International Trade Committee on Sept. 23rd, 2024

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting to order.

This is meeting number 116 of the Standing Committee on International Trade.

Welcome to everyone.

For the first hour and a half, of course, we're continuing our Canadian manufacturing study, and in the following half hour we will have committee business.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Wednesday, August 21, 2024, the committee is commencing its study on protecting certain Canadian manufacturing sectors, including electric vehicles, aluminum and steel, against related Chinese imports and measures.”

With us today from the Alberta Uyghur Association is Mehliya Cetinkaya, program and outreach manager.

From the Automotive Parts Manufacturer's Association, we have Flavio Volpe, president, who is a regular here.

From Clean Energy Canada, we welcome Joanna Kyriazis, director of public affairs.

We welcome you all.

We will start with opening remarks for up to five minutes, and then we will proceed with questions by committee members.

Ms. Cetinkaya, would you like to go first, please?

[Mehliya Cetinkaya, Program and Outreach Manager, Alberta Uyghur Association]

Madam Chair and members of this committee, thank you for welcoming me today.

I'm here to shed light on how Canada's trade with China can be and is complicit in Uyghur genocide. As many Canadians have learned over the past few years, the Chinese Communist Party has been committing a genocide against Uyghurs and other Turkic Muslims who live in East Turkestan, also known as Xinjiang. Since 1949, the CCP has worked to eradicate Uyghur people due to their different ethnicity and religion and with the ulterior motive of stealing and monopolizing the natural resources of the region.

This human rights crisis is creeping its way into our Canadian borders in the form of clothes, textiles, tomatoes, solar panels, EV batteries and so much more.

Reports indicate that over three million innocent Uyghurs are currently detained in concentration camps, where they face indoctrination, forced labour and torture in varying degrees. Testimonies from camp survivors like Gulbahar Jelilova, Tursunay Ziyawudun, Omir Bekali and others are too horrifying to repeat here today.

SDIR, the Subcommittee on International Human Rights, and our Parliament have recognized the CCP's treatment of Uyghurs and other Turkic people of East Turkestan as a genocide. Consequently, Canada can no longer do business as usual with China.

The International Labour Organization defines “forced labour” as the exaction of “work or service...from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily.”

It is clear that Uyghurs are not voluntarily offering to work. On the contrary, they're forced to by the CCP out of fear that if they refuse, they and their entire families will be punished, or, worse, sent to concentration camps. It's estimated that more than 80,000 Uyghurs were transferred out of East Turkestan to work in factories across China between 2017 and 2019. Some of them were sent directly from detention camps. Uyghurs who live in factories away from home are forced to go through ideological training, are under constant surveillance and are forbidden religious observances.

[The Chair, Liberal, Judy Sgro]

Excuse me, but the interpreters are asking if you could slow down. We appreciate that you are trying to cover it all in five minutes.

[Mehliya Cetinkaya]

Sorry.

[The Chair, Liberal, Judy Sgro]

Please just go a little bit slower.

[Mehliya Cetinkaya]

I understand. I will slow down.

A local government work report from 2019 reads that, “For every batch [of workers] that is trained, a batch of employment will be arranged and a batch will be transferred. Those employed need to receive thorough ideological education and remain in their jobs.”

The turn to green energy in order to lower pollution and costs is good in theory. However, it is clear that this initiative, if sourced from China, cannot and will not be green. East Turkestan is rich in natural resources that are part of the EV battery process. The Chinese government is actively relocating the processing of raw materials and the manufacturing of car parts into East Turkestan due to the availability of these large reserves of resources. Ironically, the manufacturing of these green technologies in China is particularly energy-intensive and highly polluting.

Uyghurs are being used as a source of slave labour in the mining and production of lithium, cobalt, coal and other materials crucial for these batteries. Purchasing electric vehicles or renewable energy and technologies from China not only directly upholds forced labour systems in place to eradicate Uyghurs, but also creates even more pollution.

As Canada strives to meet climate goals and transition to greener technologies, we must ensure that these efforts do not come at the cost of human rights and, certainly, of our environment. Collaborating with companies that utilize forced labour directly undermines Canada's commitment to ethical trade and social justice.

Xinjiang East Hope Nonferrous Metals, Tianshan Aluminum, and Xinjiang Xinfeng Co. are all are closely tied to Xinjiang Production and Construction Corps, a military economic entity, sanctioned by Canada, that plays a big role in the repression of Uyghurs. This company holds thousands of stakes in companies in East Turkestan and frequently participates in forced labour transfers with coal mining companies.

I add that the current legislation prohibiting forced labour...within Canada is weak. The United States has the Uyghur Forced Labor Prevention Act, which assumes that any products coming from East Turkestan or Xinjiang are made, wholly or in part, by forced labour until proven otherwise, whilst Canada does not. However, the goal of both countries is to prohibit forced labour from entering our borders. Canada has neither seized nor stopped a single shipment at our borders due to the reason of forced labour. From June 2022 to date the U.S. has stopped 9,791 shipments, releasing 4,537 and seizing 3,975, due to forced labour. While our neighbours can uphold their commitment to protecting human rights, why hasn't our government adopted the same policy?

Green initiatives cannot truly be sustainable if they rely on Uyghur forced labour, and China is also one of the highest polluters in the world. Supporting the Chinese Communist Party, without accountability, makes us complicit in these violations of human rights. Our economic and environmental interests cannot outweigh the fundamental human rights of millions of Uyghur people. It's essential to seize and stop goods coming in from China, East Turkestan or Xinjiang. It is essential that we call on China to address its pollution and CO2 emissions, and that we ensure our green technologies are ethically sourced by ending the Uyghur genocide and freeing East Turkestan.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Volpe, go ahead, please.

[Flavio Volpe, President, Automotive Parts Manufacturers' Association]

Thank you, Madam Chair and members. I appreciate being introduced as a regular here today.

Most of you know the APMA. We're the Canadian companies in the automotive business; that's hundreds of supplier factories and 100,000 employees who manufacture parts, tools and applied technology systems. Canadian automotive companies have 156 factories in the United States and 120 factories in Mexico. We're very invested across North America, with another 88,000 employees in those jurisdictions.

Where our bread gets buttered is in the U.S. market. Eighty per cent of the vehicles made in Canada are sold to U.S. consumers. Fifty per cent of the exports of parts go to factories in the U.S. to manufacture vehicles, 60% of which are imports into Canada. We are extremely integrated, and it's part of the reason that we at the APMA started in September and October 2023 to push the Canadian government to understand the flood of Chinese vehicles going into Western markets, including Mexico. That included seeing a rise in Mexico in one year of imports from Chinese sources from 5.4% to 19.7%, which is a threat to all of the investments that industry has made in partnership with governments, both the federal governments here as well as provincial governments in Ontario and Quebec.

We said that they had to open their eyes to the “Made in China 2025” plan, which is public. The Chinese, among other things, want to dominate the vertical dimension of advanced automotive manufacturing.

Do something. We worked hard here to raise awareness, and then we went to Washington in November last year to say the same thing to the Americans: to the White House, Treasury department, and commerce and energy departments to say that you, the Americans, are making heavy investments in the space, but also inviting Chinese products in to meet your EV mandates. We told them that they needed to make sure that they understood what they were doing and that the Chinese were so far ahead that, if the U.S. continued down this path, all it was going to do was to pay for China's goods to be sold to U.S. consumers who in turn are taxed to raise the funds to pay for the goods.

Canada does not have an OEM. There are no product decisions made in Toronto, Windsor or Ottawa, but we make up to two million cars a year. We're one of the 10 biggest players in automotive manufacturing around the world. We can supply everything that is in an electric vehicle.

The APMA led a project called Project Arrow, where we built out a working vehicle prototype that we've toured around the world. It is made almost entirely of Canadian parts, except for the screens, because the Chinese, as they did in solar, as they're going to do in batteries and EVs, flooded the consumer electronics markets and busted all the other players in that space. We say that it's China versus market-driven players, because in China, it's the state organizing all the players in there. They're either owners at the state level or a municipal level. There's Shanghai auto, the biggest Chinese manufacturer, which is a JV with lots of Western players. The biggest shareholder is the municipality of Shanghai.

Here, everybody talks about, well, you don't want to do this. Are you going to protect fat companies, Western companies, that are protecting their profits? Well, they're all publicly traded. You can see that in the auto business in the West, they all operate in single-digit EBITDA. We're very happy to see the Canadian government move forward with an announced 100% tariff on Chinese EVs.

One thing that's important to our subsector, which is in the middle of another consultation, is what we do on subcomponents. We should harmonize with the United States. There should be no daylight between us on how we treat those products. They are the vast majority of our market, they're the vast majority of our imports, and we're invested together across the continent.

On EV mandates, the CVMA came here last week and said that they were going to put forward a motion that we should harmonize EV mandates. We should do the same thing here. On our EV mandates, APMA has said quite publicly many times that they cannot be fulfilled. We can't get to 100% EVs by 2035 if we don't have Chinese product in vehicles and batteries. We are walking ourselves into this problem.

Barry Bonds cheated in front of fans for years and set records in San Francisco. It was obvious to all of us. We looked at him, and we said later in his career that he shouldn't have been able to hit the ball like that. We watched his hat size get to 8. After he retired, we all started to look at it. After all of the records were broken, after baseball was changed, we said, “You know what? He was a cheater.” I'm going to start listening to the testimony on BALCO.

We haven't erased those records. We don't talk about that whole era of baseball anymore. No one is getting into the hall of fame. China is playing like Barry Bonds. It knows the rules, is going to break them, will find the cream in the clear, and will beat you. When you catch up and want to moralize and say that you did it wrong, you've lost.

Thank you.

[The Chair, Liberal, Judy Sgro]

That's interesting. Thank you, Mr. Volpe.

Ms. Kyriazis, I apologize for my pronunciation. You have the floor for up to five minutes.

[Joanna Kyriazis, Director of Public Affairs, Clean Energy Canada]

Good afternoon, Madam Chair and members of the committee.

My name is Joanna Kyriazis. I am director of public affairs at Clean Energy Canada. We're a climate and clean energy think tank at Simon Fraser University.

Today, I would like to talk to you about EV affordability and why this must be a top priority for the federal government and industry if we want to help Canadians through a cost of living crisis and to set our burgeoning domestic EV sector up for long-term success.

Globally, EVs now make up one in every five new cars sold, and they're on track for another record-breaking year. Here at home, EV sales are also on the rise, making up 13% of new car sales across the country and nearly a third of new car sales in leading provinces like Quebec. You wouldn't think it from the headlines you've been seeing, but in the last quarter, Canada saw the highest volume of EV registrations ever. This is because EVs are one of the best ways to save Canadian drivers money and to free them from volatile gas prices. Plugging into our homegrown clean electricity saves the typical EV driver about $3,000 per year on fuel and maintenance. Put another way, today's Canadian EV drivers pay the equivalent of about 40¢ per litre of gas to charge their cars.

From a Canadian industry perspective, the transition to EVs has given our auto sector a second life. From 2000 to 2020, Canada dropped from being the fifth-largest auto-making country in the world down to the twelfth. We were losing jobs and investment in our sector. In the last four years, Canada has attracted almost $50 billion in EV-related investments, and we are now ranked the top country in the world for our EV battery supply chain potential. It is due to the fact that our country has some huge comparative advantages to offer this growing global industry. Our critical mineral wealth is one, as EVs are six times more mineral intensive than gas cars. Our low-carbon steel and aluminum, plus clean electricity to power our manufacturing operations, are another comparative advantage as companies and countries are preferring cleaner, more responsibly produced products. Our manufacturing footprint, highly skilled workforce and leading battery researchers are yet another comparative advantage as future vehicles become increasingly high tech.

In short, our auto, steel, aluminum and critical mineral sectors are better positioned to win an electric vehicle future than they are to win a gas-powered one. Many of these Canadian industries say that this is a generational economic opportunity. However, there is a major barrier that stands in the way of these opportunities for Canadian consumers and industry: EV prices are still too high. Polling suggests that the upfront cost remains the number one concern for prospective EV buyers.

Canadians currently have limited access to affordable EVs, and manufacturers here in Canada and in the U.S. aren't making them. In our submission, Clean Energy Canada argued that the impacts on EV affordability must be considered in Canada's response to Chinese-made EVs, either by considering lower tariff amounts or by complementing tariffs with other measures. Now that Canada has decided to apply a 100% tariff to Chinese-made EVs, the key question is this: What will Canadian governments and producers do with this time they've bought themselves?

Clean Energy Canada recommends that the federal government, for its part, adopt an EV affordability package made up of the following measures.

First, refund and extend the federal incentive program that helps Canadian drivers go electric. This program is more popular than ever this year, but it's set to end in March 2025, before most made-in-Canada EVs are even available to buy.

Second, ensure that new and existing condos and apartment buildings have EV charging installed. Millennial Canadians are the most interested in going electric, but they often live in or rent in apartment buildings where access to charging is limited.

Finally, preserve a strong EV availability standard that requires carmakers to make more EV models available to Canadians and will help drive down the price of EVs. This policy also offers market certainty for the other stakeholders involved, like EV charging providers, electric utilities and even mining companies, to plan and invest according to expected EV uptake.

We believe the federal government can balance multiple interests—addressing consumer affordability and climate change—while also setting our auto industry up for long-term success.

Thanks for the opportunity to contribute today. I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Genuis is up for six minutes, please.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you, Madam Chair.

Thank you to all the witnesses.

Ms. Cetinkaya, thank you for bringing more light here on the ongoing horror that is the Uyghur genocide.

From my observations, the ESG movement in practice sometimes feels like the “E only” movement. It ignores social and governance impacts in the rush to achieve specific environmental objectives. There is a major risk that the new battery economy is strengthening our strategic adversaries, undermining Canadian workers and causing untold suffering among Uyghurs, as well as people in the DRC who are often exploited by Chinese companies. Therefore, we need to be smart about how we respond to these changes, yet some, in spite of these realities of social and governance impacts, press forward with their one-track mind.

I think we need to have an approach that aligns with our economic interests, our strategic interests and our moral obligations. That is why Conservatives have pushed for strong measures to counter the strategic efforts of the Chinese Communist Party to dominate the market through tactics that are both anti-competitive and immoral.

You spoke in your opening statement about the Uyghur Forced Labor Prevention Act. It's a bipartisan bill passed in the United States that creates a reverse onus. Essentially, it's a presumption that those companies operating in East Turkestan, or Xinjiang, are using forced labour.

Why is this presumption reasonable, in your view? Should we adopt legislation in Canada that aligns with this bipartisan legislation in the United States?

[Mehliya Cetinkaya]

Thank you for the good question, Mr. Chair.

I want to start by saying that, 100%, EV batteries are also.... Exploitation in the DRC is very prominent.

When it comes to the Uyghur Forced Labor Prevention Act of the U.S., specifically, the Canadian government has released a study called “Study of Supply Chain Risks related to Xinjiang forced labour”, in which it clearly states that this is legislation we want and are trying to adopt within Canada.

The U.S. legislation is significantly stricter in assuming that all products coming from that region...because there was a lot of evidence and there were a lot of reports that showed us that things such as cotton.... Even the report that the Government of Canada released states that 85% of so-called Chinese cotton comes from East Turkestan, which means it is directly linked to the slave labour of Uyghur people. This is also true for things like tomatoes, solar panels and polysilicon. They are also coming in from the region of East Turkestan.

Therefore, the Uyghur Forced Labor Prevention Act assumes that because of the backing and the reports, and the fact that behind these different products, there is forced labour, anything coming from that region can be assumed to be from forced labour. This is because of how it is all interlinked.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

One of the things people say about enforcement around forced labour is it's complicated. It's complicated to unravel these supply chains and figure out exactly what came from where, and to have proper identification and accountability, but it would seem to me that if complexity is the challenge, we could simply be aligning with our American friends and partners to have an aligned regime. That way, if a shipment is turned around from docking and unloading its goods in the United States, the same shipment could not be unloaded in Canada. However, we haven't pursued that kind of alignment. If we had alignment, we could be sharing information. It would actually make our enforcement much easier.

This is a context in which, based on the numbers you presented, the Americans are succeeding and we're failing. They are stopping many shipments. We're not stopping any shipments, and those shipments that are being stopped on their way to the United States could well be coming to Canada.

Why don't we pursue greater collaboration with the United States and greater information sharing on forced labour? Wouldn't that solve the problem?

[Mehliya Cetinkaya]

I agree 100%. While both neighbouring countries have the same goal in mind, we do not want forced labour. We do not want to be complicit in a genocide, no matter how far away it is from our home here in Canada or in the U.S.

If the U.S.—and it's clear, like you said—has this legislation in place and has the materials and resources in place to detect forced labour within shipments, we should 100% be aligning with them and working with them. We could even expand it further and make sure that we really have a hand in stopping the use of forced labour.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

By “expand it further”, I suppose you're talking about seeking to partner with other like-minded democratic countries on a collaborative framework to keep forced labour out, which benefits workers within the free world and puts pressure on China to put a stop to this Uyghur genocide.

I have one final question.

The USMCA contains provisions on combatting forced labour. There's an obligation on the part of parties to that agreement to take action to combat forced labour. It doesn't include any kind of alignment of structures, but it includes a commitment.

It seems to me to be a bit of a trade risk if the Americans are able to see that they're putting a stop to forced labour products coming in from East Turkestan and Canada is not. That raises some questions about our compliance with that agreement.

It seems like a win-win if we could try to bring Canada into line with that agreement and collaborate more with the Americans in order to avoid potential criticism that we're not living up to our trade obligations.

I'm basically out of time, but maybe the chair will allow your quick response to that.

[Mehliya Cetinkaya]

Yes, I completely agree, one hundred per cent. We should have unity and collaboration with like-minded countries when it comes to forced labour.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Sheehan, go ahead for six minutes, please.

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

Thank you all for your presentations on this very important matter.

My first question, through the chair to the panel, would be for Mr. Volpe.

We had some testimony at our last meeting by the Canadian Steel Producers Association. I represent a steel town. It's been feeding into the auto sector for generations.

I asked, “Why?”

They're decarbonizing the steel industry. They decided that they would in Ontario. Algoma Steel is the second-largest steel producer in Canada and it's decarbonizing. I just asked why the steel industry is doing that. She just said that it's because the market's going that way.

Would you agree that the auto sector is also heading towards decarbonizing?

How important is it for the supply chain in the auto industry, particularly the EV industry, to be decarbonized?

[Flavio Volpe]

It's about authenticity. If you're going to sell a product that's going to be clean, that is going to have no tail-pipe emissions, that is going to help you achieve your green standards—whether those are EV mandates or others—then you have a responsibility to look at all of your supplies and all the raw materials. Where are they made? How are they made?

In our conversations with American officials, a lot of where they're going on a regulatory front involves asking what the embedded carbon level is in the materials, from steel to the parts that are made out of steel, to the cars that they go in. They get it and I think that we get it here, too.

That's also one way in which China is getting an unfair advantage here. There was 218 gigawatts of new coal-fired power approved in China over the last 18 months to sell us the steel that wraps the batteries that go into the clean cars that come to us from forced and otherwise underpaid labour to meet our objectives.

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

If we were to develop a national EV supply chain strategy, for instance, you mentioned one thing that might be in there.

What other things could we put in?

This could be for anyone to answer, too.

What other things could be in a national EV supply chain strategy?

[Flavio Volpe]

Joanna's testimony and the principles behind it are something that we are almost violently in agreement with. That is to say, there are very important societal reasons for why you want to have a clean transportation grid. However, the way you power that grid is important. The way you power the manufacture of the materials that facilitate that grid is very important.

If you are displacing carbon to a lower cost jurisdiction that has an opacity in how it's administered, how it treats people, how it treats labour and that is using our rules and our willingness to play boy scout around the world so it can flood those markets....

I was in the solar business before this. Don't get me started about the economics of the solar business. China is not the answer.

The strategy is that if we have raw materials in the ground here.... As Joanna said, BloombergNEF says we're the number one jurisdiction. Well, I represent all the suppliers. When can we buy the Canadian cells full of Canadian lithium, nickel, cobalt or graphite? The answer is, “at some point”.

Ford has to buy materials to put in a battery that goes into production here. If that's 2026 or 2027, pick any automaker you like and if the Chinese are ready, they'll sell it to them. If that's the only way to be able to build the vehicles to meet the mandates, we're going to have Chinese batteries.

We need to have the same focus we had in landing EV investments. We need to ask how we are going to get the stuff out of the ground, processed and manufactured into cells that are warrantable.

These tariffs will buy us those five years, but that's what we should spend the next five years doing. That's what should be in our strategy.

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

Would you like to chime in?

[Joanna Kyriazis]

I would like to say that, if we are concerned about some of the social and environmental practices China is pursuing to build out its battery supply chain, the answer should not be to slow the EV transition and give up on our efforts to address climate change. The answer should be to leverage Canadian innovation and ingenuity to do it better, cleaner and faster.

In terms of what would be in an EV battery supply chain strategy, I agree we need to find ways to accelerate the development of upstream portions of the supply chain. I see what the U.S. is doing. They are investing in a lot of battery recycling activities to get lower cost battery materials faster and in ways that are better for the environment. They're not waiting, necessarily, for the new mines that take 10 or 15 years to get online. They're also investing in those, but they're finding ways to innovate to reduce their reliance on China.

Similarly, they're investing in alternatives to graphite—China controls the global market—to make sure they have something they can offer instead. Canadian battery companies have a lot to offer, but they're struggling to scale up. We need to make sure that our approach to building up the supply chain is not only attracting multinationals to invest here but also standing up Canadian innovation and helping to scale up emerging Canadian battery leaders—which are often offering lower costs and more environmentally friendly ways of doing business.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

It's over to Mr. Savard-Tremblay for six minutes.