International Trade Committee on Sept. 18th, 2024

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

You and Mr. Kingston mentioned the need for alignment with our largest trading partner, the United States, as our economies are so highly integrated.

We don't operate in a vacuum. There are other policy issues, other areas and programs. For example, there is the Inflation Reduction Act in the United States. You have spoken to us before with regard to that and the impact that would have. We're talking about $390 billion injected into the U.S. economy in areas such as steel. You've talked to us about how the U.S. position is an enabling approach, for example, as opposed to Canada, where it's a carrot-and-stick approach.

What is the impact of the carbon tax, because there is no carbon tax in the United States? What is the impact of the carbon tax on our steel industry here? Also, what is the direct impact on possible job losses?

[Catherine Cobden]

The impact on carbon tax is growing. We have been very clear with all stakeholders, with the government, with opposition parties and many other stakeholders that the steel industry is vulnerable.

We're in a very special situation in the steel sector. I've tried to describe as well as I can the high degree of trade exposure we have as well as the competitiveness risks we face. Also, we're a large emitter, despite our efforts to be decarbonizing as fast as possible. This is not something we can do quickly. Unfortunately, given the scale of investment required and the fact that there are significant solutions that are outside of our grasp and not available yet, we need some space and time to get there.

To answer your question on the carbon pricing regime, we're well recognized in the regime in terms of being trade-exposed and being at high risk of carbon leakage, but we must be sure that the exposure we face with respect to price and stringency is managed. Before carbon pricing existed, we couldn't compete with unfair traders. Now, with carbon pricing and the escalation of the price and the reduction of our trade protections, we're starting to have trouble competing with fair traders and with others in our market.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

I'm going to go to Mr. Kingston now.

Brian, in your comments you talked about two themes. One was the notion of alignment with our largest trading partner, the U.S. You also spoke about the time that's needed to establish that supply chain in Canada.

For example, we've seen decisions with regard to Ford and the initial investment decision in Oakville, which they put on pause until 2027. Here, in my community alone, just close to me—next door to me—is St. Catharines. I used to work at that GM facility. They made the announcement in 2023 to make up to 400,000 EV units there, yet they put that on pause. Can you provide a reason that those decisions were taken?

[Brian Kingston]

Sure. I hate to state the obvious, but in some of the conversation and comments from my colleague from Environmental Defence, there seems to be a key misunderstanding about how the free market operates. Automakers build vehicles that consumers want. If they don't, they go out of business. It's different in China, where you can have state-subsidized manufacturers who don't need to make a profit and don't have to respond to shareholders, but that's not how it works in our economy.

What you're seeing right now is that automakers are taking the temperature of the market. We've seen demand going up and down with respect to EVs. They have to meter out their investments and ensure that what they're bringing into the market will find customers willing to purchase them. That's why you're seeing a bit of a rocky road right now towards those targets.

[The Chair, Liberal, Judy Sgro]

Next, we have Mr. Miao.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Madam Chair, and thank you to all the witnesses for being here today and online. Welcome back, Mr. Kingston.

In your remarks, Mr. Burton, you talked about an EV car being like a computer on four wheels, and the safety that comes with it. With the current tariff on Chinese EVs, would this help preserve the country's long-standing national security framework?

[Dr. Charles Burton]

We don't have those Chinese EVs here, and that's a good thing. I hope we never get them. That proposed tariff, I imagine, would certainly achieve that end. China's very keen to have those things running all over Canada for the reasons I gave. I think we're giving a pretty clear message to the Chinese that that's not happening.

[Wilson Miao, Liberal, Richmond Centre, BC]

You mentioned that there are no Chinese EVs here. From my understanding, and Mr. Kingston, you can correct me if I'm wrong, many of the Teslas that are being imported into Canada are actually made in China right now. Is that right?

Does that pose a threat to our national security?

[Dr. Charles Burton]

I'd be more concerned if the software updates and information were going to China as opposed to wherever Tesla operates. I have more confidence in Tesla than in a Chinese state or Chinese Communist Party-dominated business. I don't know if Tesla has Chinese Communist Party branches in its manufacturing facilities, but my main concern is the potential access of Chinese intelligence to the data.

Obviously, Tesla, Google, and all these companies gather a terrific amount of data that is used by them, but they are not regimes that are preparing to engage in a hostile confrontation with the west over, say, Taiwan or the South China Sea, and would use the potential of EVs in our country to serve their geostrategic aims.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you for sharing that.

Mr. Kingston, can you add your comments to that?

[Brian Kingston]

You're correct. The vehicle surge that we saw in imports of Chinese EVs, an increase of about 2,500% year over year, was largely Teslas manufactured in Shanghai. The reason was that the Inflation Reduction Act put in place requirements around your ability to qualify for a credit.

Vehicles manufactured in China could not receive those purchase incentives. Therefore, the sourcing for the Canadian market switched to Shanghai, because Canada had no restrictions on its incentives. In fact, over $150 million went to Chinese-manufactured EVs through our purchase incentive program.

[Wilson Miao, Liberal, Richmond Centre, BC]

Can you share with the committee more on what kind of brand made in China is in Canada right now?

[Brian Kingston]

At the moment, there is nothing. There were Teslas coming in, and some small volumes of Chinese-manufactured Volvos, but very small numbers of vehicles. There are no Chinese manufacturers that currently sell or were selling in Canada.

[Wilson Miao, Liberal, Richmond Centre, BC]

What about BYDs? My understanding is that in Ontario, there are a few vehicles manufactured by China in the bus category.

[Brian Kingston]

Yes, that's correct. BYD has a facility in the GTA, but it's in the medium and heavy duty category. There were some BYD vehicles in Quebec through a taxi arrangement at one point. There are some vehicles, but very small numbers.

[Wilson Miao, Liberal, Richmond Centre, BC]

I know that in previous conversations, and with regard to my private member's bill on the right to repair, there can be potential threats where data is being captured away from the manufacturers themselves.

Is that correct?

[Brian Kingston]

Yes, vehicles are becoming increasingly connected and are highly dependent on sophisticated software. As we had discussed in the context of theft, it's very important to keep that information secure to ensure that the companies are subject to Canadian privacy and data security laws. Hence, the comments from Mr. Burton are so important. We can't necessarily be guaranteed that when we're talking about a manufacturer that is, perhaps, state-controlled.

[Wilson Miao, Liberal, Richmond Centre, BC]

I want to move on to subsidizing EVs in our country. What kinds of recommendations or suggestions does any witness have to allow us to have a better transition to EVs?

[Brian Kingston]

If we want to achieve the sales targets that have been established by the government, we need purchase incentives, because there is a price gap. Consumers aren't willing to make the switch if we don't get to price parity. We're just not there yet.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Williams, go ahead for five minutes.

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

Thank you very much, Madam Chair.

Mr. Kingston, how many jobs are there in the auto industry, directly and indirectly?

[Brian Kingston]

There are 135,000 in direct employment and 500,000 when you add in all the indirect...supply chain, dealership and auto repair.

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

Given our integrated trade relationship with the Americans, how many of those jobs are dependent on that trade relationship?

[Brian Kingston]

It's virtually all of them. Over 90% of what we produce goes into the United States.

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

We talked about this already today. We heard about an EV mandate that the Liberals have placed: All vehicles sold in Canada must be electric by 2035.

I want you to set the record straight. Do the Americans have a mandate to do the exact same thing?