International Trade Committee on Oct. 28th, 2024

[Corey Parks]

Okay. We believe that the harmonization of tariffs is fairly important.

There's very little domestic production of tires here in Canada. There are a couple of Michelin plants in Atlantic Canada that we're familiar with. The majority of their product gets exported back to the United States. Most of our tires here in Canada on the truck and bus side come from the U.S. or from Asian markets.

For 70 years, we've seen a lot of discipline in that market—at least the 70 years we've been around—where pricing goes up and down in terms of where it makes the most sense to make product, but we've never, ever seen something that is sold so far below the raw material costs that we can't even compete. We can't retool our factories. We can't invest. We won't invest in retooling these production lines when we can't even get into the ball game on the raw material costs, so in terms of our work with the U.S., it has been very light here at Kal Tire.

What I can tell you is that the Americans have a tremendous advantage when it comes to putting the tariffs in through the normal World Trade Organization process, and that advantage is the United Steelworkers. The manufacturers of these tires are very unwilling to sit at the table and push for these tariffs when they have manufacturing that is not being subsidized in these markets, in the China market, where they're making other products beyond tires. Michelin and Goodyear make things beyond tires.

In the U.S., the United Steelworkers were the ones who brought the petition and could get into the process. That's an almost impossible task for us in our industry, because it's such a collection of smaller businesses. We see ourselves as a small business. We know we're not small—we're the largest player by a long way in Canada, in this market—and we can't get ourselves in front of that commission without a lot of work to try to find our way there, which is what led us to you here at this hearing.

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

Thank you very much.

One question that I continually ask is this. We've heard a lot about labour practices, including forced labour, and environmental practices and the difference in making both steel and tires in China. I know about the steel, but are the tires a dirty process too—as I call it—over in China?

[Corey Parks]

If you compare the environmental impact of a new tire versus a retread tire, it's about a 70% difference. When you make a new tire, you have to make the casing, and then you put the tread on it. What we do in the retreading process is buff off the old tread and put new tread on it. It's a much lighter environmental impact.

You add to that the Chinese tire that's being disposed of—because when you try to buff it off, it won't hold a retread, so they're disposable tires. We see that all over the place in our retread plants: These tires come in and customers ask for them to be retreaded, and we say, “We can't. You bought a disposable tire. Off it goes to the landfill.”

On top of all that, I would add that because they're not being sold through the normal commerce chain, where the government collects a recycling fee to pay for that—they're being sold from brokers and off the backs of trucks and docks—when they get disposed of, they're just being dumped. They're not being paid for to have that recycling process take place.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Parks.

We go to Mr. Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

Thank you to all of the witnesses for their presentations.

On August 26, the Aluminum Association of Canada and the Canadian Steel Producers Association published a joint press release to support the announcement of Canadian tariffs and to state that Canada refuses to be “a point of entry for unfairly traded and high carbon steel and aluminum imports”.

According to these two associations, in Canada, there are 18 active anti‑dumping cases against China for primary forms of steel. Furthermore, 56% of all of Canada's trade cases concern China. However, despite the high number of dumping cases, steel from China is booming. In recent years, it has even doubled on the Canadian market.

Mr. Loomis, what isn't working in the trade remedy system?

[Keanin Loomis]

I think you heard from the Canadian Steel Producers Association, when they gave testimony not too long ago, that the trade remedy system is broken. That is certainly one of the issues that we are finding. Even if you have a clear trade case to bring, you have to think long and hard before doing so because of the length of time and the amount of money required to enforce your WTO rights.

The big thing here is that, just as my colleague is facing.... It is really easy, of course, to go to the bottom line and to talk about price. What we are trying to sound the alarm on is that there's a huge risk there, too, when it comes to quality. The big issue for us is that.... If these tariffs are in place and then the price issue is equalized, we'll be able to make much higher-quality decisions when it comes to the purchasing of steel.

Again, in referring to my colleague, I have had members of mine say that when they bid on a project—we're not even talking about publicly funded projects, but an oil sands project, for example, in northern Alberta—even if they zero out their labour, they're not able to compete on price. The issue here is that it's far too easy, and the bottom line is controlling our decision-making far too much in this industry.

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

Next year, the Canada—United States—Mexico Agreement, or CUSMA, will be reviewed. I have a question on that. We also know that the Americans rightly point out that Canada is the gateway for many products that should not be entering North America.

Do you agree with that statement? What more could be done?

[Keanin Loomis]

The proof behind us being a back door is circumstantial and doesn't necessarily align with what we're seeing in terms of the declarations that are being made at our ports of entry. While there is concern that we are being used as a back door, this illustrates the importance of harmonization at all levels, from border control to, again, insisting on domestic steel and fabrication being used in large infrastructure projects. We need to assure the Americans so they have confidence that we are not the end run for Chinese steel.

One of the things the government should be doing in the lead-up to CUSMA, and I would say we should be looking at this as well, is how much Mexico is the end run or the back door for Chinese steel. It would behoove us to do a study with our counterparts in the U.S. to identify that particular problem, because the evidence is far greater that Mexico is being used as a dumping ground for Chinese steel into the U.S. market. We should be looking at that and, again, tightening up and making sure we are completely harmonized with our American counterparts so they have complete confidence in us.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Desjarlais, you have six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Madam Chair.

Thank you to the witnesses for being present with us.

It's an important study that we're undertaking related to steel, of course, as there are many Canadians who are involved in this. Whether they're employers at a shop level or whether they're executives, this is an issue that's pertinent to industries across the country. Because of the immense issue presented by China and its extreme steel and aluminum dumping here, there are actions that have largely been undertaken. That's why you're here today. The minister came out equalizing some of these tariffs with our American counterparts to ensure that much of the steel industry here is protected.

Mr. Loomis, you mentioned that part of your association's goal is to encourage domestic production of steel, which is, of course, good. We want to see more of that. It would probably solve many of the issues you're explaining today if we had more domestic production. On U.S. partnership and harmonization, I think that's an encouraging path forward, both for Canadians, who have a huge dependency on those markets, and for our contractors, who depend on those stabilizing prices to build.

The supply chain shock issues are also interesting to me. I want to explore with you how the supply chain has been shocked by this. Of course, producers—those who utilize steel—are reeling. Part of my line of questioning is on how those who are either purchasing steel domestically or have a former arrangement with Chinese steel, for example, are impacted. How do we create more resilience for those persons?

More recently, the Minister of Finance mentioned that, in light of all this, on October 15, she may consider some tariff relief for some industries. Do you support the exemption for certain industries?

[Keanin Loomis]

Certainly, if China is the only place that makes a certain type of steel that we must utilize here in this country—I can't tell you what that would be—that would be a case in which we should proceed cautiously. For the most part, I doubt that is the case, so I'm not too concerned about that. I haven't heard from any of my members that there's a particular type of steel that we must be concerned about when we deal with China, so at this point in time, I can't point to anything.

There is, obviously, a very large global market for the production of steel—besides China, there are a lot of Asian markets and others—and our members are fairly agnostic as to where the steel comes from. Again, we would love to be able to buy domestic steel, but we don't make I-beams in this country, for example, so we must go overseas, and of course—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

To that question, then, you would largely support targeted exemptions. There has to be an intersection between what you're saying and the fact that your producers are telling you they're having supply chain shocks. To me, it's likely, or at least I would assume, that the Minister of Finance took issue with the fact that there would be supply chain shocks and perhaps tried to shore up some of these industries in terms of building confidence, suggesting that on the 15th there be targeted exemptions for some producers on steel and aluminum.

To my mind, those two things seem to make sense, what you're saying and what the minister is saying. Do you support those exemptions, then?

[Keanin Loomis]

Yes. I can't tell you exactly what types of products we're talking about, but sure.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

There has to be some room in our trade economy here to look at those industries and provide some relief.

What is the next step, then? What is the next step in reducing that dependency if we're going to have targeted exemptions, which, to your point, will actually not get us in closer alignment with our American counterparts? Is there a point where you would recommend that we say no one gets any more exemptions and there's a process to build forward? Or is that a process that, to you and the industry, is void and vacant of a future and you'll just go along for the ride until you see where the market lands?

[Keanin Loomis]

If there are other markets that produce steel, then all the better and we can certainly target China—before the reasons why we must. It is a non—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

So producers are exploring.

[Keanin Loomis]

Totally.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

That's good to know.

Second, given the fact that there's been this move by Canada to look at very well-meaning tariffs to protect our industry here, do you anticipate any malicious international retaliatory tariffs?

[Keanin Loomis]

I think we have already seen this with other commodities that we produce here in this country. Many of the fabricators have close relationships in the canola industry, for example. I was informed by one of my Alberta members that their brother, who's a farmer, was at the Thanksgiving table, and he has been impacted by retaliatory tariffs. It's a far more nuanced view out west, for example, as it might be out east. I'm six months into this role, and I'm finding all kinds of incredible regional differences among the membership. Yes, folks are feeling it, certainly out west, when it does extend to commodities that are also being produced within their jurisdictions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Members, I'll try to get in a round two, if possible. Since we were delayed at the beginning, I have slightly reduced the time so that everybody gets another round, if that's okay.

Mr. Martel, go ahead, please, for four minutes.

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

Thank you, Madam Chair.

Mr. Parks, what is the impact of Chinese tire dumping on the competitiveness of Kal Tire and the tire industry in Canada?

[Corey Parks]

The competitiveness of our industry relies on the ability to make enough money to support our people and the programs that we have around them. When we are faced with these tires and we cannot go into a logging yard or into a trucking facility and compete, we can't get within a couple of hundred dollars of the price at which they are buying these spot Chinese cheap tires. We can't compete at all.

What we do is try to emphasize the service aspect of it, because the product now is a throwaway. We ask what we can do to fix their vehicle or to sometimes install the tires for them or do repairs on other things on their vehicle, as opposed to having the product be part of the sales process.

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

For the time being, you are managing to survive even though the current government has not taken firm action on this.

What is the long-term risk to Canadian industry if action is not taken?

Will we be able to continue operating indefinitely in this industry without firm measures being applied?

[Corey Parks]

I would argue that we can't survive in the long term without strong measures in this industry, and I would point to a couple of reasons for that.

Your comment that we are surviving is probably accurate. We are barely surviving. We are operating many of these retread plants below cost. We are losing money on every tire we sell, because we're trying to make money on the service piece. That is not sustainable in the long term.

To your other questions, about the long- and medium-term impact to the industry, I think it's very significant. We happen to have 290 stores across Canada coast to coast. We are in many small towns and jurisdictions where you would not normally have a tire business. We are able to do it because we're a small passenger and light truck business, and there's a bustling natural resource industry, whether it be forest products, mining, you name it. In the absence of being able to compete, some of those stores risk closure. When you start to close those stores over the long term, that's a material impact to the industry and, I think, to the transportation industry at large.

I would like to add one last thing, if I might. Every bit of the steel that we're talking about in this conversation is being moved from the plant to its final destination on these exact tires.

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

Mr. Parks, what is Kal Tire’s strategy to ensure sustainability and ethics in its supply chains, especially in the face of the current threat?