Evidence of meeting #10 for International Trade in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aluminum.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Donat Pearson  President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937
Éric Gilbert  Vice-President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937
Mike Kilby  President and Chief Executive Officer, Dajcor Aluminum
Brian Topp  Partner, KTG Public Affairs
Jamie Pegg  General Manager, Honey Bee Manufacturing Ltd.
Shelley Bacon  Chief Executive Officer, Northern Cables Inc.
Todd Stafford  President, Northern Cables Inc.
Scott D. Smith  Manager, Components, Systems and Integration, Honey Bee Manufacturing Ltd.
Leigh Smout  Executive Director, World Trade Centre Toronto, Toronto Region Board of Trade
Tabatha Bull  Chief Operating Officer, Canadian Council for Aboriginal Business
Bridgitte Anderson  President and Chief Executive Officer, Greater Vancouver Board of Trade

4:30 p.m.

Bloc

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

If we had a North American content rule for aluminum and not for aluminum parts, that would change everything. Is that correct?

4:30 p.m.

President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937

Donat Pearson

This would go a long way towards developing the market.

4:30 p.m.

Bloc

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

Based on your knowledge of the market, in the best of all possible worlds, would it be in Mexico's interest to adopt anti-dumping measures? When I look at the overall situation, I have the impression that it is only Quebec that can really be affected.

4:30 p.m.

Liberal

The Chair Liberal Judy Sgro

Could we have a short answer, sir.

4:30 p.m.

President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937

Donat Pearson

Currently, in Mexico, there is practically one smelter opening per week. There are Chinese consortiums that own plants in Mexico. So it is in their interest to bring their own metal and then reintroduce it into America.

4:30 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much.

Go ahead, Ms. Kwan.

4:30 p.m.

NDP

Jenny Kwan NDP Vancouver East, BC

Witnesses, thank you so much for your presentations.

My questions really centre on the process with respect to negotiating trade deals. In this instance, it is the Canada-U.S.-Mexico agreement.

We have for a very long time consistently been in the situation where trade deals are negotiated and signed, and then Canadians get let in on the deal after it is all said and done. The New Democrats have been pushing to change that effort so there would be more transparency and more ability for government to know what Canadians are thinking with respect to trade deals and what's important to them.

To that end, in going forward with respect to trade deals, I'd like to seek your advice on what kind of changes you would like to see with respect to process.

I'll start with Mr. Topp, please.

4:35 p.m.

Partner, KTG Public Affairs

Brian Topp

As we were discussing a little earlier, a good place to start is the letter of understanding between the NDP opposition caucus and the government. This speaks to the goals that you're just outlining. I think a good place to start is that Canadians should have as much access to these kinds of discussions as Americans and Mexicans do. The process in Congress and in the Mexican congress are more formal, more transparent, have more stops in them, more requirement for government to explain what's going on than we have in Canada.

Your colleague the honourable Daniel Blaikie, I think, has underlined these very effectively. Now we have to think about how to enshrine that in the rules, so the next time Parliament deals with these kinds of issues, you don't have to use the kind of leverage that's available in a minority Parliament to force it.

This is a requirement, I think, for the government to lay out what its goals are in the negotiations, to give stakeholders an opportunity to comment on them before the negotiations start, for the government to give progress reports on what's happening, for stakeholders to be able to give feedback and then for the matter to be assessed and for the ultimate result to be benchmarked against the results, before Parliament makes its decision. That's what Americans have and Mexicans have and what Canadians should have, too.

4:35 p.m.

NDP

Jenny Kwan NDP Vancouver East, BC

Thank you.

4:35 p.m.

Liberal

The Chair Liberal Judy Sgro

Please be very short.

4:35 p.m.

NDP

Jenny Kwan NDP Vancouver East, BC

Are there any other comments in terms of adding to those suggestions from the other witnesses?

4:35 p.m.

President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937

Donat Pearson

Our labour organization is interested, through its president, Mr. Jerry Dias, in getting involved in such issues. We have staff who are in a position to provide input to the government or the opposition parties. We are always available to get involved in these kinds of issues.

4:35 p.m.

Vice-President, Syndicat National des Employés de l'Aluminium d'Arvida Unifor - Local 1937

Éric Gilbert

It was the opposition parties that highlighted our situation and invited us to come and debate this issue. I do not know if in the future it will be important to consult all the people who are affected by these decisions.

4:35 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much.

We have completed the second round of questioning. Does anyone have an outstanding question they would like answered? I will suspend for the next 15 minutes, until our next panel, and you can speak directly with the witnesses if you choose.

I will suspend until five o'clock. Thank you very much.

5 p.m.

Liberal

The Chair Liberal Judy Sgro

I'm calling the meeting back to order.

Pursuant to the order of reference of Thursday, February 6, 2020, we continue our study of Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States. We're going into, I think, the seventh panel today.

Welcome to all of you.

We have, from Honey Bee Manufacturing Ltd., Jamie Pegg, general manager, and Scott D. Smith, manager of components, systems and integration. From Northern Cables Inc., we have Shelley Bacon, chief executive officer, and Todd Stafford, president.

Mr. Pegg, I'll turn the floor over to you.

5 p.m.

Jamie Pegg General Manager, Honey Bee Manufacturing Ltd.

Thank you.

Madam Chair, committee members, my name is Jamie Pegg, and I have the privilege of representing the 160 employees of Honey Bee Manufacturing as their general manager.

I have with me here today, Mr. Scott Smith, one of our employees who has been integral in bringing to light our requests and concerns.

We want to thank you for the opportunity to express our support for the new trade agreement and to address some requirements that our business sector will need.

Greetings are extended to you from all of the Honey Bee employees, as well as from the nine different small-town communities these people call home in southwest Saskatchewan.

Greetings are also offered from Donna Boyd, the chairwoman of Agricultural Manufacturers of Canada, and their 240-plus members.

Honey Bee Manufacturing was established in 1979 by two brothers, Greg and Glenn Honey, who started to manufacture agricultural innovations that they developed on their farm in Bracken, Saskatchewan. They innovated a swather. Their neighbour wanted it, and then the farmer down the road wanted it. After 40 years, farmers from over 26 nations have used Honey Bee equipment to harvest their crops more efficiently and effectively so more people can eat.

The key products Honey Bee produces are combine headers, to be used on almost any combine manufactured worldwide, and swathers that attach to either tractors or power units to cut and dry the crop before the combine comes to harvest it.

Original equipment manufacturers, OEMs, like John Deere, Case, New Holland and AGCO have all recognized the value of Honey Bee innovation in harvesting. At different times, they have entered into partner agreements with Honey Bee to produce either brand name headers and swathers or a Honey Bee branded table.

The innovation that has defined Honey Bee products has supported hundreds of employees at the facility in Frontier, Saskatchewan, with a population of 300. Honey Bee is the key economic driver in southwest Saskatchewan, covering a radius of over 100 kilometres.

Today, if you look around the main operations area, as well as research and development, you will see employees who represent four and five generations of farming in the local area, as well as new Canadians from the Philippines, India, Venezuela, Ukraine, Syria and Germany.

We are a global company in terms of the people we work with as well as the markets we sell to. Over the last two years, Honey Bee credits Canada for 40% of its sales and relies on the rest of the world for 60% of its sales, including 33% to the United States of America.

Being a global company, we rely on and support free trade agreements that Canada participates in. They are a necessity in our industry.

One only needs to look at the last two years of tariffs and closed borders to see the negative impact they have on our industry. We estimate that these measures cost Honey Bee millions of dollars and closed the door on a lot of job creation. That is not taking into consideration the additional cost that farmers needlessly absorb when they have to buy new equipment because of the increased price of metals and components required to build our equipment.

NAFTA was a continuation of the excellent trade relations that agricultural manufacturers enjoyed with the United States. We are hoping CUSMA will be the same. The key take-away from our testimony today is that our industry is placed on an uneven playing field versus the United States.

Honey Bee's opportunity to capitalize on intellectual property is based on our ability to operate with OEM platforms. Interoperability means that a Honey Bee harvest header can “plug and play” with the OEM combine. Historically, this has been provided in a straightforward and obvious way, just like the way a keyboard plugs into a computer. Today, we are starting to see encrypted digital interfaces on the OEM products that block us from connecting and operating our harvest headers on these OEM platforms.

Further, there is no technical information or parts forthcoming from the OEM to achieve the required adaptations independent of their direct involvement with Honey Bee engineering teams. The net result is “authorized use only”. This is controlled by the OEM digital locks and keys that are unavailable to implement manufacturers. Instead of spending our research budget on innovation, we are burning it on adaptation.

The vast majority of these machinery platforms are manufactured by companies in the United States and sold worldwide. In order for Honey Bee to continue to participate locally and globally on these platforms, we need to have the ability to connect the two and operate them in a straightforward manner.

According to Stats Canada, Honey Bee is about one of 1,400 manufacturers in Canada that develop implement products that attach to large OEM platforms. About 500 of these companies are agricultural implement manufacturers. We are dependent on the OEM platforms to host our innovation.

The impact of a technical lockout by the OEM will be the death of the Canadian implement industry and will decimate our communities. Most of the 500 agricultural implement manufacturers in Canada are located adjacent to smaller rural communities where they tend to make a significant contribution to jobs and the funding of essential services. This would be lost. The Canadian manufacturing supply chain would also be greatly impacted.

Interoperability issues affect equipment in all Canadian industrial implement sectors, which include ag, mining, construction and forestry. OEM platforms are the engines of industry that provide the power to perform work, including combines and tractors; load, haul and dump equipment; excavators and forestry forwarders.

Innovation is characterized by the traits of meeting specific user requirements that are not met by the OEM one-size-fits-all offering. Honey Bee innovation caters to the specific needs of our many markets and considers their unique operating environments, farming practices and crop diversity. Meeting these challenges is a global requirement that brings Canadian innovation to the world.

Securing the ability to commercialize innovative products in Canada is at risk today. Legislation and the trade agreement, CUSMA, don't address this, and they should. Canadian industry should have the freedom to innovate commercially on OEM platforms.

New IP clauses in the CUSMA do not place U.S. and Canadian implement manufacturers on the same footing. U.S. copyright law makes exceptions for legally modifying motorized agricultural equipment for the purpose of interoperability. Canadian copyright law does not provide for these exemptions, making it illegal for Honey Bee, or any Canadian company, to reverse engineer OEM platforms to achieve interoperability. Canada has no exception for motorized land vehicles, such as a personal automobile, commercial vehicle or mechanized agricultural vehicle, as per U.S. exemptions. The current U.S. copyright law allows for you to attach to products in the U.S. but not in Canada. This means that products made in Canada cannot be legally adapted in Canada, putting Canadian manufacturers and farmers at a disadvantage for no reason other than the lack of clarifying language.

We also seek to have changes to domestic law that mandate that the OEM equipment platforms sold in Canada interoperate with any of the implements available for use by farmers in Canada. Honey Bee desires that the CUSMA adopt some form of mandate to this effect.

Canada leads the world in agricultural innovation. From high-performance seed varieties to soil management, seed planting, and crop nutrients through to harvest tools, crop processing and farm technology, Canada stands tall in global agriculture. According to the Government of Canada trade data online, the agricultural equipment industry in Canada exports over $2.3 billion of agricultural equipment a year. The United States accounts for about $1.9 billion of this. Therefore, it is very important that Canadian agricultural equipment be able to interoperate with American platforms for this continued success.

It is crucial that the CUSMA ensure that it protects and allows the Canadian agricultural industry to not only maintain its status as a world leader, but promote industrial growth within Canada and Canadian brands around the world. At the start of this testimony, I offered you greetings from our 160 employees and their families. My desire is to see the number of employees and families increase as the company grows.

Because of the pro-Canada decisions made around the CUSMA, my fear is that we have not been heard today and, in the not-too-distant future, I will have to address those same employees and tell them that they no longer have jobs. That will be the impact if we do not address the discrepancy between the Canada and U.S. copyright exemptions in this agreement.

I also want to highlight that Honey Bee is a very small player on a very large stage. If unaddressed, there will be hundreds of businesses, employing thousands of people supporting numerous communities, that will diminish or vanish. At a minimum, the requested exemption that gives us parity with our U.S. counterparts on reverse engineering for interoperability needs to be added to the Copyright Act prior to signing the CUSMA. It is an imperative for the Canadian agricultural manufacturing industry in Canada.

Thank you for your time. We're open for questions.

5:10 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much, Mr. Pegg.

Next is Northern Cables.

Go ahead, gentlemen.

5:10 p.m.

Shelley Bacon Chief Executive Officer, Northern Cables Inc.

Good morning. I'm going to let Todd Stafford give the presentation.

5:10 p.m.

Todd Stafford President, Northern Cables Inc.

Good day. I'm Todd Stafford. I'm the president of Northern Cables in Brockville, Ontario.

Northern Cables is a 24-year-old Canadian owned and operated manufacturing company based in Brockville, Ontario. We are the remainder of what was once a large domestic aluminum wiring cable manufacturing industry in Canada. Gone are Canadian-owned companies like Alcan, Canada Wire and Cable, and Phillips Cables. These businesses were supplied mainly with primary aluminum produced in the province of Quebec.

In 24 years Northern Cables has grown to three manufacturing facilities of 275,000 square feet and 250 full-time employees. Our company processes materials sourced only in North America. Northern Cables purchases the bulk of its cast aluminum rod from the province of Quebec and exports about 50% of its finished products out of the country.

Since the economic cycle in 2007 when copper reached a price of $4.20 U.S. per pound, the popularity of using aluminum as an alternative material in power cables has increased dramatically. The U.S. government has attempted to apply tariffs on aluminum and steel products originating from outside of the United States, specifically aimed at China. Unfortunately, these measures are easily avoided by applying connectors to cables and reclassifying goods as other products, such as by selling aluminum in cast animal shapes.

Part of the tariff actions reflected concern with material being shipped to other transshipment countries before entering the United States. Statistics Canada shows significant imports of aluminum wire in the form of stranded conductors—bare, insulated and assembled cables coming from China, India, Turkey and the United States. An action by two large U.S. domestic manufacturing companies resulted in a finding by the U.S. Department of Commerce that Chinese imports were sold in the U.S. at 58.5% to 63.4% below fair value. Chinese exporters received countervailing subsidies at the rate of 33% to 165%.

Since this hearing is about the new Canada-U.S.-Mexico free trade agreement, Northern Cables has four points we'd like to raise to protect the domestic manufacturers from being harmed.

First, enforce that landed prices of competing foreign manufacturers arrive at fair market value in Canada.

Second, enforce that Canada not become a transshipment country into which aluminum is dumped, causing displacement of other aluminum.

Third, strengthen our customs import codes so that products cannot be mislabelled or repackaged in such a way as to circumvent our import rules and permit below-market prices entering Canada.

Last, support Canadian manufacturers' interests on CSA and UL wire and cable committees and standards, in which harmonization by the other two countries could reduce existing Canadian safety standards. A little example of this is the need for -40°C-rated cables in Canada rather than the -25°C-rated cables available in the United States.

Thank you.

5:10 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much, gentlemen.

Mr. Hoback.

February 25th, 2020 / 5:10 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Thank you, Chair.

Thank you, witnesses, for being here this afternoon.

The USMCA, or new NAFTA, or NAFTA 0.5, is an important deal for Canada. There's no question about it. It's $2 billion a day. We will approve this agreement, but one thing I definitely want to do at this committee is talk to different sectors and different industries to make sure we have an understanding of the impact and where it's negatively impacting a sector or an industry, that we put in the appropriate mitigation to help minimize that impact.

I'll start off with you, James, and Honey Bee.

We talked about this issue with regard to John Deere and Case and companies like that not opening up their architecture and electronics to allow the functionality of your headers. Do you see anything in the USMCA that will actually allow us to deal with that, maybe using U.S. law, for example, to make it easier?

5:15 p.m.

General Manager, Honey Bee Manufacturing Ltd.

Jamie Pegg

Randy, I'm going to initially defer that question to Scott Smith, who's done a lot of work on this. He'll give some follow-up to that, if that's all right.

5:15 p.m.

Scott D. Smith Manager, Components, Systems and Integration, Honey Bee Manufacturing Ltd.

The Copyright Law of the United States provides exemptions specifically for reverse engineering for interoperability. Interoperability was born out of the requirement for computer software to allow people with physical disabilities to enter data into a computer. Software wasn't written to accommodate that, so a provision had to be made for mouth-straw types of keyboards and whatever.

Today in the ag industry and the industrial equipment industry we're seeing these digital interfaces that replace straightforward plain old wire systems that still work. There's no additional functionality with the digital systems that are being employed on the new designs. They're just simply doing it to provide a technical lockout. It can be a wired one or it can be wireless.

As a minimum, the U.S. Copyright Law allows for this reverse engineering for interoperability specifically on farm and industrial equipment. It would still cost us a lot of money for a single adaptation to work around that system. On one of the AGCO products we developed, it cost between $800,000 and $1 million for one product, to put one swather on one tractor. We have a lot of products and a lot of tractors and combines out there, so if we have to do that, it would be completely unfeasible.

Ideally, at a minimum the Copyright Act includes the same exemptions that are provided by the U.S. Copyright Law. The information we've supplied has the link to that U.S. standard, as well as the motivation for it and explanation of it. It's very clear. It's really just clarifying language. It's updating it to be modern to reflect the realities of the industries we work in.

Ultimately, though, we're going to require some form of mandate that equipment be brought into the company with open interoperability as a default position. Ideally, that happens at the federal level, because it affects all provinces.

5:15 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Okay, but if we do that at the federal level, we have to do it not just in Canada, but right across North America. Then, of course, you ship headers into Europe and Australia and Ukraine. How do we make that global by nature?

5:15 p.m.

Manager, Components, Systems and Integration, Honey Bee Manufacturing Ltd.

Scott D. Smith

The equipment we're building for, the brands that we've mentioned, are U.S. brands, and it's the same combine that's sold in Canada and the U.S. as in Europe and everywhere else. The impact on us means that whatever we do for our development is true for anywhere we sell our product, because it's the same host platform we have to design for.