International Trade Committee on Feb. 2nd, 2022

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

I call the meeting to order.

Welcome to meeting number three of the House of Commons Standing Committee on International Trade.

The Board of Internal Economy requires that committees adhere to the following health protocols, which are in effect until February 28, 2022. Anyone with symptoms should participate by Zoom and not attend the meeting in person. Masks must be worn in committee rooms, except when members are at their place during parliamentary proceedings. However, it is strongly recommended that members wear a mask even when they are at their place during parliamentary proceedings. All those inside the committee room should follow best practices of maintaining a physical distance of at least two metres from others and maintaining proper hand hygiene by using the hand sanitizer provided in the committee room and regularly washing their hands well with soap.

As the chair, I will enforce these measures, and I thank you very much for your consideration.

Today's meeting is taking place in a hybrid format pursuant to the House order of November 24, 2021.

I'd like to outline a few rules to follow.

Interpretation services are available. You may speak in the official language of your choice. At the bottom of your screen, you have the choice of either the floor, English or French. If interpretation is lost, please inform me immediately and we will ensure interpretation is properly restored before resuming the proceedings. The “raise hand” feature is on the main toolbar, should you wish to speak. When speaking, please speak slowly and clearly. When you're not speaking, your microphone should be on mute. As a reminder, all comments should be addressed through the chair.

The committee clerk and I will maintain a speakers list, of course, for all of the members.

We are commencing a study on the Canada–United States relationship and its impacts on the electric vehicle, softwood lumber and other sectors.

With us today by video conference are, from the Automotive Parts Manufacturers' Association, Gian Paolo Vescio, general counsel; from Canada's Building Trades Unions, Sean Strickland, executive director; from the Canadian Vehicle Manufacturers' Association, Brian Kingston, president and chief executive officer; from Electric Mobility Canada, Daniel Breton, president and chief executive officer; from Toyota Motor Manufacturing Canada Inc., Scott MacKenzie, senior national manager, external affairs; and from Unifor, Angelo DiCaro, director of research, and Shane Wark, assistant to the national president.

Welcome, all.

Up to five minutes will be given for opening remarks, after which we will proceed with rounds of questions.

Mr. Vescio, I now invite you to make your opening statement. Please make sure that you keep within five minutes, after which I will have to cut you off.

Mr. Vescio, the floor is yours. Go ahead, please.

[Gian Paolo Vescio, General Counsel, Automotive Parts Manufacturers' Association]

Good afternoon. My name is Gian Paolo Vescio. I'm general counsel for APMA. Thank you for having me today.

The Biden administration's Democratic leadership and the United Auto Workers lobby in the U.S. worked together in 2021 to propose a $12,500 tax credit to consumers for electric vehicles made exclusively in the U.S. by 2027 via the build back better bill, which is now stalled in the Senate. While we were very active in trying to get Democrats to change course on a policy instrument that we considered an existential threat to the Canadian automotive sector, we do not celebrate its current demise. We know that the Biden administration is dedicated to bringing the legislation back in a form that it calculates will pass. The threat of the the incentive still hangs in the balance.

The U.S., in our observation, has turned its bipartisan attention to renewed protectionism under the threat of the rise of China. The EV market is just one element of that focus. Since the proposal first saw its amendments authored by Senator Stabenow of Michigan, we've been working closely with the Canadian embassy in Washington and directly with our congressional network in Washington to articulate to both sides of the aisle that this proposal will have an adverse affect on U.S.-based parts suppliers.

While we're Canada's national trade association for OEM suppliers to the global automotive manufacturing industry, the APMA also represents almost 40 companies that own and operate 156 factories in 18 U.S. states and employ 43,000 Americans. We have warned the American lawmakers that it's a discriminatory trade action that will affect the sector in both countries and will be challenged with vigour.

The arguments for Canadian interests against this proposal have been well articulated and, for that matter, have been well defended by the federal government. The Prime Minister and the trade minister have been leads and the APMA has conducted and supported meetings directly with team Canada. However, our focus in Washington is to appeal to U.S. lawmakers to understand the damage they would be doing to the U.S. auto sector, with the hope that this can gain some real traction for the cause down there.

In Canada, we make two million vehicles a year and we buy two million a year in a normal, non-pandemic year. In the U.S., they make 12 million vehicles annually, but buy 17 million. As a net importer of approximately five million vehicles, the country can accommodate an incredible amount of new production to replace imports it chooses to block.

This is the simple math that supporters of this bill are pursuing, but they are ignoring the way in which the automotive sector has been built over the last 100 years in our two countries. In Canada, the proposal would do irreparable harm to U.S. production investments. In addition to that fact, the three U.S.-based automakers—allowing for Chrysler and Dodge's Parisian headquarters—make one million vehicles here for U.S. consumers annually, in a non-pandemic year. They also contain 50% U.S. parts and 60% U.S. raw materials. All told, five assemblers export 80% or 1.6 million vehicles a year from Canada to the U.S.

They will all be hurt by this, especially their U.S. suppliers. We have been clear to the White House in written communication that this is not a smart move if the objective is to boost American automotive fortunes.

In the CUSMA agreement that was recently negotiated between the U.S., Canada and Mexico, we jointly agreed to and introduced the highest regional value content minimums in history, designed to drive increased business to local auto parts and raw materials suppliers.

If the U.S. passes this proposed tax credit scheme, it will nonsensically incentivize reducing purchases from U.S.-based suppliers. A vehicle built in one U.S. state that is destined for another U.S. state does not cross a border. It is not an export under the CUSMA and is not subject to any RVC compliance requirements. Because of this, U.S.-based vehicle assembly will surely reduce U.S. content in pursuit of now-permitted low-cost offshore parts alternatives for their vehicles. With no tariff threat used to source locally, the biggest winners would be suppliers from countries like China, Vietnam, Malaysia and other non-U.S. interests.

We've been very clear about this in our in-person lobby campaign on the Hill since November. As I reflect on some of the meetings that I've had with Senator Ossoff, Senator Warnock from Georgia and the APMA's dozen or so meetings with senators and congressional reps from both parties, we know there is time for the U.S. to reconsider its course of action. However, we have decided to not just focus on reminding them of their trading obligations to us, but to focus on the health and sustainability of the U.S. automotive parts sector, which, through this measure, we feel has been ignored in a misguided attempt to satisfy a special interest, single purpose labour partner.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Vescio.

Mr. Strickland, you have five minutes, please.

[Sean Strickland, Executive Director, Canada's Building Trades Unions]

Thank you very much, Madam Chair. It's a pleasure to be here this afternoon.

Thank you for the opportunity to provide some remarks on the build back better legislation and the potential impact it could have on Canada's electric vehicle industry, and how construction and building trades workers fit into that mix.

My name is Sean Strickland. I'm the executive director of Canada's Building Trades Unions, part of North America's Building Trades Unions. We represent 14 international construction unions, with offices in Washington, D.C., and Ottawa. The combined membership of NABTU and CBTU is over three million unionized construction workers, of which 600,000 are in Canada.

The women and men of the building trades are employed in constructing everything from small projects through to large multi-billion dollar projects right across Canada. The construction and maintenance sector annually represents approximately 6% of Canada's GDP. Skilled trades workers are often later employed in the operation, renovation, maintenance and repurposing of plants, factories and facilities—our members and contractors build it and maintain it.

I want to commend the work of the government on the issue thus far, for speaking up quickly and strongly against the EV credits and the potential harm they will cause.

On behalf of Canada's Building Trades Unions, we recommend that the Canadian government continue to advocate for the removal of electric vehicle tax credits that incentivize U.S.-made vehicles to the detriment of the Canadian automobile manufacturing industry; that we also develop a made-in-Canada supply chain, from mining to the manufacturing floor, for EV battery production to support our transition to net zero; and, that the Canadian government continue to ensure the U.S. upholds their commitment to our existing trade agreements, including CUSMA, the “Roadmap for a Renewed U.S.-Canada Partnership” that was signed last year by President Biden and Prime Minister Trudeau, and the U.S.-Canada critical minerals action plan.

Unfortunately, as we all know, and as you've heard from previous speakers, President Biden and the U.S. administration have committed to protectionist measures like buy America and, more recently, build back better. These protectionist measures aren't new. Throughout our long history and relationship, Canada and the U.S. have been dealing with trade matters and irritants despite agreements that have been signed by both countries. For Canadians, this is particularly frustrating.

Yes, we are two countries, but for the automotive industry, we are one supply chain that's mostly seamlessly integrated across both borders, and thousands of building trades skilled trades workers are employed on both sides of the border, keeping the industry rolling. As an example, as a small sample size, in Canada, on average, building trades members work between 170,000 and 200,000 people hours at the Toyota plants in Cambridge and Woodstock, Ontario. This represents approximately $170 million to $200 million in wages and benefits. There are another 55,000 people-hours at the GM plant in St. Catharines, in addition to thousands more man-hours in the automotive industry right across Ontario, Quebec and the rest of Canada.

The United States-Canada auto industry, as we know, is one of the most integrated industries in the world. In border areas such as Michigan and Ontario, a vehicle's auto parts routinely cross the border six times before final assembly, in a business that is worth at least $100 billion a year in trade between both nations.

For these reasons and more, in the view of North America's Building Trades Unions and Canada's Building Trade Unions, and on behalf of our three million strong workforce in both countries, we believe that Canada—and we're working hard—should be exempt from these U.S. EV credit provisions

There are some additional considerations.

Currently in Canada, our tax credit for purchasing electric vehicles applies to U.S.-made cars as well. The U.S. should do the same. Also, the new EV tax credits include an additional credit for $4,500 for vehicles built at unionized plants. Canada's unions are just as strong—in some cases stronger—and labour standards just as equal as they are in the United States, so we're aligned.

Canada has committed to a target of 100% of new automotive sales being zero-emission by 2035. This is also aligned with U.S. climate goals. Interestingly, the American Automobile Labelling Act clearly identifies Canadian auto production as domestic production in the U.S., because of our interconnected relationship.

When we look at these issues more closely, we obviously have more alignment than misalignment between the U.S. and Canada around the ultimate goal in this whole debate and discussion: transitioning to low-emission vehicles and reducing the world's carbon footprint. Surely, both countries can find a way to work more collaboratively on this EV tax credit issue to construct good policy that works for Canada, the U.S. and the environment.

Moving beyond trade and towards the economies of the future, Canada must also develop a made-in-Canada supply chain, from mining to the manufacturing floor, for EV battery production. There is a large economic opportunity to position Canada as a leader in EV manufacturing and production while simultaneously reducing our carbon footprint to net zero. We need to continue to stand up for good Canadian jobs and fight unfair trade practices at every corner.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Strickland.

We're moving to Mr. Kingston for five minutes.

Go ahead, please.

[Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association]

Good afternoon, Madam Chair and committee members.

Thank you for the invitation to take part in your study here today on the Canada-U.S. relationship and its impacts on the electric vehicle, softwood lumber and other sectors.

The Canadian Vehicle Manufacturers’ Association—CVMA—is the industry association representing Canada’s leading manufacturers of light- and heavy-duty motor vehicles. Our membership includes Ford Motor Company of Canada; General Motors of Canada Company; and Stellantis, FCA Canada.

CVMA members are at the forefront of new automotive investment in Canada. Over the past two years, Ford, General Motors and Stellantis have announced $6 billion in investment, which will create 3,700 direct jobs and tens of thousands throughout the auto supply chain. Over $4 billion of that investment has been earmarked for electric vehicle assembly right here in Ontario.

These investments are part of an unprecedented technological transformation taking place right now in the auto industry. Automaker investments in electrification alone are estimated to be U.S. $515 billion over the next five to 10 years, with the number of EVs available to Canadians expected to reach more than 120 models by 2023.

The transition to electrification is simply not possible without ambitious government efforts to address the well-documented barriers to EV adoption. Reducing the price gap between EVs and a traditional internal combustion engine vehicle is the single most powerful tool to help consumers make that switch to electric.

For that reason, the CVMA is a strong supporter of proposals to spur the adoption of EVs. Without large-scale changes in consumer behaviour, supported by incentives, it will be impossible for the U.S. or Canada to achieve their EV sales targets of 50% of new vehicle sales by 2030.

Proposals like the U.S. EV tax incentive in the build back better act will support the transition to EVs, but since we don't know what a revised U.S. credit will look like, it's difficult to say at this point what the impact will be on Canadian production. We urge the federal government to undertake a detailed analysis of the U.S. EV tax incentive on the auto industry to help inform potential solutions and proposals.

As you've heard from some of the previous witnesses, the auto industry is highly integrated throughout North America, and due to that highly integrated nature, the CVMA and our member companies support policies that align with and enhance further North American integration. Given the recently implemented CUSMA, there is a strong argument to be made for an EV incentive that supports CUSMA-region EV production.

At the same time, we should be taking actions now to support the transition to EVs and enhance our competitiveness as a manufacturing jurisdiction. Competition for job-creating investment is fierce, and we need to get serious about creating a competitive manufacturing environment. We recommend the following actions.

First, match U.S. EV adoption policies. It's critical that Canada’s EV policies be aligned with those in the U.S. to support the consumer transition to EVs, including those on consumer incentives and charging infrastructure. Canada must be prepared to both continue and increase—

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

I have a point of order, Madam Chair.

The volume of the interpretation channel is much lower than the floor volume.

Thank you.

[The Chair, Liberal, Judy Sgro]

Just give us a moment.

Can you say a few words, Mr. Kingston, and we'll try the translation again?

[Brian Kingston]

I'm Brian Kingston, Canadian Vehicle Manufacturers' Association, coming to you from Ottawa....

[The Chair, Liberal, Judy Sgro]

Mr. Savard-Tremblay, do you have a headset there? Please put it on. That's wonderful. Thank you very much.

We'll try it one more time.

Mr. Kingston, would you say a few words, please?

[Brian Kingston]

Testing. Brian Kingston, Canadian Vehicle Manufacturers' Association, Ottawa, Ontario.

[The Chair, Liberal, Judy Sgro]

Thank you.

Is it okay, Mr. Savard-Tremblay?

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

Could you do the test again with both of you speaking at the same time? There was a slight delay. Could the test be done when there's simultaneous interpretation?

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

I'm testing simultaneous interpretation for Mr. Savard-Tremblay.

Monsieur Savard-Tremblay, please let us know if you can hear the French translation well.

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

That's much better.

Thank you.

[The Chair, Liberal, Judy Sgro]

Mr. Kingston, please continue for another two minutes.

[Brian Kingston]

Thank you.

My first recommended action is to match U.S. EV adoption policies, including those on consumer incentives and charging infrastructure. Canada must be prepared to both continue and increase its own consumer purchase incentive, iZEV, and to invest more in charging infrastructure if we hope to keep pace with the United States, boost EV sales and attract investment.

Second, we must maintain regulatory alignment with the United States. While much attention has been given to the U.S. EV tax credit and its implications for manufacturing here in Canada, the federal government is currently advancing policies that are a more direct challenge to Canada's competitiveness as an EV manufacturing jurisdiction.

Introducing a regulated zero-emission vehicle sales mandate and/or a border carbon adjustment will take Canada out of long-standing regulatory alignment with the United States. Canada's seat at the North American automotive table and the hundreds of thousands of jobs the industry provides depend on this ongoing alignment. The policies being proposed are more immediate threats to automotive investment, jobs and Canada's place in the emerging EV supply chain.

With that, I thank you for the opportunity to address the committee and look forward to any questions.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Kingston. My apologies for the interruption in your presentation.

We go now to Mr. Breton.

Go ahead, please, for five minutes.

[Daniel Breton, President and Chief Executive Officer, Electric Mobility Canada]

Can you hear me?

[The Chair, Liberal, Judy Sgro]

Yes. Please go ahead, Mr. Breton.

[Daniel Breton]

Good afternoon, everyone.

We want to thank the members of the Standing Committee on International Trade for taking the time to study how the United States' build back better plan may affect the electric vehicle, or EV, industry and its related sectors in Canada.

Founded in 2006, Electric Mobility Canada, or EMC, is one of the world's leading organizations in transportation electrification. Our members include mining companies; manufacturers of off‑road vehicles and light‑, medium‑ and heavy‑duty vehicles; electricity and charging infrastructure providers; technology companies; research centres; municipal governments; universities; fleet managers; unions; and environmental non‑governmental organizations, or NGOs.

Electric Mobility Canada is “the” national voice for transportation electrification.

Back in February of 2021, EMC fully supported the Canadian and U.S. governments' agreement—at the first bilateral meeting held virtually with Canadian Prime Minister Justin Trudeau and U.S. President Joe Biden—on the importance of the development of a zero-emission vehicle future and a battery strategy.

As noted in their official statement:

The leaders also agreed to work together to build the necessary supply chains to make Canada and the United States global leaders in all aspects of battery development and production. To that end, the leaders agreed to strengthen the Canada-U.S. Critical Minerals Action Plan to target a net-zero industrial transformation, batteries for zero-emissions vehicles, and renewable energy storage.

Later that year, the U.S. administration presented its build back better plan, with specific provisions on EVs. As soon as the plan was known, EMC was amongst those who alerted the Canadian government on the risk it could present to U.S.-Canada EV relations, to Canadian workers and to the Canadian automotive industry in general.

I will outline a few of the items in this plan that may be cause for concern.

One item is the adding of another $500 rebate to EVs using battery packs in which 50% of components, including cells, are made in the U.S. Since all EVs require battery packs, this means that the U.S. administration wants battery components to be made mainly in the U.S. This could hinder Canada's capacity to attract battery manufacturers to our country and therefore deprive us of a key part of the automotive industry of the future—battery development. Although Canada is not yet a critical minerals superpower, the potential is clearly there, with 31 critical minerals identified in Canada, experienced research teams and our qualified workforce.

Another item is that after the first five years a $7,500 rebate will apply only to U.S.-made electric vehicles, and this rebate will then be in place for another five years. Considering that nine out of 10 vehicles built in Canada are sent to the U.S., this proposal clearly poses a threat to the future of the automotive industry in Canada, since almost all vehicle manufacturers are announcing the end of internal combustion engine production in the next few years.

To demonstrate how fast the world market is adopting EVs, here is some up-to-date information on some manufacturers' plans for EV production. GM is aiming at 100% EV production by 2035. Stellantis/Chrysler is aiming for 100% EV production by 2028. Ford is aiming for 40% EV production by 2030. Nissan is aiming for 50% EV production by 2030. VW is aiming for 50% EV production by 2030. Also, let's not forget newer players like Tesla, Rivian and others, which are already exclusively electric.

Let's not forget the medium- and heavy-duty sectors as well. Companies such as Nova Bus, New Flyer, Lion Electric, Girardin, Taiga, Dana and BYD are now making electric buses, school buses, trucks or snowmobiles in Canada, and there is great potential for job creation. Some of these companies also partner with local suppliers, further contributing to growth by generating thousands of indirect jobs. For example, Lion Electric has approximately 300 Canadian suppliers.

While the focus is on light‑duty electric vehicles, it should be noted that the United States government's proposals in the build back better plan, or Buy American Act, may also affect Canadian manufacturing of electric transit buses, electric school buses, off‑road electric vehicles, electric vehicle charging stations and infrastructure, and research and development. Tens of thousands of current and future jobs in the electric vehicle industry could be transferred to or created in the United States, leaving Canada with crumbs.

The future of mobility is clearly electric, whether we're talking about light‑, medium‑ or heavy‑duty vehicles. The Government of Canada knows it. The industry knows it. The scientists know it. That's why Canada and Canadian industry members must work together to ensure that we have a plan to develop a thriving electric vehicle industry in collaboration with our American ally, such as the plan signed almost exactly one year ago.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Breton.

We move now to Mr. MacKenzie.

[Scott MacKenzie, Senior National Manager, External Affairs, Toyota Motor Manufacturing Canada Inc.]

Madam Chair, vice-chairs and members of the committee, thank you for the opportunity to speak to you on this very important matter.

I'm here on behalf of Toyota Motor Manufacturing Canada, and I have responsibility for external affairs for all of Toyota's operations across Canada, including our interactions and engagement with all levels of government.

TMMC has been building vehicles in Canada since 1988, and this summer we will build the 10 millionth vehicle in our history, expected to be our newly launched Lexus NX. We've been the largest automotive manufacturer in Canada over the past five years, and last year we were responsible for nearly 40% of all vehicle manufacturing in Canada, producing more than 427,000 vehicles despite significant well-known challenges to global supply chains. We employ more than 8,500 Canadians, and we're the most awarded plants in the Americas, and second-most awarded in the world according to J.D. Power and Associates' initial quality survey.

Since our inception in Canada, our mission has been to build high-quality vehicles for the North American marketplace. Since 1988 we've enjoyed duty-free access into the U.S. market, first through the Canada-U.S. FTA, then NAFTA and now CUSMA. Each of those successive agreements has allowed us to grow from a single plant producing 50,000 Corollas per year to three plants and two sites producing 500,000 vehicles per year. We are one of the largest Toyota plants operating globally and the largest Toyota plant in North America by volume.

We produce the best-selling non-pickup truck in North America and the two top-selling vehicles within our Lexus luxury nameplate. With the addition of the Lexus NX production in March of this year, we'll build hybrid electric versions of all of our vehicles on every line. We're already producing electrified vehicles in Canada in high quantities and will continue to do so as our products continue to progress along the electrification spectrum.

We're a Canadian success story. Last year, 87% of our production was exported to the United States. The U.S. market is roughly 10 times the size of the Canadian market and has a profound impact and effect on our Canadian manufacturing operations. We produce more than twice as many cars in Canada as we sell in Canada, and the latter total includes vehicles produced in the U.S., Mexico and Japan.

Continued preferential access to the U.S. market is essential for us to maintain our production profile and continued employment for our team members. There is no realistic scenario in which we can service the Canadian market only and retain our current production levels and levels of employment.

In recent years, even after the successful negotiation of NAFTA, we've seen increasing threats to our preferred access to the U.S. market. First it was through a different and more stringent interpretation of rules of origin by the USTR, and more recently it is through proposed legislation in the United States that would effectively give preferred access through consumer tax rebates for qualifying electrified vehicles produced by three specific U.S. headquartered companies, in clear violation of the CUSMA recently agreed to by both countries and Mexico.

The catalyst for most of this action is the clear recognition by both governments and industry that the future of automotive is electrified. The industry will be undergoing unprecedented changes as internal combustion powertrains are gradually replaced by electric motors and batteries. Each automotive company will have its own public position on the pace of electrification, some more aggressive and some more pragmatic, but there's no disagreement on the end goal of shifting to a carbon-free automotive future.

Inherent in this is the understanding that batteries—1,000-pound 100-kilowatt batteries—and more specifically the ability of companies to source or build them within North America will determine the future winners and losers in the automotive marketplace. Nations understand this, and the United States sees this as an opportunity to shift production of both automobiles and these new powertrains from lower-cost jurisdictions, such as Mexico and overseas countries, into the United States, thereby securing jobs and technology while reshaping the automotive landscape.

There is tremendous risk to Canada in this scenario, and if we're unable to maintain preferred access to the U.S. market and compete on a level playing field, investments will flow into the United States at the expense of Canada, and our industry will be further weakened.

Canada must enforce its trade agreements with the United States and build a Canadian value proposition that creates broader value within the North American marketplace. One way to do this is through the development of battery supply chains. This has been mentioned elsewhere, so I won't dwell on it, but we need to focus our energies on turning things in the ground into things that we can actually use. It's not enough to say we have lithium reserves in the ground in northern Quebec. We need to transform that natural resource into highly refined battery-grade material at a competitive cost. This could be a distinct advantage for Canada and a transformative opportunity for our natural resources sector.

At the opposite end of the electrification spectrum, we need to find customers for batteries in Canada. There's a perception in the public space that if Canada could secure a large-scale battery manufacturing operation, that would attract battery-electric vehicle assembly to Canada. This is completely backwards. We need to secure product mandates for electrified vehicles first. We need to establish a critical mass of hybrid, plug-in hybrid and battery-electric vehicle production at our plants in Canada to attract battery production mandates.

Batteries, by their nature, are very large and very heavy. The associated logistics cost to ship a battery over any great distance is much greater than that for the powertrains they are replacing. Once increasing volumes reach a critical mass, economics force companies to localize production close to the customer in order to overcome increasing logistics cost. This is how you attract battery plant investments, and further, how you find the true customers for your refined raw materials.

These logistics challenges—

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. MacKenzie, but I have to interrupt. Hopefully you can complete your remarks later when responding to the questions by members.

Mr. Wark, go ahead for five minutes, please.

[Shane Wark, Assistant to the National President, Unifor]

Thank you. Good afternoon, Madam Chair, members of the standing committee and other witnesses.

My name is Shane Wark and I am assistant to Unifor national president Jerry Dias. My responsibilities include oversight of negotiations for Unifor's 40,000 members working at the Detroit three and independent auto parts facilities. Joining me today is Unifor's director of research, Angelo DiCaro. Angelo oversees the union's work on the auto sector and trade policy. We thank you for the opportunity to speak today.

Unifor appreciates the committee's undertaking of this study on how certain U.S. build back better policy proposals will harm the Canadian auto industry—notably, the proposed EV vehicle rebate that applies exclusively to vehicles assembled in America.

I started working at Ford Motor Company in Windsor in 1994. Having been involved in the auto industry for more than 25 years, I can tell you that what drives production and investment into Canadian assembly plants is our ability to sell into the U.S. market. U.S. showrooms are the final destination for roughly 90% of passenger vehicles assembled in Canada. It makes sense. The U.S. market is significantly larger than Canada's. For example, in 2019, the U.S. sold 17 million new cars. Canada, by comparison, sold approximately two million new vehicles.

A subsidy of $12,500 to purchase only U.S.-built electric vehicles—which amounts to a subsidy of 22% for an average electric vehicle—not only cuts Canada out of the most important market but creates a strong disincentive to invest in Canadian electric vehicle production. As Canada is set to ramp up EV production in the coming years and seeks further investments to secure and grow our production footprint, this U.S. proposal comes at the worst time.

The challenge is that there is a lot to like about what the U.S. is trying to do. Getting more EVs on the road will require government support and purchasing incentives. The U.S. is clearly setting an ambitious benchmark. Ensuring that these subsidies help grow good, unionized auto sector jobs is an effort to support workers' fundamental rights. The trouble starts when Canada, the United States' number one auto trading partner, is treated as an afterthought. Resolving this matter is critical to our industry-building efforts.

We thank the federal government for its support so far, but there is still lots of work to do. The congressional bill has stalled, but we fear that a new bill will surface. Finding a permanent and durable solution is critical as we look for solutions to sustain work at, for example, the Brampton Stellantis assembly plant—a 3,000-worker plant that supports thousands of regional jobs, but according to various auto analysts, has no product allocation as of 2023.

It is also critical as our union begins preparations for the next round of Detroit Three negotiations starting in the summer of next year. You can expect that EV investment will once again be a key topic of discussion.

The federal government has to continue making the case at all levels of government for a Canadian carve-in to any U.S. rebate. At the very least, the federal government must present assurances to auto workers that any U.S. action is balanced by equivalent support for our own domestic investment.

Canada is on the cusp of something very special. We are positioning ourselves as a powerhouse nation for the future of auto manufacturing—at all stages of the supply chain, from the mining and processing of critical minerals to battery and component part production to final vehicle assembly. A stronger domestic supply chain will provide us greater leverage when dealing with isolationist trading partners like the U.S. now and in future.

Unifor is not celebrating the demise of President Biden's build back better program. In fact, the derailment of a nearly two-trillion-dollar economic growth package for our largest trading partner is bad news for Canada. But to ensure Canada doesn't get caught in the crosshairs, we need a proper industrial strategy, one that buffers us against trade threats and is built to support good jobs.

Thank you again for this opportunity. I look forward to taking your questions.