International Trade Committee on Oct. 23rd, 2018

[Randy Hoback, Conservative, Prince Albert, SK]

We've also heard in other testimony last week that there is a solution there. If you make one phone call and accept the quota on steel and aluminum, you have a solution. There's also the concern that if we don't do that, the U.S. is going to import only so much, and they don't care if it comes from Canada, Germany or anywhere else, but once they hit that number, that's it. So if you want to have a bigger quota now, you'd better do it today, because if you wait two weeks from now, Germany and Korea might eat that amount, and all of a sudden we'll be sitting here with nothing.

Do you subscribe to that theory?

[Gian Paolo Vescio]

Obviously, we wouldn't describe quotas as good. I wouldn't presume to say this is good; this is bad. I would prefer to see what was on the table before making a judgment. Obviously our government has to be pragmatic in dealing with a partner that's bigger than we are, but at the same time, we would prefer that they try to come to a resolution where—

[Randy Hoback, Conservative, Prince Albert, SK]

I get it.

Pardon me, I don't mean to cut you off, but he's going to cut me off, I think, so—

[Gian Paolo Vescio]

No problem. Go ahead.

[Randy Hoback, Conservative, Prince Albert, SK]

Being pragmatic is very important. The reality is that by not being pragmatic at the start of this, by letting it drag on and drag on, we've gotten what we've gotten. We could have solved this with Trudeau and Obama with TPP, because that was the NAFTA replacement. We wouldn't be here today if they had gone down that road. This government chose not to, so Obama chose not to put any equity into it either. We could have avoided all this, but it is what it is.

If you want to talk about being pragmatic moving forward, then any uncertainty that's sitting in the industry right now is still sitting there even though you have a trade deal. I think a lot of companies said, “Oh, great; we have a trade deal. The uncertainty is gone. We'll get back to normal.” Yet if you talk to anybody in manufacturing in the steel sector, no. In fact it's worse, because they don't know anything more today and we were given this false sense of security that this was all going to be solved.

Mr. VanderVeen, let me give you a chance to answer this. Do you feel better today or are you more concerned about your future today than you were, let's say, six months ago?

[Mark VanderVeen]

Well, I'll tell you, in January I lost a lot more nights of sleep than I have recently, but there are still a lot of issues out there creating a lot of concerns.

Our concerns are with the consistent increase to our costs of goods sold. When we have tariffs implied, when we have a steel industry in the United States that arbitrarily raises the prices at the AMM, we cannot predict where we should set our prices so that we can be a profitable company moving forward. When we have that uncertainty, when you sit down and look at return on investments for your capital spend, which is eroding as we speak, the shareholders sit back and say, “Can you guarantee that return on investment or do we sit and wait?” When you sit and wait, what happens? There is stagnation, and that is the last thing we want to see in this industry.

So, yes, we are concerned with it.

[Randy Hoback, Conservative, Prince Albert, SK]

How much time do I have, Chair?

[The Chair, Liberal, Mark Eyking]

You have 15 seconds. You can get a comment.

[Randy Hoback, Conservative, Prince Albert, SK]

Do you think we should continue with the surtax or do you think we'd be better off going down the road of getting rid of the surtax and getting more competitive? Let's eat the 25% the U.S. has thrown at us. If their consumers want to pay more money for their goods, so be it, but let's make us more competitive, and that way we can be more competitive not only in the U.S. but right across the globe. Would that be a lot wiser attitude?

[The Chair, Liberal, Mark Eyking]

We can have a quick answer.

[Mark VanderVeen]

That is an option, but I don't believe we're in a position to become 25% more competitive.

[Randy Hoback, Conservative, Prince Albert, SK]

But you don't have to be. Ten per cent might do it.

[Mark VanderVeen]

Right.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Hoback. We're over time. We're going to try to get everybody in here.

Mr. Dhaliwal.

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

Thank you, Mr. Chair.

Thank you to the witnesses.

Mr. VanderVeen, you were saying that Canada can be a leader. In fact it's a leader only because companies like yours have played a key role. Government can only be a force of good and can create an environment.

I want to congratulate you also on your 100th anniversary coming up as well. Congratulations.

[Mark VanderVeen]

Thank you very much.

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

You mentioned a 28% steel price increase. Do you think it's just because of these tariffs or would it have come anyway?

[Mark VanderVeen]

I don't believe it would have gotten to that level, but of course I'm not an expert in the industry. With the administration in the United States putting out the threats that would allow the supply and demand of steel in the United States to fluctuate and alter, the steel manufacturers have had the opportunity to increase prices. I didn't believe they would increase as much as they have, but you probably would have seen a fair percentage of this 28% due to the tariffs and the trade initiatives that are going on. The tariffs were put in place by the administration to allow the steel industry in the United States to expand capacity. They have not expanded capacity; all they've done, based on supply and demand, is increase the prices. It has been extremely significant. As I mentioned, on top of that, we're now looking at the 25% reciprocal tariffs that we have to deal with. So it is significant.

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

As you know, we have signed the USMCA. It's going to help the auto industry. The minister is working very hard even on aluminum and steel, but in the meantime the government has come up with all these supports they can give to the companies.

[Mark VanderVeen]

Right.

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

What are your opinions about that? What else could have been done besides coming up with an agreement?

[Mark VanderVeen]

I am very opinionated about that, so I will temper my approach to it. The announcement was that $2 billion was going to become available. That was just in our backyard in Hamilton, I believe at ArcelorMittal Dofasco.

We've done a lot of looking around, a lot of research, a lot of digging around to understand how we can access some of that to improve our innovation, and I believe that's where it is. We've had a difficult time gaining transparency to that. The one area we have been approached is by the EDC, who I believe has taken a very substantial chunk of that $2 billion. We have had dealings with the EDC in the past, and I'm not going to knock them, but at this particular point I don't need a bank to lend me money because the government has implemented policies that are drawing back my profitability and cash flow. It's like the government implementing policies that are constraining your paycheque. You can't pay your mortgage payments anymore, but they'll let a bank lend you money.

That's not what we're looking for. We're a free enterprise. We'd like to move forward with this. If there are programs out there, please work very diligently to make them more visible and transparent to us.

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

Have you approached the minister's department to somehow find out if there are programs besides EDC?

[Mark VanderVeen]

We've searched through the web to see how we can access that, and now we've hired a consultant to help us.

Again, consultants are not very cheap, or very—

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

Okay.

Mr. Vescio, how about your members? How do they feel about the government support that's coming up? Have they submitted their remissions and gotten the money? What is your feedback from them?