International Trade Committee on June 26th, 2018

[Dean Allison, Conservative, Niagara West, ON]

Once again thanks to the witnesses for being here.

I feel that this is a surreal time. We're all calmly sitting around the table, but the reality is we're in a very major crisis. It's kind of like the frog in the pot. If he jumps into hot boiling water he's going to jump right out, but I feel like we're boiling to death here and that there are going to be some very serious consequences in the next two to three weeks, or the next month.

Mr. Young, one of the reasons I invited you and all of the witnesses here is to talk about that. I don't know if people really understand or appreciate—this is for all of you guys, but I'll direct this to you, Mr. Young—how difficult it is to acquire new customers. The reality is you spend years, and if you're going to change customers, there are supply chain issues. There are a whole bunch of things you need to consider, because your customers expect quality. It's not just leaving the U.S. supplier and going to a Canadian one. There are a whole bunch of things that need to be factored in.

You did talk about it briefly, but perhaps you could talk more about how complicated it is with uncertainty, not knowing what the plan is, not knowing how long you're going to have to subsidize the tariffs. How on earth can you actually function and make plans for the future when everything is so unsettling?

[Stephen Young]

Absolutely. I'll try to do that in two stages.

The one point is asking about how long it takes to get U.S. customers. We have had a tremendous partnership with Dofasco, all three of our steel mills, but ArcelorMittal Dofasco has been a large part of our growth. As Sean mentioned, it is affecting our community. I'm one of his customers who is dealing with that. Since 2014 we have really grown to that number—as I said, it's 270% growth—and it only takes a couple of times when you are offside in a competitive nature or when you're quoting a job that you will start to lose your footprint in an area.

We are large suppliers to the RV industry. We heard someone speak about that today. That is a very thin-margin business. We have a great footprint there. We have invested in Janco Steel. We have put in four lasers in the last two and a half years. We have started doing a parts business. That is going to be lost because they will go elsewhere very quickly.

The uncertainty you speak about, Dean, is that if we knew the rules and if we knew the rules were going to last for the next year, we could maybe make a good business decision, but right now the last thing we want to do is lay off people. We went through the financial crisis of 2008-09 and we did not lay off any workers. We actually expanded in 2010. Our biggest growth has been from 2010 to now. It is tens of millions of dollars that we have invested back capitally into our company, and we don't know the rules any more.

I can tell you that when I say we will have to have a decision about laying people off, it is real. That is not just saying something to make a big statement. We're going to have to do that. We do not want to do that.

[Dean Allison, Conservative, Niagara West, ON]

You're already talking about not bringing in people. If nothing changes, in other words, if there are no supports announced, nothing happens other than the fact that it gets kicked down the road, when do you start laying off people?

[Stephen Young]

Those discussions are happening every day. Al Schutten and I sit and look at each other and wonder. We try to look at things that are possible and probable when we're trying to work out risk in business. We don't really have an idea of what is probable any more, but what is possible is actually quite frightening.

I don't know the actual answer regarding how long does it go. We have not done anything yet because that is the last decision we ever want to make, but when we ask the government for help, that actually is a plan. There is going to be money coming in from the tariffs. Tariffs are put in place to help industries that are dealing with either unfair trade or disadvantages, and we need some help. If we got that help, we could at least skate a little bit. We would be just breaking even. We don't have large margins in our business, probably 10% to 12% usually. You can see we're not asking for a handout; we are saying, “Keep us in the game.”

To your earlier point of how quickly we can lose customers, it is already happening. I have tremendous support from people in the U.S. who are now saying, “We'll catch up with you in a few months maybe and we'll talk again, but for now, we have to cover ourselves.” It's very frightening.

[Dean Allison, Conservative, Niagara West, ON]

How much of your business is U.S.-related at this point?

[Stephen Young]

At least 30% right now.

[Dean Allison, Conservative, Niagara West, ON]

That's 30%?

And that's down by 60%?

[Stephen Young]

It's already 60% down in the month of June, month over month, from April and May.

[Dean Allison, Conservative, Niagara West, ON]

And you don't see that getting any better as we [Inaudible].

[Stephen Young]

It's going to get worse.

[Dean Allison, Conservative, Niagara West, ON]

Okay.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Allison. Perfect timing.

We're going to move to the Liberals now.

Madam Lapointe, you have the floor.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

I want to welcome all of you, and I thank for being here with us today.

I have a question for you, Mr. Rousseau.

You said that tariffs on steel and aluminum could directly affect supply chains, and workers.

As you know, I come from Quebec. In Alma, there are several aluminum plants. In my riding, North of Montreal, the Raufoss company processes aluminum, which is exported not only to the United States, but also to other countries.

You spoke of temporary measures we should put in place in case of layoffs. I'd like you to tell me more about that. You said we would need to help workers acquire other skills. How could we improve the situation? I am thinking of the workers at Raufoss, in Boisbriand. That enterprise just invested and doubled its aluminum rim production capacity.

[Larry Rousseau]

In our brief, we ask that in such circumstances, workers be taken into account. We are hearing talk about layoffs. Sales may decline and the economy may slow down, but workers may have to deal with the worst consequences.

We already proposed models. First we have to support working men and women. If we give the companies the subsidies they request, it is to ensure their financial viability and to keep people in their jobs. The situation could change and we have to maintain production capacity and the ability to sell and export our products.

If the situation gets worse over time, we will absolutely need to have plans and strategies in place to know what to do with the workers. That is precisely why we are asking you to create a working group to study different scenarios.

The situation in Alma may be different from the situation in British Columbia because the industry is different. This working group will have to be able to present recommendations fairly quickly, which a trade-monitoring committee will not be able to do. The working group will have to understand the needs of unions, of businesses and of government.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Earlier, you said that we would have to work with the provinces, as is done in the case of softwood lumber. Could you tell us more about this?

[Larry Rousseau]

If the steel and aluminum industries decide to try other production avenues, there will have to be programs to enable them to train their workers. The fact that we work in a given sector does not mean that we cannot, together with the industry, determine whether workers can acquire new skills and perhaps even retrain.

I would, however, say that that is not what we should do in the short term. In the short term, we have to see to it that workers have access to employment insurance benefits. If people have to be laid off, we have to ensure that they have access to existing programs such as employment insurance.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, that is interesting.

Mr. Galimberti, you spoke a lot about the steel that is produced for the auto sector. Other witnesses spoke of other things. Mr. Winkler spoke about the pipeline. What percentage of the steel produced in Canada is used by the automobile industry?

[Joseph Galimberti]

Just to use a generalized round number, normally domestic steel consumption in Canada is about one-third for automotive, one-third for infrastructure, and one-third for energy, meaning oil field use. That would be a good guidepost. In automotive it is probably slightly over one-third.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

I think my speaking time is up, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

Yes, that's it.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Chair, Liberal, Mark Eyking]

We're good to go and will move over to the NDP.

Ms. Ramsey, you have the floor.

[Tracey Ramsey, NDP, Essex, ON]

Thank you, all, for being here on such short notice. I think we're in dangerous waters and at a critical point, and it does require some urgent action.

I thank you not only for coming here on short notice today, but also for bringing concrete proposals of things that we can do in this unprecedented time we find ourselves in.

The first one I want to comment on, Mr. Rousseau, is the rapid response working group. I think it is critical to do a jobs impact assessment on who will be impacted on the ground. That is also very critical to communities that depend on these jobs.

Have you been able to secure a commitment from the government, or potentially a meeting, to discuss this rapid response working group and its potential going forward?

[Larry Rousseau]

We are certainly making the recommendation and having talks, but I can't say this has been committed to at this time. But certainly we are going to work very strongly and make it very clear that we need this kind of a working group that can be more nimble and make recommendations and come up with some solutions as this very dynamic situation evolves.

We can have decisions coming out of Washington from one day to the next that throw another monkey wrench into this or does something else, so we're going to have to have something that can be very reactive, as well as proactive, in a very short period of time.

[Tracey Ramsey, NDP, Essex, ON]

I agree.

We haven't really talked a lot about the table 2 tariffs that we're looking at. There are folks who couldn't make it here today—the recreational boaters, the furniture companies, a lot of very large sectors in our economy—who are concerned about the implications of this table 2, so I hope we will be adding that to our study and having briefs from them.

My next question is really for Mr. Galimberti, Mr. Winkler, and Mr. Young. It's about the product exclusions that are being granted to products that are unavailable domestically in the U.S. We saw the U.S. extend these to some of the other countries, but not to Canada.

I'm wondering what actions, if any, our government could take to increase the likelihood of the U.S. Secretary of Commerce granting requests to exclude certain U.S. companies' imports of Canadian steel and aluminum from the U.S. tariffs, and the work that you've potentially done around that.