International Trade Committee on Oct. 28th, 2024

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Thank you, Mr. Bickett.

You spoke about sanctions earlier. In the current context, aside from these sanctions and the tariffs already imposed by Canada, could Canada take other measures against China, in collaboration with its partners?

[Samuel Bickett]

Absolutely. There a number of them, but the one that I'll really emphasize today.... Well, I'll emphasize two. The first one is human rights sanctions. The United States sanctioned a number of officials, in Hong Kong in particular, for their crackdown on the democracy movement there. I was a political prisoner for four months in Hong Kong, and there are still many of my friends and our fellow movement folks over there. About 1,800 people have been political prisoners, at last count. The U.S. has a program to sanction officials who were involved in eliminating Hong Kong's autonomy, as well as in cracking down on democracy and human rights there. We would very much like to see Canada, the EU and Britain join those sanctions to ensure that these officials feel some punishment for that—that's number one.

Number two is more with respect to the report here. As I mentioned in the opening statement, Canada now, very recently, as of last year, changed its laws to allow for secondary sanctions. Previously in Canada—with respect to, for example, the Russia sanctions—it was sanctioning Russian companies and individuals, and there would need to be a separate sanctions regime to, for example, sanction Hongkongers for what they were doing in Russia. That's no longer the case. The law has changed, and so secondary sanctions can be issued. The U.S. issued some of these—not enough—and we pushed them very hard on that, as well as the EU. We would like to see Canada—and this would be a very easy thing to do—at least catch up to those U.S. and EU sanctions. Where investigators there have already completed those secondary sanctions investigations, Canada could join them very easily. We would also really like to see countries like Canada take the lead in pressing their allies to do more on this front.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, you have two and a half minutes.

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

Thank you, Madam Chair.

I would just like to continue my discussion with Mr. de Pulford where we left off.

Mr. de Pulford, you told us about your concerns that espionage could lead to data collection in the fields of research and transportation electrification, as well as on electric vehicles themselves.

How could we protect ourselves from these attempts to interfere with technologies?

[Luke de Pulford]

I would like to emphasize the importance of the work being done in Canada at the moment through your inquiry into interference. What that is doing is mapping out the operations and activities of the United Front Work Department, which other countries, frankly, haven't done in an explicit way.

I want to underline one aspect of the UFWD: talent acquisition agencies. These talent acquisition agencies operate all over the world, including in Canada. Their purpose is to try to get Chinese nationals to go back to China to work, sometimes in state-owned industries but, generally speaking, to take the expertise they gained in Canada, sometimes in sensitive research scenarios, and to use it back in China. Those talent acquisition agencies need to be thoroughly investigated, and their activities need to be stopped. This is something, unfortunately, we're suffering in many places. That's just one way that we can confront the infiltration and influence operations of the United Front Work Department.

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

The members of your alliance are from many parliaments around the world.

Here in Canada, no cargo has been seized under the Fighting Against Forced Labour and Child Labour in Supply Chains Act, while in the United States, the illicit goods seized from the Uyghur region alone are worth over $700 million.

How do you explain this disparity?

[Luke de Pulford]

Well, I think it might come down to capacity and political will. The truth is that the legislation in place in the United States imposes what they call a “rebuttable presumption”, so they presume that things coming from Xinjiang are tainted with forced labour until it's proven otherwise. That reversal of the burden of proof means it's really quite easy for U.S. Homeland Security to do quite a lot more to stop the import of those products.

I think it's down to the seriousness with which we take these issues, but also down to the strength of the tools we have. The legislation that the U.S. has is much stronger than everywhere else because of the rebuttable presumption.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Desjarlais, you have two and a half minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Madam Chair.

I want to return to Mr. Bickett to elaborate on a case within your report:

In U.S. v. Hossein Hatefi Ardakani & Gary Lam, filed in December 2023, the defendants were charged with crimes related to the procurement of U.S.- manufactured dual-use microelectronics for Iran. Ardakani, an Iranian national, and Lam, a resident of Hong Kong and China, allegedly conspired to illegally purchase and export these components to support Iran’s drone (UAV) program.

Through “a sophisticated network of front companies”, components for UAVs “were shipped to Hong Kong before being re-exported to Iran. This network allegedly involved multiple companies in France, Canada, and China—some aware of the ultimate buyer and some not.”

Mr. Bickett, can you expand on the involvement of Canadian companies in this case?

[Samuel Bickett]

This was a situation that's a pattern for Iran, which is probably the most sophisticated of all of these sort of rogue state actors on these fronts. They've had a long time now to develop their ability to hide their sales of oil and their acquisition of goods for their drone programs, for their missile programs. They do it very effectively. There have been some leaked emails and things like that, which have given us some insight into this.

Iran, all over the world, has front companies in jurisdictions where it is able to create these through locals or through non-locals who put these together. That includes in Canada. Canada is not the biggest centre of that. The U.S. is used quite a bit as well. Being able to trace these companies in places where beneficial owners are protected can be quite difficult.

It's not that this was being run out of Canada; it's that there were front companies set up there, and there would be multiple cash transfers involved between different front companies across the world. If they lose a couple of them, they still have a lot more to back it up. I wouldn't over-read the Canadian element there, but it is certainly something that would be important for the Canadian government to track.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Desjarlais.

Mr. Genuis, I'm trying to give everybody an opportunity here, so we have four minutes for you and then four minutes for Mr. Sidhu.

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

Thank you, Madam Chair.

Mr. de Pulford, you spoke, in response to my colleague's question, about the differences between the American government's relative success in stopping products made with forced labour coming into the United States, and about Canada's catastrophic failure in preventing products involving forced labour from coming into our country.

You mentioned legislative differences between Canada and the United States, and you also mentioned potential issues of capacity. It has always seemed to me, though, that we can address the capacity challenges by having effective alignment among democracies. You understand that it's difficult to trace origins and that digging into supply chains can be complex, but if we collaborated more effectively with like-minded allies so that we could be sharing information, we would ease any capacity pressures and ensure that we would be succeeding at the level of our allies.

I would like to see a situation where, if a shipment is turned away from Seattle because it has products made with forced labour, it can't simply go and dock in Vancouver, so that we're benefiting from American experience and know-how and, really, the bipartisan work that's been done there. I also wonder if this kind of framework for collaboration could be extended to more allies, and if we could establish some kind of partnership involving our North American economies but also Japan, the U.K., Europe, etc.

What do you think about the possibility of establishing some kind of effective alignment on preventing products made with forced labour from coming into our economies and sharing information in the process?

[Luke de Pulford]

I think it would be long overdue, but the complexity of the task shouldn't be understated. For example, in any phone, you will have literally hundreds, possibly even thousands of sourcing inputs. For each of those sourcing inputs, you will have a different supply chain or a slightly diverse supply chain. Trying to map out exactly where every single piece of that thing comes from is an extraordinarily complex thing, but companies know how to do it—otherwise, where do they get those things? It is very possible.

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

Can I jump in quickly on the complexity piece?

My point is, if the Americans are doing it, can we not simply make better use of the information they're already gathering? It's complicated for someone to do it, but it would seem less complicated to have multiple countries benefiting from the same information than to have everyone doing that work themselves.

[Luke de Pulford]

I think the point I was making is that what's so revolutionary about the Uyghur Forced Labor Prevention Act is that it provides that you cannot import anything from there. It's not just a whole phone; it's also the bits. It's the constituent parts, and that makes a big difference.

I was coming to address your point. Complexity is not a reason not to do it, and we do have some interesting new tools. For example, with organic materials, there are companies like Oritain. Oritain isn't the only company. There are companies like Oritain that have isotopic maps of various parts of the world and have technology so sensitive that they can take a hair on your head and tell you where you've been over the past six months. Any organic material they can test, and they can tell you whether or not it comes from Xinjiang.

We don't need to be doing this all-encompassing thing here. We can spot-check companies, and some companies do have contracts with Oritain and other similar organizations. There are ways around this. I don't believe in the capacity argument. It's a question of political will, but we do have to have the legislative tools, and at the moment, I believe that really only the U.S. does when it comes to Uyghur forced labour.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Sidhu, you have four minutes, please.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Madam Chair.

Building on sanctions, I want to mention this from budget 2024:

Since 2017, the government has undertaken significant work to crack down on financial crime:

Investing close to $320 million since 2019 to strengthen compliance, financial intelligence, information sharing, and investigative capacity to support money laundering investigations;

Creating new Integrated Money Laundering Investigative Teams in British Columbia, Alberta, Ontario, and Quebec, which convene experts to advance investigations into money laundering, supported by dedicated forensic accounting experts;

Launching a publicly accessible beneficial ownership registry for federal corporations on January 22, 2024. The government continues to call upon provinces and territories to advance a pan-Canadian approach to beneficial ownership transparency;

Modernizing Canada's anti-money laundering and anti-terrorist financing framework to adapt to emerging technologies; vulnerable sectors; and growing risks such as sanctions evasion; and,

Establishing public-private partnerships with the financial sector, that are improving the detection and disruption of profit-oriented crimes, including human trafficking, online child sexual exploitation, and fentanyl trafficking.

Budget 2024 takes further action to protect Canadians from financial crimes.

I'd like to ask the witnesses here with us today about the anti-money laundering legislation and actions that we put into place, and how those have helped address some of the gaps in the sanctions.

Maybe, Mr. de Pulford, we can start with you. I think you were talking about sanctions.

[Luke de Pulford]

I think that, of the two witnesses, Mr. Bickett is probably more qualified to address that question on this issue.

[Maninder Sidhu, Liberal, Brampton East, ON]

Sure.

[Samuel Bickett]

I'm not an expert on Canadian law, but we think the biggest thing that Canada has done—which I'm very approving of—that can potentially address some of the shortfalls in the sanctions program is revise the law to permit third-country sanctions. Again, it hasn't been used yet. In particular, if you're going to address something like a rampant effort by multiple countries to evade Canadian sanctions through trade companies, you're not going to be able to end that by just sanctioning the ultimate beneficiaries of that in Russia and Iran. You have to sanction the evaders. Even that, as we were talking about earlier, is not really going to change that much, because they can simply start a new company. They can always find new people to do it.

Ultimately, what we would really like to see—what we've been really emphasizing in Canada, the United States and the EU—are sanctions against some of the infrastructure companies, particularly, and most important of all, financial firms. The new sanctions authority that Canada has given itself allows that to happen where there are regional banks—in Asia, in particular—that we know are financing quite a bit of this illicit trade. You don't have to sanction the Bank of China, but if you sanction a smaller regional bank, every other bank will fall in line.

As I mentioned earlier, when it comes to corporates and financial firms, they will fill the holes and push the limits as far as they can. Really, the only way to get them to revise how they're acting is to issue some sanctions and to set a few examples. They will then revise their due diligence programs. They will very quickly stop doing the things that they do.

In short, I would say that there's been progress in revising the law—and that's great to see—but we would really encourage more use of the new tools that are available.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Thank you to our witnesses. We very much appreciate the valuable information today.

We will suspend momentarily until our other witnesses can come to the table.

Thank you.

[The Chair, Liberal, Judy Sgro]

I call the meeting back to order.

My apologies for the delay, but we'll make sure that you get sufficient time to make your points with the committee.

We have, from the Canadian Institute of Steel Construction, Keanin Loomis, president and chief executive officer, and from Kal Tire, we have Corey Parks, president.

Welcome to all. We will start with opening remarks and proceed with a round of questions.

Mr. Loomis, you have up to five minutes for your presentation.

[Keanin Loomis, President and Chief Executive Officer, Canadian Institute of Steel Construction]

Thank you for inviting me to present my brief on behalf of the Canadian Institute of Steel Construction on this very important topic.

Established in 1930, CISC is Canada's voice for the steel construction industry, promoting the use and benefits of steel in construction and supporting the needs of the membership and industry through technical expertise, knowledge transfer, research and development, industry codes and standards, and certification and advocacy.

We represent the steel manufacturers, fabricators, suppliers, constructors, engineers and architects who are building with steel in Canada. Steel is a strong, adaptable material that is sustainable, cost-effective and resilient, among many other benefits, making it a reliable choice for building Canada's vital infrastructure.

I want to begin by commending the federal government for the measures, which were supported by all parties, announced on August 26. The CISC is supportive of the 25% surtax on imports of steel and aluminum products from China under section 53 of the Customs Tariff, which we, in conjunction with the Canadian Steel Producers Association, advocated for the government to introduce.

Our fabricators are generally supportive of creating a strong domestic steel industry. They recognize China as a bad actor in the fabricated steel industry and, most importantly, recognize that it is in our best interests to protect access to and harmonize with our closest trading partner, the United States. However, it must be acknowledged that Canada does not domestically produce all the raw steel that our members need to build in this country. While CISC encourages domestic production, we recognize that at present our members must have access to outside markets to build the high-rises, hospitals, schools and bridges our country needs.

Since much of the steel we buy is from the United States and our fabricators do a significant amount of cross-border work, the Department of Finance and other relevant departments must work closely with their U.S. counterparts to support harmonization in our ongoing response to China's unfair trade practices.

We also appreciate the government's intentions with the recently announced remedies to support stakeholders facing supply chain shock due to the recently announced tariffs. While these remedies are well intentioned, we caution the government to be selective in applying remedies to ensure that the objectives of the tariffs are fulfilled and that Canadian domestic materials continue to be prioritized. The remedy application process should require that the supplier operates under the same rules as our domestic suppliers do for any remedies to be granted. While we commend measures introduced thus far on raw Chinese steel, there is more work to be done to support the domestic steel industry and Canada's larger economy against unfair trade practices.

The current tariff regime is ambiguous as to the steel that has been melted down and poured in another country or as it pertains to downstream steel products, which is steel that has been fabricated or, for example, incorporated into our household appliances. Omitting downstream products from the list enables loopholes for bad actors to continue to exploit. Fabrication is the real value-add in the steel industry, where our members take raw steel and engineer and craft it for our building purposes, all with safety, quality, sustainability and cost-effectiveness of national infrastructure projects top of mind. This is very engineering-intensive and high-tech, and it requires skilled labour.

Failing to protect Canada from imported fabricated steel products will result in losing this vital skill from our domestic manufacturing knowledge base. We need to protect our Canadian manufacturing industry's ability to build well with steel, to support our infrastructure needs and to quickly and safely respond to environmental crises, such as the Fraser Valley flooding in 2021, in which steel bridges were rapidly deployed to restore transportation corridors after several bridges were washed out. Our members were among the very first responders in that natural disaster, and as we face many more, we need to continue to have this important domestic capacity.

The push to extend the tariffs to downstream products has gained support in the United States as well, with the bipartisan congressional steel caucus last month calling on the Department of Commerce to expand section 232 protections for certain downstream products, including fabricated structural steel. In the interest of continuing to achieve harmonization with the United States and protect this cross-border industry, we should be expanding section 53 tariffs on the same.

To further support the steel industry and the highly skilled engineers and tradespeople who fabricate and innovate our country's steel infrastructure, the CISC recommends that the government establish fabricated-in-Canada requirements in the construction of all taxpayer-funded and taxpayer-supported manufacturing projects, including those that support the transition to a low-carbon economy, such as EV and battery plants.

Our communities receive a four-time return on investment when we utilize Canadian fabricators to build our infrastructure. The overall economic success of the steel industry, like other sectors of construction, is shaped by the economic boost in opportunities that arise from big projects, particularly government-funded projects. Canadian taxpayer-funded projects should not be awarded to companies purchasing foreign fabricated steel in countries that lack reciprocal procurement policies.

Once again, thank you to the committee for inviting me to appear on behalf of the Canadian Institute of Steel Construction.

I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Corey Parks, we go over to you for up to five minutes, please.

[Corey Parks, President, Kal Tire]

Good afternoon.

My name is Corey Parks. I'm the president of Kal Tire, which is a family-owned Canadian company based in British Columbia. We employ over 4,800 people in Canada and are one of the country's largest independent tire dealers. We're the largest remanufacturer of truck and bus radial tires, which are also called TBR tires.

Canadian industry and consumers are threatened by the dumping and subsidizing of low-quality, single-use Chinese truck and bus tires. I'm here today to ask you to include the retreading industry in the protections being considered for electric vehicles, aluminum and steel. I will share some background on our industry, discuss the economic, affordability and environmental implications of these unfair trade practices, and ask you to consider the urgent need for action to protect Canadian interests.

In 2023, the Canadian tire industry contributed approximately $7.1 billion to the economy. It represents a vital part of our national transportation and supply industries, directly supporting tens of thousands of Canadian jobs and indirectly supporting many others.

The truck and bus radial tire market and its associated remanufacturing sector annually contribute $2.3 billion to the economy and are especially important. Remanufacturing of tires, which is often called retreading, adds a new tread to a used tire casing, extending its lifespan. Retreading has been a well-established and integral component of the transportation sector in Canada for over 70 years. Today, roughly 50% of all truck and bus tires on the road are retreaded tires.

Retreaded tires are a popular, sustainable and cost-effective alternative to new tires, which reduces waste and carbon emissions by 70% per tire when compared to new tire production. Further, our experience indicates that one quality tire can be retreaded three or more times and can cover the same distance as 12 low-cost, low-quality, single-use tires.

The retread industry is threatened by waves of low-quality, single-use tires imported from China at prices below the raw material costs of the commodities needed to manufacture them. These tires enter Canada supported by non-market practices, including government subsidies and weaker labour and environmental standards, making it impossible for the domestic industry, tire producers and retread industry to compete. These low-quality, single-use tires are poorly made and do not have the structural integrity to effectively and safely accept retreads. As a result, increased tire waste is being sent to Canadian landfills.

In short, this unfair competition threatens our domestic industries by depressing prices, discouraging local investment, filling our landfills with unnecessary waste and risking elimination of thousands of Canadian jobs.

If unfairly traded imports of truck and bus tires continue, the retread industry will likely disappear and Canada's transportation sector will rely on Chinese imports to maintain operations. Ensuring that the retreading sector can compete on a level playing field will strengthen our supply chain and help Canada keep its economy independent from foreign economic influence.

Our key allies, including the United States, the European Union and the United Kingdom, have already implemented measures to protect their truck and bus tire manufacturing and retreading industries from unfairly priced Chinese imports. In 2019, the U.S. imposed up to 90% duty on truck and bus tires manufactured in China. The duty was renewed just this year. Unfortunately, Canada is now the only major western nation where dumping of these Chinese-manufactured TBR tires still occurs, and it's gaining momentum.

To safeguard the Canadian industry, economy and environment, we urge you to support a 109% surtax on truck and bus tires manufactured in China. This step would promote fair competition, protect thousands of jobs, safeguard our supply chain and support Canada's environmental goals. Countering unfair trade practices is essential to Canada's economic and environmental well-being and the survival of this industry.

I would like to end with three points. First, Chinese tires are being dumped and subsidized in Canada at prices below the raw material costs needed to make those tires. Second, the growing presence of these tires in Canadian markets is threatening the very existence of the remanufacture industry in the short term and the stability of the transportation sector in the medium and long term. Finally, western nations that have implemented duties to stem the dumping and subsidizing of these tires into their countries have returned market stability and fair competition to their domestic tire and transportation industries and have ensured a more level, market-based economy for these products.

Finally, I want to thank you for the invitation to appear before this committee. As a growing independent business in Canada, this is a very intimidating place to find ourselves. However, it's important to me that each of you know how much it means to each of these thousands of Canadians that you are interested in hearing about the very real threat that these dumped tires pose to their jobs, to the tire and transportation industries at large, and to the broader Canadian economy.

I'm happy to answer any questions you may have.