International Trade Committee on March 21st, 2017

[Michael McQuade]

My comment would be that we face a host of challenges. They seem to change every day, but if I were to list number one, it would be the trade issue. It's been there for decades. As quickly as you solve one particular case, one particular product, with a number of countries, you're faced with a different product or a different set of countries producing and exporting exactly the same material. I would suggest that trade remedy has been an issue for a number of decades. Not to lay all the blame at the feet of trade remedy, a credit crisis in 2008 obviously caused issues, and on and on would go the list. However, if I had to have one sustaining issue for a number of decades, I'd put trade remedy at the top of the list.

[The Vice-Chair, Conservative, Randy Hoback]

That's been more than five minutes, so I'm going to have to stop you there and move on to the next witness.

Thank you, Mr. Duvall.

Mr. Sheehan, please go ahead for five minutes.

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

Thank you.

I'm going to start with Sault Ste. Marie Chamber of Commerce and Rory Ring for a couple of minutes, because he only had 30 seconds to present. Explain the impact that both Essar Algoma and Tenaris Tubes have on the local economy and the rest of your chamber members. As well, take sort of a national view. I know that when I was first elected, the chamber became a resource city. Could you explain the impact, nationally, that the steel industry has on the supply chain?

[Rory Ring]

Our chamber of commerce is 90% made up of SMEs. If you break that down, 60% of our membership are small businesses, and 30% of those would be considered micro-businesses, so the echo effect of every dollar taken away from the steel industry is multiplied throughout our membership and their ability to engage in commerce.

We also find that these chamber members are the innovators that are the supply chain into the steel industry, helping to create the innovations, whether it's water filtration or shrinking a carbon footprint.

We definitely see that impact hit us right on the street. As I mentioned, we've lost 500 businesses in the last five years. That's very significant, because small and medium-sized enterprises are job creators. In that national scope, 80% of all jobs in Canada are created by small and medium-sized enterprises.

We need to be able to give them the opportunity to access the capital that is generated from the activities of our large industrials, to recycle that into innovation, technology, and creating partnerships with our education and academic institutions for developing R and D and for really developing along the STEM education stream. This will enable us to build new and breakthrough innovations, as many of them have a base carbon footprint they cannot avoid, and breakthrough technology is required to reduce that carbon footprint.

Then, by engaging the membership and those in the SME world, we can develop proprietary knowledge and will hopefully be able to sell that in 2028—if you like—to the Chinese to help them understand that they are a producer of 28% of GHGs in the global economy. We could even help the U.S. to understand and start to build their technologies to address the 22% GHG they are responsible for in the global atmosphere.

It's very important for us to be supportive of keeping green and blue steel produced in Canada, whether that facility is in Saskatchewan or Alberta, or whether it's building ships in Vancouver or—in our own instances—the SIS Group providing locomotive framework to Peru and Chile and having the proprietary knowledge to be able to do that. It's very important to make sure our industry is treated as a supply chain cluster—and it is very much a cluster. Also, the drop in the pond for Essar Algoma represents 10,000 other jobs in our community, so for every one job lost and for every dollar lost, that echo is significant.

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

Thank you very much for that.

I'd just like to ask Essar a question. In 2016 the budget had on page 128 some trade remedies, “Strengthening Canada's Response to Unfair Trade”. How has that helped the industry? We always like to showcase examples of where it does work when we change. As part of that, there was also a consultation process where they went out to both the producers and the unions to solicit input. What are your thoughts about perhaps more remedies that could be put in place?

[Kalyan Ghosh]

The most important point, as I think Mike said, is that the problem with unfair imports into the country is that when you stop one, another one comes up. The second problem is that a big chunk of it is coming from steel companies owned by state-owned enterprises, and you cannot fight governments.

The issue that came up in 2015 was purely imports, nearly two times the normal imports into North America. That led to the collapse. Yes, there were other issues at Algoma, but if that collapse had not happened, maybe Algoma would not have gone into CCAA at the end of 2015.

The processes are being changed, and I think the government is taking the right steps. However, I think the important point is that the commodity market that we play in is so volatile that the process has to be much more agile and responsive.

[The Vice-Chair, Conservative, Randy Hoback]

Sorry, Mr. Ghosh. It seems as though I'm always cutting you off. I apologize.

We're going into our second round now. We are expecting votes here any minute now, so for the second round, we'll just go for three minutes.

We'll start off with the Liberals.

Mr. Peterson, you will have three minutes.

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

Thank you, Mr. Chair.

Thank you to all the witnesses for participating today and for adding your important insight into what we're doing here. It is much appreciated.

I'll start with the Hamilton chamber.

Can you give a picture of how important the steel industry is to your community and your chamber of commerce?

[Huzaifa Saeed]

Absolutely. I briefly touched upon the supply chain that our colleagues have mentioned as well. One interesting thing about Hamilton steel is that it's not just Dofasco and Stelco—those are the household names—but it's companies that have been in business for over 100 years, and they're making the pipes and the value-added products. I think when steel is dumped into the market, a lot of them aren't at a scale where they can really pursue large-scale actions with CITT as some of the multinationals are able to. I think for them what is really necessary is for a system to be there automatically. It's not going to be a place where they can take unilateral action.

The other challenge is that, to their mind, the future of steel is going to be either a niche industry, in which they're able to specialize using R and D and capital investment, or them being bought up by a larger conglomerate that will help them evolve. Those are the only two pathways they see. The third pathway for them is something I don't think is amenable to the government at the provincial-federal level, and that is for the government to get out of their way. They're very afraid of the signals out of the U.S. in terms of environmental protections, trade remedies, Buy America, and America First. They're not able to compete at that level.

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

I appreciate that.

I want to take a global look at industry for a moment, because we're all focusing, rightfully so, on the dumping, mainly from China. There's no doubt about it, that that's where most of it is coming from. We touched on Korea as well.

How much of this dumping actually affects your ability to export? Are other markets being dumped into and therefore there are no export opportunities for your company either? Is that also a factor that is playing a role here?

[Kalyan Ghosh]

Do you mean export out of North America?

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

Yes.

[Kalyan Ghosh]

Logistically or structurally the industry is situated such that the logistics costs do not allow us to go to, let's say, Europe. That's the problem. If somebody has to come in, the same logistics costs apply, but if they're coming up from a state-owned enterprise, the cost is inconsequential.

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

Obviously, your biggest export destination is the U.S. market.

[Kalyan Ghosh]

Yes.

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

But they must be suffering from some of this dumping, as well, so is that impacting you? I take it that your export market has shrunk because of that as well, as have even export opportunities in the States?

[Roger Paiva]

I would just point out that in our case, half of the rebar used in Canada comes from offshore sources. We should be able to supply all the rebar for the domestic industry because we wouldn't have any logistics obstacles. It would be the cheapest rebar. For us to export to other markets, as my colleague said, becomes an issue of logistics, because it costs us a lot more.

[The Vice-Chair, Conservative, Randy Hoback]

Mr. Ritz, you have the floor for three minutes.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, ladies and gentlemen, for your presentations today. I am sorry for the shortness of time.

The one thing that strikes me is that there is always going to be global ownership, but what concerns us are the local jobs, direct and indirect. It really doesn't matter who owns the company; it's where the paycheques are delivered to.

We've had a lot of good discussions here on trade remedy, and I certainly agree with you. We face this on a number of different issues. It's the agility and timeliness of the trade remedy as much as the rules that are around it. We're seeing Trump coming out now saying that even if there's a WTO recommendation on something, he may not follow it, which flies in the face of rules-based trade.

I was going to drill down just a little bit further. Somebody talked about border measures, and the problem we have is that when you look at the percentage that's used domestically in Canada, we always punch above our weight, and the vast majority of it has to find a home somewhere else. How do you set up border measures that don't create a problem for you trying to export into another market when it reciprocates?

[Trevor Harris]

I think that's the legitimate challenge that as an industry and as a government we need to overcome.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

It's sort of the last resort.

[Trevor Harris]

As we look at the North American steel industry, we are very tightly integrated. I think it was mentioned earlier that north of 80% of our exports go directly into the U.S., and another significant percentage would then go to Mexico. So steel leaving offshore is relatively minimal.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

That's steel leaving Canada, but it's—

[Trevor Harris]

When we look at the American market, it's almost a one-for-one exchange. They export into Canada as much as we export south.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

We build certain things, they build certain things, and we swap.