International Trade Committee on Feb. 26th, 2020

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting to order. Pursuant to the order of reference for Thursday, February 6, 2020, we are studying Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States.

Welcome to our witnesses who are here by teleconference and those with us in the meeting room. By video conference from Niagara Falls, we have CanadaBW Logistics, Kevin Jacobi, executive director; and from Tanzania, Eddy Peréz, international policy analyst with Climate Action Network Canada.

Here with us in Ottawa, from DECAST, we have Jim Tully, executive vice-president. We are expecting Bob Benner, from Hamill Agricultural Processing Solutions, shortly.

We will go with the video conference. Mr. Peréz, you are in Tanzania and I understand that you don't have the best connection in the world, so we will open with your comments, sir.

Please go ahead.

[Eddy Peréz, International Policy Analyst, Climate Action Network Canada]

Thank you very much.

My apologies for the quality of the video. I am in Tanzania, in the traditional land of the Wa-arusha.

On behalf of Client Action Network Canada, we thank you for the invitation to address the Standing Committee on International Trade.

Climate Action Network Canada is the country's largest network of organizations working on climate policy, and the sister organization of the world's largest network of environmental organizations, regrouping more than 1,300 groups around the world.

I'd like to begin these remarks by standing in solidarity with, and highlight and support the work throughout 2018 and 2019, and the comments by member organizations like the Canadian Labour Congress, Unifor, the Assembly of First Nations, the steelworkers, and many other members who participated in the consultations and worked closely on NAFTA 2.0. I also support comments by our allies such as the Council of Canadians.

For over 25 years, NAFTA has contributed to climate change, toxic pollution, economic insecurity, and social inequality and environmental deregulation. This is a result of a trade system that Canada has prioritized in favour of corporations over people.

In the current climate crisis, we can't continue to promote trade models that lock ourselves into multi-decade trade deals that add fuel to a house on fire.

The questions that we have for you are as follows. Is the current CUSMA on the right side of history? Can we seriously use this trade deal to tackle climate change and toxic pollution? How is the new version of NAFTA different from the last one? Will it reassure those who are working inside and outside of this Parliament to ensure Canada upholds its climate obligations and responsibilities?

We therefore recognize, however, that the absence of any energy proportionality provision in NAFTA 2.0 is a clear win in environmental terms. The same applies to the deletion of ISDS. But is this enough?

Democrats in the United States voted against the ratification of the agreement because it does not address climate change, the greatest threat facing our planet.

Now that Canada is contemplating its ratification, we should focus on how to create domestic safeguards to ensure that while Canada implements this agreement, it does so while upholding its environmental and climate obligations.

Let me just remind the committee of the current state of play.

CUSMA fails to address, acknowledge or even mention the climate crisis. Most of the provisions in the environmental chapter are vague and remain largely unenforceable. Chapter 28 provides new avenues for corporations to influence regulation.

Considerable attention was given to fishing subsidies. However, that is clearly not the case for fossil fuel subsidies, which are similarly destructive and tell a sad story of North American's ongoing support for the high-carbon-intensive economy.

CUSMA shows again the deep deprioritization of the environment chapter to a point where specific wins, like the elimination of ISDS, are undermined by the complete lack of reference to environmental governance; and there is no mention of UNDRIP.

This deal hardly mentions pollution, and it does not include specific and binding terms to address documented pollution dumping. There are no independent and binding enforcement systems for environmental terms and it does not create an independent body to investigate and initiate cases against environmental abuses.

How do we move forward?

These are quick recommendations from Climate Action Network.

For us, climate action alone won't stand if it does not ensure that trade deals protect the rights of workers and also recognize the rights of indigenous peoples.

Acknowledging that because of the current political context, Canada was not able to ensure meaningful progress to include climate in the current text is not enough. Canada must ensure that this trade deal does not block our ability to respect our climate obligations and commitments.

How do we move forward?

Canada has committed to increase its climate targets and to reach net-zero emissions by 2050. Canada has committed to provide new nationally determined contributions, and those new NDCs rely heavily on expanding renewable energy, so there may be more disputes to come and we need to be prepared.

Here is what we encourage you to do.

Parliament should request an analysis on how this trade deal can support further climate policy, particularly in three key areas. The first is how CUSMA facilitates, or not, the trade of climate friendly goods and services and further strengthens the promotion of Canada's climate objectives. The second is how trade rules, at the very least, are not a barrier to climate policy goals. The third is how trade deals impact the international transfer of mitigation outcomes under article 6 of the Paris Agreement, particularly in the context of the Quebec-California cap and trade system.

Finally, we are way behind where we need to be. In this climate crisis, achieving climate objectives should be considered to be a legitimate reason for departing from trade rules. Such considerations are being considered in the EU. Weak clauses, even when enforceable, are not a guarantee that a trade deal can be seen as a tool for climate action.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Peréz.

On to Mr. Jacobi.

[Kevin Jacobi, Executive Director, CanadaBW Logistics Inc.]

Thank you very much. I appreciate being asked to be part of this conversation.

My name is Kevin Jacobi. I'm executive director for CanadaBW Logistics, located in Niagara Falls, Ontario.

To put it in context, my company is an import-export development company. We help local businesses support expansion of their exporting needs, as well as international companies find a home here in Niagara, for them to be part of our community and develop their businesses within the Canadian infrastructure.

I'm here to speak in support of the USMCA and the ratifications that are being done, in the hopes that it's going to give stability to our companies here.

We have a number of companies whose opportunities have been greatly impacted by changes in tariffs subjugating such things as steel and aluminum. Our client base here develop contracts between their suppliers and the people they're selling to that can last more over two to three years. When tariffs come in the middle of a contract, we don't have the opportunity to adapt or to evolve what we're trying to do as businesses. It impacts our margins or it dissolves our company.

Working with our chambers of commerce here, as well as being the executive director for both the Niagara Industrial Association and the World Trade Center Buffalo Niagara chapter, we see there being dramatic impacts from this uncertainty without this deal being ratified.

What we're hoping to see through ratification is stability in the market. We understand that there are going to be pluses and minuses, depending on the sector of business that our companies are in. However, we'll have the rules in place to allow us to make decisions that we can impact and can forecast beyond just the short term. We're firmly in the process of having.... I think we have a very small window for us to ratify, based on the political climate in the United States. If we don't take action soon, we may lose that window of opportunity.

Niagara—and Niagara is one of the largest trade networks across Canada, being a border community—has the busiest border crossing for people coming back and forth from Canada and the U.S., but it is also the second most important border crossing when it comes to total value of freight. We are one of the few areas in Ontario with a trade surplus.

The ratification of the NAFTA 2.0 or USMCA will solidify our ability to impact Canada's economy, as well as attract businesses and investment into our Canadian business cycle. One thing we do with my company—what we try to accomplish here—is to develop a landing point for international companies to develop manufacturing and marketing opportunities within our region to better impact their ability to do business with both Canada and the U.S.

We understand that Canada is a very small market compared to the U.S.. However, we are seen across the world as a stable market, a place of doing business in an environment that respects fair trade and other cultures. We give a landing point that allows them to have fair access to both Canada and the U.S. and, of course, Mexico, to a limited extent. We don't really have as much going here for Niagara in that respect.

We hope that the committee will take the advice of the people who are presenting to move forward with ratification and give Canadian businesses a stable platform for us to grow our communities.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Jacobi.

On to Mr. Tully, for Decast.

[Jim Tully, Executive Vice-President, DECAST]

Good afternoon. Thank you for allowing me to present before this committee.

My name is Jim Tully. I'm the executive vice-president of DECAST Limited.

DECAST is a manufacturer of precast concrete infrastructure products and is located just outside of Toronto. We directly employ over 500 people, and our supply chain affects another 3,000 people.

While NAFTA and now CUSMA should provide open markets to both sides of the border, history has shown us that this is not the case. There are several existing U.S. policies that have affected small to mid-sized companies like DECAST: buy America; buy American; the American Recovery and Reinvestment Act; and President Trump's executive orders on U.S. content. We've been affected over the last few years in the following ways.

Under buy American, for construction projects, contractors must use construction materials that are 100% manufactured in the U.S., with greater than 50% of materials coming from the U.S. Canada is exempt for contracts greater than $10 million; however, most of the projects that we bid on fall under this amount. Many states and municipalities also use similar geographic production requirements.

Under President Trump's executive orders, President Trump has clearly stated that he wants to buy American first and has incorporated this concept into three executive orders affecting buy America and buy American policies. These executive orders create more uncertainty for companies like DECAST.

The direct result of these policies has been that the Canadian market for infrastructure products is wide open to U.S. companies, allowing for predatory pricing and dumping. ln 2018, DECAST lost the equivalent of 41 full-time jobs on projects lost to imports of U.S. steel pipe. Our understanding of the pricing by U.S. manufacturers is that it was at or below the cost to manufacture. Just last week in Winnipeg, a U.S. pipe manufacturer from Texas undercut local pipe producers. Given the distance they had to ship, they are selling at or below their cost.

ln conclusion, to help manufacturers like DECAST Limited, Canada should impose domestic content preference on its infrastructure funding to provinces and municipalities, as recommended by the Canadian Manufacturers & Exporters. This type of domestic content preference could be implemented under the concept of reciprocity to account for true and open free trade.

Thank you for your time.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Tully.

We'll go on to our members with Mr. Dowdall.

[Terry Dowdall, Conservative, Simcoe—Grey, ON]

Thank you, Madam Chair, and I thank my colleague Chris Lewis for allowing me this time today.

As a former mayor and a deputy warden and warden of the County of Simcoe, I've had the opportunity through the years to work with the organization that is here to present today.

I want to thank you, Mr. Tully, for being here. I know you're a very busy man.

As you said at the beginning, yours is a company that's grown quite a bit through the years. We had expansions in 2011, 2012 and 2016, and in 2019, I believe it was a $12-million expansion and 35,000 square feet as well. It is a growing company.

It has done very well and in fact celebrated its 35th anniversary. It is incredible in today's economy to have that length of time. It's a large employer and, as well, during its 30-year anniversary, presented cheques of $15,000 to two local charities, the Women's and Children's Shelter of Barrie and, in Alliston, My Sister's Place. Through the years, this organization has donated much time and energy and is one of the key cogs, quite frankly, in Simcoe—Grey.

I had the opportunity through the Federation of Canadian Municipalities to help with that growth you were having in the industry to build upon what you have, and I know that through the years there sometimes has been a lot of red tape from organization. As well, we had the steel policy for a while and, at the end, the buy American policy.

Certainly our party believes in free trade, and ideally with less government involvement. I just wondered if you could speak a little more on how free trade affects you and, if we could make the playing field even, how that would work.

I have another question. I know that there's a $186-billion rollout for municipalities for infrastructure projects that, from what I gather, aren't getting out there in time. Could you speak also to the amount of business you get through the cities and the municipalities, how important this is for the municipalities that need that infrastructure and how important it is for you and for your organization to grow and expand once again?

[Jim Tully]

From our perspective, the real effect on us has been that we have no ability to bid on U.S. jobs. We have no ability because of the uncertainty that's caused by buy America and buy American policies and by these executive orders that have come out. By the time the local proponent who's asked us to give them a price figures out whether they can use us as a supplier, the bids are closed. It's too late. So, we're blocked on bidding on pretty well any project.

How this affects us is that our U.S. competition—and I'm all for open and free competition when it's equal—has the ability to come into Canada to bid on jobs, and they use predatory pricing when they come up here. They use pricing that covers maybe their overheads, and they don't look at profit. They're just dumping. If I told you the prices that went in to Winnipeg last week, it's ridiculous. They're coming out of Texas, and they're 25% below the local guy. It's unacceptable.

They do this freely, knowing that we have no ability to retaliate. That's our real problem. Like I said, from my perspective, reciprocity is the answer: If you put this kind of policy on us, we do the same back. That's the only clear answer.

It worked about a decade ago when the FCM canvassed the federal government and was able to put a reciprocity clause into force. Right away, the U.S. took off the limitations on Canada. If we can do that again, especially in this climate that we're sitting in today, that would have a great effect and help companies like ours.

[Terry Dowdall, Conservative, Simcoe—Grey, ON]

Just to follow up on the importance of infrastructure to the City of Toronto, as an example, our large cities that need it as well, and the type of work that you're doing and how it could have an effect, the American part of it, if you're not bidding on those contracts, how it will hurt you.... All of those expansions were pretty much in line with tender contracts at the time. You do the major subway. You do the major girders that people see when they're driving in Ontario here on the 401. I don't know if you can give an update on the importance of that as well.

[Jim Tully]

It's hugely important to us. The infrastructure is a massive part of what we produce for. I'll give you some examples. In the Ottawa area, we're working with the two LRT proponents. We're supplying all of the girders that will be used in those elevated sections of those LRT lines that are being built in Ottawa. Any delay in infrastructure projects that come out is a delay of work for us. We're always pushing to see that funding flows freely and flows in a proper amount of time.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Dhaliwal.

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

Thank you, Madam Chair.

My first question is for Mr. Eddy Peréz.

Can you hear me?

[Eddy Peréz]

Yes.

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

Okay.

First of all, I want to thank you for your advocacy on the environment. That's great.

As you very well know, we believe in the environment. You mentioned already that by 2050 we will have zero net emissions. We believe that the commitments to high levels of environmental protection are an important part of the trade agreements as well, as they protect our workers and our planet, particularly when we talk about CUSMA. This is the first-ever trade agreement with an enforceable environment chapter. This replaces the separate agreements that we had in the previous agreements.

As I come from British Columbia, marine environment is very important to me—Randeep comes from there as well. It upholds air quality and fights marine pollution. Wouldn't you agree that these are the positive steps moving forward?

[Eddy Peréz]

It's fair to say, as I mentioned in my statement, first of all, the approach of Canada and the U.S. on trade does require some type of enforceability—for example, for the environment chapter and other chapters. That said, enforceability does not mean that the clauses that countries agree to respect are ambitious enough to ensure that trade between two or three partners continues to negatively impact climate change.

Let me just give you a couple of examples of things that are not in CUSMA, and while this deal in some ways brings some key, important elements of progress, it does not allow for greater climate protection.

First, there are no binding climate standards within the text. Key Democratic leaders, such as the head of the Senate for the Democrats, voted against this deal. He said it did not address or mention the climate crisis.

The current NAFTA 2.0, far from including any climate standards, fails to even mention climate change. It is a glaring omission, with in fact NAFTA's incentive for corporations to dodge the hard-fought clean energy policies of the U.S. by moving to Mexico, for example, and eliminating jobs and perpetrating climate pollution.

You mentioned marine protection, and that is great. As I said in my statement, the three countries that are partners for the CUSMA actually address subsidies for fisheries, but there is no mention, for example, of how fossil fuel subsidies are going to be tackled by countries and reduced in order to encourage, and actually stop distortion in, the markets on renewables.

On clean air, water and land standards, the deal barely mentions pollution and it fails to include specific and binding terms to actually address documented dumping of pollutants.

For example, the text recognizes that air pollution is a serious threat to public health, and in that sense, you and I agree. However, it fails to include a single binding rule to reduce the air pollution that NAFTA has exacerbated.

From the 2018 version of the text to the 2019 revision, this revision actually repeats these failures and omits essential limits on air, water or land pollution. These are just some examples for you.

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

Mr. Jacobi, yours is a border town. So is Surrey, British Columbia, and we have a lot of logistics companies as well. I appreciate you supporting CUSMA.

Could you tell logistics companies in my part of the world how this will benefit them when they trade or move goods across the borders?

[Kevin Jacobi]

I'd be happy to.

We have to look at the idea of the ratification of this NAFTA 2.0 as being greater than just our trade between Canada, the U.S. and Mexico. I'm very proud of what this government and past governments have done to create free trade agreements across the world.

What we allow through our participation in the North American free trade agreements is access for our partners in other countries to develop their presence within our communities using logistics companies such as mine, in my area, and the logistics companies in your area as well, to be able to attract these other countries to develop partnerships for existing manufacturing and develop products that are syntheses of ideas and of working components between multiple countries to become products of Canada that would then have greater access to the Canada-U.S.-Mexico ability of a supply chain.

That's how we direct ourselves—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Jacobi.

Mr. Dhaliwal, you're out of time.

We'll go on to Mr. Savard-Tremblay.

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

I thank all presenters and witnesses today.

I wanted to direct my questions to Mr. Peréz, but the screen seems to be frozen. I don't know if we still have a connection.

[Eddy Peréz]

I'm here.

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

Hello, Mr. Peréz.

Thank you for your presentation, which was very informative.

Correct me if I am wrong as I do not want to misquote you. To summarize, you stated that, with respect to the former NAFTA, some progress has been made but it is far from what it should be in the current era of climate change.

[Eddy Peréz]

That's exactly right. That was a very good summary.

I believe that there are two main points to make.

First, despite some progress having been made, such as investor arbitration and other small improvements in environmental protection, when we look at the agreement as a whole, this treaty does not do nearly enough for Canada to meet its climate commitments. In my view, this is a major weakness of this agreement.

Second, there is absolutely no guarantee that certain provisions of the current treaty will not be strengthened once the current U.S. president is no longer in power. At present, there is no process for reviewing, for example, the co-operation of the three parties. There is also no mention of the climate crisis.

Generally speaking, these are major weaknesses.

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

There is no mention of the climate crisis or any reference to global environmental agreements.

[Eddy Peréz]

Seven multilateral environmental agreements are mentioned, but they are the very same ones mentioned in the former agreement. There have not really been any changes or updates despite the fact that Canada's position on these issues has changed significantly in the past 25 years.

The commitments Canada made in 2019 demonstrate a willingness to make more ambitious commitments. Unfortunately, they are not reflected in the agreement with the country's largest economic partner.