International Trade Committee on May 30th, 2024

[Angelo DiCaro]

Yes, I have very serious concerns, and this goes beyond any conversations about competitiveness on cost. This is about a country and an industrial model that is built on baked-in subsidies, not just unfair labour but forced labour, things that we wouldn't tolerate in Canada and are certainly against the spirit of what we're trying to build in the CUSMA as a high-road trade agreement.

China is developing this EV space, as president Lana Payne has mentioned, through methods that I think would not be tolerated in other nations. They are intentionally oversupplying—not unlike what's happened in aluminum and steel, as others will tell you—producing an excessive capacity for the express purpose of flooding the global market with cheap exports.

Right now, based on some of the public reports we've seen—things are a bit difficult stats-wise to locate in China—there's an expectation that, put simply, the level of production of EVs in China, the overcapacity alone is larger than the entire North American auto market for sales. This is not something people should be taking lightly, and we're going to have to deal with it.

[The Vice-Chair, Conservative, Kyle Seeback]

I'm going to have to interrupt. It's about a minute over. I let it go quite a ways. Thanks for that answer.

I'm now going to turn to myself for a round of questions. I'm going to exercise the chair's prerogative.

I want to go back to talk a little bit about steel.

Mr. Sheehan was talking about how tariffs are terrible, and how the 232 tariffs were terrible for steel. Would you agree with me that the reason Canada was originally side-swiped with the 232 tariffs was that the anti-circumvention mechanisms we had in place in Canada at the time weren't sufficient, so the United States said, “We're going to hit you with tariffs because steel's being dumped through Canada into the United States.” Would you agree with me that this was the predominant reason?

[Catherine Cobden]

Yes. Just to clarify this further or to go into further detail, the intelligence we had out of the United States through the 232 tariff situation was that, obviously, we're all very exposed to steel overcapacity in China. It is, I think, something like 45 times our entire domestic market, so these are huge numbers of tonnes. Like us, our U.S. industry is also very concerned. When they took action using the 232, they took it on everyone. Slowly but surely, we had to convince them that we were not the problem and work it back.

Having said that, we are always at risk of being viewed as a back door, so we have to make sure we close that door.

[The Vice-Chair, Conservative, Kyle Seeback]

Now it looks like this is a risk again. Would you agree with me? The United States is looking at it. They've just put in the 301 tariffs on a whole bunch of things. Is Canada at risk again?

Our anti-circumvention system, which the current government brought in, just isn't working efficiently or quickly enough because there have been no cases.

[Catherine Cobden]

We actually are very interested. Obviously, anti-circumvention has to be updated, and we want that to happen, so yes, it's agreed that we must get that done. However, we've added to the list since the 301 has come in, and we need to consider tariffs on China ourselves.

We just talked about EVs. I want to say that the number of EVs from China, based on Canadian import stats, is very scary as well. It's not my place to make policy for the government, but if I were in charge, I'd be looking at the full supply chain, not just steel.

[The Vice-Chair, Conservative, Kyle Seeback]

If we look at our current anti-dumping reg system, it's not fast and not responsive, certainly not compared to the United States. This is not a new problem. This has been going on for six or seven years. It has to be transformed. Would you agree with me on that?

[Catherine Cobden]

Absolutely. I have to say, somewhere along the way we lost track of the script. The script isn't, “Oh, we're successful in our trade cases.” The script should be, “We don't need trade cases.”

We're very far away from that in steel. The CBSA has just reported to us that we are 67% of all their activities in steel. We are highly exposed.

[The Vice-Chair, Conservative, Kyle Seeback]

It's not working because imported steel has gone from 19% in 2014 to almost 40% now in 2022. I don't have more recent numbers. The anti-dumping is very clearly not working and has to change.

[Catherine Cobden]

Mr. Chair, I would say that it's not enough. We need that. It's a self-help tool. We're not suggesting we get rid of it, but we need to add to it.

[The Vice-Chair, Conservative, Kyle Seeback]

Right. It has to be better and more responsive.

The other issue is that, though Canadian steel is fantastic—it's one of the lowest carbon steels in the world—we export most of our steel to the United States when we export.

Would you agree with me that Canadian steel is at a disadvantage as a result of the carbon tax?

[Catherine Cobden]

As mentioned, the U.S. only has carrots, while we have carrots and sticks. To your point, we make some of the greenest steel in the world, so we should be proud and strong on that point.

We also have decarbonization projects that have been announced. As already answered, we should be able to be competitive, but we have this disparity between the carrots. It's not just the stick. We also don't have the same scale of carrot.

[The Vice-Chair, Conservative, Kyle Seeback]

Let's talk about the stick.

Is the stick helping your industry, yes or no? Is the carbon tax helping Canadian steel domestically and with our exports to the United States?

[Catherine Cobden]

They don't have one and we do.

[The Vice-Chair, Conservative, Kyle Seeback]

This makes our steel more expensive.

[Catherine Cobden]

Yes. Also, it is going to be even more so.

[The Vice-Chair, Conservative, Kyle Seeback]

What happens to the Canadian steel industry when the carbon tax is $170 a tonne?

[Catherine Cobden]

It will depend on the carrots, I suppose.

[The Vice-Chair, Conservative, Kyle Seeback]

If there are no carrots, what happens?

[Catherine Cobden]

If every industry in Canada is exposed to $170 a tonne, that is a very high price for a high-emitting sector like ours. If our competition is not exposed to that same price and there is no carrot—there are a lot of ifs here—obviously we're in serious trouble.

[The Vice-Chair, Conservative, Kyle Seeback]

Thanks very much.

We'll now turn to Mr. Sidhu for five minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Mr. Chair. I'll be splitting my time with MP Collins.

Ms. Cobden, we spoke a bit about carbon pricing. When I was in Paris, France, for the OECD, a conversation came up about CBAM legislation in the European Union. They are also trying to figure out ways to protect the environment but ensure their industry has a level playing field. They're looking at the steel produced in China with dirty coal. How do you level that playing field? I think they're trying to do it with their CBAM legislation, where they'll penalize countries that don't have a progressive environmental policy.

If Canada doesn't have a carbon price, would we not be at the same level as China and be competing with them? Wouldn't this give Canadian industry an incentive with the European Union?

[Catherine Cobden]

First of all, we don't produce steel in the same way. Our steel demonstrates, via third party well-documented reports, that it's much greener and cleaner than Chinese steel. I don't think that has anything to do with what you're describing.

[Maninder Sidhu, Liberal, Brampton East, ON]

What the European Union is saying is that, if a country does not have progressive environmental policies or carbon pricing in place, they will in fact impose an import or carbon tax on countries that export to the European Union. I think, when I'm talking to other industries, it puts Canada at an advantage to have environmental policies or carbon pricing in place.

[Catherine Cobden]

Right. I understand the question.

As mentioned in my opening remarks, we don't ship to the EU, so we are most seized with a level playing field with the United States. That is our predominant market for steel. It's not domestic. It's in the U.S.

I understand your question, but what I'm saying is that what we do.... That's where the interesting thing is. It's what they just did on 301. We would not want a CBAM with the United States, would we? Secondly, the section 301 tariff can be done as fast as possible and give us that same protection.

[Maninder Sidhu, Liberal, Brampton East, ON]

I want to give credit to the steel industry for their innovative practices to bring down the emissions while steel is produced.

I'm going to turn now to MP Collins for the rest of my time.