International Trade Committee on Feb. 2nd, 2022

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

Thank you for joining us today.

Mr. Vescio, has the government asked you how it could better assist the Canadian electric vehicle industry with respect to American tax credits or any other external threats? If so, I want to know your recommendations and whether they were well received.

[Gian Paolo Vescio]

First, I would say yes. The federal government is alive to this issue, like I said in my opening remarks. We've been working closely together with it and the embassy in Washington to be able to come in front of the lawmakers, in front of whomever this bill is going to be dealt with, in whatever new form it comes in.

I would suggest or continue to recommend that we ask the government to say, “Look, this is going to be a problem”. When this issue starts to rise, if we don't get in front of this now and if we aren't hypervigilant about it, we're going to have issues down the line because it's such a binary threat

Automakers, as my colleagues have said, are making decisions for the future now. My recommendations would be to continue the course, continue to make sure that first, we remind our American friends about our trading obligations to each other; and second, really remind them and make sure that they care about this issue in that this is going to affect them in an adverse way, if not a worse way than it affects us.

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

Mr. Vescio, on November 11, 2021, you participated in the focus group entitled Panels Title. During the discussion, a question was asked about the possibility of replacing raw materials and parts from Asia with raw materials and parts from a local supplier.

You said that Canada could do it, but that there were shortcomings. You also said that the Government of Canada should change its mindset and start looking for value in some areas other than just cost. Lastly, you said that the government should be able to control the process.

Where do you see the Government of Canada currently lacking leadership on this issue?

[Gian Paolo Vescio]

I would simply say that these issues aren't in a vacuum. Decisions by multinational corporations are not necessarily made with one issue in mind.

In understanding the value proposition in Canada, knowing that there are things in the ground that can go into the car is essential to understanding that investment here makes sense. I would say it's imperative for governments of both stripes, which we've been working with, on both the provincial side and the federal side, to understand that making our jurisdiction as attractive as possible, for all the reasons that everybody else on this panel has mentioned, is essential, and continuing to do that and continuing to sell Canada as the place to be for auto production.

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

Thank you, Mr. Vescio.

Mr. Kingston, in July 2021, the Stellantis group announced plans to build five battery manufacturing plants for electric vehicles. Of those five plants, two would be located in North America, and at least one in the United States. I find it inconceivable that Canada hasn't yet announced the construction of a plant, given all that Hydro‑Québec is developing in terms of batteries. In the end, Canada may not have a plant at all.

Does Canada's approach to attracting foreign investors lack leadership?

[Brian Kingston]

No, I think the federal government in particular has done a lot of work in attracting investment in the battery sector. We obviously don't know what the outcome of Stellantis's plans for a battery footprint in North America are, but I think there is great potential that we could at some point see a battery investment in Canada, for all the reasons some of the other witnesses have outlined. We do have all the materials; the supply chain is there. We have to move quickly to go from speaking about what we know the resources in the ground are to building mining capacity and, in particular, processing capacity to ultimately feed those plants and then go into final vehicle assembly.

I think the opportunity is there. I'm still hopeful we could see some investments made in Canada.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Martel. I'm sorry, but your time is up.

We move to Mr. Sheehan for five minutes.

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

Thank you, Madam Chair.

Thank you to all our presenters.

I just want to begin by talking about something that's in my backyard: the steel industry. We saw what happened when there was some American protectionism via section 232. That was imposed not only on steel but also aluminum. We all worked together as the trade committee. We went forward and had a real team approach. We got in the face, literally, of American legislators, businesses and unions, and we talked about it. Something we talked about was the supply chain and how that would affect the auto industry; and how many times a part, a piece of a car, crosses back and forth over the border, through the auto pact, and how that would inadvertently become a tax on Americans and have unintended consequences, including the effects of rising prices and such.

As we move forward with electric vehicles, we're starting to see investments happening in the Sault and Hamilton, where we're moving from coal-based manufacturing, as it relates to steel, to electric arc, reducing our carbon. Manufacturers and consumers, actually, are demanding that. I think you're seeing that increase.

We've seen investments in northern Ontario at First Cobalt up in the Timiskaming area, with cobalt sulphate manufactured to go into electric vehicles.

I want to pose my first question to the Canadian auto manufacturer of parts person who was talking about the auto pact.

What have been the benefits of this free flow of goods across the border? Where do you see it going in the future? I'll start with that question.

[Brian Kingston]

I'm sorry. Was that for you, Gian Paolo?

[Gian Paolo Vescio]

Was that for me, Mr. Sheehan?

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

Yes, please. Both of you can take a stab at it, if you like. That's fine. I would like those comments.

[Gian Paolo Vescio]

There's no secret as to how interconnected the American and Canadian auto sectors are. We will bully this point forever. I think we know where the future's going. I just had a daughter. She's eight months old and she'll probably never in her life start a car that goes v-v-v-vroom and then starts.

Understanding the importance of how our two countries have operated almost seamlessly as one sector for the last hundred years is imperative to the prosperity of us all in the sector. I think the government understands that. I think that's why they're extremely live to this issue with the build back better bill. I think we also need to take a step back and see that this bill is being brought with a plethora of other issues and measures in it. This EV tax credit is only one piece. We also have to be live to the political realities in the United States.

We're half way in the game here. We're probably at halftime in this process. We need to continue to make sure that both the American automotive sector and the American administration understand how imperative a measure this is and how it will affect them. Appealing to the American interest is the way we kind of drive this point home.

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

I'd just like to delve down into that. One thing we made sure to underline and highlight was China. China has certain elements of capitalism, but there's a lot of command-based economy whereby they subsidize their steel industry so much that it results in dumped steel. It was always our intention, and we always told the Americans, that we'll wall up together and have that wall in place.

My supplementary question is about China as a competitor as it relates to electric vehicles and how it would be beneficial for the United States, Canada and Mexico to be aware of that and to continue to work together. I say this because we all have things we bring to the table that make cars produced in North America the best cars in the world.

[The Chair, Liberal, Judy Sgro]

Who would you like to answer that question? You have 11 seconds remaining.

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

That may have been more of a statement, too. I see a lot of heads nodding in agreement. I'll leave it at that.

Thank you, Chair.

[The Chair, Liberal, Judy Sgro]

We'll go on to Monsieur Savard-Tremblay for two and a half minutes.

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

Thank you, Madam Chair.

I just want to finish the conversation that Mr. Breton and I started earlier.

Mr. Breton, you were right to bring up the topic of minerals and batteries. I wanted us to address this issue and not just the vehicle sales aspect of it.

What's the underlying issue?

You said that it's a matter of security and geopolitics. I would like the committee members to understand how critical this is.

[Daniel Breton]

We often tend to think in terms of critical minerals, electric vehicles and renewable energy. However, in reality, there are a whole host of electronic products that require critical minerals, such as the computers that we use today and televisions.

Also, one aspect that really shouldn't be overlooked, and the Pentagon has already talked about this matter, is the weapons issue. On a strategic level, it's important to control the extraction and processing of critical minerals, not only for use in the economic and energy transformation associated with transportation electrification, but also for weapons purposes. At Electric Mobility Canada, we see this as a national security issue.

We know that most processing of critical minerals is done in China. We need to talk about weapons and the military sector. This whole other aspect isn't talked about enough and can become a trump card for Canada. If we want to help develop an American electric automotive industry with Canadian critical minerals, we're saying that we can be partners, not only because we want jobs in the automotive industry, but also for national security and weapons reasons. The Americans are extremely sensitive to this issue, particularly because of their current relationship with China.

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

Based on your conversations with American officials, where are things getting stuck?

Does the United States feel that it can manage this alone?

[Daniel Breton]

We think that the United States is currently making plans that more closely reflect domestic politics. In other words, this is more about partisan politics than about a vision for the future of the United States. This undermines a vision for the future of North America, not only in terms of the environment, but also in terms of strategy and national security.

We need to help American elected officials understand that collaboration is in the best interest of Canada, the United States, the environment and national security.

[The Chair, Liberal, Judy Sgro]

Thank you very much. Your time is up, sir.

Mr. Masse, you have two and a half minutes, please.

[Brian Masse, NDP, Windsor West, ON]

Mr. DiCaro and Mr. Wark, the Auto Pact has been raised here. The Auto Pact was negotiated as an international agreement between Canada and the United States. Where do you think we are now versus what we gave up with NAFTA and other negotiations? Right now, we've actually kind of returned to a lower position, in my opinion.

[Angelo DiCaro]

I can take a first stab at that, Mr. Masse, and then maybe Shane will jump in.

It's a bit of an open-ended question. There's a long history to the Auto Pact. To some extent, right now we're dealing with the product of that decision we made in 1965 to build an integrated North American industry. I guess that works insofar as the bigger trading partner of the two is well aligned with principled approaches to the free movement of goods between borders, but the minute they want to close down, it changes the calculus.

Really important pieces of the Auto Pact were the individual covenants that were struck between each of the OEMs, the automakers, to commit them to value-added production in Canada and so forth. Of course, all of that managed trade approach died away under NAFTA and then was firmly destroyed under the WTO.

So we're swimming in murky waters. Again, it kind of gets masked when the U.S. is willing to play ball, but when they don't want to anymore, we have a bit of a rethink about how we approach trade. I won't get into a long diatribe on this, but we talk about industrial policy and we talk about the situation we're faced with now. If trade policy isn't factored into that larger conversation of a suite of things we have to consider about how we move forward effectively, I think we're missing a key piece of this.

I don't know if Shane wants to supplement that.

[Shane Wark]

Yes.

[The Chair, Liberal, Judy Sgro]

You have 20 seconds, Mr. Wark.