International Trade Committee on May 2nd, 2022

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

I call the meeting to order.

This is meeting number 16 of the House of Commons Standing Committee on International Trade. Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021.

As per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during proceedings.

I would like to make a few comments for the benefit of the witnesses and the members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking. For those participating via Zoom, you have interpretation options at the bottom of your screen of floor, English or French. All questions have to be directed through the chair.

I apologize to our witnesses. As you know, quite often on Mondays and Wednesdays the House has votes, which delays our getting the meeting under way. I apologize for that. Thank you all for being here.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, March 21, 2022, the committee is resuming its study on trade opportunities for Canadian businesses in the Indo-Pacific.

We have with us by video conference today, from the Business Council of Canada, Trevor Kennedy, vice-president of trade and international policy; from the Canadian Labour Congress, Lily Chang, secretary-treasurer, and Elizabeth Kwan, senior researcher; from Devinci Cycles, Maude Gauthier, strategic initiatives director; and from NioBay Metals, J.S. David, chief executive officer and president.

Welcome to you all.

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

Mr. Kennedy, I invite you to make an opening statement of up to five minutes, please.

[Trevor Kennedy, Vice-President, Trade and International Policy, Business Council of Canada]

Thank you, Madam Chair and committee members, for the invitation to take part in this meeting on trade opportunities in the Indo-Pacific.

Canada is an Indo-Pacific nation by virtue of its geography, history and strong people-to-people ties as well as business and trade ties. We must recognize that the Indo-Pacific region is critical to Canada's future economic growth, its economic security and its role as an advanced nation that is home to a range of leading international firms.

Given how important trade is, we are pleased that the committee has undertaken this study on the Indo-Pacific region.

I will first focus on growth. Most of the world's economic growth over the next several decades is projected to take place within the Indo-Pacific. The McKinsey Global Institute estimates that, by 2040, Asia will account for 50% of the global economy and become home to most of the world's middle-class consumers. Canada and Canadian companies cannot risk missing out on this enormous growth opportunity.

On the issue of diversification, economic resiliency is a growing concern around the world. In some countries, this has given rise to calls for protectionism and nearshoring or onshoring. For a trading nation such as Canada, resiliency means something else entirely. Other than in a few critical areas, self-reliance is not a viable strategy for Canada. Our country must become more, not less, globally engaged with like-minded and fast-growing partners, including in the Indo-Pacific.

On the issue of relevance, Canadian companies have a successful track record beyond our borders, especially in the United States. The United States will undoubtedly remain an attractive place to invest, but like Canada, its share of the global economy could shrink over the coming decades. It's worth questioning, therefore, whether continued success in America will be sufficient to be considered a global leader in the 21st century. Canada and Canadian companies must work harder to establish a meaningful presence where growth is occurring, principally in the Indo-Pacific.

One way Canada can advance its regional interests is to release an Indo-Pacific strategy, and this should include a significant focus on trade and economic ties. Within that strategy, we believe that trade negotiations can play an important role in building a bridge between Canadian and Indo-Pacific markets.

First, on the CPTPP, this has been a beneficial agreement for Canadian exporters, and we believe it can deliver even more opportunities through its expansion. We support ongoing accession talks to bring the U.K. into the framework and support the additional accession for any economy that can meet its high standards. Considering the potential value of new applicants, we see South Korea as a particularly important addition. We expect their application is imminent.

On ASEAN, in our 2017 report “The ASEAN Advantage”, which we developed in partnership with the Canada-ASEAN Business Council and the Asia Pacific Foundation of Canada, modelling showed that a deal would result in significant trade growth and position Canadian firms to compete in this lucrative market of now nearly 700 million people. We welcome progress toward this goal.

As far as a Canada-Indonesia CEPA is concerned, Indonesia will be one of the largest economies and most populous countries within a few decades. For now, however, it's an underdeveloped relationship. Just last week we had the opportunity to meet with representatives of the Indonesian business community, KADIN. I can say that both business communities were optimistic about the opportunities and believe a bilateral deal can enhance our growing relationship.

Now I'll discuss India, the CEPA and early progress trade agreement. With growth exceeding 8% this year, India is projected to be one of the fastest-growing economies in the world. While it's been a challenge to advance trade talks in the past, India has recently shown openness toward a different approach in pursuing trade deals with advanced economies, including Australia, the U.K. and the EU. To ensure Canada has an advantage in the market, we welcomed the agreement to relaunch CEPA talks and to consider an early progress trade agreement to unlock opportunities in the near term.

Looking to other frameworks, Canada should closely monitor and assess if its participation in other frameworks could be beneficial, including the Regional Comprehensive Economic Partnership.

Canada should also closely follow the forthcoming U.S. Indo-Pacific economic framework. We understand that this initial framework will not include Canada or Mexico, both of which are Pacific nations and were part of the original TPP with the United States as well as now members of the USMCA. There could be a risk for Canada to remain on the sidelines of this potentially important regional economic framework that will include our key partners in the region, including many CPTPP countries and our most important trade partner, the United States.

To conclude, the Business Council of Canada supports a comprehensive economic strategy with an ambitious trade agenda. It's critical that our country move quickly and in partnership with industry and other stakeholders to ensure that we don't miss out on opportunities.

Thank you. I look forward to answering your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Kennedy.

Please go ahead, Ms. Chang.

[Lily Chang, Secretary-Treasurer, Canadian Labour Congress]

Good afternoon, Madam Chair and committee members. Thank you for the opportunity to speak today.

My name is Lily Chang. I am the secretary-treasurer for the Canadian Labour Congress. I am joining you today from the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinabe, the Chippewa, the Haudenosaunee and the Wendat peoples, known as Toronto. My pronouns are she and her.

The Canadian Labour Congress advocates on national issues on behalf of three million working people. We speak on behalf of workers in all sectors of the economy across Canada. These workers contribute directly to trade, from production to manufacturing to transportation, as well as at ports that ship and receive goods.

Given that trade negotiations in the Indo-Pacific region only just recently started, my comments today will be general and will highlight labour's priorities for trade in the region.

First, let me quickly lay out some thoughts on the context of the trade negotiations for the region. Globalization based on economic efficiencies has clearly made countries vulnerable and less resilient to major disruptions such as the pandemic, the war in the Ukraine and the zero-COVID lockdowns in China.

The ongoing and cumulative effects of these global events have been profound. There have been disruptions of the global economy and global supply chains, increased isolationism, setbacks in labour standards resulting in immense human suffering, breakdowns in social cohesion and growing inequality, especially for the most marginalized and vulnerable in our societies.

It is even more important now to have effective mechanisms in trade agreements and trade policies to enforce sustainable development commitments and to uphold and promote strong labour, social and environmental standards and protection. We need resilient and sustainable social, economic and cultural systems that foster social cohesion and collective prosperity through a human-centred recovery, in line with the ILO global call to action.

Canada’s trade agreements must be coherent with domestic policy priorities and, at a minimum, contain a strong, enforceable labour chapter that includes but is not limited to the protection of the fundamental principles and rights at work in the ILO Declaration on Fundamental Principles and Rights at Work, 1998; as well as the eight fundamental ILO conventions that include Freedom of Association and Protection of the Right to Organise Convention; Right to Organise and Collective Bargaining Convention; Forced Labour Convention and its protocol; Abolition of Forced Labour Convention; Minimum Age Convention; Worst Forms of Child Labour Convention; Equal Remuneration Convention; and Discrimination (Employment and Occupation) Convention.

Next month the ILC will discuss adding occupational health and safety to those fundamental principles and rights at work.

This must also be central to Canada’s trade priorities: combatting forced and compulsory labour, and child labour in the supply chains; addressing violence against workers exercising their labour rights, including single instances of violence or threats; ensuring that migrant workers are protected under labour laws; ensuring non-discrimination in employment on the basis of sex, including sexual harassment, pregnancy, sexual orientation, gender identity or gender-based wage discrimination; and ensuring decent conditions of work with respect to minimum wages, hours of work and occupational health and safety.

The CLC also supports other domestic policy priorities in trade negotiations including strong environment and equity commitments.

We were heartened to see that the trade objectives for Indonesia and ASEAN included comprehensive and enforceable labour commitments, comprehensive and enforceable environment commitments, dedicated provisions on trade and gender, and dedicated provisions on trade and indigenous peoples.

Trade agreements have real impacts and consequences for workers, their families and their communities. Workers must not be displaced from their jobs from increased labour mobility and outsourcing, local food security and production as well as local industries must not be undermined, and workers’ rights, including migrant workers’ rights, must be protected.

Fundamental human and labour rights, equity and environmental protection must be integral in trade negotiations. Canada must model internationally fair and human-centred trade agreements that are strong, comprehensive and enforceable for our common prosperity.

Thank you for this opportunity to present workers' views today. We look forward to questions from the members.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Chang.

We go on to Ms. Gauthier for five minutes, please.

[Maude Gauthier, Strategic Initiatives Director, Devinci Cycles]

Hi, everyone. Good afternoon.

Thank you for giving us the chance to speak on this committee. I'm here today to present a situation that we think is unfair regarding customs tariffs in Canada.

To give a bit of our background, we are Devinci Cycles, a proud Canadian bicycle manufacturer. In fact, I'm pretty sure we are one of the last big manufacturers in North America in terms of units made every year. We make over 20,000 bicycles per year here in Saguenay, Quebec. The biggest growth opportunity in our industry is the electrification of the bicycles. To give you an idea, they are actually around 10% to 15% of our sales this year, but in two or three years they will represent around 40% to 50% of our sales. The trend is clearly visible in Europe.

For your information, a company that buys a complete bicycle made in a foreign country will pay import duties of about 13%, as planned in the Canadian harmonized system, which is the business model most of our competitors use and that we use, as well, for entry-level bicycles in order to stay competitive.

However, we do more than that. We import bicycle parts and components that are used to make bicycles, like the brakes, wheels and carbon frames. We pay the duty on every single component according to the CBSA regulations, and we assemble these bicycles here in Quebec.

We even go further. We buy aluminum extrusions from local providers in Canada or import some more complex hydroform extrusions. We make the bicycles from these raw tubes to an aluminum frame and then assemble it. If you've ever ridden a BIXI in Montreal, you've had a ride on a product that is 100% made in Quebec.

Until now, all is a good and fair, but when we are making electric bicycles, the game changes. The company I spoke about, which only imports full bicycles from overseas, benefits from the preferential tariff of 0%, as stated in the harmonized system. On our side, we pay the duties on every single component we import, but because of some sentence constructions, we also pay duties on the second-most expensive part of our bicycle, which is the battery. We pay tariffs on it.

For every other person or company, importing bicycles is duty-free, but for us, as we want to promote quality jobs in our area—and that is an important mission for us—we have to pay the duty on those batteries, which are benefiting from the preferential tariff as full bicycles. This situation is upon us because our main battery provider is Shimano, which is a company based in Japan, but they do make their bicycle batteries in those countries we are talking about today in southern Asia.

Because we cannot have a certificate of origin, we cannot benefit from the preferential tariff. That directly impacts us. We think this kind of grey area between the preferential, the HS code and certification of origin is impacting us.

I'm happy to answer your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Gauthier.

We're on to Mr. David, please, for five minutes.

[J.S. David, Chief Executive Officer and President, NioBay Metals]

Thank you, Madam Chair.

My name is Jean‑Sébastien David and I am the president of NioBay Metals. NioBay is a mining company listed on the Toronto Stock Exchange. We are recognized for our work on the extraction of two critical and strategic metals: niobium and tantalum.

We have two projects in Ontario in the James Bay Lowlands, and another in Quebec, the Crevier project, where two metals, tantalum and niobium, are found in a single deposit. The deposit was discovered in 1974, and I am here today to tell you that this project will come to fruition purely because of developments in the battery industry. The advances that Toshiba and Echion Technologies have made in recent years have meant that, in the last two years, we have put time into resurrecting this project. The objective is to extract 1,500 metric tonnes of niobium oxide and 125 tonnes of tantalum oxide per year.

The Philippines, which are included in your list, are interested in tantalum. I would point out that another country is interested as well, but it is not on the list: South Korea. That country has been a big consumer of niobium for several years now. It uses it in its steel mills. So it's important that you add South Korea to your list.

Niobium is actually a relatively rare element. There are only three mining sites producing it on the planet. Two sites are located in Brazil and the third is in Canada. The entities in Brazil are China Molybdenum, which is 100% owned by China, and CBMM, a family corporation 25% of whose shares are owned by China. It is therefore logical for there to be a purely Canadian product.

The considerable progress that has been made in respect of niobium batteries relates primarily to recharging capabilities, that is, charging speed. They can take a lot of recharge cycles and they can also function better at very low temperatures. We first saw these batteries on the market a few years ago now. For batteries made of niobium anodes, it was about three years ago. At this time, however, we are seeing the development of batteries made of niobium cathodes.

For tantalum, as I mentioned, the Philippines would be buyers. The main production of tantalum is in the Democratic Republic of the Congo.

[The Chair, Liberal, Judy Sgro]

Mr. David, excuse me for interrupting. Our translators are having some difficulties. Could you adjust your microphone?

Please go ahead, Madam Clerk.

[The Clerk of the Committee, Ms. Dancella Boyi]

Mr. David, the microphone icon has maybe not been selected.

Can you check it?

[J.S. David]

It should be working.

I can continue in English, if you want.

Can you hear me better?

[The Chair, Liberal, Judy Sgro]

Try that again, please, Mr. David. You can start again with your time.

[J.S. David]

Okay.

Again, I am representing NioBay Metals, which is based in Montreal. We're playing with two special metals, which are niobium and tantalum. Those are critical metals for our economy. We call them green metals. Niobium in particular creates an alloy with steel. It allows the steel to be a lot more flexible. Adding niobium to your steel will allow you to have more capacity when you have different temperatures. That's why in new construction, new buildings, new skyscrapers, new bridges, everything other than pipelines, they're using steel with added niobium.

We do have a few projects in Ontario and mainly one in Quebec. One was discovered in 1974 in Quebec, and it has critical—

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

Madam Chair, the interpreters are saying it isn't any better. We have the reverse problem in the other language: we can't get the interpretation into French, or it is making it difficult.

[The Chair, Liberal, Judy Sgro]

Mr. David, could you just hold on again.

[J.S. David]

I didn't change anything.

[The Chair, Liberal, Judy Sgro]

Sometimes there are ghosts in the room that create things, but we have to ensure that we have accurate translation for all of the members.

[J.S. David]

I understand that.

[The Chair, Liberal, Judy Sgro]

We will suspend for a minute while the technician tries to sort this out.

[The Chair, Liberal, Judy Sgro]

I'm calling the meeting back to order.

I'm going to suggest we start with the questions from the members. When Mr. David's connection problems have been resolved, possibly we can go back to him and give him a couple of minutes to get him on the record.

We will go to Mr. Martel for six minutes, please.

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

I'd like to thank the witnesses for being with us today.

Welcome to the committee, Ms. Gauthier.

[Brian Masse, NDP, Windsor West, ON]

On a point of order, Madam Chair, are votes not being called?

[The Chair, Liberal, Judy Sgro]

Yes, they are, but we can continue for 20 minutes if everybody is in agreement.

Is everybody in agreement that we continue for 20 minutes? Then we can vote from our app here in committee or wherever you're stationed, so we don't lose too much time. The clerk will keep track of the time for us.

Everybody's fine with that.

Thanks for raising that, Mr. Masse.

Mr. Martel, we'll go back to you.

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

I'd like to welcome you to the committee, Ms. Gauthier. I'm very pleased to see you here and to shine the spotlight on a manufacturing company that is well known where I'm from.

Does Devinci Bikes export bicycles or bicycle parts to the Indo-Pacific region?

[Maude Gauthier]

At present, we have business relations with countries in the Indo-Pacific region. They are suppliers to us, and have been for over 30 years. Because the bicycle industry is very specialized, it's a market that has developed there. The suppliers have now become very specialized.

We don't really sell bicycles there, but we do business with a number of suppliers in those countries.