International Trade Committee on Sept. 23rd, 2024

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

Thank you, Madam Chair.

I'd like to thank all the witnesses for their presentations today.

My first question is for you, Ms. Cetinkaya.

We know that there are currently quite significant deficiencies in the control of goods produced by forced labour.

If we compare our situation to that of the United States, we realize that the value of illicit goods seized in Canada is almost nil, since there was only one seizure, and it was subsequently cancelled. In the United States, however, the value of seizures is in the millions of dollars.

We know that, in Canada, it's up to customs officers to prove the use of forced labour, as if observed by flashlight, whereas in the United States, it's up to the company to show that it's not using forced labour.

How do you explain such a big difference in the results and in the approach?

[Mehliya Cetinkaya]

Thank you very much for the question, Madam Chair.

I agree 100%. I believe the correct number is about three billion dollars' worth of value that the U.S. has seized. Canadian companies are required to report whether or not they have forced labour in their supply chains, based on the customs tariff, which was amended so that companies must report to the Canadian government. That's available on the Public Safety website, I believe—a catalogue of all companies that use forced labour. They find it hard to report because of third- and fourth-tier companies doing forced labour, like cotton being picked, then transferred to a different region—things like that. It's a little difficult for companies to report.

The CBSA has the resources and ability to look into these third-tier companies because, often, it is a collection of similar third-tier companies when it comes to Nike or different clothing companies. They all have a few groups of Chinese forced labour companies that they use. The CBSA has the resources and capability to look into them, question them and put out a statement to companies saying they cannot do business with these Chinese companies because they're directly linked to forced labour.

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

You also talked about solar panels.

I've already heard from people on Capitol Hill in the U.S. that there's a suspicion—so far unproven—that solar panels rejected in the U.S. would simply be shipped to Canada and pass through here like a letter in the mail. Ultimately, Canada would become the United States' backdoor garbage can.

Do you share that suspicion?

I repeat, the panels that are rejected in the United States are simply sent to Canada.

[Mehliya Cetinkaya]

Yes, I do 100%. For solar panels, it's specifically polysilicon that's coming from the East Turkestan region. It's also said that 85% of Chinese cotton is from East Turkestan. If the U.S. is stopping them, but our Canadian government, which has the same goal, has not stopped or seized a single shipment, I 100% have suspicions that's happening.

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

Let's talk about aluminum. We also know that aluminum production from China's Uyghur regions has grown massively in recent years. Today, that represents nearly 10% of the world's supply. So we can suspect the use of forced labour in such a case. Much of the production is shipped out of the region and mixed with other metals to make aluminum alloys in other parts of China, including the automotive industry.

According to Human Rights Watch, once aluminum has been melted down and mixed with other materials, it's impossible to prove that it comes from China's Uyghur regions, or how much of it there is. That's often how aluminum made with forced labour will enter domestic and global supply chains. Automakers rarely know themselves where the aluminum they use comes from.

Do you think this aluminum would make its way into the supply chains without manufacturers and consumers being aware of it?

[Mehliya Cetinkaya]

Yes. I will say that it is a tactical thing that China's been proven to do, whether it's in textiles or in the automotive industry. However, I will say that, right here, I have a minimum of eight companies that specifically use Uyghur forced labour in the Xinjiang region to mine aluminum. Whether these companies are going and mixing that with other metals, or different companies, the origin or extraction of that aluminum is associated with a company name. That is information that, if I have it in front of me, we're able to look at. The CBSA is able to look at it. The Canadian government is able to look at it. I am able to prove it right here with us.

Also, they are moving it out, but are also creating a lot of factories within East Turkestan to process those raw materials, and then that process of moving out is slowing down. They're actually even manufacturing car parts within East Tristan as well.

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

Thank you.

Very quickly, please, can you tell me if automakers are taking the necessary steps to minimize the risk of aluminum produced by forced labour in their supply chain?

If we have any time left, I'd like to hear from Mr. Volpe on that as well.

[Mehliya Cetinkaya]

No. Recently Volkswagen has been one of the companies that are very prominent in the region for forced labour. They released a report where they lied about what companies they're using. They lied about what processes and what parts of their supply chain have Uyghur forced labour in them, so I do not think that companies are being accountable.

[The Chair, Liberal, Judy Sgro]

Mr. Volpe, do you want to add something quickly?

[Flavio Volpe]

Sure. Automakers that are manufacturing in North America and are subject to the USMCA have a much stricter rigour, both from a regulatory standpoint and from their own ESG commitment in terms of the transparency of where things are coming from. Of course, a lot of the aluminum for North American manufacturers is coming from Quebec.

What Canadian suppliers don't control is where subcomponents may come from, that is, from which other regions, and we've always expressed concern that anything coming from China is suspect.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

I have Mr. Cannings for six minutes, please.

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

Thank you.

Thank you all for being here today.

I have 100 questions and only six minutes, so I'm going to try to move along fairly quickly.

I'm going to start with Ms. Kyriazis.

You mentioned that sales in provinces such as Quebec and British Columbia are very high and are approaching or exceeding world sales. Why is that? Is it the infrastructure on the highways? I know I can drive around my riding. It takes 11 hours. I can stop every 15 minutes and can charge up if I need to.

Is it the sales mandates in those provinces? Is it incentives? Is it all of the above? What can we do federally to change that pattern across the country so that we see a broader uptake?

[Joanna Kyriazis]

Thanks, Mr. Cannings.

B.C. and Quebec are certainly Canadian leaders when it comes to EV uptake. They've both put forward comprehensive policy packages that focus on the demand side of the equation as well as the supply side.

They do offer generous incentives to consumers looking to buy an EV. They have the two longest running programs in the country. They invest heavily in charging infrastructure.

They have some other measures as well, but most Canadian provinces actually already offer EV purchase incentives, and so what's different about B.C. and Quebec is that they have the sales mandates in place, which require carmakers to sell more EVs in those jurisdictions and allocate more of their inventory.

You'll often see, when a new EV comes to market, that they're available in only B.C. and Quebec first. Even the Ontario-made electric Dodge Charger is only available in B.C. and Quebec at first, because the requirements are in place there and not yet federally.

What we can learn from them is, I think, the importance of the supply side of the equation, preserving a strong EV availability standard federally, which recruits automakers to use the tools they have at their disposal to help Canadians go electric.

That could be pricing structures, offering discounts on EVs or low-interest financing. It could be making sure their dealers have everything they need to succeed in selling EVs and helping Canadians by answering the questions they have, and by investing in charging.

The recent PBO report actually showed that the EV availability standard is going to get us almost all the way to where we need to be by 2030 in terms of our public charging network largely by leveraging private capital as carmakers invest in charging to help meet their sales targets.

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

Okay. In your third point, your recommendation was an EV model standard.

My wife and I were out looking for an EV this summer. We went to all of the lots in the area. There were plenty of EVs available. We have friends who have had EVs and said we shouldn't look at this, this or that. We just want a little car to run around town with. All of the EV cars available were big SUV-types of cars. Some of them used to be small but have grown over the last few years. That's something you see in internal combustion cars as well.

Is that what this standard would seek to address, this “always getting bigger” trend we see in other car models?

[Joanna Kyriazis]

Well, it will certainly seek to address the problem of EV prices being too high by causing carmakers to have to drive down prices to meet their sales.

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

There are small, affordable EVs available in Europe, for instance, that don't, as I know, come from China.

[Joanna Kyriazis]

Yes. Right now Europeans have 12 EV models to choose from that are under the price point of $45,000 Canadian. In Canada, we have one, the Fiat 500e. We used to have the Chevy Bolt as an option, but that's been discontinued despite being the second best-selling EV in Canada.

Certainly, that EV availability standard, among other things, is needed to improve EV affordability and get more Canadians the vehicles they want and can't yet afford.

[The Chair, Liberal, Judy Sgro]

You have one minute and 20 seconds remaining.

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

I'll turn to Mr. Volpe.

I just want to talk about your comments on the supply chain, battery recycling, graphite and all of these things that Canada can do really well. I know I have the Teck smelter in my riding and Trail, which wants to invest hundreds of millions of dollars in an EV battery recycling plant, making it one of the biggest, if not the biggest, in North America.

I have a fabulous graphite mine. It's sitting there idle, because all of the graphite in the world seems to be mined in Mozambique by Chinese mining interests, and they control that whole thing.

What can we do to accelerate, as we have with battery manufacturing, all of that investment, that whole supply chain, to get us away from China?

[Flavio Volpe]

I think we have to stop being naive about why Chinese products are cheap. The first thing is that they're heavily subsidized. It's an opaque system. They dominate the global markets in the critical mineral verticals. They bet early, but they didn't bet in a market function. These are not companies that speak to analysts and watch their share price. They have a different relationship with return on investment.

The tariffs are going to help. They're going to buy some time, but we also have to have a national strategy that says there are a whole bunch of consecutive processes when we approve a mine, maybe like we did during the pandemic when we needed stuff immediately. We looked at those processes and saw how many of those we could make concurrently. It's very nice to say that consumers should have the cheaper vehicles, but when you're working in a market economy, if the companies are not charities and they're not subsidized—there are lots that are not subsidized by the federal treasury—if they decide to put out a losing product that nobody buys or that they buy and lock in losses, that company won't exist anymore. The Canadian supply chain is very much for electrification as being at the head of it. There's Project Arrow; look it up, and you'll see how heavily invested we are in it. There are no charities in this. That's the difference between here and what the Chinese have set up.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Martel for five minutes, please.

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

Thank you, Madam Chair.

I would also like to thank the witnesses for being here today.

Mr. Volpe, Canada has been slow to implement its tariffs. Why do you think that is?

[Flavio Volpe]

That's a good question, because I've asked the same.

I think that with that gap in the time, we miss the opportunity to tell everybody who would have us do it another way that the most important thing in automotive in Canada for return on investment, for jobs and for upstream and downstream opportunities, is that we understand that the American market is where the milk gets in the coconut for us. If 80% of what we sell gets sold to an American consumer, there should be no daylight. I commend the government for going aggressively to the American standard, but we're also pushing the government to say, by the way, on the rest of it, go to the American level and tell China and the rest of the world that we know that we can make a go of it profitably in this continent if we don't put distance between us and the Americans.

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

In your opinion, when the U.S. has regulations of this kind and we don't follow suit, or are slow to do so, could that limit or hinder Canada in its future bilateral negotiations with the Americans?

[Flavio Volpe]

Generally, yes. I will say on this one specifically that when I first spoke to the Deputy Prime Minister when she announced that we would do a 30-day consultation, I asked, why are we doing a consultation? In part, I thought the answer was thoughtful. It was that on the critical minerals end of the piece, the Americans don't have that opportunity in the same proportion that we do, and that we're all looking for perhaps how the Chinese would respond. And there are pieces of the Canadian economy that help create the balance we're in so that we need to make sure that we knew what we were getting into before we signed up for that American standard.

Generally, though, in automotive, as we learned through the NAFTA renegotiations, there is no room for pushing back on the American consumer base and on the American partner, because we're also about to see whether the former president becomes the new president and his rather unnuanced way of doing trade is something I think we should all be aware of as we deal with China.