International Trade Committee on Dec. 11th, 2024

[Angella MacEwen]

If you're looking at it in terms of negotiations, Trump will not accept us being in lockstep. The way he bargains is if you say yes, he asks for more. As Mr. Campbell indicated, this is a bargaining chip or a tool we can use in those negotiations.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Sidhu for six minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thanks, Madam Chair.

Thanks to our witnesses for being with us here this afternoon as we talk about the carbon border adjustment mechanism the EU is bringing in and how we can take next steps.

Mr. Campbell, you had very good opening remarks. You mentioned that it's better to make the investments now rather than pay tariffs to other countries so that we're investing in our own country instead of sending money away somewhere else.

I'm going to turn to Mr. Lundblad online. You mentioned it could hurt your industry if it's subject to carbon border adjustments. It's important I mention that our government is making investments to help the steel and aluminum industries. We've invested close to a billion dollars in Sault Ste. Marie and in Hamilton, Ontario, close by, for electric arc to make our industry less carbon-intensive. You mentioned that aluminum produced in Canada has the lowest carbon intensity in the world.

With carbon pricing in place, as we've heard from many witnesses in this study already, it gives us a competitive advantage when we compete with other countries that produce steel and aluminum. Could you speak to some of the competitive advantage we have, whether it's through innovation or carbon pricing? It's more than likely, with our carbon pricing in place, that we could be exempt from the EU's CBAM when it comes into force in 2025.

[Troy Lundblad]

Yes, there's no doubt that Canadian-produced steel and aluminum are among the greenest in the world. They're on par with the United States. In some sectors, they're even greener than steel produced in the United States.

We are not opposed to a carbon tax or a price on carbon in the Canadian economy, but what we would like to see is some sort of adjustment at the border, whether that's a carbon tariff or a carbon border adjustment, to ensure that the price of goods—steel and aluminum, particularly, but also goods imported into the Canadian market—reflects the same costs that are imposed on Canadian-produced steel and aluminum. That will ensure a level playing field.

In terms of exporting steel and aluminum to the European Union, which I'm in the best position to speak to, we don't have large amounts of steel and aluminum being exported to the EU, as the previous witnesses testified to. However, the United Steelworkers recognizes that other manufacturers are going to be exposed to added costs with respect to the CBAM in the European Union, so there are additional advantages to implementing a similar program here.

[Maninder Sidhu, Liberal, Brampton East, ON]

If Canadian steel and aluminum are going to be hit with the CBAM, it could be an even bigger market for you if you have a competitive advantage. Is that correct?

[Troy Lundblad]

It could, in theory. As far as I know, from projections from the Canadian Steel Producers Association and the Aluminium Association of Canada, there aren't expectations that our steel and aluminum exports to the EU are going to increase in any significant way. I'm not in a position to speak to the other sectors that are also important to the Canadian economy.

[Maninder Sidhu, Liberal, Brampton East, ON]

Absolutely. You can talk about fertilizer and many of the other sectors that are important to Canada's economy.

Mr. Campbell, you ran out of time earlier, but I was very intrigued when you mentioned that it's better that we innovate now than pay tariff carbon border adjustments to other countries that may perhaps bring them in, whether it's the U.K., Australia or those in the EU. Can you expand on that and talk about Canada's competitive advantage at this point in time?

[Neil Campbell]

In the long term, the trajectory is that we'll see more countries dealing with trade-related carbon measures. A lot of those may be border carbon adjustments—CBAMs—or they may be different models. We'll also possibly see the U.S. do something, but it may not be as climate-driven, or at least as domestically rooted, let me say that. There are already half a dozen bills in the U.S. with different suggestions before the change in administration.

I think Ms. Cobden, whose testimony was referred to, was talking about a carbon intensity-oriented focus. There's another approach about implicit carbon, which says that we're causing our manufacturers to spend a lot in the U.S. even though we don't impose a price.

I think implicit carbon, from a trade law point of view, is much tougher. I think intensity-based approaches could work and be married with charging above an intensity level. That creates an opportunity for Canada to think about doing a regime that works with Canada's climate policy, with maybe a bit of adaptation, but that becomes somewhat complementary to a design in the U.S., even if the U.S. is using a design that doesn't necessarily credit others.

I think we are in a better place as people who have already cracked the tough nut of starting to measure, monitor, report and price carbon.

[Maninder Sidhu, Liberal, Brampton East, ON]

I know I have 20 seconds left, but as a quick comment, I think what the U.S. is looking at through the PROVE IT act is.... They don't want to lose market share to other countries, so they said, “Let's get ready for this. Let's look at the data. What are we doing to lower the emissions produced by some of our manufacturing industries?” I think that's what they're trying to do. They're trying to get a leg-up, so it's important to note that, while we talk about being in lockstep, they know that this may be the future, and that's why they're looking at it. It's a bipartisan bill, by the way, backed by Republicans and Democrats.

[Neil Campbell]

We may not be in lockstep, but we still do things that are complementary.

[Maninder Sidhu, Liberal, Brampton East, ON]

Yes.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, go ahead for six minutes, please.

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

Thank you, Madam Chair.

I want to thank all the witnesses for their presentations.

My first question is for the two United Steelworkers Union representatives, one of whom is participating online and the other in person.

I'll leave it to you to decide how you answer the questions.

In your testimony, you mentioned that Canada's aluminum industry has the lowest carbon intensity in the world. In large part, it's thanks to the hydroelectricity available in Quebec.

Now let's make a connection with the mechanism proposed to us here, which you seem to be in favour of.

How could this mechanism help improve the competitiveness of Quebec producers? Could it help?

[François Soucy, Legislative Staff Representative, Political Action and Communications, United Steelworkers]

Thank you for your question, Mr. Savard-Tremblay.

The idea is to promote a competitive advantage that we already enjoy in Quebec or in Canada, particularly when it comes to electricity and energy. We have some of the lowest carbon emissions in the world. Quebec producers who operate in the regions need to be protected.

Earlier, when you put questions to other witnesses, you mentioned that you greatly value jobs in the regions of Quebec.

Well, communities across Canada are able to survive thanks to industries. We want to add value to those industries. We want to save communities. We want to keep jobs in Canada. We want to promote aluminum, which is unique to Quebec. We also want to protect communities and jobs in this sector.

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

Yes, I think that's one of the risks that has been making the headlines due to the threats of higher tariffs. If there is indeed a danger, if there is one issue that cranks up the pressure, it is dumping. It happens everywhere, and it's a real.

What measures are lacking that would allow the Canada Border Services Agency to provide better oversight and prevention?

Is there a lack of investment or resources?

[François Soucy]

Yes, absolutely. That's one of the things we talked about as well.

The CBAM is one of many tools. If we are going to use those tools to protect our industries, our jobs, we need the means to match our ambitions.

Canada imposed a 25% tariff on steel and aluminum imports. The United Steelworkers union worked hard to fight dumping by China. We asked the government to expand the measure to protect steel and aluminum jobs.

If the Canada Border Services Agency isn't resourced to determine where the imported steel is from, there could be a problem. We won't be able to impose the tariff.

There are all kinds of ways around the rules, to get steel and aluminum into the country. Since Chinese steel and aluminum are carbon-intensive, allowing them into the country is at odds with the measure being implemented.

Canada recently brought in new rules for country of melt and pour reporting. It's possible to get around those rules too, such as having the steel transit through another country before it enters Canada.

The government needs to give the Canada Border Services Agency the power to determine where the imported product is from so it can apply the tariffs accordingly.

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

You said there was a study on countries, and I would think it covers China. I've also heard things about India when it comes to aluminum. Is—

[François Soucy]

I don't have the whole list in front of me. I can look for it on the website of the department that deals with international trade. I saw it recently. I can't tell you all the countries on the list off the top of my head, but there are quite a few.

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

Thank you for telling us about it. We can have a look at it.

You talked about a lack of resources, a lack of investment. Could new technology be a way to improve traceability?

[François Soucy]

Yes. We aren't talking solely about human resources. We also want investments in technology that would support better traceability.

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

Can you talk more about the importance of having a green procurement policy and its role in creating a market for low-carbon materials?

[François Soucy]

It's another one of the tools we are asking the government to put in place.

We don't think it's right for the government to be making significant investments in public infrastructure these days without leveraging Canadian-made steel and aluminum. In fact, those products are often imported from countries with very low labour and environmental standards.

For that reason, we think the government should prioritize green procurement. By extension, that would give a big advantage to Canadian producers, as well as those jobs and communities.

[The Chair, Liberal, Judy Sgro]

You have 40 seconds remaining.

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

Do you have anything else to add? Would you like to say more on a particular issue?

If there's anything—