International Trade Committee on June 26th, 2018

[Angelo DiCaro, Acting Director, Research Department, Unifor]

As we said in the opening remarks, when you look at the proposed countermeasures that have been laid out by the government.... Leading up to this consultation, we did some quick costing of those. We're looking at nearly $2 billion that would be generated through that piece, so there's a lot of money to work with.

One success story we've seen, in a way, is the quick movement on the softwood lumber action plan, which was in large measure a mitigation plan. The difference with that plan is that this was money that didn't come from a new revenue stream.

We have some new opportunities here to think about how we would approach this. In the case of the impacts—and our figures are showing that in excess of 40,000 direct jobs will be touched by these tariffs by the U.S.—the magnitude is going to be much larger than what we've seen so far. We're talking about enhanced work sharing and other employment insurance top-up measures. They're all contemplated in the softwood lumber package, but I think these are things that we should consider here. The big-ticket item, which Quebec was very quick to move on, is the idea of trying to keep these facilities operating. That's where there is money to be used for reinvestment, which is good. There's money that can be put through loan guarantees, which is also a good measure.

In addition to that, as we mentioned in the opening remarks, is thinking about other competitive advantages we can look at through broader social programs. If you ask any manufacturer, our health care system is a huge benefit and a cost saver when we're talking about cross-border trade. Now's the time to be making more movement toward a new pharmacare program, something that would also keep skilled people in Canada but also alleviate some of those extra cost burdens. Those are just a few ideas we've been thinking about, and that $2 billion could come in handy, and could be put to good use.

[Tracey Ramsey, NDP, Essex, ON]

A point of frustration for me has been the fact that we've sat around for a year now waiting for this section 232 decision without a plan in place. We now have auto tariffs looming, with potentially no plan in place, and we haven't even been able to fully address at this committee the implication of that on our communities and on workers. How is Unifor preparing for these potential auto tariffs to help those it represents on the ground?

[Jerry Dias]

First of all, it would be devastating to the entire industry.

There's not an assembly plant in Canada that will survive a 25% tariff, because almost everything we build goes to the United States. There's no way we can say that the effect will be marginal, because just the opposite will be true.

The question becomes what do we do. We have to retaliate. I realize that's a focus of some concern amongst some of those on this panel. Ultimately, I take a look at what the United States is doing. When they first imposed tariffs on softwood lumber we didn't do anything, and now they're having a devastating impact. When they slapped tariffs on paper we didn't do anything. When they came after our aerospace sector—which surprisingly and fortunately got settled in U.S. courts—we didn't retaliate. Now it's steel, now it's aluminum, now it's cars, and now it's auto parts. Doing nothing didn't change Trump's course of events. As a matter of fact, the less we did in the beginning, the more it has left us vulnerable to more tariffs.

Now we're in a situation where we have to fight. There is just no other way. We can't sit back and say, “Let them keep slapping us with tariffs.” As ridiculous as it sounds because it is ridiculous, we're going to have to be as punitive as the United States is.

What can I say to our members who are going to be negatively impacted? We are going to have to make sure that the federal government puts into place significant programs today to ensure that we not only survive the short term but also the long term. We can't have the death of our number one industry in Canada. It's an $80 billion a year industry. If you take a look at the direct and indirect jobs, you're looking at about half a million jobs there alone.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Dias.

We're going to go to the Liberals.

Mr. Drouin, you have the floor.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you very much, Mr. Chair.

I want to thank the witnesses for being here this afternoon.

Mr. Paschini, you said that you have to import most of the metal construction parts, and then re-export them. I imagine that Terrebonne serves markets in eastern North America. Have you spoken to the businesses in the U.S. that provide these products to you? Have you told them that what is happening is bad news for everyone, on both sides of the border?

This does have an impact here, and the fact that you have to turn to the Canadian market to meet the demand will eventually have an impact on American workers, after July 1.

[James Paschini]

Are you talking about the Great Falls plant, or the one in Terrebonne, or about the employers?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Earlier, you said that you import the majority of your supplies from the United States, because Canadian mills cannot keep pace with the demand. If the duties are implemented, there will be repercussions on all of your imports from July 1. You said yourself that you would check to see if the Canadian market could meet the demand. Did you discuss this with the American subcontractors you do business with, and explain the consequences of what is going on?

[James Paschini]

We have indeed discussed this with some of our clients, and some employers, and they are really reluctant to commit to a Canadian company. They have no interest in doing so. They don't want to commit because they don't know what the future holds, anymore than we do.

Basically, everyone is wondering who will wind up holding the hot potato. Who will pay the 25%, will it be the client, or us? Who will pay it?

Clients will prefer to do business with an American company that will do the work for less. They aren't going to rack their brains about it. Of course, we have expertise, knowledge and good will, but in the end, American clients, especially these days, make their decisions based on price. It's that simple. They calculate how much their building is going to cost them and ensure that the person who builds it is qualified. That's all. We are caught in the crossfire.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you very much, Mr. Paschini.

Mr. Wilson, you've highlighted a few recommendations for this committee to look at.

Obviously, for point number one on the NAFTA renegotiation, are you getting a signal that we're not at the table?

[Mathew Wilson]

Generally, the talks have stalled by the sounds of it, and that's a huge problem.

I see that Jerry is nodding.

This is bottom line. This goes away if NAFTA is done. They've made that very clear in the U.S. I know that in Canada we keep saying they're not tied. They're tied in the eyes of the U.S., and that's all that matters. We need to figure out the path forward, whatever that path is, because the consequences for the economy are too great.

Where are they right now? I don't really know exactly where they are but they certainly have been delayed from where we had hoped they would be by now; that's for sure. That's not pointing the finger at Canadian negotiators. That's just the reality of the situation.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

No, I think the message has been clear. We're at the table. It just a matter of it taking two to dance, right?

[Mathew Wilson]

Three.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Three, yes.

On point number four, the emergency direct financial funds, is there a dollar amount attached to that?

[Mathew Wilson]

No. We've seen, as was mentioned, $100 million from the Quebec government, which was just for steel and aluminum. I don't know what the dollar amount would actually be. It would be very large though, if you look Canada-wide and at the direct impacts that are going to come out of this. It's great to say we'll support companies and their employees through work sharing and stuff like that. I'm more worried that the companies won't be there in a couple of months and there will be no employees to support through work sharing.

There could be some significant short-term pain. The issue is the ripple effect. Let's just take an auto parts supplier, for example. If an auto parts supplier is running on 5% margins, and all of a sudden their parts coming back in are 10% more expensive, they're now in the hole 5% on everything they're making in Canada. How long will they be able to operate? How much money do they have in the bank to be able to withstand that?

Then one of the ripple effects is that if one auto parts supplier goes down, what about the next one down the line? There is always a next one, so I'd be looking really closely at the tier two and tier three suppliers, the smaller parts suppliers in the industry and what their health status is like. The larger ones tend to have a bit more flexibility in pricing and have a bit more weight to push back to their customers on, but the smaller guys don't have that flexibility and will be trying to absorb it, and frankly won't be able to absorb it for very long.

Then we don't have to worry about work sharing and the rest of it because they just won't be in business to even worry about. That's the part I would look at immediately, and that pain will start happening over the summer.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. That wraps up your time, and that wraps up the first round.

Looking at the clock, we have time for two more slots. The Liberals will have the first one.

Go ahead, Mr. Sheehan.

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

Thank you for the presentation and some excellent ideas.

One of the things you mentioned, Mathew, is that manufacturing accounts for about 11% of GDP. It is estimated that Algoma steel, which is a manufacturer in Sault Ste. Marie, contributes 40% of the local GDP. That's just them. That doesn't even include Tenaris, so we have significance. In Sault Ste. Marie, it's extremely significant, as in some other aluminum and steel towns where there is a smaller community. If someone loses their job, they can't drive 20 minutes to get another manufacturing job, so it's critical that we have the right supports in place while these unacceptable tariffs are happening.

I do agree with your comments that the best solution is a NAFTA deal, but in the meantime we have heard some really good ideas about supporting workers through work share. One of the things we can do is work sharing and rapid response, as we've heard mentioned by some other people. Others have suggested that the government could play a role in investing and modernizing our manufacturing facilities through the SIF program that was in the budget in 2018. We haven't really heard about that.

Do you think it's a good idea and that companies should also take a look at the 50¢ funding and supports to invest in manufacturing?

[Mathew Wilson]

Here's the problem. We supported SIF. We worked really closely with Minister Bains and his office. It's a great program, except it takes forever to get money out of it.

When you're talking about short-term emergency situations like we are in today, we need immediate relief, not something that might happen in 18 months or two years, and I use the word “might”. Since that program was announced, we have heard of very many successful companies that have gone through it. It takes them a year and a half or so, but we've also heard of companies that have gone through the year and a half and were then denied at the end of that year and a half. It's not going to work.

That's why we like things that are right in the tax measures. Don't make them granting programs where companies have to apply for certain things. Make it more outcome-based: if you invest, you get x. Clean, simple, small companies, large companies, everyone can apply for that just through the tax code. It is way easier, and it is not some bureaucrat who doesn't understand the industry or the pain they're going through who's making the ultimate decision, which tends to be what happens under a lot of these programs.

Again, those programs are great but not for this type of situation .

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

Your recommendation is to expedite the SIF program, if you will, for steel and aluminum companies.

[Mathew Wilson]

Correct. That's why something like an ACCA change, which is already on the books, would help a lot. That directly gives cash back to companies that are investing today, which puts cash in their pockets, something that all parties have supported in the past and something that's already on the books and that the U.S. has done.

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

Robert, did you want to comment?

[Robert Dimitrieff]

Yes.

Definitely, I would agree that investment in technology and things can be done to make our industries and players in them more competitive with American operators. At Patriot we're doing those on our own. We haven't applied for funding through that program yet, although we're aware of it and have considered it for potentially down the road.

So it's definitely a good idea, but the point is that this is a critical and imminent threat to us. I'm not even asking for assistance right now in the form of additional funds. What I'm looking for is that you don't tariff me with no notice. Four weeks' notice is practically no notice. The problem I have is that I won't make it to the point where those investments will help me, because now I have this unnatural barrier that has been raised by the federal government's actions and that has not allowed me to make the necessary changes, because in my industry it takes so long for changes to happen.

That's a fundamental thing. It's an immediate problem. What's going to happen on July 1 is an immediate problem. I suppose it could change between now and Sunday, but I'm going on the assumption that what was announced is what is going to happen. I was told through the media that the Minister of Foreign Affairs says that Canadians like to “hope for the best and prepare for the worst”. Well, I'm telling you, I am preparing for the worst, and it is bad. It is not a good thing. I need help—now.

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

So you supported the consultation period, and your position is that their tariffs should not apply to you.

[Robert Dimitrieff]

Well, my—

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

I have a question about your situation, though. I'm just trying to think about this. I got from your testimony that you import steel. Then you make a product. Then you export it. Is America one of your markets? Would you be tariffed—

[Robert Dimitrieff]

Ninety per cent of my product ships to the United States.