International Trade Committee on Feb. 18th, 2020

[Jean Simard]

Thank you.

First, on the anti-dumping, basically we have to look at what happens in the market that we want to address. What we see is metal flowing into Mexico more and more in the shape of finished products such as cans and wheels coming from China, and then a substituting of those same pieces and parts in the Mexican market and pushing the equivalent from Mexico out into the U.S.

In March 2019, there was a section 301 tariff against Chinese wheels in the U.S. A month later, Chinese wheel imports into Mexico increased by 260%, all the way up to July. In the same period, Mexican exports of “Mexican” wheels increased by 240% for the same period. If you connect the dots, it's either a case where Chinese wheels coming in are taking the place of Mexican wheels in the Mexican market and enabling Mexican producers to ship into the U.S., which breaks the market—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Am I to take from this that there is an adequate system in place to be able to measure what's coming in and in what quantities?

[Jean Simard]

Yes, absolutely.

It's vigilance through visibility and the right safeguard measures to address these situations. It plays to our detriment because we provide downstream clients with the metals to make the wheels in the U.S. This is harming us in our market of exports because it's displacing, eroding, our market share. This is why it's important to us. That's for the anti-dumping, if it answers the question. On the—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Sorry, but just to expand on that, in the event that we're able to see a correlation like this, where suddenly there's a particular type of product made out of aluminum coming in from China to Mexico and there's a corresponding availability of product for export out of Mexico, what does a remedy look like in that case? Does this trade agreement provide any remedy?

[Jean Simard]

No.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Where do we look to for a remedy?

[Jean Simard]

The remedy is always in the hands of the country of import. In this case, the first phase is in the hands of Mexico when the Chinese stuff knocks on the door, and the second phase is in the hands of the U.S., when the wheels come into the U.S. They have to be able to control with tariff codes. They have to see the stuff coming in. If they see the stuff coming into Mexico before it shows up or its equivalent shows up on their side of the border, they can pre-empt it. The pre-empting could be done through the joint monitoring approach by the three countries.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

On the content requirement and ensuring that we have...?

[Jean Simard]

This is a more delicate one, because we're going to have to work with industry, the car industry and with our government. We're going to have to work with U.S. industry to ensure that there's a growing use of primary metal that is smelted and poured in the region, for parts manufacturers also. Is it a branding campaign by Canada? That's part of it. Is it also defining in further detail what those rules of origin will mean in the coming months? One of the aspects of those negotiations is that, in the coming months, the industry and governments will sit down and share their respective interpretations of what was arrived at as a deal.

We have to find ways to use these coming months to work with the devil that's in the details to make sure that it speaks on our behalf. I don't have any solution today, but we're looking at it.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Blaikie.

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I want to thank the witnesses for appearing here today. I particularly want to thank the Canadian Automobile Dealers Association for bringing an economist here, because since December 14, we've been asking the minister to provide some economic impact studies. She's been very unco-operative. I think today everybody saw that we had to pass a motion. Hopefully we will get some of that information, because nobody believes that the minister and the Prime Minister would sign on to an agreement of this magnitude without having some type of advice and economic impact studies in front of them.

Mr. Dicko, I'm going to put you on the spot, and I hope you can give us a little information. We heard about the rules of origin. I believe that currently it's 62.5%, and for some of it, that may be going up to 75%. Coming from Oshawa, where we used to build cars but we are going to be building parts and doing some type of manufacturing, I think people see this as a good thing for the short term. In other words, we're going to be able to move some of that manufacturing—or keep some of it—here.

I was wondering if you guys have done any analysis of the short term versus the long term. I've read some analysis that says that because of these new rules of origin, there's going to be increased red tape here, and that's actually going to increase the cost of building products here in North America. We all know there's that tipping point, at which manufacturers, instead of building cars here, just say, “You know what? Forget it. There's too much paperwork and too much for us to be competitive. We may just build that car offshore, pay the tariff and bring it in.”

That's my first question, whether you have done any analysis on the short term and long term.

Also, we heard about the labour part of this agreement, such that these products had to be produced in factories paying at least $16 an hour. I believe the idea was to push some of the manufacturing from Mexico north. I can see that happening. However, is there anything in this agreement that would favour a manufacturer investing in Canada rather than in the United States? Mr. Williams was quite correct with his work on the Canadian Automotive Partnership Council, which said that we're getting only about 7% of new investment. Is there anything in this agreement that would actually say to Ford, GM and Chrysler, “I want to make that investment in Canada versus in the United States”?

That's quite a bit to go through, so could you just do your best to answer that?

[Huw Williams]

I'm going to save the economist by just giving one quick answer to Mr. Carrie off the top, to give him time to do his math.

One of the things you really highlighted there, which you picked up from my presentation, was the 7% going to Canada. Committee members will know that investment numbers mirror the production value over time. As we have greater investment, obviously, we have greater production. It's very troubling when investment numbers start to decrease because that starts to affect the long-term future of production.

The most important thing to underscore in terms of your question is that in Canada we have to make a decision. Are we trying to attract investment? Are we being very aggressive about it, or are we going through the motions?

I sat through CAPC meetings with various ministers. This was an initiative started by Minister Flaherty, when he was in Ontario, and Minister Rock when he was Minister of Industry, in a joint production, and I just think that we have to get serious as a country, because the stories like those of Oshawa and elsewhere just aren't good for the economy. We have to make sure that we have a better competitive offering.

Over to you, Mr. Dicko. Good luck.

[Voices]

Oh, oh!

[Oumar Dicko]

The rules of origin will gradually increase the content of these products that are made in North America, to 2023, to 75% in some instances. What that will do is more products and more parts of these vehicles that are manufactured in North America will be made here, so that would have a direct increase on the production in North America, in the short term.

In the long term, what's going to happen is that they will have a trade-off between producing in Canada or in North America versus producing offshore and shipping back to Canada. I think the manufacturers at that point would have to make the decision whether or not it's cheaper or more convenient to produce here in North America because of the rules of origin versus producing offshore and shipping into Canada. That trade-off would have to happen. We haven't done a specific economic impact study on that, but in the short term, certainly, we'll see production increase in Canada. In the long term, the manufacturers will look at the trade-off between producing offshore and shipping to Canada or producing here.

[Colin Carrie, Conservative, Oshawa, ON]

The second part of my question was whether there was anything in the agreement that would favour Canada—

[The Chair, Liberal, Judy Sgro]

Mr. Carrie, I'm sorry.

[Colin Carrie, Conservative, Oshawa, ON]

I'm out of time, am I?

[The Chair, Liberal, Judy Sgro]

Yes, I'm sorry. If it was really short, you could have tossed that in there.

Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

My first question is for Mr. Simard. When was the last time we had an increase in installed capacity in the aluminum sector? If my memory serves me right, that was 15 years back.

[Jean Simard]

The significant one was the Alouette phase two, which—

[Chandra Arya, Liberal, Nepean, ON]

Right now, the Canadian installed capacity is about 2.9 million tonnes. Is that correct?

[Jean Simard]

No. It's 3.2 million tonnes of production, so installed capacity is probably 3.5 million tonnes because we're at 93% utilization.

[Chandra Arya, Liberal, Nepean, ON]

That's fine.

How much of an increase have we seen in the installed capacity in the last 15 or 20 years?

[Jean Simard]

Between 1990 and 2000....