International Trade Committee on Sept. 23rd, 2024

[Flavio Volpe]

I noted quite publicly and quickly that the Chinese response to similar actions by the U.S. and Canada is to take the U.S. to the WTO for the IRA production subsidies and be silent on their tariffs, and then come after us on tariffs and immediately say, “Before we actually have that hearing, we're going to make something up on canola”.

You know, this is the country that arrested the two Michaels; there was a great piece in the CBC today about what that actually means for people. I'm not sure why we have Canadian apologies for the Chinese. They will pick on us like they pick on Australia and see if they can get a moral victory against us, while they know that with the Americans, if they actually beat them on something, the Americans will counter.

[The Chair, Liberal, Judy Sgro]

Sorry, Mr. Cannings.

We keep hearing a lot about Volkswagen, and they're not on our witness list. Can I take the initiative to invite Volkswagen to come before the committee specifically to do with forced labour and many of the other things we're hearing today? Is that okay? Is everybody in agreement?

[Some hon. members]

Agreed.

[The Chair, Liberal, Judy Sgro]

Okay, thank you very much.

Mr. Baldinelli, please go ahead.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us this morning.

I'm going to go to Mr. Volpe.

Building on some of the comments by my colleague earlier, he had mentioned you had done a recent interview with BNN Bloomberg. You talked about the 11 months it took you negotiating and putting your thoughts forward to the government on the EV tariff; it took a while.

Also, in your testimony you just talked about the current consultations that are going on regarding the subcomponents. Do you have concerns there? What are your thoughts on that? Should we not, given the highly integrated nature of our market, simply continue to follow what's going on in the United States?

[Flavio Volpe]

I'm going to preview my submission in full here: Match the U.S. measures.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

My colleague from Green Energy Canada talked earlier about the low-cost production vehicles that are out there. I know my colleague from B.C., Mr. Cannings, was looking for one too. I think GM just announced recently that it's retooling its one facility in Michigan and will be producing the GM Volt again starting in 2025, so that's good news for consumers in that regard.

You also spoke, Mr. Volpe, about the highly integrated nature of our auto sector since the Auto Pact in the sixties and the emission standards approach. We've followed that approach with the United States since that time, but with the sales mandate of 2035 and the U.S. not having a sales mandate, will we even be able to meet that mandate in the production? We won't have a supply chain established in Canada by that time to service the requirements of getting an industry started. Would you not agree?

[Flavio Volpe]

Yes. If you look at my public statements from when the EV mandate was first proposed at the end of 2022 and then when it came in, we will not meet that standard.

One thing we implored the environment minister and the previous environment minister to do is.... This industry works when the EPA and Canada are aligned. California is an important market, but it's a market. States that align with California are important, but they're markets. Car companies that operate on single-digit EBITDA will build to the bigger market.

If you diverge and you cause companies to have to engineer a different configuration, you're going to take cost out of them.

Who wins? It's companies that don't have to profit.

Where do they come from? They come from China.

Why did Western-based players fly into China in the early 2000s when they joined the WTO? First of all, there are no Canadian OEMs, so I'm not maligning any Canadian OEMs. OEMs said that they can make more profit if they take advantage of the manufacturing costs deltas there. Well, the Chinese learned how to make cars at global quality standards and they learned the technology in manufacturing processes as well as anybody else.

What we didn't calculate was they don't care about profit, so now we're in trouble.

[The Chair, Liberal, Judy Sgro]

You have two minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

There's the notion of regulating the emission standard and leaving the consumer choice there. The Vehicle Manufacturers' Association mentioned that just the other day.

There are IC enginest that are highly effective in their emission standards, and hybrids and EVs.

Again, I don't think we'll be in a position to meet the 2035 standard now in terms of establishing an integrated supply chain, so why don't we go back to what's been so successful for the industry, which is having those emission standards in place? As the market matures, you'll see the growth of the EV market.

Would you not agree?

[Flavio Volpe]

Yes.

I think we're all committed to that electrification. Electrons versus combustion is actually good for everybody. It's a better, cleaner product and I think Canada's positioned to win there.

However, there's nothing wrong with saying that you bought a six-cylinder Dodge Charger from Windsor. It supports a lot of jobs

[Tony Baldinelli, Conservative, Niagara Falls, ON]

I have a 2022 Buick Enclave. I worked for four summers at General Motors, so I purchased a GM product. The carbon intensity that went into the production of that vehicle is cleaner than what would come in from China today. People don't realize that.

How do we get people to understand or reconcile the fact that what is coming in from China is state-sanctioned, low-cost—they're heavily subsidizing— slave labour and they're one-third of the world's carbon emissions?

[Flavio Volpe]

How do we do that?

I think we have to do things like this. We have to have frank conversations among each other that are non-partisan and ask, do we like the jobs? Do we like the industry? Do we like the investments in Canada? If we do and if we value that EV transition, we know that the Canadian auto industry has always won when it can sell to American consumers.

What are the American regulators doing for that market? We should do the similar thing here.

Now, that's not to say that the Americans are going to take the lead. I think we have better auto drive and connected drive technology in this country. We have the upstream capabilities and the ability be a major battery player globally here.

However, if we jump out quicker than companies like Toyota Motor Manufacturing Canada, which made 125,000 hybrids last year that don't qualify in any of the standards—we're going to try to go faster than Toyota—that means going into the arms of BYD and CATL. There's no Canadian content there and everybody there makes $2 an hour, when they get paid.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Mr. Arya, please go ahead for five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

It's interesting. Obviously, with all the political parties supporting these tariffs, I don't think there are going to be any dissenting witnesses. I don't think they will dare to come and dissent before this committee. However, international free trade, as we know, is dead. I foresee a time in the near future when we'll build a firewall around Canada, the United States and Mexico. Maybe we'll open just a bit more for friendly countries like Korea, Japan, Australia and maybe parts of Europe.

Mr. Volpe, it was quite interesting when, during one part of an answer, you indicated that safety was the reason that North American car manufacturers are building bigger cars. Immediately my thought was, “What about the millions of small cars currently running in Canada now and the small cars that we are importing from friendly countries like Korea and Japan?” Anyway, that is a discussion for a different time.

Ms. Joanna Kyriazis, thank you so much. You mentioned several times and emphasized EV affordability, which I agree with, to fight climate change. We are taking the right direction to go in for the electrical vehicle thing—and not just electrical vehicles but also energy storage, etc. In talking about electrical vehicles, you mentioned affordability in a big way. As I'm sure you know, no North American manufacturers are planning any affordably sized—I mean small-sized—electrical vehicle. In your view—I know you may not have done the extensive study—how many years or decades do you think it will take for North American car manufacturers to start building affordable or small electric vehicles?

[Joanna Kyriazis]

I think it has to happen soon if we want to reach mainstream buyers.

[Chandra Arya, Liberal, Nepean, ON]

Oh, I think it has to happen soon. I agree, but I want to know, what is your time estimate? How many years do we Canadians, who can't afford to buy bigger vehicles, have to wait?

[Joanna Kyriazis]

Let's say it will be five years, and this idea that there's no demand for smaller, more affordable vehicles is not true.

[Chandra Arya, Liberal, Nepean, ON]

No. It is not true.

[Joanna Kyriazis]

The top-selling vehicle in Canada, by far, is the Tesla Model 3. Before it was discontinued, the Chevrolet Volt was was the second top-selling EV. They are small, affordable electric vehicles.

[Chandra Arya, Liberal, Nepean, ON]

Even for gasoline cars, if I'm not wrong, the Honda Civic is the top-selling car in North America. But anyway, I have limited time. I'm sure you appreciate that.

On the energy side we talk about how we have more critical minerals.... We talk about “from mines to mobility”. Most of the time the talks are about developing mines and batteries and about manufacturing batteries and electric cars. I don't hear many of us talking about the critical component of mineral processing, of which China controls 70% to 90% of the market in the world. Should we impose tariffs on that now?

[Joanna Kyriazis]

I think that, when we talk about the upcoming or current consultation around all of the other parts of the battery supply chain, it's very hard to paint that with a broad brush. Just in terms of the critical minerals, we have got 31 to think about, or at least six or seven that are of very high value within the EV battery supply chain. In each case we have to look at what the level of reliance is on China. What alternatives do we have available and when can they come online? What are Canada's capacities to produce those components? Then, again, what are the cost impacts on producers and, ultimately, Canadian buyers?

To talk about things like cathode active materials or battery cell manufacturing, we have landed a lot of investment in those parts of the supply chain in Canada—

[Chandra Arya, Liberal, Nepean, ON]

Thank you. I have very limited time.

Mr. Volpe, I have one quick question. We have imposed tariffs on steel imports. You come from the manufacturing sector, so I'm sure you'll appreciate.... There are many products within the steel industry that are not manufactured in Canada. In fact, the CFIB, Canadian Federation of Independent Business, raised this issue that products that are not manufactured in Canada are also getting tariffs imposed on them, making it unnecessarily expensive for Canadian small businesses. Do you agree? Do you support the imposition of across-the-board tariffs on steel imports?

[Flavio Volpe]

I think the treatment of steel is very clear in automotive in the USMCA. You had the steel people in here last week. There's no daylight between our and their position.

I will say that this current government invested in making small electric vehicles with Honda in 2027, I believe, and they're available from all of the manufacturers that are Western-based in this market over the next few years, so I think you may want to correct that.