International Trade Committee on Feb. 25th, 2020

[Donat Pearson]

Indeed.

[Stéphane Lauzon, Liberal, Argenteuil—La Petite-Nation, QC]

How can the poor-quality aluminum produced in China take the place of your product when your plants comply with environmental standards, for example?

[Éric Gilbert]

If you bring the aluminum in through Mexico, there's remelting. So you're remelting aluminum. At that point, you can bring in alloys. That's how we lose our niche.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir. I'm sorry I have to cut you off.

Mr. Epp.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Madam Chair.

I have a question for Mike Kilby.

Several months ago, I had the opportunity to tour your facility and witness first-hand the growth from zero to 250 employees over a 10-year period. You walked me through the impact of the CITT findings in 2014, 2019, and the U.S. findings in 2016, regarding countervail and dumping.

Can you tell me how this deal and its provisions will impact the employment level at your facility? Also, how could the U.S. 2021 review of that potentially impact your facility?

[Mike Kilby]

Thank you.

As I said before, these anti-dumping and countervailing duties have been very important for the Canadian and U.S. operations of aluminum extruders. It's allowed the extrusion industry to recover and thrive again. The extrusion industry just hit the 2006 levels again in 2018.

It is a growing industry. Manufacturing jobs are coming back to the industry. I know that of nine extruders in Ontario, six serve the automotive industry, and all are growing right now and adding both facilities and employees.

The 70% requirement for aluminum for automotive is a really big deal for us. More and more, automotive business is starting to move into Mexico, and the Chinese have been unrelenting in finding ways around the anti-dumping and countervailing duty tariffs. We know that Mexico is the back door in for that industry. There is no other reason for Mexico to insist on the reduction or elimination of that 70%. They can get aluminum in North America like everybody else.

My colleagues from Quebec will be displaced out of Mexico over time. There is absolutely zero doubt in my mind about that. The Chinese have already moved metal into Mexico. They tried to move it into the United States subsequently and were caught red-handed doing it. They were fined and so on. They then moved that metal to Vietnam and tried to move it back into the United States. These are the types of things we're up against with the elimination of that 70% North American content for aluminum.

This is the thing that will help investment in the aluminum industry in North America. Those things all fit together. Why Mexico would insist on its elimination is beyond me, other than they want to advantage themselves on subsidized and dumped metal into Mexico.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

As a follow-up, can you explain to me whether in the section 232 tariff exemption that Canada and Mexico presently enjoy there is any way that some form of protection can be afforded to our domestic extruders and smelters through that mechanism, or through parts, is imported aluminum basically undetectable?

[Mike Kilby]

Yes, the section 232 order has given a boost to the price of metal in North America. It should be helping smelters in both Canada and the United States with investment decisions. Both Canada and Mexico were exempted from that 10% duty, but the provision was also put in that if exports of regular fare extrusions from either Canada or Mexico start coming across the border and those numbers start to rise, the United States would revisit those provisions.

We're hyper aware of that as an industry in Canada. We're not going to be biting the hand that feeds us in that regard. We're all very aware of the implications of section 232, but also, it does keep Mexico honest for stopping other what I'll call normal fare extrusions, non-automotive extrusions, coming across the border into the U.S. in large quantities.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Epp.

Mr. Sheehan.

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

Thank you very much to all of our presenters. It's excellent testimony. I think I'll start with Brian Topp.

We've all heard about the team Canada approach. A lot of us were part of it. I know that at your level the minister engaged with people from the NDP and the Conservative Party and really tried to gain perspectives from the different premiers at all sorts of political levels. This trade committee was down in Washington a couple of times, eyeballing our counterparts, both Conservative and the NDP opposition members, and saying, “We're not going to ratify that in Parliament unless you lift those steel and aluminum tariffs.”

I'm from a steel town, with Algoma Steel and Tenaris, and, by the way, we also have a lot of small steel producers.

Brian, for the record, could you comment on your perspective on that sort of team Canada approach and how it resonated with the Americans that you were dealing with, as opposed to their approach, and how that, going forward, will help us with future deals?

[Brian Topp]

I'm going to pass.

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

That's fair enough.

To the aluminum folks, since we're on the topic of steel and aluminum that we had the section 232 tariffs on, how have they affected your particular businesses?

The government announced a few things in support of your industries. We heard testimony from both the steel and aluminum industries that they're still on their heels after the 25% and 10% tariffs, and that things like the strategic innovation fund that was available for large producers and small and medium-sized producers...and any other support that you think going forward will help your industries continue to grow as we are coming out of those section 232 tariffs that were just lifted in May of this past year.

I will start with the guy from Chatham, near Sault Ste. Marie.

[Voices]

Oh, oh!

[Mike Kilby]

The section 232 tariffs did have a negative impact on us. The lifting of those tariffs has helped us for sure.

Our industry is fairly geographic. As you push extrusions farther into the United States, the geography of freight gets in the way. There is an impact from section 232. It did exist and doesn't anymore. The very fact that it can be reimplemented keeps industry honest, from trying to further advantage themselves from the lack of the tariff.

I'm not sure if that answers the question.

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

I think it does. I think it's important to highlight and underline your statement, and I think we heard testimony that if it were ever reimplemented as any kind of tool, it would definitely have a negative effect on your industry, so I appreciate that.

I'll ask our friends from Quebec the same question.

[Donat Pearson]

The 10% tariffs put in place for aluminum have had an impact. If I'm not mistaken—and I don't want to speak for Rio Tinto—I believe it was a $20 million loss per month to the employer. It didn't necessarily slow down primary metal production. It's really the primary metal that's produced in our facilities.

I used to represent the Laterrière plant where they make rolling ingots. One hundred percent of our production went to the United States. This had the effect of imposing an additional tax on the employer. At the same time, however, the so-called Midwest premium was increased. This balanced the situation for the employer.

[Éric Gilbert]

It was mostly, I believe, the small producers who used our aluminum that were being penalized because of that.

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

Yes. It was our experience, in hearing some testimony on the effect on small and medium-size because of the integration of the North American Free Trade Agreement in the past, about how aluminum and steel could pass back and forth through the border once or twice. We put a lot of measures in place to rebate those individuals, but small and medium-size businesses sometimes don't have the cash flow or capacity that a large place like Rio would have. We definitely heard those issues.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Sheehan. I'm sorry, but your time is up.

Mr. Savard-Tremblay, you have two and a half minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

We could pick up the conversation where we left off.

You didn't have time to answer a question from my colleague earlier. I'm going to give you the opportunity to do so.

[Éric Gilbert]

Indeed. We were saying that for the last 10 years, Russian and Chinese production has been stagnating. Rio Tinto seemed to say that our production had remained the same and that it had not been affected.

I want to remind you what's happened in Quebec over the last 10 years. Rio Tinto closed the Beauharnois plant and the Shawinigan plant. They were old plants.

The next plant to close, the oldest one in existence, is ours. Basically, what we want is to have a future in terms of production at the AP-60 plant during phases 2 and 3, so that after the closure of our plant, which is at the end of its life, we can look forward to a future at the AP-60 plant. That is what the debate is about.

When it is said that China's production has had no effect on Rio Tinto's production, it is not true. Two plants in Quebec have closed, and ours is next on the list. I don't think the Alma plant will be closed before ours.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Hence the idea that the aluminum smelters could expand.

If we were to establish real rules about the origin of aluminum, like the ones the steel industry benefits from, can you tell us how, in concrete terms, that would make your life easier?

[Donat Pearson]

We want Rio Tinto to move the projects forward and complete the testing phase at the AP-60 plants. Instead of simply selling the technology platform, we need to go to new markets by developing AP-60 with Elysis technology, which eliminates all greenhouse gases and makes our aluminum even greener, which we need to promote. We must ensure the future of our industry.

[Éric Gilbert]

And that of the workers.

[Donat Pearson]

That of the workers as well, of course, since we represent them.