International Trade Committee on June 13th, 2024

[The Chair, Liberal, Judy Sgro]

There's only so much time.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Who agreed to it?

[The Chair, Liberal, Judy Sgro]

Mr. Cannings, you have the floor for two and a half minutes, please.

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

Thank you.

Minister, you were just mentioning the carbon border adjustment mechanism, CBAM, that is in the EU and how that is beneficial for countries with carbon pricing. I was talking to the steelworkers last week, and they brought up the situation that we have here in North America with Canadian steel, which is the lowest-carbon steel in the world pretty much, and yet we face competition, primarily from China, but also from the United States even to keep our domestic steel industry going. They were hoping that Canada would consider bringing in a similar mechanism, a border adjustment mechanism, so that their steel would be recognized for those properties. It would also, I think, help with this backdoor question we have with bringing in cheap steel from China and other parts of Asia that the United States doesn't like.

First of all, I'm wondering if your government is considering bringing in a border adjustment mechanism, and if so, would that be legal under the present CUSMA?

[Mary Ng, Liberal, Markham—Thornhill, ON]

We have been doing consultations on a carbon border adjustment. The Minister of Finance has been doing that. More will be said, I think, once we get a look at those consultations.

On Canadian steel, in budget 2024, Finance has certainly taken steps to increase funding and introduce legislative and regulatory amendments to support workers and industries. The concern around the overcapacity of steel is a very real one. It's work that Canada does with the United States, but also with other trading partners.

I said this earlier in response to a different question, but Canada will not become a back door to the U.S. market or become a dumping ground for unfairly traded goods. This is something we will continue to work on.

I think what we have just implemented together with the steel producers is a country of melt and pour to create greater transparency. That, too, will help.

There's more work that has to be done, certainly, but the issue of overcapacity is an issue for Canada, for the U.S. and, frankly, for the G7, and we need to keep doing work to ensure that, with the investments we have made in greener steel, we reap the benefits and it should be treated as such.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Minister, thank you very much for being here today. It was very valuable information.

We will suspend for a moment and then we will start our questioning with the departmental officials.

[The Chair, Liberal, Judy Sgro]

I call the meeting back to order.

We have the departmental staff here to answer some questions from the committee. We're going to start with Mr. Martel for six minutes, please.

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

Thank you, Madam Chair.

With respect to aluminum, the minister said that Canada was not a dumping ground and that the three countries were working together. I find it a little hard to believe that the three countries are co‑operating when I see that Mexico doesn't properly control its aluminum imports like it's supposed to, which creates an unfair situation. What do the officials think?

[Aaron Fowler, Associate Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development]

I can assure you that Canada works very closely with the United States and with Mexico across the full range of trade issues, including on critical sectors such as the aluminum sector. I have not heard any concerns expressed with respect to the transshipment of Mexican aluminum into the Canadian market, which seemed to be the situation implied by your question. If I've misunderstood, perhaps you could reframe it.

If the concern is the nature of Mexican aluminum imports from the world, there are a multitude of fora, committees, working groups and opportunities created by the Canada-U.S.-Mexico agreement for the three parties to have constructive discussions about that. However, as far as I am aware, no concerns have been raised with me or my team regarding the possibility of transshipment of aluminum through Mexico to Canada.

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

Mr. Fowler, I'm going to turn to you, still on aluminum.

You are no doubt aware of section 232 on tariffs imposed under the U.S. Trade Expansion Act, under which tariffs were applied to Canadian aluminum under the Trump administration. Currently, under the Biden administration, they are not in force, but section 232 still exists.

Are you aware that, if these tariffs return, it will hurt the industry very badly? Do you have a game plan? We've seen this before and it's been very hard on the industry.

[Aaron Fowler]

Thank you very much for the question. I fully accept the premise behind it.

The North American integrated market for trade in products like steel and aluminum is critical to the prosperity of Canada and to the well-being of the aluminum sector in Canada. The United States is not in a position to fully satisfy its own domestic market needs when it comes to aluminum. It relies on imports of aluminum products and it relies significantly on Canadian producers to provide inputs into manufacturing.

I've had no suggestion that the United States is reconsidering an imposition of 232 tariffs on Canadian aluminum. We work very closely with the Canadian sector. It works very closely with its counterparts in the United States and Mexico and we of course work with the United States to ensure that if any issues arose that caused concern for the United States as a trading partner, we would move proactively to address those, recognizing the importance of the situation.

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

I will now talk about softwood lumber. There is definitely a glaring lack of leadership on your part in this area. As we know, nothing's been done in nine years.

The Arbec sawmill in my riding has just announced that it's closing down for at least a month because of tariffs on Canadian softwood lumber exports to the United States. As a result of the closure, 180 employees have been laid off.

Why are there constant delays in forming dispute settlement panels?

[Aaron Fowler]

I fully agree that the situation with respect to the treatment afforded to Canadian softwood lumber exports to the United States is unacceptable. The tariffs that have been imposed by the United States are unwarranted and the tariff rates that have been arrived at by the methodologies deployed by the United States are inaccurate and will not be sustained when subjected to a legal challenge.

Canada has a very aggressive litigation strategy with respect to softwood lumber. We've made good progress with respect to advancing that strategy in recent months. We have seen new panel formations under the Canada-U.S.-Mexico agreement to consider different U.S. determinations with respect to softwood lumber. We will prosecute this to a satisfactory resolution.

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

Mr. Fowler, I'd like to know why there are constant delays in forming dispute settlement panels.

[Aaron Fowler]

The time that it has taken to establish panels to hear different softwood cases is extremely frustrating to the Government of Canada. We have been pushing counterparts in the United States to move more quickly with panel formation. It is a process. It does take a certain amount of time.

In recent months, as I indicated in the previous question, we have seen an improvement in the pace at which these panels are being formulated. We have had two new panels formulated since the beginning of the year.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Sheehan for six minutes, please.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you, Madam Chair.

We're studying the 2026 CUSMA review. I've been on the trade committee for a while and have witnessed the process that we had undertaken.

I was proud that Canada had tried to put a gender lens, an indigenous lens and a union lens on it by engaging with the various groups. Will the review be taking in, other than this fine study in which we're going to present some information.... You have a couple of years until 2026. Are there plans to go back, engage, take the pulse and see what their expectations were in the CUSMA deal, having been engaged...for what it will look like now in 2026?

That's for you, Mary.

[Mary-Catherine Speirs, Director General, North American Trade Policy and Negotiations Bureau, Department of Foreign Affairs, Trade and Development]

Indeed, we have a fairly robust consultation methodology that we use when we are reviewing our trade agreements. It is our full intention, looking ahead to 2026, to proceed with broad and comprehensive consultations with Canadians, including a special focus on some groups that have been traditionally under-represented in trade and that we have sought to really advance in CUSMA.

We have a specific SME chapter, which is designed to encourage and support the participation, for example, of small and medium-sized enterprises and foster their engagement in international trade under CUSMA.

As you note, we do have gender provisions and indigenous provisions. We will be making an extra effort to ensure that stakeholders and rights holders are engaged and informing our views as we prepare for the review.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

I will pass the rest of my time to Francis Drouin.

[The Chair, Liberal, Judy Sgro]

You have four minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Madam Chair.

I'd like to thank my esteemed colleague from Sault Ste. Marie, with whom I always have the opportunity to work on steel issues.

My question is for all the witnesses: When there are allegations of dumping, what kind of recourse do our Canadian businesses have? I'm thinking in particular of the Canadian International Trade Tribunal: Can Canadian businesses use this type of tribunal to ensure that steel is not dumped in Canada?

[Aaron Fowler]

That is exactly right. The Canadian industry has recourse to redressive measures to deal with situations of unfair trade practices, whether it's dumping on the part of foreign companies into the Canadian marketplace or heavily subsidized goods entering Canada at a rate that affects the competitiveness of Canadian products in the Canadian marketplace. Those companies and industries in Canada have a right to petition CITT to impose measures at the border that would offset the margin of dumping or the margin of the subsidy and its impact on Canada.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you very much for that.

Now I'm going to put on my farmer's hat. I also want to thank my colleague Mr. Blanchette‑Joncas, who spoke to the importance of supply management in Canada. We know that the United States protects certain commodities as well. So sugar is subject to a form of supply management.

I come back to this whole issue and how we build a relationship with the United States. Some agricultural groups, including groups in the United States, sometimes forget that Canada has an integrated relationship with the United States. For example, cattle can come from Alberta, but be fed in the United States and then come back to Canada. In 2016 or 2017, if I remember correctly, your teams gave us the example of the hamburger, which clearly demonstrated how integrated our agricultural economy is with the U.S. market.

Do we still have that dialogue with the United States to make sure that we maintain that co‑operation, even though I know Canada is sometimes seen as the little guy? I'm proud of our economy and our farmers, but sometimes we have to remind our neighbours south of the border of that. Do we do that all the time through our embassies or our teams on the ground?

[Matthew Smith, Chief Agriculture Negotiator, Department of Agriculture and Agri-Food]

We absolutely have, as was described, a very integrated economy in the agriculture space with the United States. I know this committee has already heard from a number of witnesses to that effect, including the fact that some products move across the border.

Many times, the import on one side is the input to export on the other. Some products in agriculture may add value more than once and cross the border several times. That integration is very valuable. It's very well known in the agriculture space, and we work very hard with our committees and in our interactions with industry to make sure we have all the best and latest examples to bring to bear. At the Department of Agriculture, we work very closely with colleagues in Global Affairs and our diplomatic presence across the United States at the embassy and in the consulates, as well as with business, provinces and territories, to make that message clear.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Monsieur Blanchette-Joncas, go ahead, please, for six minutes.