International Trade Committee on Nov. 1st, 2022

[Flavio Volpe]

I feel like Simon Cowell now. Do I get the last vote? Do we go to Hollywood, Brian?

I'm not a politician, so I get to say what I think. I don't have to worry about the balance.

Where the answer comes is in the balance. We talk about austerity. We're going into this fall economic statement and we're all saying, boy, the finance minister better cut a whole bunch of programming. Then we say that maybe we can match proportionally the American trillion-dollar investment. You can't have it both ways.

In our business, it's very simple. If team Canada is chasing a Volkswagen investment or a Mercedes investment, we know that the offer based on the American formula might be x. What we've said to them and to the province is to make sure they match that or are competitive on that. You don't have to cast a wide net with a $100-billion allocation because we don't have it—or $50 billion or $10 billion.

I say that from experience. I worked at Queen's Park, as some of you know, in the McGuinty government. We had the Next Generation of Jobs Fund. We said, “Here's the net. Please, fish, swim into it.” It doesn't work that way. What I think we should do and what's been successful over the last year or so is spearfishing. Choose the one you want to go after and just make sure you get it.

[Brian Masse, NDP, Windsor West, ON]

Really quickly, because I don't have much time, I'm going to go in reverse order. Sorry to the other guests, but I'm big into auto. This is important.

If I could, I'd like a yes or no. Should we match the consumer incentives that the U.S. is now offering?

They changed theirs. They included some used batteries and so forth. A good example is that the Chrysler minivan that's built in my riding gets a better incentive from the U.S. than it does from Canada. Should we be looking at matching the consumer incentives?

I'll start with Mr. Volpe, then go to Mr. Poirier, Mr, Kingston and Mr. DiCaro. You'll have to be quick to make it in time.

Mr. Volpe, go ahead, please.

[Flavio Volpe]

You started with the wrong guy.

If we're going to do what we do now, which is sell most of our cars to the U.S., it's not as important. If we want to be in a scenario where we build where we sell, then yes, we need to have more competitive incentives here because they just aren't competitive.

[Brian Masse, NDP, Windsor West, ON]

Go ahead, Mr. Poirier.

[Matt Poirier]

My quick answer is yes.

[The Chair, Liberal, Judy Sgro]

Okay. Thank you very much. I have to move on.

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

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

Thank you to all the witnesses for being with us.

Mr. DiCaro, last winter, we conducted a study on electric vehicles. One of the recommendations in the report was about the importance of building a strong supply chain, from ore extraction to lithium ferro phosphate battery production and electric vehicle production here, in Canada.

It seems that we are taking too long to build this chain in Canada. I would like to know what factors make Canada less competitive on the world stage in terms of producing these batteries.

[Angelo DiCaro]

If I understand the question, you're asking what factors make us less competitive. I would say—and maybe I will sound like an auto sector salesperson here—there's no reason why Canada can't be among the most competitive jurisdictions in the world.

When you think about all the ingredients we have—from natural resources to the existing capacity and networks, all the way up to maybe the most important asset, which is a skilled labour force—I think, as we said in our recent auto sector policy, which was released in August, Canada should be aspiring to be a powerhouse in this space. Critical minerals are just one key pillar of that strategy.

The time scales that are presented to us about how quickly and, frankly, how inclusively we bring these mining projects up to speed, including through careful consultation with indigenous communities in this space, are vital, so not doing that right could create a problem for us. I'll give the benefit of the doubt to government that we're moving in the right direction, but maybe in those cases not doing things properly could pose a problem.

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

If I understood correctly, the factors you mentioned would allow Canada to perform better in the face of competition from other countries. Is that correct?

You mentioned some factors, but my question is the following: what would allow Canada to perform better in the face of competition from other countries? You say we should have everything it takes to do so.

[Angelo DiCaro]

That's right. I guess one of the key pieces is how we strategically put all of those components together. I think one of the dangers we face is that we're attempting to build a sector and see it grow significantly but absent is a coordinated strategy in which various policies will intersect with one another, from climate policies and purchasing incentives all the way to industrial strategies in manufacturing development.

I would invite others on the panel to weigh in on this, but in some cases some of the policy development we have been seeing suggests that there's a bit of a misalignment about what the goals are. I think one of the barriers we face in this case is making sure that we're all singing from the same song sheet and that all governments are coordinated as closely as possible to make sure this happens.

I would say that falls on us in a lot of ways. Of course an active government policy with investment subsidies, as has been the case for generations, will continue to be the case, and I think that's what the discussion is focused on today.

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

That's interesting.

Unifor's mission is to keep the Canadian manufacturing sector strong. Could the tax credits in the U.S. Inflation Reduction Act of 2022 hurt the Canadian supply chain for zero‑emission vehicle batteries?

[Angelo DiCaro]

This may be the most lucrative space there is right now in developing a clean economy. Canada has proven that we have the capacity to grow the sector. I think we have to not kid ourselves into thinking that every auto-making nation around the world has the same ambitions we do. The difference is that maybe a lot of those auto-making nations aren't equipped with all of the ingredients they need to build out full-blown supply chains within their domestic markets.

There's going to be a huge competition for these critical investments that will stabilize the industry, with the assembly mandates and precursor materials that will be coming online. Since we know that others also want what we want, making sure that we have ourselves in the game for all of those things is going to be vital.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We will move to Mr. Virani for five minutes, please.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you.

I'm going to go a bit quickly, and I will ask the various witnesses to keep their responses to about 60 seconds.

I'm going to start with Mr. Volpe.

We've talked a bit about supply chains. They just came up in the last answer by Mr. DiCaro, and Mr. Carrie had questions about them. I feel like you highlighted the fact that it's difficult enough to deal with a neighbour that's 10 times our size, but when we have “own goals” and economic blockades of things like the Ambassador Bridge, as we saw earlier this winter, what do they do to the supply chains that affect your industry and to things like just-in-time delivery? How do they affect our relationship with the U.S.?

[Flavio Volpe]

I think you know that I was the plaintiff on the emergency court order that cleared that blockage, and I did it on behalf of the companies I represent and some of my colleagues who are here before the committee.

I said then and I'll repeat now that if we don't have our security strategy and security tactics in line with those of the United States and we allow dozens of people to cost us hundreds of millions of dollars a day in our most critical industries, then we undercut our ability to sell to the Americans. We are part of their critical minerals and energy security strategy.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you, Mr. Volpe. I'm just going to move on. I apologize.

I'm going to turn to Mr. Kingston from the Canadian Vehicle Manufacturers' Association.

You and others have talked about a team Canada approach, and I couldn't agree more comprehensively. We see on things like tax credits a bit of a checkerboard, unfortunately. We see pretty aggressive stuff at the level of our federal government and we see somewhat aggressive actions taken by B.C. and the Government of Quebec.

We've seen a complete step-back on the part of what represents the largest auto industry in the country, which is in the province of Ontario, dating from the 2018 election. How do you respond to that kind of effort in terms of the team Canada approach you're promoting?

[Brian Kingston]

I completely agree. We need stronger consumer incentives across the board, including in the province of Ontario, the largest auto market we have in Canada. We do not have an incentive there. That's where our concern with the zero-emission vehicle sales mandate comes in, because the government wants to hit these targets and regulate sales, yet we have a patchwork of incentives that, across the board, are lower than what they have in the United States.

[Arif Virani, Liberal, Parkdale—High Park, ON]

I will turn to Ms. Cobden.

I agree with you completely on the green procurement piece. I feel, however, that there seems to be a bit of synergy now that we didn't see before. There's a very aggressive climate activist government in the United States dealing with a Canadian partner that's already taken a lot of steps and a lot of measures.

Where I would express some polite disagreement—and you can educate me otherwise—is with your statement that your industry is trade-exposed. My understanding is that with the output-based pricing system, the way the carbon price is calibrated is meant to protect trade-exposed industries such as steel.

Is that mechanism doing the work it's meant to do? If it's not, please explain to us how we could tweak it.

[Catherine Cobden]

To be clear, that is a construct of the OBPS, and we need to ensure that it does not.... I am putting on the table that it's quite critical that we continue to put our trade exposure centrally into the conversation about how the regulations are developed.

Currently we see proposals that are worrisome. However, we are going to be optimistic that we will remember the trade exposure of the steel industry as we look to update those regulations.

As you may be well aware, a Canada Gazette notice was put out on Friday. It didn't say “we won't modify your stringency and we won't reduce your standard”. Instead, it said that we would study it further.

What I want to put on the table in response is that we must remember our trade exposure. Otherwise the competitiveness hit on the industry will be insurmountable.

[Arif Virani, Liberal, Parkdale—High Park, ON]

I think I have about 50 seconds left. I will put something to Mr. DiCaro.

I think it's helpful to have Unifor here, particularly when the notwithstanding clause is being used pre-emptively by the Government of Ontario to affect unionized workers in the education sector.

Can you elaborate on your views on critical mineral battery production here in Canada and how we can empower domestic production to be developed further here?

[Angelo DiCaro]

Very quickly, I think we know there is going to be a lot of capacity needed in this space for battery manufacturing. As others have mentioned, landing these factories in Canada is going to be vital, not just for the growth of the supply chain domestically but also since, as you have to understand, there is going to be quite a bit of disruption because of this transition for workers who are currently building parts that are not going to be needed in these new electric vehicles.

These battery facilities are massive constructs that could have thousands upon thousands of people, and they serve as really important landing zones to support a transition. We need workers supporting what's going on rather than being victims of this transition.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Monsieur Savard-Tremblay, go ahead for two and a half minutes.

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

I want to ask the same question as earlier, but in a slightly different way. It will be for Mr. Kingston this time.

Do you share this concern of a pending relocation, given the U.S. Inflation Reduction Act of 2022?

[Brian Kingston]

I think we're in a good place with our existing automotive footprint and the recent investments that have been announced. Canada is very unique and fortunate to have five OEMs investing in building vehicles in this country. That said, we have both an opportunity and a challenge. The challenge is with the battery assembly. The size and scale of section 45X make it extremely challenging for Canada to compete for new investments in battery cells and modules.

The opportunity is in critical minerals. The U.S., particularly through the Defense Production Act, is looking to secure—and you have to look at this through a security lens—a North American supply chain for these inputs. Canada, through the lens of the Defense Production Act, is considered the domestic source.

If we get our act right and together on critical minerals, we will have a huge opportunity here in Canada.

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

Do your members include manufacturers of heavy‑duty vehicles, or are they all light‑duty vehicle manufacturers?