International Trade Committee on Oct. 21st, 2024

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

I call the meeting to order.

This is meeting 121 of the Standing Committee on International Trade.

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

We have with us today the Honourable Mary Ng, Minister of Export Promotion, International Trade and Economic Development. From the Department of Foreign Affairs, Trade and Development, we have Rob Stewart, deputy minister, international trade, and Aaron Fowler, associate assistant deputy minister, trade policy and negotiations.

Welcome to you all.

We start with opening remarks, and then we will proceed with rounds of questions.

Minister Ng, we're very glad to have you with us today. Thank you very much. I turn to floor over to you, please.

[Mary Ng, Liberal, Minister of Export Promotion]

Thank you very much, Madam Chair.

Good morning to all the committee members. It's a real pleasure to be here today to assist you with your important work and, through your work at the committee, it's always an honour to speak to Canadians from coast to coast to coast.

Ensuring a level playing field for Canada's auto manufacturing sector and its workers, including the emerging electric vehicle sector and its related supply chains, is a priority for me and for my government. We're at a pivotal moment for global trade as we navigate the transition to a green economy. From technological advances reshaping industries to shifts in global supply chains, the move towards a sustainable zero-emissions future is reshaping our economic landscape. This is a critical inflection point, when the decisions we make will shape the future of our planet and our economy. Electric vehicles and their supply chains are a key piece of that global shift towards a net-zero economy, and this is a strategic sector and one that is critical to Canada and to Canadian workers.

Canada's auto manufacturing industry supports over 500,000 good-paying Canadian jobs, many of which are unionized, and our EV supply chain has the potential to be ranked first in the world. Unfortunately, Canada's EV sector and its workers are facing acute threats from unfair competition from China, which is why our government made the necessary decision to address this threat head-on.

Since 2015 the Government of Canada has invested over $120 billion in climate action and clean growth. By focusing on innovation and green jobs, and by working with like-minded partners, Canada will build a more resilient, sustainable and competitive economy. Canada has the raw materials, expertise, energy and skilled workforce required to pursue these goals and to help lead the global transition to a net-zero economy.

To meet the challenges and, indeed, to seize the opportunities, the government is working hard to attract investments in EV manufacturing and its related supply chains. These efforts already provided real returns, with major investments by leaders such as Stellantis, GM, Honda, Volkswagen, NextStar and Northvolt, attracting over 44 billion dollars' worth of investment to expand Canada's EV production capacity along the supply chain.

These investments, combined with existing government incentives for people who buy EVs, will play an important role in building Canada's clean economy and in securing long-term opportunities for workers in the sector. These investments will provide generational opportunities for Canadian workers by promoting growth, anchoring supply chains, maintaining Canada's key role in an integrated North American auto sector and supporting a shift to the net-zero economy.

However, Canada's competitiveness is at risk of being seriously undermined due to unfair competition from China.

Chinese manufacturers, which benefit from non-market policies and practices, heavily tilted the playing field in China's favour and led to a significant overcapacity in EV production. China's policies included pervasive subsidization, insufficient labour and environmental standards and other measures that artificially lower production costs. As a result of these unfair advantages, China's global EV exports have grown exponentially, distorting global trade and preventing fair competition. These practices hurt not only our workers and our economies but global trade and security more broadly. They are also undermining the multilateral trading system and the WTO rules, which were not designed for challenges of this nature. This is a matter of concern across the economic sectors that affect us all.

Canada's not alone in responding to China's non-market policies and practices. Several other trading nations have taken measures to defend their industries from Chinese overcapacity. On September 27, the United States increased section 301 tariffs on EVs, steel, aluminum, EV batteries, critical minerals, solar products and other goods imported from China. On October 4, the EU member states voted to impose countervailing duties on Chinese EVs on a definitive basis.

Canada must not become a destination to dump Chinese exports diverted from other markets. During our consultations in July, Canadian industry and our workers confirmed that exceptional measures were required to address this extraordinary threat and to defend our economic security. It's why Canada announced a series of exceptional measures on imports from China to protect our emerging EV sector and the related supply chains. These include a 100% surtax on Chinese EVs, effective October 1; a surtax of 25% on Chinese steel and aluminum, effective tomorrow; a consultation on potential surtaxes on imports, from Chinese batteries to battery parts, semiconductors, solar products and critical mineral products; and Chinese EVs and EV chargers are no longer eligible for Canada's incentive programs.

We fully support the multilateral rules-based system and believe that a strong, multilateral set of rules is the best long-term approach to effectively address trade-distortive measures, and that the WTO has to have an essential role to play in ensuring a level playing field. Canada's goal is to have even stronger international rules that better address these policies and practices, which are at odds with a fair and open market-based trading system.

Madam Chair, we stand firmly with Canadian businesses and workers and will continue to protect them from the challenges posed by unfair trade practices. For too long, past trade policies overlooked the environment, labour rights and the inclusion of SMEs, women-owned businesses, indigenous peoples and others who have historically been under-represented in our economy. We can no longer afford trade policies that ignore climate change and are not inclusive.

We must invest in our communities and celebrate our successes if we're going to emerge as the economic leaders of the 21st century, and I truly believe we are in a strong position to do so. We need to face our challenges head-on and respond with ambition. Confident countries invest in themselves and their people, and that's exactly what our government is doing. That's what we're focused on.

I'm more optimistic than ever about Canada's ability to meet the moment.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Minister Ng. We appreciate that.

Moving on to our questioning, we'll go to Mr. Williams for six minutes, please.

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

Thank you, Madam Chair.

Thank you, Minister, for being here today.

Minister, with 70% of our trade tied to the U.S. and only 5% with China, we're still running a $50-billion deficit. The Americans acted on Chinese tariffs in February, while your government delayed until June.

Why did we wait four months?

[Mary Ng, Liberal, Markham—Thornhill, ON]

First, let me congratulate my honourable trade critic colleague. It's the first time we're at this committee together. I look forward to getting questions from you. I suspect they'll be tough, but I'm very pleased to be answering them.

You've seen that we've taken strong action and that the tariffs against EVs are aligned with those of the United States. It was really important to also talk to Canadian industry, which we did through consultations with the various sectors that are affected.

As I said in my opening remarks, those tariffs are now in place for imports of Chinese EVs into this country.

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

Minister, one concern we have is that, when we look at 70% of trade, which is about $500 billion that goes back and forth across the border, we have a mandate on EVs in Canada. By 2035, there will be a ban on gas combustion engines. Hybrids are included as well. When we look at the Americans, they don't have that ban.

When we look at what's happening between the U.S. and Canada, it seems that the reason we waited four months to look at tariffs—the Americans looked at them in February, and we didn't look at them until June—was due to the fact that we have to rely on imports from China, whether they are critical minerals or EVs, to fulfill the mandate Canada has, which the U.S. doesn't.

Is that true?

[Mary Ng, Liberal, Markham—Thornhill, ON]

No. Canada has taken very firm action both to fight climate change and to build a green economy. Having a good ambition to have electric vehicles in this country by 2030 is an achievable target.

At the same time, investing $120 billion since 2015 to create a green, sustainable economy means that those investments to build out the supply chain from critical minerals to processing to manufacturing the parts, building these EVs in Canada and the end-of-life recycling...and there is some really great work happening in companies in British Columbia.

It's important to do both. Ultimately, it's important to have a plan to fight climate change but also to build the industries, all of those from mining to recycling, processing, batteries—

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

I'm so sorry, Minister. I only have so much time.

Do you believe the 2035 mandate is needed in order to fulfill that mandate when we buy 80% of our mined critical mineral resources from China?

[Mary Ng, Liberal, Markham—Thornhill, ON]

I think it's really important that we do everything we can to attract investment for critical minerals and their processing. Great Canadian mining companies are doing that. Indigenous peoples are part of negotiating and working on those—

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

Minister, we're not doing that. We buy 80-plus per cent of our critical minerals from China.

Is the 2035 mandate something you believe in and that Canada needs in order to fulfill our trade mandate?

[Mary Ng, Liberal, Markham—Thornhill, ON]

You're making the assumption that we will keep buying to that order of magnitude into 2035. I'm saying to you here that 120 billion dollars' worth of investments in greening our economy will allow Canada to process and extract those critical minerals in a sustainable way, share them with our partners—the United States, Europe, Australia, Korea or Japan—and have a real plan to fight climate change, while also building out those very critical industries from critical minerals to processing, all of the parts, manufacturing and the end of life.

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

Minister, right now it's taking an average of 10 years to get those critical minerals out of the ground. We haven't even started any of those mines. We're not even mining lithium in Canada right now, which is a critical component of batteries, and if we're not doing that, it means we need that from China.

This week, Oliver Zipse, the CEO of BMW, warned the EU ban on the sale of gasoline and diesel cars from 2035 is no longer realistic. He will see a massive shrinking with such a ban in the European market.

Do you believe the same thing is true in Canada?

[Mary Ng, Liberal, Markham—Thornhill, ON]

I believe the plan we have to work with Canadian industries, manufacturers and our skilled people and the technology that will be there to support these industries will make Canada the most competitive place on earth to build out these industries.

You can look at the record of the range of investments we're attracting and the commitment by businesses, companies and investors to build not only in this value chain but also in hydrogen, in electricity, in nuclear—

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

Thank you so much, Minister. I only have one more minute left.

Once again, we're looking at a mandate that is hurting our industries right now. It is a mandate where we're seeing massive dominance of Chinese-mined minerals, not those from Canada. It's having an effect on our workers. We can look at that relationship with the Americans and the fact that we didn't mirror those tariff rebates right away. We're not even looking right now at the fact that the Americans have already gone further to talk about software and hardware on Chinese-made cars.

The retribution has been, we feel, in softwood lumber, where we saw 3,000 workers lose their jobs in the forestry sector, but more importantly, it is affecting canola farmers. We have 43,000 farms that grow canola, and we're seeing their livelihoods under the gun right now.

Why didn't we take better action to protect that industry, knowing there would be retribution because of tariffs against China?

[Mary Ng, Liberal, Markham—Thornhill, ON]

I think it was your party that also agreed we should put in place tariffs.

I would also say to Canada's canola sector, as I've said publicly, that we have the best agri-food sector and the best canola sector in the world. I'm looking forward to continuing to defend our agri-food sector in international fora. I don't think anyone in the world has ever accused Canada, and certainly not the agricultural sector, of not playing by the rules.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Sheehan, please go ahead for six minutes.

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

Thank you very much, Minister, for your testimony and for your action on various things related to the trade file.

I'm from Sault Ste. Marie, which is known as a steel town. When I was first elected, Algoma Steel was in bankruptcy protection. It was right up on the ropes. Tenaris's tubes plant, where you have been, had two dozen people working there. Today, Algoma Steel, after actions taken by this government and your protection of the steel industry.... In 2016, in our first budget, we put in place trade remedies to stop the dumped steel. When I met with this industry and the United Steelworkers right after being elected, they squarely blamed the previous Conservative government for its lack of action on dumped steel.

I want to fast-forward to your latest actions to strengthen the steel industry and protect Canadian jobs and workers.

Can you please tell us more about the 25% tariff on the dumped steel that is coming from China; the protections for the auto sector, where one-third of the steel goes, 100%; and some of the actions that were taken when Trump put his section 232 tariffs on Canadian steel, and we did our anti-tariffs?

Again, the Conservatives called our anti-tariffs dumb. They weren't dumb. We won.

Please go ahead.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you very much.

It was terrific to be at Tenaris when they were making an announcement to expand that plant. Expanding that plant means jobs for people in your community. These are steelworkers—union-paid workers—and these are jobs. They're jobs in Canada.

Whether it is there or whether it is in Hamilton at Dofasco and ArcelorMittal, it is such an important sector that we must protect to create more opportunities for those jobs and those workers.

The 25% tariff on steel and aluminum is a direct response to the overcapacity that we are seeing and experiencing not only here in Canada but, indeed, globally. When I am at international fora like the OECD and we are presented with data that shares the overcapacity of steel on the global marketplace, in part because of deliberate policy for that overproduction or oversubsidization, it distorts the world and it distorts the trading system. We are taking action on those tariffs, and the 25% is going into effect tomorrow.

The other thing we did was implement “a country of melt and pour”, something the steel industry had been asking for so that, again, we have greater transparency about where the steel is coming from. That is another measure that will help support the Canadian steel industry.

I'm always pleased to work with you and with members of the steel caucus because of the strong voices directly connected to those companies that you do so much work to support.

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

Thank you very much.

Bloomberg recently stated that Canada is now the premier global destination for attracting FDI, or foreign direct investment, in the EV space. In your opinion, what comprehensive advantages does Canada have that make it such an attractive place to invest?

[Mary Ng, Liberal, Markham—Thornhill, ON]

A strong and predictable trading environment is one, with excellent trade agreements not only here in North America but around the world. Companies like Volkswagen, which made significant investments in Canada, made a choice to invest in Canada. What they see is the incredible skills of the Canadian people, whom we invest in, and they see a real action plan to fight climate change. Therefore, by investing in a very important production facility that will build EVs, they can be assured that the rules-based system here in Canada will create that predictability for them.

Another advantage is the incentives that we have also put in place. What you are seeing is deliberate investments and incentives so that we can build out this sector in a really strong way. That is deliberate action the government has taken to fight climate change and build an economy that is green and will work for everyone, and that includes making strategic investments in this sector. These are all factors that went into the various investments that have come in.

Like I said earlier, $120 billion to create a green economy has been invested through tax credits and a whole range of other measures. We are seeing $44 billion of investment specifically in the EV supply chain. Companies and their boards make decisions on Canada as a destination for all of the very strong reasons that I just talked about.

It really is about having a plan to fight climate change and to build this sector right here in Canada.

[The Chair, Liberal, Judy Sgro]

You have 20 seconds remaining, sir.

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

Thank you very much.

I'll just make a statement. In a study that we're undertaking right now, both the Canadian Steel Producers Association and the United Steelworkers have stated that the work you have done is significantly strengthening the steel industry and creating future opportunities.

Thank you very much for your testimony today and your work.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, you have six minutes, please.

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

Thank you, Madam Chair.

I thank the minister and her officials for being with us today.

Everyone here agrees that China is not a trading partner that respects international trade rules. We are aware of all kinds of dumping practices, among other things, but one of the major issues is the use of goods produced by forced labour. For instance, we know about the issue of imports from Xinjiang. According to the government's figures, Canadian authorities have made no seizures—zero—while in the United States, $700 million worth of goods has been seized thanks to an act, the Uyghur Forced Labour Prevention Act.

However, we know that there was supposed to be a Canadian statute on this. In the March 2023 budget, it was written in black and white that a bill to ban forced labour would be introduced by the government before the end of the year. That didn't happen. In March 2024, the government again committed to introducing forced labour legislation by the end of the year. Today is October 21. There's not much time left before the end of the year.

After breaking its word in 2023, will the government keep its word in 2024?

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you for the question.

Look, I think that forced labour and making sure there isn't any in our supply chains is an issue that we must take seriously, and we are. You saw that we made commitments to bring forward legislation, which we are planning to do. It's not quite the end of 2024 yet, but we are committed to doing that.

We have a very strong agreement with America and Mexico with a prohibition in the supply chain. We have a supply chains act, which came into place in January 2024. I think you're going to see that Canada will be the only country and jurisdiction that has both a supply chain act as well as strengthened forced labour provisions.

This issue is actually quite complex, and I launched a consultation just a couple of days ago to make sure that we are working with the sector and all those affected, in putting forward this legislation to meet those strengthened requirements for the Canada-U.S. relationship. I'm confident that we will meet our obligations.