International Trade Committee on June 4th, 2024

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

Chair, how long do I have?

[The Chair, Liberal, Judy Sgro]

You have three minutes.

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

I'll turn to Mr. Verheul.

You talked about trying to bring advantages to the North American market as a whole. I'm just wondering about how you might also consider, say, the EU, what they're doing and where they're going with trade agreements. Is there any move to try to align new trade agreements with other major sectors like that?

I was meeting with steel workers this morning, and they brought up the issue of the CBAM, the Carbon Border Adjustment Mechanism. We hear a lot about carbon leakage and things like that, because Canada has a price on carbon and the United States does not.

Is there any possibility that something like a North American CBAM would fly in a renewed CUSMA, which would help in many ways?

[Steve Verheul]

With respect to the CBAM, there's been a challenge so far in that the U.S. has shown no interest in going down that track. As a result, we don't have too much potential to go down that track if the U.S. is not headed there.

I think the biggest problem we have on the climate change side now is that countries are going off in different directions on their own. There's no coherent approach to addressing climate change. The U.S. has an approach. The EU has a different approach. Canada has a slightly different approach.

We need countries to take common policies and have international rules, not just domestic rules, that would allow us to have a more coherent response to climate change.

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

Yes, and that's where I was headed. If the United States sees what's going on in the EU and their exporters are impacted, might there be some appetite in the major trading partners around the world for centring all of these things?

[Steve Verheul]

I would certainly hope so.

The U.S. and the EU have been talking for years under the global arrangement on sustainable steel and aluminum, trying to come up with an approach that would allow them to follow the same path. The U.S. had a proposal, and the EU had its proposal for CBAM, primarily, but they have been unable to close the gap between them. They are not headed in the same direction, so that process has essentially failed.

I think the U.S. and the EU will try again to come back to some kind of common ground, and Canada would certainly want to be part of that too, but at the moment, it seems like it's pretty much stalled.

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

Okay.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We're moving on now to Mr. Martel for five minutes, please.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Thank you, Madam Chair.

My thanks to the witnesses for joining us.

Mr. Verheul, should we expect the newly elected president in Mexico to be more co‑operative or, on the contrary, less co‑operative?

[Steve Verheul]

I think it's a little bit early to say for sure, given that Claudia Sheinbaum has only been in place for a couple of days and doesn't come into power until October, but I think there are some helpful signs.

Our fear was that she might follow the path of former president López Obrador, which created a fair amount of tension between the U.S. and Mexico particularly, but also with us to some extent.

In particular, we are hearing that the new Mexican president would be more sympathetic to environmental considerations and trying to move in that direction, so there may be more common ground that could be explored.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

My concern is that we're more likely to see Mexico and the United States negotiating between themselves without Canada. That's what they've done to increase protections on steel. They didn't do the same for aluminum. I'd like your opinion on that.

With respect to the softwood lumber dispute between Canada and the United States, we've generally noted the government's lack of efficiency in terms of moving the file forward. There's still no agreement. There are also timelines for the formation of dispute settlement panels in CUSMA. The minister has yet to appoint a Canadian ombud for industry.

I'd like you to address these issues and tell us about the repercussions these trade irritants can have.

[Steve Verheul]

Well, certainly with respect to Mexico I think we will see significant tensions that will still exist even under the new president.

There are tensions over energy and the interventionist approach that Mexico has taken to energy. There are also concerns about China—both imports and investment from China—operating as a back door through Mexico into the U.S. The U.S. is highly concerned about that, and there are security issues that are also a concern. I think it is more likely that Mexico will have more challenges in this process than either Canada or the U.S. will have.

Softwood lumber is always a challenging issue, because it was always outside of the trade agreement with respect to trying to negotiate some kind of bilateral settlement. As you probably know, there has been work going on to try to see if that might be possible, but the appetite on the U.S. lumber industry side has not been all that high, and unless they can get interested in actually negotiating a deal, it's hard to negotiate by yourself.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

You may anticipate that there will be difficulties in future discussions. Earlier, you talked about a more coordinated approach among the three countries. I found this solution quite interesting, in a way, to counter China's manoeuvres.

I'd like you to explain that further. What do you mean by a more coordinated approach?

[Steve Verheul]

When the U.S. took the action it took three weeks ago to impose significant new tariffs against imports from China in key areas like electric vehicles, batteries and critical minerals, that really made life difficult for Canada and Mexico. If the U.S. has those actions in place, neither Canada nor Mexico particularly wants to become a back door for China to get through, because the U.S. will then look at restrictions against Canada or against Mexico.

There's a lot of pressure, on Canada in particular, to try to replicate those kinds of restrictions against imports from China. However, I think all of this could be done so much more effectively if the U.S., Canada and Mexico sat down and said, “What are we going to try to do to protect the North American market from imports and investments from China that are not on a fair trading basis and need to be restricted?”

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Martel. Your time is up.

We will go to Mr. Sidhu for five minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Madam Chair.

Thanks to our witnesses for taking the time to join us here today.

For my first question, I'm going to start with Mr. Laskowski.

You mentioned the repositioning of foreign empty containers. Can you expand on that a little? The understanding I got from you is that in the U.S. you're allowed to move full and empty containers if you're a carrier, but in Canada, if there's a U.S. plate on the trailer, you can't.

[Stephen Laskowski]

It's a critical issue. We've been talking a lot about the Americans' approach to this. It's a critical issue for American business. It's more so for them than it is for the trucking industry.

The issue is this. I drive down into the United States, and within any state—pick a city—I drop a load. I drop my trailer off. In the supply chain now, because of the growth of the economy, there simply isn't enough warehousing, so what a lot of shippers and receivers do is use the trucking industry's trailers to store goods in their area. The most efficient way to do this is for a Canadian trucking company to go down into the United States, drop its trailer and pick up a full trailer—your own trailer. It has to be your own trailer, another Canadian trailer that you own that's being stored there. What is allowed, indeed, is that the Canadian trucking company can move an empty trailer, but it must be the empty trailer that is being unloaded that day. You cannot move the empty trailer that you left there last week. It's a difficult thing to say, “Yes, you can move an empty trailer. It just has to be the one you came down with.” However, the supply chain doesn't function that way. The same applies to an American carrier coming up to, say, Toronto or Windsor, wherever the case may be. They can move.

Our governments and industries on both sides of the border say, “Okay, this arcane rule has to change.” It is not good for CUSMA. It is not good for trade.

You know, for 30-plus states their biggest exporter is Canada, and the goods are moved by truck, primarily, and so this movement is to help them. That is the issue. The issue is that we aren't asking for something that they're not allowing us to do; we're just asking them, “Let us move an empty trailer that we own, other than the one that we went down with.”

[Maninder Sidhu, Liberal, Brampton East, ON]

Understood.

As you know, our government launched the team Canada strategy for engagement with the U.S., led by Minister Ng, Minister Champagne and of course Ambassador Hillman. In terms of this discussion and this advocacy for this very issue, are you already in touch with U.S. counterparts? Can you maybe speak to that?

[Stephen Laskowski]

Fortunately, for over a decade, the Government of Canada has been a great champion of this issue. In fact, as I mentioned earlier, they have signalled to the United States that we are ready when they are. There's ongoing work right now by Minister Anand under the regulatory co-operation council on this very issue, but if that process is not successful, we're asking if this issue can get attention at the table in 2025 by both governments and under the 2026 review.

[Maninder Sidhu, Liberal, Brampton East, ON]

Got it.

In the minute I have left, I will turn to Mr. Verheul.

Given your extensive public sector experience, I'd like hear more about what you think the best impacts of our advocacy may be as part of our team Canada U.S. engagement strategy before the election and after the election in November. What do you think is the best approach?

[Steve Verheul]

I think the whole advocacy effort is really geared towards getting as many key players in the U.S. as possible to understand the importance of not causing disruption in the Canada-U.S. relationship when it comes to trade, talking about the benefits that exist and talking about what else we could do. I think the advocacy effort is really what needs to happen in the lead-up to the review.

We should also make sure that we're preparing for the worst and make sure that we're consulting with industry, consulting with the labour sector and consulting with civil society to make sure we have all of our plans laid out and all of our fallbacks in place so that we've kind of gamed this out the whole way through. All that preparation is lengthy and detailed, but that's exactly what it takes to do well in this kind of a review.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Monsieur Savard-Tremblay, you have two and a half minutes, please.

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

Mr. Vaillancourt, given the time you had, you mentioned quite quickly that the investor-state dispute settlement mechanism is still in effect with respect to Mexico.

The Canadian Centre for Policy Alternatives sent the committee a document containing 25 recommendations. To permanently eliminate it, one of the recommendations was to remove lawsuits from the investor-state dispute settlement process for Canadian investors in Mexico, but also for Mexican investors in Canada.

Do you agree with that recommendation?

[Claude Vaillancourt]

Yes, I completely agree with that.

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

Is it going to be a game changer? We know that this type of lawsuit was mainly aimed at the United States.