International Trade Committee on Sept. 16th, 2024

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Breton.

We're moving on to Mr. Warren, please, for up to five minutes.

[Marty Warren, National Director, United Steelworkers Union]

Thank you, Chair and members of the committee.

My name is Marty Warren. I'm the Canadian national director of the United Steelworkers union. I'm here with Meg Gingrich, the assistant to the national director. We appreciate the opportunity to appear before you today as part of this study.

United Steelworkers represents over 225,000 members across Canada, many of whom work in industries such as steel, aluminum and mining. These industries, which are vital to our economy and the workers in these sectors, are the backbone of Canada's EV supply chain. They face massive risks due to China's trade practices.

The motion for this committee study rightfully emphasizes the serious threat that electric vehicles from China pose to Canadian industries and workers. Chinese EV manufacturers are heavily subsidized and benefit from unfair competitive advantages, including poor environmental, labour and human rights standards. These practices pose a direct threat to over 600,000 Canadian workers in the steel, aluminum, mining, auto parts and auto-manufacturing industries. Our members, who take pride in producing high-quality materials, are being unfairly undermined by cheap, substandard imports. That's why we need to protect the entire EV supply chain from predatory Chinese competition.

The USW strongly supports the use of section 53 of the Customs Tariff on Chinese EVs. Our largest trading partner, the United States, has already announced an increase in tariffs on Chinese EVs to 100% and an increase in tariffs on steel and aluminum to 25%. These remedies are scheduled to kick in September 27. We believe Canada should follow suit to ensure that our domestic industries are not left vulnerable, by imposing the same border tariffs and expanding remedies on other parts of the EV supply chain, including steel, aluminum and critical minerals.

The issue before us today goes beyond just EVs. Excess Chinese industry capacity and unfair trade practices have long plagued the steel and aluminum sector. For years, we've been warning of the devastating effects of Chinese steel dumping, which has led to falling prices, job losses and the decline of our domestic industry.

Just last year, offshore steel increased its share of the Canadian market from 19% to 38%. Steel and aluminum are the centre of the EV supply chain, and this market cannot grow without a stable and competitive industry. As China continues to flood global markets with cheap steel and aluminum, Canadian producers, who adhere to some of the highest environmental and labour standards in the world, are being undercut, and workers suffer the tragic consequences.

We urged the government to expand the scope of section 53's authority to impose tariffs on steel and aluminum products originating in China, and we are pleased that the government has acted in this direction. If Canada does not follow through with this, the Canadian steel producers estimate that over 760,000 tonnes of Chinese steel could be diverted into Canada due to the U.S. tariffs. The status quo would be devastating for Canadian workers and businesses. Even with section 53, Canada remains at risk as a result of lower tariff and non-tariff barriers on China than are imposed in the U.S.

While these tariffs are necessary, they are only part of the solution. We need a comprehensive and coordinated industrial strategy that includes steel, aluminum and critical minerals as pillars of our EV supply chain, from mining to refining critical minerals and producing the steel and aluminum that will go into EVs and batteries.

We also call on the government to increase the use of Canadian-made steel and aluminum in publicly funded infrastructure projects. Public procurement policies should be a priority for these domestic products.

Additionally, Canada must implement a carbon adjustment to level the playing field. Canadian producers are world leaders in producing low-emission steel and aluminum, and yet they are being penalized by foreign competitors with much higher carbon footprints. We need a—

[The Chair, Liberal, Judy Sgro]

Thank you very much.

I'm sorry, but I have to cut you off, Mr. Warren. Maybe you can get in your last comments in response to a question.

I'll go to Mr. Herman, please, for up to five minutes.

[Lawrence Herman, Counsel, Herman & Associates, Cassidy Levy Kent, As an Individual]

Thank you very much, Madam Chair. I'm very pleased to be here.

I hope I'm not a bit out of context. I was asked to come and give some views on the legal aspects. I'm a lawyer. I'm not a policy person. I'm pleased to answer questions, and I hope I can provide some clarification.

I'll give my testimony in English because I'm not very familiar with the technical words in French, but I'll do my best to answer you in French, if necessary.

Look, Mr. Warren made a very good point, and I think the committee has to be conscious of this. Our most important trading partner has taken action against Chinese EVs, steel and aluminum. Canada, as part of the Canada-U.S.-Mexico Agreement, has to follow suit. We don't necessarily have to do everything the Americans do, but we're part of an international agreement—a North American trade agreement—and it is incumbent upon Canada to take action accordingly. That's what the government has done under section 53 of the Customs Tariff. I can talk a bit about the Customs Tariff act and section 53 during the question period.

There is no doubt that China breached its WTO obligations. They engage in strategic targeting of foreign industries through massive subsidies and exports that are developed and implemented, basically, to inundate and take over foreign markets in strategic areas, and we have to be conscious of that. We have to respond to China's aggressive use of subsidies in breach of basic WTO GATT obligations.

I should mention that we're talking about subsidies and not dumping, but dumping of goods can't be completely ignored. The traditional trade remedy approach doesn't work in this case. Trade remedies deal with individual companies that experience injury. There is no way in which the traditional trade remedies—anti-dumping and countervailing duties—can deal with China's aggressive strategic actions.

I want to talk a bit about national security, and I'm going to make some suggestions in the answers to questions. We have rights, under WTO GATT provisions, to take action when Canada's national security interests are affected. In my view, in this case China's actions are a threat to our national security interests. I think section 53 of the Customs Tariff act should be amended to include reference to national security, and there are other aspects of our trade laws that could also be changed to include references to national security.

Those are my comments. I'm happy to deal with any of these points in the question period.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Herman.

We now move on to the members and their questions.

Mr. Williams, go ahead for up to six minutes, please.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you very much, Madam Chair.

Thank you to our witnesses for attending this very important meeting today.

We talk, really, about the need for balance, balanced trade, in looking at this relationship with China but also with the Americans.

Mr. Herman, I'll start with you. Can you let the committee know a bit about the current relationship with the U.S. and the Canadians when it comes to trade? Specifically, can you speak about the recent almost doubling of software lumber tariffs, the digital sales tax and what they're bringing up as concerns on that?

[Lawrence Herman]

Those are good questions.

Look, in a major trading relationship like the one we have with the Americans, there will always be disputes and disagreements, and softwood lumber is one of those. It's just a fact of life that the U.S. industry is well organized and deep-pocketed and they can keep this dispute going as long as they want. The only way to deal with softwood lumber is to have a separate agreement with the Americans settling this matter.

There will always be these kinds of differences. The point I make is that in the large scheme of things, it is important for Canada, Mexico and the United States to work together to deal with major international concerns, such as the Chinese aggressive trade actions. As part of a trilateral trade agreement—one of the largest, if not the largest, relationships in the world—we should work together with our trading partners.

Look, to be frank—I don't think it's a secret, and everybody on the committee will know this—our trade with the United States is our dominant interest when it comes to international trade, and we have to work closely with them, Mr. Williams, notwithstanding the differences we might have in discrete, separate subject areas.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Just from your expertise, right now is that relationship better or worse, given the fact that softwood lumber has been going on for a while and they've just doubled the tariffs, and they're bringing up issues that are affecting trade? They're talking about a digital sales tax affecting a trading relationship. Is that making the relationship worse?

[Lawrence Herman]

Look, there will always be tensions in certain areas. We have an agreement, and the agreement provides for the resolution of those disputes through a third party settlement process. We'll have to work that out. The Americans will—

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you so much. I'm sorry, but I only have so much time.

Mr. Warren, we've talked about the steel industry and aluminum. You talked in a broader sense about 600,000 workers. How many workers are there in just the steel industry, directly or indirectly?

[Marty Warren]

Meg might help me with that answer, but directly in the steel industry, for our union alone there are probably close to 20,000, and that's our members, our locations. Then, obviously, there's the downstream: all the shops around it that support it, the maintenance work. You're talking 100,000 jobs or more.

[Ryan Williams, Conservative, Bay of Quinte, ON]

That's 100,000 jobs and good paycheques in Canada in this industry.

We've talked about the EVs, obviously, and the steel and aluminum industries in China, and you did talk about dumping in those industries and how that was going to affect this. You used a large number. You talked about 19% to 38%. How many jobs would be threatened if steel is continually dumped, if we don't have these tariffs in place on aluminum, steel and EVs? How many of those jobs would be threatened?

[Marty Warren]

I would suggest to you that if we don't figure it out, every job will be under threat, because it comes down to investment. Again, if you can't sell your steel.... There's no premium on green steel right now, even though we produce some of the greenest steel in the world. There's no premium in the marketplace for green steel. If we don't put in tariffs to help these manufacturers so they invest, what's a nation without a steel industry? What about all the good jobs and the communities they create?

I will tell you—the last point I'll make—that if we're not able to stop our porous borders with foreign steel being dumped in, at the end of the day it leaks into the U.S. Our greatest trade partner, especially with steel, is the U.S. I assume their patience is running thin if we cannot look after our borders and the foreign steel continues to leak into their country. I'm very concerned about that.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, sir.

Something else we've been hearing about from some of the producers as well, which is affecting this, is the carbon tax. The carbon tax is going to increase the costs for the steel industry. If so, how many jobs would be under threat out of that?

[Marty Warren]

Well, right now, I think it's too early to say how many jobs.

From my perspective, there is no doubt about it: Steel producers should not be let off scot-free around creating the green economy or continuing to grow within the green economy. I am somewhat concerned about how it ramps up with the steel industry. We're having a harder look at that right now and we're trying to see if they need a bit of a carve-out, a bit of a runway so the technology can catch up with them, so the investments can kind of catch up with our steel industry. It's clear that they shouldn't be let off the hook, but I am concerned right now. The way it ramps up, if it is.... We need a closer look at it to see how it impacts investment.

[The Chair, Liberal, Judy Sgro]

Thank you—

[Ryan Williams, Conservative, Bay of Quinte, ON]

Are you asking them for a pause? Is that something you're asking for?

[Marty Warren]

No, not directly. We're reaching out to some of the parties to have the discussion. I was with the steel producers a couple of months ago. We talked to all three of the parties about it and made them aware of it. Again, we're hopeful that as we continue down this path to figure out a solution that works for our environment, our children and our grandchildren—

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir. I'm sorry. I have have to interrupt. We're 20 seconds over.

The next person is Mr. Sheehan, please.

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

Thank you very much to everyone on this presentation.

It would seem that everyone is in agreement that these tariffs are a good idea. Thank you very much for presenting your various points, opinions and data on this.

Marty, you talked about this dumping that's been going on for a very long time. I'm the member of Parliament for Sault Ste. Marie. I've been there for quite a while. I've seen how important the steel industry is directly for the steelworkers, but also for the economy in the Soo and northern Ontario.

When I was first elected, Algoma Steel was in bankruptcy protection. The Tenaris tubes mill had a handful of people working there: basically just maintenance and keeping the lights on. They squarely blamed dumped steel. That was why they were in such a terrible situation.

Fast-forward, and in our first budget, we implemented a plan to strengthen Canada's response to unfair trade. We implemented measures that created a longer length of time in which a penalty, once levelled, would be in place, and then we launched a consultation.

After that consultation in 2017, we introduced some really important facts. The particular market situation was one piece of anti-dumping legislation, and there were the anti-circumvention scope ruling and union participation. I want to highlight and underline the union participation and how important I believe it has been for us as we continue our journey together to strengthen the steel industry. I think of Cody Alexander from district 6 and how he said he went to and participated in one of these committee meetings. They had a favourable ruling after the steelworkers presented how it would affect their jobs and how unfair this was.

Could you explain to the committee as well? I really appreciated the steelworkers' help when the section 232 tariffs were put in place—25% on steel and 10% on aluminum—and how the United Steelworkers on both sides of the border were able to work with us—including Leo Gerard, from northern Ontario, Sudbury, a Companion of the Order of Canada—and the importance of that voice.

Maybe you could explain to this committee the ongoing efforts of the United Steelworkers in working together, on both sides of the border, to strengthen the steel industry. I'd like you to provide some comments on that.

[Marty Warren]

Yes, I would say we're very fortunate. We're an international union on both sides of the border, which not only gives us a voice in Ottawa, but it gives us a voice in Washington. We do a lot of work together to protect our countries and our economies. As we all know, our economies are so dovetailed together on almost everything.

Just to back up to your point around some of the tariff cases and our having the ability to testify in tariff cases, that is a huge step forward. You hear that from a lot of the committee people, who would normally just get facts and a whole bunch of stuff. When they're able to hear a worker on how it affected their community, and the layoffs and the lack of overtime.... You hear a lot of committee members saying that matters: how that affected their bargaining and how they were in a weaker position to bargain for pension plans and wages. That's been a huge step forward, and I can't thank the committees enough for allowing us to be part of that.

I just want to say that with melt and pour coming up, that's a huge step forward, too, because some of these countries circumvent it. China and some other countries like to go to three different countries, change the stamp and dump it in: It's still dumped steel. With the implementation of melt and pour, we really need to resource that. We also need to resource the CBSA in terms of effecting or enforcing the trade remedies we're getting at the trade council.

Thank you for the work you've done and the importance you see in the steel industry. I can tell you that we and our U.S. counterparts work strongly together to protect our two economies and to make sure that both of our economies have a thriving steel industry and many other industries.

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

You began speaking about exploring a carbon adjustment. Could you please delve into that a little further? What would a carbon adjustment do, potentially, to protect steelworkers' jobs, aluminum jobs and EV jobs, etc.?

[Marty Warren]

The theory behind a carbon border adjustment is that when steel comes to our shores and it's made in a way that doesn't meet our standards, creates an environmental impact or creates a problem with carbon emissions, for it to enter our border to be purchased, there's a carbon border adjustment. You're not doing what it takes to change the world for our kids and grandkids. We can no longer just let your steel or your product into our country if it's not made to our standards, because all you're doing at that point is undercutting all the good work the steel manufacturers are doing in Canada and the U.S. You make them not want to invest, and the minute you don't get investment in these huge operations, you're like a grape dying on the vine.

Yes, it's a next step, and it's an important step.

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

I was going to ask the CLC how important prevailing wages and union wages are for the tax credits. Could you answer that in a very short time?

[The Chair, Liberal, Judy Sgro]

Give a brief answer, please.