International Trade Committee on May 30th, 2024

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks.

Catherine, I'm going to pick up on the carrot-and-stick approach.

I've represented my area for almost my entire adult life. In that time, I can say that—having served on the public health board for my entire time on council—thousands of people died in my city prematurely as a result of air pollution. Therefore, the carrot-and-stick approach in Hamilton is very important because it leads to better health. It's not just an investment to combat climate change. It's not just an investment in jobs and keeping those steel companies open. It's actually keeping people alive by improving our air quality.

The carrot approach for many decades didn't work, so I think the stick approach we've talked about here today is an important tool. It's no small coincidence that the climate call to action from the steel producers came out in 2020. It didn't come out in 2014 or prior, so I think the industry read the tea leaves and they're on board. The $400-million investment in Dofasco, in my community, that our government made will go a long way in helping us reach our targets. I know the company, Dofasco, is on board as well.

Can you talk about the importance of past carrots and what future carrots you'd like to see, knowing that your industry is committed to climate change and reducing emissions?

[Catherine Cobden]

For the record, the steel industry is taking action on climate, so I didn't think we were discussing that. We are taking action. We have announced projects that will reduce emissions by a further six million tonnes, so that's significant, while we're already starting from the greenest position out there.

What I need to stress is that we don't get a green premium on this steel, so when our steel is up for bid against high-carbon imports from jurisdictions like China, we cannot compete and we don't get any benefit for our green credentials in those processes. That is a real challenge to the industry.

I understand and take the point on the blend between carrots and sticks and everything, but what I'm trying to say is that the blend isn't there. Right now, it's much more stick than carrot. If we want a carrot-and-stick process, we have to double down on making sure those support mechanisms, like domestic content, are included. That will give at least some help to the industry. Otherwise, it's just a challenge.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chair.

[The Vice-Chair, Conservative, Kyle Seeback]

That's time.

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

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

Thank you, Mr. Chair.

My question is for Unifor representatives. I'll be brief.

In 2022, Unifor pointed out in a press release that the trade partnership between Canada and the United States presented several significant challenges. These included, for example, electric vehicles, softwood lumber, of course, lumber tariffs and, naturally, the Buy American Act.

Some of these irritants have evolved, there are new ones, and so on.

What's the state of play today? What challenges remain as we speak?

[Lana Payne]

Briefly, because I don't have a lot of time, obviously on the forest sector, the complexity of issues facing the forest sector is great right now, but the tariffs are making things much worse for many operations in the country. There are specific tariffs against individual companies in Canada in that regard, many of which employ Unifor members. Obviously, that is a very big concern.

With respect to EVs, you've just heard my colleague talk about where we need to go there. We have to make sure we're expanding the rules of origin to include the new kind of EV components that we will be making in Canada. By doing that, we will be protecting Canadian jobs.

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

Excellent.

I have about a minute left, and I have one more question for you.

We know, for example, that there was once a case where Mexico, Unifor and its Mexican allies brought a situation of workplace abuse into the spotlight. This prompted Canada to file an official complaint under the Canada-US-Mexico Agreement, CUSMA's, rapid response mechanism. It was the first time such a mechanism was used, and it worked.

What do you take away from this experience? What about the balance sheet? Can we further improve the agreement to ensure that workers' rights are respected for all partners? Or would you say that the status quo is more than enough? Would you like to make a recommendation to the committee?

[Lana Payne]

We learned that the mechanism was extremely important and that it needs to be used as we've used it. We were the only Canadian example of this mechanism's being used. I think it's been used 22 times by the United States. We've learned a lot in terms of how it can work to protect workers' rights, and I would suggest that it needs to continue to be amplified and used in CUSMA.

When we go into a review, I would suggest that looking at that entire mechanism, how we protect it and how we can continue to amplify it is very important. Certainly we can't look at getting rid of it when you consider what is occurring even in the United States right now with the Mercedes vote in Alabama. I would say that mechanism and what is occurring in the U.S., in the southern U.S. in particular, also needs to be reviewed. I realize I've gone over time.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll go to Mr. Cannings for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm going to stay with Ms. Payne and talk about dispute mechanisms. You talked about the softwood lumber situation, which has dragged on for eight years. It seems that the only way to bring that to an end is to have a string of successes in a dispute-mechanism way. I think it's very unfortunate that we lost the investor-state dispute mechanism in the latest CUSMA compared to what was in the first NAFTA.

I'm just wondering how you would suggest we move forward on the state-to-state dispute mechanisms to make them more effective and to make them more useful in holding the Americans to account for their, essentially, bullying tactics around softwood lumber.

[Lana Payne]

Yes, and we're not finished yet. It looks like we could be facing even higher tariffs again in this regard. The reality is that the only way we get this resolved is by negotiating with the U.S. Canada has to enter into negotiations with the United States to resolve this problem once and for all, and the discussion around CUSMA and the review you will be doing and that will be occurring over the next two years is a perfect opportunity for Canada to use this moment to do that.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I guess I would just try to get some clarification there. You say we can only move forward through negotiation, but it seems to me the only way that negotiation is driven and the only thing that moves the United States toward negotiation is victories by Canada in the dispute mechanisms in those tribunals. That's what forces them to the table.

[Lana Payne]

Yes. We can certainly look at the penalties around when you lose at those tables, but it doesn't stop the U.S. from going there. We've had numerous cases where we have won through those mechanisms, so we're going to have to figure out how we solve this problem, because otherwise we will be in this cycle forever. I would suggest to you that we need to attempt to negotiate a resolve here.

[The Vice-Chair, Conservative, Kyle Seeback]

That unfortunately brings us to the end of this panel, which I thought was excellent.

I want to thank all our witnesses for your very valuable insights as we go into this review of CUSMA.

We are going to briefly suspend while we bring in a new panel.

[The Vice-Chair, Conservative, Kyle Seeback]

Welcome back, everyone.

For our second panel today, we have a number of witnesses.

From the Canadian Centre for Policy Alternatives, we have Stuart Trew. From the Canadian Vehicle Manufacturers' Association, we have Brian Kingston, president and CEO. From the Dairy Farmers of Canada, we have David Wiens and Daniel Gobeil.

Welcome back. I think you've all been here before.

You will all be able to make an opening statement of up to five minutes. I'm going to try to keep you as close to that as possible. We will start with Mr. Trew.

We invite you to make your five-minute statement.

[Stuart Trew, Senior Researcher, Canadian Centre for Policy Alternatives]

Thank you very much to the chair and the committee for the chance to be here.

As we've been talking about this afternoon, we're still two years away from a mandatory six-year review of the Canada-U.S.-Mexico agreement, but I think it's a good thing for this committee to be thinking about it and preparing for that process right now.

The federal government and some business associations appear to believe that Canada should seek a smooth rollover of CUSMA rather than risk another potentially messy renegotiation. This is part of the team Canada strategy that we're seeing right now with trips to the United States.

I think a smooth rollover is probably wishful thinking for two reasons. The first is that, no matter who's in office in Washington in 2026, there will be political and industry pressure on the U.S. administration to adjust CUSMA's rules in areas such as dairy market access, energy, agriculture and food policy, automotive rules of origin and, possibly, digital trade. Canada is facing considerable U.S. pressure to drop its Online News Act and its digital service tax, for example, and we know there's a target on supply management.

The second reason a smooth CUSMA review is unlikely is that it was never the intention of the Trump administration when they negotiated the deal, and it's something that I think the current administration agrees with. If we look at Katherine Tai's comments last month, she said the whole point of the review is to maintain a certain level of discomfort, and she meant that for Canada and Mexico, so I think we should just be expecting that we're going to go into something much bigger than what would be a rollover.

A simple reapproval of CUSMA may also be a lost opportunity, given shifts in thinking about trade policy even since we renegotiated a few years ago. All three North American governments acknowledged the unequal benefits of trade for women, racialized workers and indigenous peoples, for example, as well as trade's contribution to biodiversity loss and climate change. The geopolitics of trade, the importance of subsidies and industrial policy have also shifted since we renegotiated CUSMA. For example, does CUSMA help or hinder our efforts to bolster North American manufacturing and supply chain resiliency? There are questions around the rules of origin. I think these are bound to come up, as we talked about in the last session.

The six-year review of CUSMA, while not without significant risks to Canada and Mexico, at least forces us to rethink whether the treaty is delivering substantive, widely shared benefits. We think Canada should seize the moment rather than ducking and weaving. By that, I mean Canada should prepare for the review as if a partial renegotiation were inevitable, whether or not there's a Democrat or a Republican in the White House.

This morning the CCPA published a collaborative report that assesses how CUSMA is operating to date and suggests ways to build on the environmental, inclusive, trade and worker centred novelties in the agreement that built on the original NAFTA. The authors make 25 recommendations for fixing NAFTA's labour provisions, including the innovative rapid response labour mechanism, closing gaps in the rules of origin in the auto sector as well as improving enforcement of the environmental chapter, which is not much improved upon from the original NAFTA, from our perspective.

Other aspects of the agreement can be made more inclusive and worker-focused in the right circumstances. For example, the digital trade chapter is completely out of date with current U.S. thinking on the need to better regulate emerging artificial intelligence; the need to protect people, especially children, from harmful algorithms and workplace surveillance technologies; and the need to crack down on monopolies in the tech sector. CUSMA's cross-border data flow provisions and its prohibition on data localization should be reviewed.

The three CUSMA parties should also find the courage to completely dismantle the vestiges of investor-state dispute settlement between Mexico and the United States. The ISDS regime is incompatible with the achievement of human rights, including indigenous peoples' rights, and the protection of biodiversity. Leaving it intact, even in a limited form, creates unacceptable risks for Mexico and, I think, an unacceptable power imbalance in what should be a more equal North American relationship.

Progress in any of these areas will depend on the political configuration of the continent in the lead-up to the review. Still, Canada would be wise to come to the table with a solid list of proposals as leverage in a potentially stressful negotiation. I just conclude by saying that any review should contain ample opportunities for consultation with civil society stakeholders in the three countries and should not be left up exclusively to trade negotiators or corporate lobbyists.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you for being under time by 25 seconds.

We now turn to Mr. Kingston for an opening statement of up to five minutes.

[Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association]

Thank you, Mr. Chair and committee members. I appreciate the opportunity to be here and to take part in your study on the CUSMA review.

Since the Auto Pact of 1965, Canada has reaped enormous economic and social benefits by being part of the integrated auto sector in North America. Through common regulations and competitive supports, we manufacture and sell into a market that accounts for annual sales of nearly 28 million vehicles. It's this integration that has allowed Ford, General Motors and Stellantis to make historic job-creating investments into Canada to produce electric vehicles and batteries.

Today, the CUSMA serves as the foundation for the integrated North American auto industry. The agreement provides certainty, reinforces the long-established integration of the auto industry supply chain necessary for its competitiveness and facilitates regulatory alignment of vehicle technical regulations with the U.S. This gives Canadian consumers access to leading vehicle safety technologies, emissions technologies and fuel efficiency technologies at the lowest possible cost.

The CUSMA also provides Canadian manufacturers with duty-free access to the much larger U.S. market. Last year, $51 billion in vehicles was exported to the United States, making this our second-largest goods export. With the upcoming review in 2026, Canada must do everything possible to protect our preferential access to the U.S. market and support the integrated supply chain.

This can be achieved by ensuring that our trade and regulatory policies in the automotive sector are aligned with the U.S. Given the once-in-a-generation transformation to electrification under way right now, as well as threats posed by countries like China, the consistency of automotive trade and regulatory policies across the larger North American market has never been more important. We recommend the following actions.

Number one, enhance regulatory alignment with the United States. Our seat at the North American automotive table and the hundreds of thousands of jobs this industry provides depend on continued regulatory alignment of vehicle safety and emissions standards.

The federal government's recently implemented zero-emission vehicle sales mandate is a significant departure from the long-standing Canadian approach of alignment to the U.S. This is a direct challenge to the integration with the U.S. through CUSMA and our competitiveness as a ZEV manufacturing jurisdiction. By prioritizing zero-emission vehicle sales over the development of a North American supply chain, the mandate opens Canada to subsidized or dumped electric vehicles from China and other non-market economies. This misguided sales mandate must be scrapped in advance of the 2026 CUSMA review.

Number two, strengthen Canada's role in the EV supply chain. With the industry transitioning to electrification, Canada must move quickly to grow and diversify our production of critical minerals. This will strengthen our role in the auto supply chain, enhance North American security and increase trilateral trade. It will also enhance Canada's importance at the CUSMA table as the U.S. moves aggressively to build a domestic EV supply chain.

Number three, we need to improve our transportation system reliability. Automotive companies operate very complex logistical plans that ensure scheduled uninterrupted delivery to and from auto plants across the continent. As a result, the automotive supply chain depends on reliable and efficient transportation logistics.

Over the past few years, transportation disruptions have occurred with increasing frequency in Canada, doing significant damage to the North American economy. In advance of this review, we need to demonstrate to our North American partners that Canada is a reliable jurisdiction for the production and movement of goods.

Before I conclude, I want to take a moment to address the recent increase in U.S. tariffs on Chinese EVs and the implications for Canada and CUSMA. Canada cannot be out of step with its largest trading partner and strongest ally on China as we approach the CUSMA review. There is simply too much at stake for the automotive industry and the broader Canadian economy if Washington perceives Canada as misaligned.

We should be prepared to strengthen our trade defences in response to a surge in dumped Chinese EVs into the market and, at a minimum, we must work closely with our American partners to address potential security threats posed by Chinese-manufactured connected vehicles. Given the highly integrated nature of the North American highway network, the security of Canadian roads is the security of American roads.

Thank you very much for the opportunity. I look forward to your questions.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Mr. Kingston, and thank you for also being 25 seconds under time.

We will now turn to Dairy Farmers of Canada.

Please go ahead for five minutes.

[David Wiens, President, Dairy Farmers of Canada]

Thank you, Mr. Chair and committee members, for this opportunity.

I'm pleased to be able to represent the perspective of our 10,000 dairy farmers from coast to coast in support of your study in preparation for this upcoming review of CUSMA.

My name is David Wiens, and I am a dairy farmer from Manitoba. I am also the president of Dairy Farmers of Canada. I'm joined today by my colleague, Daniel Gobeil, who is also a dairy farmer and who serves as vice-president of Dairy Farmers of Canada. He is also the president of the Producteurs de lait du Québec.

I would like to thank you all for this opportunity and for undertaking this study on this upcoming CUSMA review. As committee members are aware, there are still a number of trade irritants regarding CUSMA that the Government of Canada will need to be cognizant of as it enters into formal discussions. Daniel will talk about an important one in a moment, which impacts Canada's ability to export.

We have heard that one of the outcomes of the next U.S. election may be of particular concern for some. In dairy, I would note that the last two panels initiated against Canada were under the current administration. The attention Canadian dairy gets south of the border is related to domestic U.S. politics, with many of the dairy states being swing states for both Democrats and Republicans. For that reason, Canadian dairy will continue to be of interest for some politicians in the U.S., regardless of their political affiliation.

I'd also like to remind the committee that the combined potential impact of the World Trade Organization, WTO; the Canada-European Union Comprehensive Economic and Trade Agreement, CETA; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP; and CUSMA amounts to an estimated 18% of Canada's domestic dairy production.

We're greatly concerned that despite the second CUSMA dispute panel ruling entirely in Canada's favour and dismissing all U.S. claims, the U.S. could use the review mechanism in the accord to try to achieve what it couldn't through the complaint process. As we know, CUSMA is based on a system of rules that is subject to a dispute settlement system. We believe that if one of the signatories wants to override panel decisions through the review, it calls the whole agreement into question. It is essential, therefore, that the government ensure that the CUSMA review is not used to create a pretext for more concessions.

Put simply, we expect the Canadian government to advocate for Canadians and oppose any further market concessions.

With that, Mr. Chair, I'm ready to pass it on to my colleague Mr. Gobeil.

[Daniel Gobeil, Vice-President, Dairy Farmers of Canada]

Thank you, Mr. Wiens.

Mr. Chair and esteemed members of the committee, thank you.

I want to begin by acknowledging the support given by all parties to protect Canada's supply management system for many years.

As you know, concessions have been made. Mr. Wiens alluded to this. Canada's milk producers also thank you for the compensation that has been paid to producers.

However, there is no doubt that an agricultural model of concessions accompanied by compensation is not viable for us as entrepreneurs. It is in this sense that we must respect supply management.

We want to mention one thing: in addition to the 3.9% of the market that was conceded to the Americans, other important rules were requested, including a ban on Canada exporting any dairy products to all world markets. It's unique for an agreement between three countries to prohibit one of its signatories from exporting anywhere on the planet. At the moment, we're not hearing about a potential reopening of the market for three main products—skimmed milk powder, protein concentrates and infant formula—but, if there is a reopening and if Canada expresses an interest in such a reopening, it's obvious that the sector will have to take this very important element into account.

With that, thank you again. Bill C‑282 is still on the drawing board in the Senate committee.

Mr. Wiens and I are available to answer any questions you may have about this ongoing matter.

[The Vice-Chair, Conservative, Kyle Seeback]

Great. Thank you very much. We'll now turn to the rounds of questions.

First is Mr. Jeneroux for six minutes.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Thank you, Mr. Chair.

Thanks, everybody, for joining us here today.

I want to start with you, Mr. Kingston, on a couple of topics, probably first on the critical minerals piece.

Benchmark Mineral Intelligence estimates that we need more than 300 new mines to be able to keep up with the demand required for batteries by 2035. I'm hoping you can provide your insight on that, and then also could you speak to some of the competitiveness and decoupling issues that we're seeing with the United States right now?

[Brian Kingston]

Yes. When it comes to critical minerals, I raise this because I think, as we approach this review, one of the things that we want to do is approach the Americans with constructive areas where we can help them achieve their objectives and do so in an aligned North American fashion. Critical minerals are just one of those obvious places.

Right now, the EV and battery supply chain is dominated by China, and Canada happens to have the full suite of critical minerals in our ground here. However, we've done a very poor job of actually getting them developed and processed, so this gives us a huge opportunity to be important to the Americans, have some leverage at the negotiating table and ultimately achieve the EV objectives that have been established by governments around the world.

We're talking about over 380 mines required, yet production of Canada's suite of critical minerals has gone down virtually across the board in every sector over the past decade. That is a huge challenge and we need to reverse that if we want to succeed in this discussion and in this transformation.

On the competitiveness piece, the federal government deserves huge credit for the $40 billion in new investment we've seen in the auto industry. This is unprecedented, a huge success, but what we're seeing is that the government's industrial policy is totally disconnected from its environmental policy. We need investment yet we have an EV mandate that is completely disconnected from our U.S. partners, and it opens us to vehicles from other markets where there could be dumping occurring or illegal subsidization.

That disconnect is a huge problem, and it needs to be fixed before we get to the CUSMA review.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

What exactly in the environmental policy is disconnected from the industrial policy?