International Trade Committee on Oct. 16th, 2018

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

You said you were thinking you would be forced to move somewhere, but on the other hand you are saying that the price across the globe has gone up whether or not it's in any other country, so how would you be able to compete when the steel price is going to keep on going up irrespective of what the tariffs are here?

[Jean-Denis Toupin]

I do not agree that the price of steel is going up everywhere. What I said is it that the Canadian steel market is affected by the increase in price of steel from the United States. The Europeans who export to Canada have taken advantage of that increase to put up the price of their steel coming into Canada. The price on the European market, before it is imported to Canada, is about $0.60 per pound, which, in my opinion, is the world market price. Once it gets to Canada, steel costs between $0.90 and $1 per pound.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

You also mentioned that the federal government programs in place to help manufacturers are difficult to access. What can be improved so you can easily access those programs to be competitive?

[Jean-Denis Toupin]

The program is actually for Europe. The program reimburses the surtaxes, mainly for steel imported from the United States that is then re-exported to the United States.

It is also possible to reimburse the surtax on steel imported from the United States that is processed and used in Canada. Distributors of Canadian steel who supply us with steel are reluctant to tell us the value of the surtax that they have paid, so that we can claim it back from the government, because, by giving us the exact value of the surtax, they are also telling us their purchase price and therefore their profit margin. They give us a lot of information and we have difficulty determining exactly the amount of the surtax in the overall increase in the price of steel. Because of that, it is hard for us to claim it back.

[The Chair, Liberal, Mark Eyking]

Thank you.

Thank you, Mr. Dhaliwal.

We're going to move over to the NDP now.

Ms. Ramsey, you have the floor.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

First of all, I'd like to say hello to Mr. Toupin. My colleague Karine Trudel, the MP for Jonquière, could not be here at the committee today. I know you're located in her riding. She wanted me to pass along her greetings today. She's in the House of Commons.

I want to focus on CAMM. They're here from Windsor–Essex. They were here in the spring talking about the potential impact of this, and throughout the summer we've seen and felt it in our region, very deeply. Within 30 kilometres of Windsor–Essex, there are 250 mould, tool and die makers. This is a huge employment base in our area, which has survived the most difficult time in the recession and has diversified in a way that has created jobs, only to find those jobs under threat once again. Four or five of the largest mould makers in North America are in our region. I think we heard from Mr. Bilton that we're talking about 13,000 jobs in our region alone, in this sector alone, that are impacted.

I want to talk about the action that's needed, the meaningful action that is needed. I think we heard quite clearly from Mr. Azzopardi what's not working. We had a town hall in the middle of the summer, with 300 people who came at a moment's notice to talk about the impact on their businesses.

Mr. Azzopardi, could you update us on where they're at now and what you think needs to be done to support the sector?

[Jonathon Azzopardi]

Thank you, Ms. Ramsey. Thank you for all the support you bring us. We really appreciate it. We've had a lot of support over the summer. I'm trying to figure out how to work through this.

What we've seen, and where we feel the government can do better, is in its support of SIF, the strategic innovation fund. It is specifically targeted to steel and aluminum producers, and it is falling short. We believe that it's focused on the wrong area. Right now it's focused on steel and aluminum producers. The unfortunate thing is that what we've seen with steel and aluminum producers is that there's no appetite for expanding supply and demand.

Since World War II, we have been monitoring steel, and steel has now become commoditized, while the industry has over the years seen a lot of consolidation. With supply and demand, to be kept in check, will not see any new foundries being put online. This funding, right now, we believe, is not having the impact they would like to see, and it should be broadened and opened up more to the tier one and tier two steel and aluminum foundries.

We believe that if you are going to enter into an agreement with the U.S. and Mexico, your job is not done until you can answer the following questions.

What is the government's plan to protect its borders against the countries that want to import into Canada to get access to the U.S. and Mexico? What are you going to do to protect our borders against low-cost countries that want to take advantage of Canadian companies, countries that want nothing more than to gain access and not employ Canadians? How does the Canadian government plan to protect us against steel fabrication from low-cost countries that use government subsidies fuelled by low-cost labour to gain a foothold or a controlling interest in Canada? What is the long-term strategy for manufacturing in Canada to export to the USMCA partners and other countries when we continue to reduce government funding for SMEs and virtually eliminate SMEs from SIF by moving the threshold from $2 million to $10 million minimum for projects? You're basically telegraphing to us that you do not want SMEs in Canada, because we can't even reach that minimum threshold. Why are you reducing our access to the SR and ED program by eliminating capital expenditure and continuing to reduce the minimum number for proxy? Why are you removing GOA funding from our two largest trading partners, Mexico and the U.S.?

Why are you creating an uncompetitive tax environment for Canadian companies against other global jurisdictions? Our combined tax rate of above 26.5% is a higher personal tax rate than that of the other partners we're trying to compete with, and now you're eliminating income splitting. The accelerated depreciation program for equipment purchases is being reduced to below the rate our largest trading partner has to pay, while you are supporting programs that make us less competitive, like cap and trade and carbon tax, which the global jurisdictions we're trying to compete with do not have to consider—this when Canada is a net consumer, not a net producer, of carbon gases.

We feel that, in a lot of cases, the federal government is not using its time wisely and is putting in strategies that do not add value and that aren't supporting the largest GDP contributor and employer in Canada.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

That pretty well wraps up the time. We are going to go to the Liberal Party.

Welcome, Mr. Hébert. You're a member from Lac-Saint-Jean. You have the floor for five minutes.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

I am delighted to see my friends from the Lac-Saint-Jean region. I certainly would not have missed this opportunity to meet you and talk with you. Thank you again for appearing before this committee.

As we know, as of June 1, 2018, there has been an exemption from this unfair and unjustified surtax imposed by the United States and their unpredictable president.

Mr. Thibeault and Mr. Toupin, I am going to try to make my questions as short as I can, in order to give you more time to answer them.

The Government of Canada is taking in about $2.5 billion per year from the surtaxes. In your opinion, how should we use that money to help the industry, particularly in the Lac-Saint-Jean region?

[Evans Thibeault]

As I mentioned at the outset, our company buys steel mostly in Canada. We process the product and we resell it in Canada. As Mr. Toupin mentioned a little earlier, we buy in Canada and the distributors are now charging us $1 per pound. That price includes taxes and surtaxes, so it is very difficult for us to recover them, given that we do not have access to that information.

On the other hand, when we bid on contracts where we are in competition with foreign competitors, they base themselves on the world price for steel, which is not $1 per pound at all. It is somewhere between $0.60 and $0.70 per pound at most. So it is very difficult for us to remain competitive in a situation like that.

To help us, the tax refund program would have to be more flexible or we have to be exempt from those taxes. If we process steel in Canada for resale in the country, we automatically lose our competitive edge. So the help has to be by making it easier to recover the taxes, given that the distributors from whom we buy steel do not give us that information.

[Jean-Denis Toupin]

I would like to add that the Europeans have taken advantage of the cost increase in the United States to increase their own rates. For example, we could obtain supplies by paying $1 per pound in the United States and $0.95 in Europe. However, that cost increase is not a surtax on steel in Europe; it is just that the Europeans have adjusted to the laws of the market. The surtax has had an impact on the cost of supply, but the effect is not just direct. It is also indirect.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

You and I have talked about this on several occasions. You said that you would probably have better solutions to propose, given that you are on the front line. You said earlier that it seemed difficult to access the program, which stands at about $2 billion.

What are the problems you have to face, either with Export Development Canada, EDC, or with the Business Development Bank of Canada, BDC?

I have done some checking and it would seem that BDC has not been asked for a great deal of support. Could you give us some more details about that, Mr. Toupin?

[Jean-Denis Toupin]

In connection with the program, we have read that reimbursement is possible if the steel is not available in Canada. Whether the steel is bought in Europe or the United States does not matter, because it can be available in Canada, but not in the quantities or sizes we need or when we need it. For example, if we have to build a bridge in 14 weeks and we are told in Canada that the steel will be delivered seven months later, we cannot get our supply in Canada. Canadian producers will tell us that the steel is available, which disqualifies us, but actually, it will not be available when we need it.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

Great.

Do I have any time left, Mr. Chair?

[The Chair, Liberal, Mark Eyking]

You have one minute.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

I like hearing the solutions you propose because you are on the front line. The problem affects Canada as a whole.

As a final comment, can you tell me how you see the coming months? Could the situation cause problems in your own companies? We are talking about almost 600 jobs in the Lac-Saint-Jean region, which is huge. How can we help you in the short term?

[Jean-Denis Toupin]

What would help us is if government assistance were not limited to the reimbursement of surtax, but rather was more of an adjustment to the cost on the world steel market and the cost of sourcing from Canada. In the meantime, we are more concerned that major projects using steel will be delayed or cancelled because of the higher costs.

[Evans Thibeault]

I would add that the anti-dumping taxes or the taxes in place help to maintain high steel prices in Canada. This is not helping to adjust the world steel price. It will keep creating a distortion or imbalance between the price of Canadian steel and the world price of steel. Once again, it is very difficult for Canadian companies to remain competitive.

Your decisions must not contribute to maintaining an unbalanced price. The fact that the price of steel in Canada is $1 per pound is not problematic; what’s problematic is that the price on the world market is much lower. If the world price were also $1, there would be no distortion. Right now, there is a big discrepancy and we are experiencing it on the ground. Competition will be much fiercer for future contracts, and good contracts in Canada will be awarded to companies outside Canada because of that.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

Thank you. Your comments are very helpful to the committee.

[The Chair, Liberal, Mark Eyking]

Mr. Hébert, thank you. You're way over time and that ends the first round. We might have to shorten a bit with Mr. Sheehan. He's up next.

Go ahead, sir.

[Terry Sheehan, Sault Ste. Marie, Lib.]

How much time do I have?

[The Chair, Liberal, Mark Eyking]

You have four and a half minutes.

[Terry Sheehan]

Okay.

Thank you very much for your presentation. It's very helpful for us as we undertake this study and make recommendations to the government on how to deal with the situation.

I have to ask this first question, because I want it to be on record. President Trump has placed tariffs on Canada and the rest of the world—it's a world tariff—using 232, which is a little-used mechanism in American politics, which suggests that Canada is a national security threat to the United States.

So for the record, I would like to ask all of our presenters whether they feel that any of their products or situations are a national security threat to the United States of America?

[Michael Bilton]

No, it's quite the opposite, actually.

[Evans Thibeault]

No. The products we manufacture are not a security issue, far from it. They are designed to help people. We are not a threat to the Americans or anyone else in any way.