International Trade Committee on Feb. 24th, 2020

[Isabelle Des Chênes]

It's a great question.

Certainly our members look at a variety of factors before making that investment decision. That does include the regulatory climate, things like climate change regulation and so on.

We work with the government to try to ensure there are systems in place that will allow emission-intensive trade-exposed groups such as ourselves to have slightly...so that they pay attention to the fact that we are trade exposed, and really understand the need for regulation that is fair. Things like transportation and the availability of feedstock also play an important part in terms of deciding on those investments.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

[Isabelle Des Chênes]

It went by so quickly.

[The Chair, Liberal, Judy Sgro]

Maybe we will have some time after.

Mr. Arya, you have five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

Once again, I have a question for the Chemistry Industry Association.

I should say that the chemistry industry has the most positive outlook in terms of investment and in terms of growth potential. If I'm not wrong, your industry talks about overall North American investment of around $250 billion, with a potential of about $25 billion in Canada. In fact, for a few years, I worked in the oil-rich Middle Eastern countries, and I've seen the new petrochemical complexes coming up. Almost all the manufacturing of basic polymers has ended here, but I understand that NOVA Chemicals is setting up a polyethylene plant here in Canada.

[Isabelle Des Chênes]

NOVA Chemicals, yes. In Sarnia it has a $2.2-billion investment and—

[Chandra Arya, Liberal, Nepean, ON]

With regard to the potential $25-billion investment that you foresee as possible in the next two, three or four years, which segment of this chemistry industry does that fit into?

[Isabelle Des Chênes]

What we're seeing now is $10 billion in investment, or announced, in the last 18 months in the plastics industry. That's plastic resin produced from propane: polypropylene. These companies would be the first to manufacture these types of products here in Canada. Certainly, there is potential for additional investment in sustainable plastics. Frankly, Canada has the lowest carbon grid on the planet because of electrification—

[Chandra Arya, Liberal, Nepean, ON]

With a lot of major North American companies being taken over or working in partnership with very big GCC chemical companies, is that affecting investment in North American markets? Is investment going more towards the Middle Eastern countries?

[Isabelle Des Chênes]

What we're seeing with major companies is that, obviously, they're international. They compete internally for those investment dollars, so they'll look to Canada, Chile or the U.S. gulf coast in order to make those investments. In the end, regulatory policies are what really impact those investments.

[Chandra Arya, Liberal, Nepean, ON]

Adding value to oil and gas, of course, through the petrochemical industries, one other segment is fertilizer. I don't think there's any potential in Canada or North America for fertilizer plants.

[Isabelle Des Chênes]

We don't represent the fertilizer industry, but certainly they should be invited to speak about their opportunity here.

[Chandra Arya, Liberal, Nepean, ON]

Okay. How is the chemistry industry's potential for export outside of the North American market?

[David Cherniak, Senior Policy Analyst, Business and Economics, Chemistry Industry Association of Canada]

We don't have specific numbers, but the demand for chemistry products in developed markets closely tracks GDP growth levels. That's a completely different—

[Chandra Arya, Liberal, Nepean, ON]

I ask that because your sister industries, such as aluminum producers and steel producers, basically have given up looking at the markets outside of North America. The aluminum producers have not invested in a single new smelter in the last 15 years, and they don't have any plans to do so. They're content with the North American market.

Is the chemistry industry in Canada also looking to export outside the North American market?

[David Cherniak]

Yes.

[Chandra Arya, Liberal, Nepean, ON]

Okay. Are the free trade agreements we have with the European and Asia-Pacific countries helping the industry grow?

[Isabelle Des Chênes]

Yes.

[Chandra Arya, Liberal, Nepean, ON]

Is there any particular segment of your industry where you see this potential, or is it within every segment of your sector?

[Isabelle Des Chênes]

It's across all segments in terms of plastic resin production, organic chemistries, the chemistries that go into alternative energy sources, or the chemistries that go into keeping food and water safe, so it really depends.

[Chandra Arya, Liberal, Nepean, ON]

Did you want to add something?

[David Cherniak]

Yes. With regard to basic chemical production, the good thing about our industry is that we consider ourselves serial upscalers. Our basic products can go into so many different products and we don't like to confine ourselves to speaking about one or two specific things.

When we get members like a couple in Alberta that have joint venture partners from the Middle East actually investing in Canada versus the other way around, they'll do what's best for them. They will add facilities into their internal clusters to make those facilities the most competitive.

It's across a broad range of things, but it's just important to know that those basic chemicals are driven mainly by economic growth. Therefore, the highest-growth regions in the world are the ones where we see definite export potential for our products.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Mr. Savard-Tremblay for two and a half minutes.

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

Thank you.

I want to pick up where we left off earlier. You were saying that we needed to go further to address non-tariff trade barriers.

Would you mind elaborating on that, please?

[Corinne Pohlmann]

In order to address issues for smaller companies, that's the more important area to tackle. That can be anything like standards that are imposed by certain sectors or certain governments. It can also include—and this is what doesn't get included in this agreement—the subnational levels of government. There are rules and regulations by province or by state, and that can also make a real barrier to smaller companies. That's where those regulatory co-operation agreements really have to focus. It can't just be at the national level; it has to come down to that subnational level because that's often where smaller companies find themselves stuck. I think that's an important element of it.

Then there are other rules. I would take, for example, the rules of origin. Those are very complex rules. There are ways, if you're a larger company, to figure out how to best address those rules for your products. For a smaller company, once a decision has been made, it's very hard to appeal that decision. Finding ways to address those things that can be difficult for smaller companies to really fix or deal with quickly is going to be an important part of making this effective for small companies.