Evidence of meeting #16 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 trade.
A video is available from Parliament.
2:45 p.m.
Ken Neumann National Director for Canada, National Office, United Steelworkers
Thank you, Madam Chair and members of the committee.
The United Steelworkers thanks CIIT for the invitation to participate in the committee's study of the impact of COVID-19 on Canadian international trade relationships, with a focus on the United States and the United Kingdom.
The United Steelworkers represents more than 800,000 members across North America, including 225,000 members in Canada, in virtually every sector of the economy. We are the primary private sector union representing workers in trade-exposed sectors and regions. We also have a strong relationship with the trade union movement in the U.K., specifically through our partnership with Unite the Union and our global union, Workers Uniting.
As such, trade policy and trade agreements are of fundamental importance to our union and to our membership. The massive drop in trade between the U.S. and Canada, with exports down by 41% in April alone, has had an immediate impact on our members, particularly those in trade-exposed sectors such as manufacturing. At the height of the economic shutdown, about 15% of our entire membership was on a layoff of some type, including about 20% of members in manufacturing.
The COVID-19 pandemic has highlighted fundamental problems with the international trading system and our reliance on global supply chains for essential products. We must refocus the entire trade system to one that benefits both the workers and the environment, rather than one fixated on obtaining the cheapest possible products regardless of the conditions of production.
However, we are currently focused on the United States' possible reimposition of section 232 tariffs on aluminum, the risk posed by unfair trade on the steel industry, as well as the ongoing softwood lumber dispute. We are disappointed that these issues were not fully resolved prior to the negotiations and the implementation of CUSMA, which came into force on July 1.
While there are positive aspects of CUSMA, specifically the labour provisions demanded by trade unions and the U.S. Democratic Party, the section 232 side letter legitimizes the once-rare national security tariffs and curtails our options for counteractions in the event the United States reimposes the tariffs. The possibility of 10% tariffs on aluminum products threatens the 15,000 direct and 41,000 indirect jobs in Canada's aluminum sector, including 5,000 workers represented by the Steelworkers.
The United Steelworkers emphasizes that Canadian aluminum does not pose a national security threat to the United States, nor has there been any significant surge in exports. This assertion is backed by The Aluminum Association, which represents the majority of producers in the United States. Compared with 2017, exports in the first quarter of 2020 declined by 12%, and are up only about 3% compared with the annual average of 2017, the last full year without any major trade disruptions.
The cancellation of the original section 232 tariffs in May 2019, along with the end of the ABI lockout in the spring of 2019, led to the resumption of more normal trade patterns between our two countries. The drop in the U.S. aluminum prices is largely caused by the significant drop in demand as a result of COVID-related shutdowns, particularly in the auto sector. Massive growth in the Chinese production over the past 20 years remains the biggest threat, increasing from 1.9 million metric tons in 1999 to 31 million metric tons in 2019.
Ultimately, Canada must strongly defend community-sustaining jobs in the aluminum sector. That means that if the U.S. does reimpose section 232 tariffs on Canadian aluminum, Canada must impose retaliatory tariffs on a wide range of U.S. products, not only on aluminum. If the U.S. is not prepared to play by the rules, Canada should not be limited by the agreement signed last May. Canada must also stand up for the 22,000 direct and 100,000 indirect jobs in the steel industry. Since this pandemic, we have seen a 20% overall drop of steel mill exports to the U.S. in May.
This makes it even more important to grow the domestic market for Canadian steel. We could start by making sure that we use only Canadian-made steel products on government infrastructure projects like bridges, energy projects, transit and buildings.
Canada's steel is a very low carbon and global standard, so it is the green alternative to foreign steel. However, we should also implement a carbon border adjustment so that we're not placing our steelmakers at an unfair disadvantage compared with other countries that do not price carbon. Furthermore, workers and unions should also be considered as part of the domestic industry under Canadian trade law. This should allow trade unions to initiate trade cases in order to protect the domestic workers.
Canada's softwood lumber exports remain at risk despite our maintaining NAFTA's chapter 19 dispute settlement mechanism in the CUSMA. These provisions are not enough to prevent future duties on softwood lumber. Steep declines in forest product exports—minus 18% in May—combined with the volatile trade situation with the U.S. adds insult to injury to the Canadian forestry sector beset by declining prices.
Workers in British Columbia have been particularly hard hit by these multiple crises as thousands of workers have lost jobs and communities have been decimated by the effects of trade disputes, low prices and COVID-19.
Looking to the United Kingdom, United Steelworkers contend that any post-Brexit trade agreements must be based on strengthening workers' rights, and trade of products must be made in decent working conditions in both countries. We stand with our U.K. trade union allies in their opposition to the U.K.'s entrance into the CPTPP.
Along with our partner union, Unite, we support a trade policy that includes binding labour rights and strong trade safeguards for vulnerable industries and one that does not include investor-state dispute settlement provisions, or diminish the right to regulate.
Overall, the COVID pandemic has laid bare fundamental problems with the international trade system and our reliance on global trade chains for essential products. We need a broad vision and policies to ensure that Canada has the capacity to produce essential goods domestically in a manner that improves the quantity and quality of employment and allows us to meet our climate obligations.
Most importantly, we need to stand up to protect jobs in the aluminum sector and to ensure that the new CUSMA does not lead to continued erosion of the Canada-U.S. trade relationship.
Thank you for the opportunity. Mark Rowlinson and I are happy to answer any questions you may have.
2:50 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mr. Neumann.
We will move on to our questioners.
Mr. Hoback.
2:50 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, witnesses, for being here on a nice July day here in Ontario.
I'm going to start with you, Mr. Burney. I know you're in Colorado, but you should be in Ontario. It's a lot nicer here than Colorado today, I would swear.
In one of your articles you talked about the “economic prosperity network” that was being created. That was the U.S. basically working with Japan, Australia and like-minded countries to develop a system to have each other's back in times of need, for example, like now on personal protective equipment or ventilators and things like that.
In discussions with other people around the world, the members of the Conservative caucus trade members have been talking to groups, associations, and other trade ministers. We're starting to see countries form these groups or cartels where they're not only talking about having each other's back, but actually setting regs. They have the regs set, and if you're going to trade with that bloc, that's the reg, that's the safety standard, that's the item you're going to trade in, which will set the global regs.
What's your comment on that and why do you think Canada should be involved with that?
2:55 p.m.
Derek Burney
Well, it goes to the fundamental point I was trying to make in my opening remarks, which is that the world is turning more to self-reliance and self-interest, and that the American initiative was very much in that direction.
I think a lot of countries found that they were far too dependent on China, in the first instance, for the supply of the kind of medical equipment that we found necessary to deal with the pandemic.
2:55 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
I apologize. The interpretation was interrupted because the volume was too low.
2:55 p.m.
Liberal
2:55 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
The interpretation was interrupted because the volume was too low for the interpreters. Before we continue, is it possible to fix the problem?
2:55 p.m.
Liberal
The Chair Liberal Judy Sgro
Just ensure that your volume is at its maximum as well, Monsieur Savard-Tremblay.
Mr. Burney, would you mind backing up a little bit.
2:55 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
My volume setting is not the issue. The interpreters said they couldn't interpret with the sound the way it is. It's not me.
2:55 p.m.
The Clerk
Marika, maybe we can do a sound check now.
Mr. Burney, do you hear me?
2:55 p.m.
Derek Burney
Yes, I hear you very well. Can you hear me?
2:55 p.m.
The Clerk
Can you continue to talk a bit? Marika will tell you what to do.
2:55 p.m.
Derek Burney
I don't think I can do very much to fix my Internet connection. I'm on Wi-Fi, and in the mountains it does tend to get a little erratic. I apologize, but it's beyond my technical competence to fix the issue.
2:55 p.m.
Liberal
The Chair Liberal Judy Sgro
I think the clerk is advising us now, so can you go back to the point where we interrupted you?
2:55 p.m.
Derek Burney
I'll try. In effect, I was saying that I think this initiative that the Americans are leading is exactly what I was referring to in my opening remarks about the world turning more to self-reliance and self-interest.
One of the lessons we've learned from the COVID-19 pandemic is that many of our companies became too dependent on supply chains linked to China, and so the Americans are trying to get—I might even suggest, in the context of a trans-Pacific partnership concept—a group of like-minded countries to ensure that we are not dependent on unreliable sources of supply for dealing with future pandemics. I'm thinking that Canada should be very much in favour of this initiative.
In fact, one of the earlier commenters talked about the importance of supply chain resilience. One of the ways you can get supply chain resilience is by getting a network of countries to join together to ensure that we aren't caught with our pants down in the way we were with this pandemic.
2:55 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Madam Chair, there is still no interpretation.
2:55 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
I hope you're not cutting into my time because of technical difficulties.
2:55 p.m.
Liberal
2:55 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
All right. That just leads into both the Canadian Chamber of Commerce and to you, Mathew, from the CME.
We're starting to see a shift in the supply chains, like Mr. Burney talked about, and we're hearing this from other people we've talked to. They say there's a huge opportunity here in Canada because we have these trade agreements around the world and are positioned in such a way that we can ship and manufacture.
What do you think the government should be doing at this time to take on some of this opportunity to take advantage of companies wanting to move part of their supply chains out of China, to not be solely reliant on China and have them located here in Canada?
I talked to a few companies that said they don't want to get 100% out of China, but they might get 60% or 70% out of China, just to make sure they don't end up in a situation like they have right now.
3 p.m.
Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
Mr. Hoback, was that to me, to Mark, or to both of us?
3 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
It was to both of you. I think you both could handle it quite easily.
3 p.m.
Senior Vice-President, Policy and Government Relations, Canadian Manufacturers & Exporters
I'll start and then turn to you, Mark, if that's okay.
As I mentioned in my comments, we see this happening and we see a huge opportunity, but companies are going to shift those supply chains to countries where they can produce economically and still supply. Part of the reason my companies went to China in the first place was cost competitiveness, moving out of places like western Europe and North America, or certainly Canada and the United States, and into those markets.
We'll see that swing come back, but whether we'll get it or not is entirely up to us. Companies will shift, but they're not going to come to high-cost jurisdictions in Canada, the United States, western Europe or other places. They still need, to some degree, a lower cost production opportunity.
Some of the earlier surveys we're seeing are looking at places like Vietnam and Mexico as regional hubs for manufacturing products in those supply chains, but as I mentioned, I think there's huge opportunity here for Canada as that realignment happens. It won't happen suddenly; it's going to happen over a period of years. There's a massive opportunity with it and we can take advantage of it, but we need to get our business conditions right.