International Trade Committee on July 9th, 2020

[Mark Agnew]

Yes, I am very much aligned with what Mathew has said. There's a lot under our direct control that we can do to have it make fiscal and financial sense for companies. At the end of the day, a company can't be running at a loss permanently.

For example, how can we have capital cost allowances such that, if you want to build a capital-intensive facility here, it's going to actually pay off for the company that has made that investment? How can we use procurement as a tool to incentivize early-stage companies to invest here in Canada? There are a lot of things within our direct control, and absolutely, we think that there are things we should be doing internationally, but we can't be thinking about only one and not the other.

[Randy Hoback, Conservative, Prince Albert, SK]

Am I out of time?

[The Chair, Liberal, Judy Sgro]

Yes.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. I trust you.

[The Chair, Liberal, Judy Sgro]

Ms. Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Madam Chair.

First, I'd like to ask a question of Mr. Wilson from Canadian Manufacturers & Exporters. My understanding from reading various sources is that even The Aluminum Association in the Unied States has said that the U.S. is unable to meet the domestic demand for aluminum and that, in fact, they could get up to one third of domestic demand at maximum capacity.

Is that your understanding as well?

[Mathew Wilson]

Yes, it is, and it's largely because of the integrated supply chains that developed. We have certain expertise in sourcing that goes into their system, and they have some that comes into ours. That's why these tariffs between countries that have a common production platform make no sense whatsoever. It's the same with steel, any auto threat and any of those other ones. They just make no sense at all in an integrated system, and you can say the same for things like government procurement policies and buy American. It's all the same type of protectionist action that doesn't work in an integrated manufacturing platform environment such as we have with the United States.

[Rachel Bendayan, Liberal, Outremont, QC]

Are you in touch with American manufacturers on the other side of our border?

[Mathew Wilson]

Yes, absolutely. They are a lot of the same companies, right? A lot of those companies that are using the products in the United States are the same companies that are operating in Canada, and they're our members. We're working closely with our counterpart organization, the National Association of Manufacturers, on these issues, as well as the Canadian government. We're talking to the trade department, Deputy Prime Minister Freeland's office and others. Certainly, we've made our concerns very well known. I think the government is well aware of industry concerns and the potential negative impacts, both in Canada and in the United States.

[Rachel Bendayan, Liberal, Outremont, QC]

Speaking of the negative impacts, obviously, it would mean increased prices for manufacturers, but it would also mean increased prices for consumers. Is that your impression?

[Mathew Wilson]

At the end of the day, we as consumers pay the bill. Industry doesn't. No one, not governments nor industry picks up the tab. At the end of the day, it's on consumers, and that's the unfortunate part of this. It's never really explained all that much. That's why tariff reduction often happens: It's to lower consumption costs for consumers. In this case, however, you're looking at a soft drink can or an adult beverage going up by 10 cents or whatever, just because of an aluminum tariff. It doesn't make a lot of sense.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you, Mr. Wilson.

I'll go to Mr. Agnew if I still have time, Madam Chair.

Mr. Agnew, in your opening statement you mentioned the importance of our supply agreements. I just wanted to read into the record the dates of several joint statements that Canada was involved in and in many cases took the lead on: on March 25, March 30, in a May 14 agreement and on April 22.

There are a number of very interesting instruments that Canada was able to sign with like-minded partners that have made a difference in ensuring that our supply chains remain open. I wonder if you could be a little bit more specific when you talk about the security of our supply agreements and tell us what additional measures you think the government can take to continue to work towards keeping trade flowing internationally.

[Mark Agnew]

The first thing I would say is that the statements we've been producing have been a fantastic initial effort. What we're saying very much is to build on that and take them to the next level. Those statements, at the end of the day, are not legally binding on the countries that make them, so I think the next level up is to say that we've agreed to this in principle as a statement, and now let's actually put our money where our mouth is and put some legal text in writing that we as a country would be willing to abide by in an international legal treaty sense.

What I think that would specifically look like is to make it much tighter around the justified grounds for countries to use export restrictions that would prohibit the production of, say, PPE from leaving a particular jurisdiction. Certainly, what we have seen in the current context is that under our current trade deals, there's a very wide berth to interpret what public health and national security grounds actually mean, and there's a scope, we feel, to begin to make that much tighter and more narrowly defined.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll now go to Monsieur Savard-Tremblay.

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

Good afternoon.

I would like to thank all the witnesses for their presentations.

I have a question for Mr. Wilson. Much like my colleague's, it will specifically involve the aluminum sector. As you know, the industry is extremely important in Quebec.

Mr. Wilson, you are most likely in contact with the main U.S. buyers of Quebec aluminum, that is, auto parts manufacturers.

Right now, we are trying to avoid the worst. Is there no way to let them know that new tariffs would penalize them considerably, especially since they are in states that will play a decisive role in the upcoming presidential election?

[Mathew Wilson]

Those American companies are well aware of how it's going to impact them, and they are working with the White House and U.S. trade officials to avoid the impacts.

You mentioned automotive. Most automakers use aluminum castings for engines and other things. Ford's F-150, the bestselling vehicle in North America, has an almost entirely aluminum body. The impacts on the auto sector would be massive, and aerospace would be the next one.

These companies are very well aware of the impacts on their supply chains. They don't have other sources of supply. It comes out of Quebec, Manitoba and British Columbia. Some supply comes out of the U.S., obviously, as well, but a huge chunk of it comes from here. Our intelligence, as well as what they're telling us, is that they're working with the right officials in the U.S. to make them aware of the direct impact on their operations in the United States and on the workers.

We saw this with steel. The same thing happened. These companies were very quiet for a long time and then they started getting vocal. It was companies such as Ford, Harley-Davidson and others that stepped up and started talking about the direct costs of the 232 tariffs on their production, on their employees and, at the end of the day, on their products, which made them less competitive in the marketplace.

We hear that they are talking and we expect them to continue talking. These are political problems that bear no basis in reality a lot of times, and that's part of the problem we're facing.

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

You seem to be saying that contact has been established, at least, between some of the elected officials in question and the auto parts manufacturers, which, I repeat, are often located in key states for the U.S. presidential election. They're called swing states because they could determine who wins.

Since you're saying they've been in contact, do you expect any duties? The major aluminum producers haven't taken the normal route, so they are going to take the presidential route, but they need to put that before both chambers.

Based on the information you seem to have and your interpretation of it, is that where we're heading?

[Mathew Wilson]

To be perfectly honest with you, I don't know. I really hope that a Canadian exemption is created on this because of the integrated supply chains, but I don't know. It's so political. Maybe others on the call can make a better guess than I can, but I would assume so. That's a guess at best, though.

[The Chair, Liberal, Judy Sgro]

Your time is up.

We will now go to Ms. Mathyssen.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Thank you all for appearing today.

Mr. Neumann, you briefly mentioned safeguard measures, and I know that during the imposition of the previous steel and aluminum tariffs, the government imposed temporary safeguard measures. We had pushed for those to be permanent.

Going forward, would you support permanent safeguards to protect against these further tariffs that our industry seems to be experiencing?

[Ken Neumann]

Mark and I fully agree. The fact is that, listening to the discussion and listening to the testimony—as I said at the beginning, our union represents members in trade-exposed sectors and across the regions, be it in softwood, aluminum or steel—I have to tell you that I don't have a warm, fuzzy feeling about what's been happening to our members in the communities where we work.

When we came out of this thing in May of 2019 in regard to lifting the tariffs, I think we unfortunately fumbled very badly. The fact is that we have not looked after the needs and the wants of the aluminum workers, forestry workers or the steelworkers and the steel industry. You can't continue to reward bad behaviour.

I look at this file. Quite frankly, a large percentage of this file is probably 80% political, and the other 20% may be based on some facts. I mean, many of the witnesses have already testified with respect to what's happening to aluminum in the United States. They can't produce what they need to consume. They depend on Canada. It's good aluminum. It's a good product. It sustains good middle-class jobs. The fact is that the only people it's going to benefit is China and Russia, and it's going to be a detriment to workers in the United States, the auto sector and the consumer.

Yes, they should impose the duties, tariffs or the countervailing measures permanently. The fact is that we should not be pushed around. The fact is that the government has to stand up for the citizens of Canada. We maintained that back then, and we maintain that today.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Thank you for that.

You also spoke about the targeted growth of the domestic product, the use of local skilled labour and those environmentally friendly materials within the government infrastructure programs. I believe that, in past testimony, Mr. Wilson has also talked about the need for the implementation of a national manufacturing and automotive strategy, and combining that with our export and industrial strategies.

Could you both talk about the benefits of that and how that would impact your members and, Mr. Wilson, yours as well?

[Ken Neumann]

I'll pass that to my assistant, Mark Rowlinson. He's familiar with that.

[Mark Rowlinson, Assistant to the National Director, United Steelworkers]

Hello, everybody. Yes, we've been advocating for the need for a national advanced manufacturing strategy in this country for a long time. Frankly, it's now needed more than ever in the wake of the pandemic.

Mr. Agnew also referenced the fact that government procurement can be an important measure that governments can take to spur new manufacturing in this country. I want to highlight one issue, though, that is relevant to this committee's inquiry. One of the issues that we had with CETA when it was signed was that it places limits, or could place limits, in our view, on the power of the domestic government to fully exercise the power of procurement to create jobs by excluding bidders from outside of Canada.

We think that, when you're renegotiating or negotiating a new agreement with the United Kingdom, the government should pay particular attention to preserving its ability to create jobs in Canada through the power of procurement.

[Mathew Wilson]

Yes, we definitely need a national manufacturing strategy. Procurement should be a core part of it. We released our strategy on what we're calling a recovery and prosperity strategy. Just two weeks ago I met with about 75 MPs during a virtual lobby day to present this. We think it's critical. Not only does it help grow domestic investment, but it also helps exports grow.

Part of the challenge on growing exports, diversifying exports and the rest is that agenda that we always talk about in this committee that, if you're at maximum industrial capacity, which largely we've been at in Canada now for quite a while, you can't grow exports. There is no capacity to grow. We're sitting at—or we were prior to COVID-19—around 83% or 84% capacity. In the biggest export sectors like automotive, we were over 100% capacity. If you don't grow capacity, you don't grow exports.

We need a strategy that drives investment, that grows the sector and grows capacity, whether it's for procurement or export sales, and that is really important.