding for infrastructure in Canada over the past several years, we have refocused our efforts on projects here in Canada and have rebounded with strong sales and growth. In fact, we just completed a $20-million expansion to our facilities. However, U.S. sales remain stagnant as far as overall sales are concerned.
I have reviewed the technical summary of the filed negotiated outcomes, but to our knowledge, there are no current import duties for eurozone companies in our product line. The eurozone, British, and Asian companies do in fact ship goods and services to Canada, similar to the products that we produce. For instance, the approximate value of the majority of the structural steel is $150 million Canadian for the Long Harbour nickel processing plant, which is under construction in Newfoundland as we speak. It is produced by William Hare, a steel fabrication company in Britain. We in fact bid on this project, but the contract was awarded by the owner, Vale, to this offshore company.
I have a side note, talking about Vale, on what we've seen in the past number of years. Vale, which was formerly owned by Inco, was sold for $18 billion or something like that in 2006 to Vale, a Brazilian company. We find that the larger international companies have a tendency to shop the world for their goods and services needed here in Canada, whereas Inco, when they were a Canadian company, would shop in Canada for their goods and services. We do find a bit of a propensity for large international companies that own and operate, whether it be mines or whatever, here in Canada, their tendency is to shop the world as opposed to shopping here in Canada for their goods and services.
Another example of foreign companies working here in Canada is the Walterdale Bridge in Edmonton, which is a $120-million bridge that was recently awarded a few weeks ago to Acciona/Pacer, a joint venture from Spain. They're a Spanish general contractor, and they in turn awarded the structural steel fabrication for that project to Daewoo, which is a Korean-based fabrication company. We are seeing a lot more foreign competition, at least in our business. When I say foreign, I mean European and Asian.
U.S. companies, we find, are not as competitive, or we're competitive there as well, because we have similar cost structures. We could compete in the U.S. fairly recently; however, with buy American, what's happening now is we're having difficulty getting work in the U.S. simply because of that condition, along with the value of the Canadian dollar.
We do have several concerns with the CETA. Just as a preamble, I think it's important to understand that in our business, or in any other business we're talking about here, ocean container rates are such that shipping costs from Europe to Canada are comparable to shipping costs within Canada. I can send a container to Ireland, Scotland or Spain for the same cost as I can send a truck to Ontario. When you look at freight or geography, we're such a big country, the geography is not as important when it comes to costs as far as freight and deliveries are concerned. A lot of times the playing field is balanced a little bit in that our geography doesn't have a major impact as far as cost is concerned.
The other factors we're going to talk about are that other countries have certain protective measures, such as buy American provisions, which impede free trade.
How does the CETA police and deal with eurozone countries that provide tax or labour benefits for exports? We see that some countries have tax-free zones and export tax credits that certainly create an uneven playing field for companies like ours.
The current agreement does not provide federal, provincial, or municipal protection with respect to local benefits. For example, here in Halifax the reconstruction of the Macdonald Bridge is going to be contracted for in the next several months. It's a $160-million project. Without any local benefits under the new CETA , there will be no advantage for us to be the local company, as opposed to someone from Spain or Korea or another country. To us, that's a real concern: how the federal and provincial governments will provide some incentive for local benefit.
Also, a good example of that is how the recent WTO rulings related to Ontario's Green Energy Act will adversely affect job creation. The Ontario government mandated that 50% of the cost of wind tower construction had to be spent in Ontario. They've been doing that for several years, and the WTO recently ruled that's an unfair labour and trade practice. I believe there's going to be a lawsuit over that with the Ontario government. They're going to have to pay somebody some money.
With those kinds of trade practices under the CETA, there are no measures in there that I can see if the federal, provincial, or municipal governments want to protect local industries, whether through energy conservation or labour market conditions.
With respect to the infrastructure stimulus moneys that are put forth by the federal and provincial governments, when the federal government decides they're going to inject some infrastructure and stimulus money into the economy, with this CETA, there's nothing to keep that money here in Canada. That work can be sent to other countries. If it's for building a bridge, for example, that work can be done in Spain, Korea or other places, because under the CETA, under free trade, they have equal rights to do the work here in Canada. We see that as a hindrance.
We also see there'll be a lot of exposure to legal battles, with respect to interpretation of the CETA. I have a legal opinion on the agreement now. There are still holes in the agreement in principle. A lot of loose ends are subject to legal interpretation, and that results in a lot of litigation. I don't think the agreement is ironclad when it comes to legal interpretation.
Getting back to item 7, I want to talk about the factors beyond our control that would significantly affect our competitiveness with eurozone states, one being currency exchange rates. I did some analysis of our sales over the past 10 or 12 years, U.S. sales compared to the U.S. dollar, and there's a direct correlation with the Canadian dollar strengthening and our sales in the U.S. shrinking. Undoubtedly, the euro has decreased about 30% in the last two or three years; certainly that helps European companies, because their euro is certainly weaker and that affects their costs.
You look at all the states—the countries are states; it seems to me the word is used interchangeably between eurozone countries and states. I looked at average household wages in the eurozone. I looked at Canada compared to a number of the countries we're dealing with here, and for the most part, average wages are 30% to 40% less than here in Canada.This will undoubtedly shift labour to the lower-cost areas. If something can be made more cheaply somewhere else because of lower labour costs, then that product will likely shift to that area, so we see that potential.
Also, some of the factors that are really unknown, safety, environmental, human rights, and other factors may be less stringent in certain countries, which will obviously affect our competitiveness. If we have certain safety requirements and human rights, there are a lot of factors that go into our cost, and other countries that may not have those conditions obviously are at a competitive advantage.
In closing, we're an at-risk company. We receive limited federal, provincial, and municipal funds in our operations. We're strong supporters of free trade, but insofar as it's fair trade. What I mean by fair trade is we've been competing with U.S. companies and they're comparable as far as human rights, laws, wages, all the components that go into the cost of doing work, are concerned. If they're fair and comparable, then we're happy with that, but we think of it more as fair trade as opposed to free trade.
That's it and thank you.
