International Trade Committee on Nov. 3rd, 2016

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

We have the officials until one o'clock. Are we going to continue, because I...?

[The Vice-Chair, Conservative, Randy Hoback]

We've gone into the third round, and we can talk to the other parties about going to a fourth round. If there is a desire from all parties to do that, we'll look at that, but—

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I really have a number of questions I want to ask.

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

Take more time. Take 10 minutes, then.

Chair, give him 10 minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Okay.

[The Vice-Chair, Conservative, Randy Hoback]

I have to keep some sort of routine here. I'll tell you what, I will be flexible and maybe let you sneak over a minute, just as I will with everybody else, if that's okay.

Let's go to six minutes instead of five.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Less preamble, more questioning....

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

There has to be a preamble.

I have to tell you, I get so frustrated when we talk about these things.

I'm going to tell you a story. This is a true story. Back in 2007, I was one of the fortunate ones to go to China, with a group of four. They invited us. It was the first time I had ever gone to China. It was an eye-opener, to say the least.

When we got back, the Chinese embassy contacted me and asked me about the trip. They said they wanted to talk, and I said, “Wonderful. What do you want to talk about?” They said they wanted to talk about the environment. I thought, “Geez, yes, that's a good idea”, because when I got there, I really thought they were burning tires. I thought that was how they heated their homes and everything else. You suddenly realize that this is coal and that this place is badly polluted. So I said, “Sure, that's a great idea. Let's talk about it.” I started talking about it and they said, “No, no. We want to talk about yours.”

They talked about carbon, and how we needed to reduce that—and they are way ahead of us, the carbon footprint and that sort of thing. They did not feel that they should have to participate until at least 2025, and they cited reasons such as that the western economy has polluted. You've probably heard all this stuff. I was shocked. I was just stunned. I couldn't believe what I was hearing.

In my first question, I mentioned that there has never been a period of time in the history of the world when a major power hasn't been a major steel producer. We are talking about all this stuff, but I think that, in essence, if we talk about Chinese influence, their hegemony, how they are traversing the globe....

I looked at a number of trade disputes that have come down the pipe. Most of them involve China, but a lot of them involve countries that I know do not produce these products: Oman, Saudi Arabia, Mexico. They are funnelling this stuff into our economy.

I am asking this question of Foreign Affairs. Do you talk about those things? Do you recognize the fact that we have put ourselves in a position where we can no longer be competitive, especially with a country that hasn't even been granted...non-market economy? How are we going to do that? We talk about all these other things: we need to do this; we need to do that.

The fact remains that they burn dirty coal. Every one of their plants.... I've seen them. They have their own energy producers. They can crank this stuff out, and it doesn't even matter if they have to meet the market.... That's my first question.

The second question is, what would a free trade agreement do with a country like China, in the steel industry? Maybe you can just talk to the committee about those two things.

[John Layton]

For your first question about China, I can't really speak to the climate change implications. That's an important issue. Certainly, developing countries say that it should be developed countries that take the burden of addressing emissions. There are multilateral agreements on climate change, and that's something—

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I have to stop you for a minute. I can't believe you are not thinking about this. If a country says that, and they're still plowing their fields with oxen, that's one thing, but when they are cranking out all types of products, especially products that demand high-carbon fuels....

I didn't tell you the story about the wind turbines. This was way back when wind turbines were just getting popular. We walked through a plant that was so big that we had to take a bus on the way back. They weren't producing all those for China; I can guarantee you that. They were absolutely state of the art.

I am not suggesting that we shouldn't be reducing our carbon footprint, but is the Foreign Affairs department at least examining the possibility that we are being duped, and as a result we cannot compete in some of these areas?

[John Layton]

The issue about trade-intensive industries and the impact of carbon-intensive imports is something that's part of the emissions discussions domestically.

In terms of what Global Affairs Canada is doing, certainly on the steel file, we recognize that China has 400 million tonnes of excess capacity and that they're also the biggest consumer. They consume half of the world's steel, but growth is slowing there. They're moving to a more service-oriented economy with internal consumption, less export-oriented. Their excess steel is increasing and their exports are increasing. That's something we're trying to address. Minister Freeland addresses it with the Chinese when she meets with them. We're co-operating with our North American partners. The G20 leaders announced the global forum on steel overcapacity. We're trying to use that as a forum to work with countries like China that have massive excess capacity and to communicate ways that we can co-operate in addressing and reducing that capacity and to reduce the trade impact that has on countries like Canada.

To your second question on free trade agreements, we've recently announced exploratory talks with China. That's the occasion for the government to look at issues such as that and determine what our interests are and what the challenges are in having an agreement with a country like China that has sectors that are state controlled. As part of the progressive trade agenda, we will be looking at things like labour and environment issues in the exploratory talks with China.

[The Vice-Chair, Conservative, Randy Hoback]

I'm going to have to stop you there.

Ms. Lapointe, the floor is yours for six minutes.

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

Thank you.

I have some other questions about steel. I am very interested in the industry, which is part of our Canadian economy.

We talked about the Buy American Act earlier. I often hear something from Canadian steel processing companies trying to sell their products in the United States. They tell me that, with all government contracts, American companies are able to prevent ours from getting into their market. With private markets, I know that Canadian companies can export to the United States.

Do other countries have tariff or non-tariff barriers that block exports in the same way as the Buy American Act? It happens in the United States, but does it happen elsewhere? If other countries are using measures of that kind to limit access to their markets, what can we do to encourage our Canadian steel industry?

Could you each answer in turn, please?

[John Layton]

I think that we have to continue to advocate that we have an integrated economy with the United States and integrated supply chains and that it's to their detriment economically to have these policies. That's part of our advocate strategy in the United States, to continually educate the United States about the importance of Canadian suppliers.

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

Are they listening?

[John Layton]

Sometimes.

It's a challenge, but we keep sending the message.

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

It takes time.

Do you want to add anything, Mr. Halucha?

[Paul Halucha]

When I hear you talk about this, what comes into my mind is the automobile sector, where, obviously, we have very integrated supply chains between ourselves and the United States. All those players have the option of buying Canadian steel or American steel, and the reality is that they buy both. They buy specific products, depending on what their market need is and what the best product is. Canadian steel companies compete very well in getting into those supply chains.

I was at a company on Saturday— I won't say which one—touring an assembly plant. At one point, they showed us the supply base, and two of the three major Canadian steel suppliers were there, represented, and selling actively into that.

If members walked away from the meeting today with the view that the Canadian industry was not able to compete, I think that would be a wrong impression to have. The fact is, as I tried to outline in my statement at the beginning, that we do have a very competitive industry. They can compete, and they do compete, especially on a lot of the high-margin products. The mills in China often produce very raw materials. They produce higher stuff as well, but the costs of getting it to Canada.... Transportation costs on heavy products are a big consideration.

I know from a lot of the advanced manufacturing companies we meet with that they want to have local supply. It's the security of knowing that your supply chain is in Hamilton, in the Soo, or close to the 401. You can get the product, and you can get it on time. If there is a problem with it, you can get it fixed. Those are supply chain advantages that are really profound and worth keeping.

For example, with our two companies in bankruptcy, one of the points we kept hearing—and continue to hear—from advanced manufacturing firms in Ontario, Quebec, and elsewhere was how important it is to have competition even within the Canadian marketplace. They really value having those competitive sources in Canada.

I think the market is there. The challenge we've been talking about is the dumping, the oversupply issue. If you look at the price per tonne for steel, we have very competitive products in Canada. They can compete, and they can win.

On the climate change issue, you think about the cost. That's one side of it. I tend to think about the advantages of starting to brand Canadian steel more aggressively as low-carbon. More and more countries think about that—not only end suppliers or end consumers like us, but also intermediate companies that are purchasing. It matters to them that they're buying.... Lots of advanced companies we go to make a point of telling us that they buy Canadian steel and that this matters to them. It matters to them that they have that local base.

There are a lot of strong advantages for Canada going forward. In particular, I think the low-carbon footprint of our steel is one that we are probably just beginning to maximize as a real competitive advantage in the marketplace. I expect and hope that this will grow as a real differentiator that positions our firms to grow.

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

Actually, most of our steel goes to the United States. But in Europe, people are more sensitive to the environment, as we are in Canada. The Americans are less so.

Do you think that the European market could offer possibilities to Canadian steel producers, because it has less impact on the ecological footprint?

[Paul Halucha]

Yes, absolutely.

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

Is there a way to open that market up? Could we work towards it a little more?

[Paul Halucha]

When you get to the point of hearing from the companies, I think they will be in a better position than I am to talk about their market strategies, in terms of developing those markets in Europe.

The free trade agreement that we just signed last week is very important to strengthening our trade relations with Europe, and I think it will create a lot of opportunities. I know that a key step the Department of Foreign Affairs is taking is to actually market the opportunities in Europe much better to Canadian firms, and I expect and hope that the steel industry will be part of that conversation.

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

Thank you very much.

[The Vice-Chair, Conservative, Randy Hoback]

Perfect. You're at six minutes and 15 seconds.

Ms. Ramsey, you have six minutes and 15 seconds also.

[Tracey Ramsey, NDP, Essex, ON]

Scott.