International Trade Committee on Dec. 9th, 2024

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you, Madam Chair.

It's great to be joining the committee today.

I'll start with you, Ms. Cobden.

We know that Canadian steel is manufactured in a much less carbon-intensive way than the dirty steel that comes from other countries, like China and India. Can you talk about how buy clean policies could help support the Canadian steel industry?

[Catherine Cobden]

It would be a really strong opportunity for buy clean policies for the steel sector if they were to be adopted in Canada. It's also fully compliant with the trade order, the WTO, etc. We would and do ask for buy clean to be part of the comprehensive tool kit on climate change. We have, I think, taken steps towards it, but not steps that work for the steel sector yet.

[Gord Johns, NDP, Courtenay—Alberni, BC]

One element of the U.S.-Canada steel dispute is that the U.S. accuses Canada of being a back door to Chinese products. They say our anti-circumvention framework isn't working.

Can you speak about how we could fix Canada's anti-circumvention regulations and how this would help our relationship with the U.S.?

[Catherine Cobden]

The first thing we should all tell the Americans when they say we're a back door to China is that we have introduced tariffs, section 53 tariffs. All parties supported this to introduce a 25% tariff on Chinese imports. That is huge. We also introduced “melted and poured”, which is also important.

The third and final piece that must be done is improving the anti-circumvention legislation. While we have a framework, the domestic industry is communicating very clearly to everyone that it's not sufficient and doesn't meet the test of the United States.

There are several legislative changes we'd like to see take place. We are happy to submit those to the committee.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I'll go to you, Mr. Behboodi.

First, thank you for your testimony. This isn't steel-related. I come from a forest community on Vancouver Island, Port Alberni.

The federal government highlighted in the 2023 fall economic statement the opportunity for Canada to leverage the economic and environmental benefits of waste biomass conversion for heat and energy, noting that it's a high-potential decarbonization pathway. As the Canadian forest sector weathers significant market headwinds, particularly, as I said, in my home province of B.C., extracting more value from forest biomass will offer significant opportunity for forestry workers and communities, yet the government has been dragging its feet.

We know that, as a source of carbon-neutral energy, biomass has the potential to provide Canadian electrical grids with a sustainable and reliable source of energy while creating high-paying jobs for rural and remote communities. It also includes the displacement of emissions, intensive forms of energy used to power our communities while reducing the vulnerability of our forests to devastating fires.

Could you speak about how timely the passage of these ITCs is as part of the fall economic statement? Certainly we know that industry stakeholders have grown deeply concerned about the long delays in the passage of this implementing legislation, recognizing that Canada's competitors in the United States have had a two-year start with the passage of the IRA, which includes similar investment tax credit provisions.

[Rambod Behboodi]

I'd just like to say that I began my career in steel defending the industry against unfair trade, and I spent a great deal of time in my career defending the softwood lumber industry in British Columbia, so your question brings me happy memories, both professional and personal.

The short answer is that we should be doing everything yesterday. The challenge we have in Canada is not just access to the U.S. market, which is always under some sort of stress. We heard just yesterday President Trump saying that Canada is being subsidized to the tune of $100 billion, and so on and so forth. This is on top of all the tariff threats, so there is that angle.

The other thing that we obviously have to worry about is the subsidy measures in the United States. On the one hand, our access to the U.S. is under threat. On the other hand, our competitiveness in the U.S. and globally is under threat as a result of those measures, which says to me that, even though we obviously have very limited capacity to constantly compete with U.S. subsidies, we really do need to be alive to those challenges and, where we can, match them.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you.

This is really important to the Catalyst paper mill in Port Alberni, where I live, and to workers in the forest sector. I hope the government will move rapidly in following through with its promise from last year's FES.

People are losing their jobs. We lost a sawmill in our community last week. I really hope the federal government will move with urgency.

[The Chair, Liberal, Judy Sgro]

Thank you.

We'll go to Mr. Martel for five minutes, please.

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

Thank you, Madam Chair.

Thank you to the witnesses for being with us today.

My question is for Ms. Cobden.

I'd like to know how the carbon tax has affected the competitiveness of Canada's steel industry.

[Catherine Cobden]

Thank you.

Indeed, there's been an impact already, at $80 per tonne. It is a cost to our business that many other jurisdictions in our marketplace, which we're competing with every day for the sale of steel, do not face.

It is imperative for us to recognize that we do not live in a system that's homogeneous. Different countries have different approaches, but our approach is putting competitive pressure on the steel industry. As I mentioned before in this Q and A, different sectors are at different stages of pressure. The steel industry is at the bleeding edge, if you will, of pressure under the carbon pricing regime.

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

In terms of a carbon border adjustment policy, steel is one of Canada's most at-risk exports.

Have you done any in-house forecasts to measure the potential impact such a policy could have on Canada's steel industry?

[Catherine Cobden]

Should the U.S. impose 25% tariffs on the domestic steel industry, it will have a devastating effect. For a year, starting in mid-2018, we had 25% tariffs on the industry. Every one of the CEOs on my board has been very clear that it is extraordinarily devastating.

The point I would add is that we have the opportunity, particularly in steel, to remind the Americans of how the 25% tariff also deeply affected their side of the border. It does harm on both sides when you have such an integrated economy, as we do in steel.

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

That's interesting.

Are steel companies prepared to absorb the additional administrative cost that goes along with implementing a carbon border adjustment mechanism, or CBAM, like greenhouse gas emissions reporting?

Would it to be a disproportionate burden, do you think?

[Catherine Cobden]

I guess it would depend on how the BCA is prepared. I'm not talking about the CBAM but about the carbon trade measure, however it's designed. I was quite clear in my opening statement that the CBAM is not a design that would serve us well, and we are categorically opposed to it, if I may say so. However, there are ways to design it that would be effective, and particularly effective if we coordinate it with the United States.

We support the idea of carbon trade measures as long as we are, to your point, not designing them in a way that's extremely challenging, like the CBAM, and—not “or” but “and”—are aligning them with the United States.

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

How much time do I have left, Madam Chair?

[The Chair, Liberal, Judy Sgro]

You have one minute and 20 seconds.

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

All right.

I'll continue with you, Ms. Cobden.

What specific challenge do you see in Canada and the European Union's working together to harmonize the CBAM and Canada's carbon pricing regime?

[Catherine Cobden]

We're in an interesting situation whereby our climate policies are most aligned with the EU's, but our market, at least in steel, is most aligned with that of the U.S.

Our situation is complicated because, as I've already described, it's not a matter of just shipping more steel to the EU. That is not a market that's open to us, and we don't foresee that happening. Therefore, we must maintain the U.S. market access, and we must protect our domestic market. Those are two things we must do, but the carbon pricing regime, as I said, is not aligned with the U.S. regime.

We've already discussed the IRA. We have some IRA-type tools here, but not all of them and certainly not in the same way. Also, we have strong alignment with the EU, but it's not our market.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Martel.

Go ahead, Mr. Badawey.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Madam Chair, and thank you to the witnesses for being here today.

I want to dig a bit deeper, from the how to the what—that being levers we can put in place to actually open up more co-operation with the United States. Obviously, the regime that we have in place here in Canada with respect to carbon pricing aligns with the regime that the EU has, and for the most part it prevents a lot of what I'll call border taxes or pollution taxes at the border from occurring, which is a good thing. Otherwise, we'd be paying those tariffs and, quite frankly, it would cost us more if we didn't have the regime in place. As you noted, though, Ms. Cobden, the U.S. doesn't have that regime in place.

What I'm particularly interested in, especially going forward with the negotiations and discussion—I won't call them negotiations yet; I'll call them discussions—with the U.S. specific to China, with it being a high emitter of carbon, and other countries.... It's not, by the way, just about steel. It's about all products.

Do you find that there's an opportunity to work more closely with the U.S. to share this same regime in our discussions moving forward, to strengthen our collective international trade performance and use it as a mechanism to compete more effectively against China? Will putting these carbon trade measures in place with the U.S.—again, not just with steel, but with all products—therefore make the markets more robust for both Canada and the U.S.?

[Catherine Cobden]

That's what we hope. Again, we can't predict the future. Our stance at CSPA, and this is confirmed, basically, by all of the leadership of the steel sector across Canada, is that we need to demonstrate the best and prepare for the worst as it pertains to Canada-U.S.

Demonstrating the best is doing exactly what we've been doing to maintain that trajectory. There are section 53 tariffs, which do two things: they help us domestically and also demonstrate the positive to the U.S. There's the “melted and poured” tool that we've been describing and the anti-circumvention changes that we have yet to do.

Certainly, if there is any sort of opening on a foreign pollution tariff or some other pollution measure at the border that the U.S. starts to signal, it would be our hope that we would step into that fulsomely and discuss, describe and negotiate with the U.S. one that's like a North American or at least a Canada-U.S. approach to this problem to do exactly what you're describing. We really hope that we do that.

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

Thank you, Ms. Cobden.

Mr. Behboodi, I'll ask you the same question.

[Rambod Behboodi]

In principle, given that the U.S. is our main market for these and many other products—75% of our exports go to the U.S.—of course we need to be aligned to the extent possible with the U.S. market framework. The challenge we have, as I mentioned, is that the security of access that we have to the U.S. market is not guaranteed. It is no longer guaranteed.

Ms. Cobden referred to the 2018-19 section 232 measures. We managed to get out of that. We managed to negotiate the Canada-U.S.-Mexico agreement. The hope was that we would be able to move beyond that now that the agreement is in place.

However, what we're facing since then is, number one, under the Biden administration, we weren't hit with tariff measures; we were hit with a $400-billion subsidy framework, which we then had to match. That in itself creates a framework that is challenging for Canadian businesses.

With President-elect Trump, even before he comes into office, we have threats of tariffs of 25% for whatever. Then, just yesterday, as I said, there was another discussion about subsidizing Canada, because of the trade deficit.

That security of access isn't there, which suggests to me that while in principle it's good to align ourselves with the U.S., it is perhaps time to start looking outside to other markets and trying to develop other markets. This is something that is really up to the private sector. It's not for governments to do, but we really do need to pay close attention to the fact that the secure access that we've had to the U.S. market may not be something that can continue.

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

Thank you, Mr. Behboodi.

I'll say this in conclusion to Ms. Cobden, if I may: I'd like to connect in the future to, in fact, put a strategy forward for those discussions with the U.S. That goes for all those who have given testimony today. I'd appreciate that involvement.

Thank you, Madam Chair.