International Trade Committee on March 23rd, 2017

[David McHattie]

This is actually, in our view, the most valuable of the tools. It enables the CBSA now to investigate and make a decision when calculating the dumping margin to make sure that they are considering what would be the costs and pricing from an exporter, based on a properly functioning market. If their costs and/or prices are distorted in some way, for some reason, such that there's a particular market situation going on that impacts their cost, now the CBSA has the opportunity to say, “Something wrong is going on there. I'm going to go to a surrogate cost that is more reflective of reality and make the calculation on the normal value or on the dump value.” That will increase, therefore, what that fair selling price will be in Canada, and the market prices can go up by whatever the gap there was. These are profits that we'll be able to reinvest, employing more Canadians and making our facilities more productive.

This is a very important opportunity for us. The United States and many other countries had this tool and Canada didn't. This is fantastic modernization.

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

Advanced manufacturing has been talked about in the past. How important is that to the industry, and what might be some of the plans for the future modernization of steel mills in Canada?

[David McHattie]

I couldn't express what our colleague from ABB described as what manufacturing of the future will look like. It looks like that today in our facility.

For example, we can be on a laptop anywhere in the world and watch the production go through our line. We can watch as an operator changes the speed, the temperature, the torque, or whatever it would be in that line. It's giving them predictive opportunities to improve that. It makes it more productive, there is more quality control, and it is something that our clients demand. Advanced manufacturing is here today, and as Mr. Donnelly said, the commitments of the government are critical to help our investments in this.

[Sean Donnelly]

I acknowledge Carolina's comments about ABB, but industry 4.0 is something that we're looking at, both from the view of a global entity and locally: how do we connect the data to the people?

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to the second round, starting with the Liberals.

Go ahead, Madame Lapointe.

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

Thank you, Mr. Chair.

Hello and welcome, everyone. Thank you very much for being with us today.

Mr. Ducharme, I have a number of questions for you.

I know your company has activities on both sides of the border, in Canada and the United States alike. If NAFTA were reopened, would you expect certain problems or improvements?

[Éric Ducharme]

It depends on what the changes are, of course.

In my presentation, I gave the example of the Gordie Howe bridge. To my knowledge, this is the first time in Canada that there have been clauses requiring purchases to be made in Canada or the U.S. This means that there will be North American competition for the project.

Among the major infrastructure projects in Canada, there are three bridges: the Gordie Howe bridge, the Champlain bridge, and the George Massey bridge, in Vancouver. They will all spur strong demand for raw materials, including steel.

As I said, 50% of the work for the Champlain bridge has already been awarded to European companies.

As to the George Massey bridge, for which a bidding process is ongoing, it is clear that a large part of the steel will come from Asia. There will be international and Asian competition. Regardless of what we do in Canada, we will not win.

As to the Gordie Howe bridge, perhaps owing to the U.S. influence in the project, there are buy American clauses. NAFTA will enable us to create jobs and participate in the construction of this bridge. I see a lot of benefits.

In my opinion, it should do more for the public projects that will be funded by our tax dollars.

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

Thank you.

You said that half of the work for the Champlain bridge will be done by foreign companies. Were you talking about the design or the steel structures to be delivered?

[Éric Ducharme]

I meant both. Half of the manufacturing work will be done by foreign companies. There was a international bidding process for the engineering work and bids were received from companies in several countries. The design will be done by a mix of international and local companies. As to the manufacturing of the metal structures only, half of the work will be done here and the other half elsewhere.

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

There is a competitive advantage. You said it is hard to understand why the Spanish companies won the contract for the steel. From what I understand, the steel comes from Spain. You also said that we have to beware of Korea and China.

The committee was told that a ton of steel shipped from China to Vancouver costs $40. Steel manufactured in Hamilton costs $120 per tonne, and if it is shipped to Vancouver, then it costs $200. I understand...

[Éric Ducharme]

An important point was raised earlier. I am talking about measures that can be taken to help steel companies. First, a distinction has to be made between raw materials and manufactured products. What you are describing is different from my situation. For my part, I am a manufacturer and I deliver a final product.

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

I know there are various types of steel. If we use steel from other countries to manufacture steel structures for all our bridges, would it make a difference to the quality of the final product?

[Eric Ducharme]

Yes. I am not trying to cause a stir here today, but I have to say there is a huge difference. The situation with the Champlain bridge is not over. In Alberta, there have been all kinds of stories about this kind of industrial project. The one that comes to mind involves the steel modules from Korea that had to be cut into four sections to be transported. So, in the end, there were no savings for the client. The client ended up paying more, in fact. That is just one example.

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

Okay.

From what I understand, it was actually an issue with transparency in the bidding process.

What should the Canadian government do in this regard? Should we set new standards? In your opinion, what measures could be taken to improve the steel industry as a whole? What changes would you like to see?

[Éric Ducharme]

There are many things.

First, I think that as manufacturers we should be better informed about the recourse available to us, so we are not left on the sidelines. Going back to the example of the steel from Spain, what recourse do I have in that case? I know it is dumping and it is 40% to 50% below what it should be. I can prove that. All I can do, though, is sit there and watch.

So what recourse do I have with the government? What can I do to ensure that steps are taken in response to my appearance before this committee and the comments I am making? That is one thing.

I would also go back to my idea of a “Buy Canadian Act”. The U.S. has had a Buy American Act for a number of years. It is perhaps viewed negatively. In the U.S., the Buy American Act applies at various levels. For the bridge projects, it applies across the board. That means 100% of products and services. The ADF Group was recently awarded a project at New York's Laguardia Airport. It is a major expansion. For this airport, the Buy American Act applies at 50%. That means 50% for the U.S. and 50% for outside companies, which means we can play a role in the project.

In Canada, I think we could get to that point. That possibility should also be explored.

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

Thank you very much.

[The Chair, Liberal, Mark Eyking]

We're way over time, I'll have to cut you off there. Maybe you'll get another chance to finish up your thoughts.

We have just enough time for two four-minute slots here. We're going to have the Conservatives go first.

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

Thank you, Mr. Chair. Thank you ladies and gentlemen for your presentations today. Certainly tech is the efficient wave of the future.

I thank you, Ms. Gallo, for your presentation.

There's all this talk about dumping. Is there actually physical steel showing up, or is it they're just using pricing as a hammer to bring your price down?

David, you alluded to that.

Éric, you also talked about how the Champlain Bridge will be half steel from somewhere else. At the same time, you alluded to the fact there's really no saving by the time they transport and all this. I was a general contractor in my former life, and if there wasn't saving I didn't do it.

Who's buying? How much of this is actually showing up in Canada, where's it going, and who's actually buying it?

[Éric Ducharme]

Right.

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

If you're going to register an anti-dumping thing, it has to come from you, as a manufacturer.

[Éric Ducharme]

What we've seen in the market.... Obviously, these firms from Spain did not decide one morning they were going to travel to Canada and promote their steel. It's these engineering, procurement, and construction , EPC, contractors, the ones who take the work and eventually subcontract it.

On that specific bridge, you had a group of Korean and then Canadian-based companies and then you had Spanish with Canadian-based. The Spanish EPC who was on the project...it went out for bid, and eventually he looked at the prices and he said, if we take steel from sources that I already have in Spain we could cut the price down by whatever, be more competitive, and eventually get the work. This is where it started.

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

Okay.

Is the quality the same? It's all done to specs.

[Éric Ducharme]

This is what I'm saying. I don't want to open anything here, but I foresee issues on the Champlain Bridge, they're coming.

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

That was the problem with the last bridge.

[Éric Ducharme]

There are issues with that steel coming in, there are major issues coming, which this contractor is going to have to live with.