International Trade Committee on Nov. 1st, 2022

[Matt Poirier]

That's a great question.

We've been focusing a lot on auto. That's what a lot of these proposals are targeted towards. All of manufacturing is being peeled away. We have energy production, mining and auto. Canada's response to the IRA needs to take into account all of these other sectors of the manufacturing industry, as a whole. That would be our primary concern.

I look at this rather simply, too. The U.S. has turned on a shop vacuum to suck up incentives, and we're standing here with a dustbuster. We have to make a decision. Are we going to try to match it or at least compete with that, or are we going to let all the investment go south?

When we focus on this, we have to take into account all the sectors, and particularly envision the SME manufacturers that are going to be part of these supply chains. They might not be able to avail themselves of programs like the SIF. That's why we're focused on not just matching the U.S. programs with our equivalent programs, but coming up with new ones to account for all of these new incentives that have been thrown out there by the States.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Would any other witness like to add to this?

Go ahead, Mr. Kingston.

[Brian Kingston]

Our emphasis has obviously been on auto and how to respond to the specific opportunities that may arise for new investments in Canada. We think the best approach to doing that is using the existing programs we have. Use the SIF. Make sure that if a company is considering Canada, we are offering a package comparable to what they could receive in the United States. You can calculate it relatively easily through this section 45X production tax credit.

That's the key. We have to be offering something comparable if we even want to be in the conversation.

[Catherine Cobden]

May I weigh in as well?

[Wilson Miao, Liberal, Richmond Centre, BC]

Yes, of course.

[Catherine Cobden]

We haven't specifically talked about this yet around this table today, but there are a couple of other features in the IRA programmatic suite, if you will. They are worth considering and get to your question about ensuring we're maximizing benefits and moving forward.

One is the application of support mechanisms specifically for the operation of these climate solutions. In Canada, a lot of our programs are targeted towards capex. In the U.S., they've extended the envelope to also focus on opex. I think there's good value in that. That would be very helpful in Canada.

The final point I want to make is about another benefit of the IRA for all industry. The U.S. is now turned on, and we should see breakthrough solutions come forward. We may want to be strategic in Canada and think about what we can do to foster adoption as those breakthrough technologies come forward.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

I'd like to address the following question to Mr. Volpe.

I was looking through some of the statistics published on your website. It says that in 2018, automotive parts shipments were worth over $35 billion and the industry employment level was over 100,000.

Do you have an early or rough estimate of how these figures may be impacted in future years by the IRA? What is the rough timeline for when your members might begin to feel the impact of this new act?

[The Chair, Liberal, Judy Sgro]

That's a long question. We need a brief answer.

[Flavio Volpe]

The characterization that the IRA is going to negatively affect the industry is not one I agree with. There are threats, so to link a prediction on employment.... I'd rather link our prediction on employment to investments that have been announced by the five manufacturers in Canada in the last 18 months, and to the ones we think are going to land in the next six to 12 months. That's going to have a positive effect, because you need more people to make more stuff.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We have Mr. Seeback for five minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I want to expand a bit on where Mr. Baldinelli was going.

It seems to me that we're in a very reactive space in Canada on a lot of these issues. We don't have a cohesive strategy to deal with the myriad of issues coming up, whether it's manufacturing vehicles or manufacturing steel.

We're talking about the IRA. To me, it raises these questions: Does Canada need a far more focused approach to all these issues to preserve manufacturing in this country? Do we need a real strategy from the government on EV manufacturing, a critical mineral strategy, an energy strategy that keeps energy affordable and a strategy on affordability? You were talking about the OBPS and these kinds of things.

At the environment committee, I asked whether Canada had costed out the EV structure to build the EV network across Canada. I was told, no, they haven't done it. Where's the long-term thinking?

Catherine, Brian and Matt, would you comment on that? I think it's critical that the government revise how it's doing this piecemeal stuff and come up with a robust strategy to preserve Canadian industry.

[Catherine Cobden]

Certainly, strategies need to evolve and keep pace. As I tried to reference in our remarks, we've seen a big shift. Something really big has happened with the IRA in the U.S., so we need to be very strategic in our response to that.

As for the evolution of our strategy, I think you're right. The area we need to put some urgent attention on is industrial competitiveness as industries transform in a net-zero economy. How are we going to do that, measure that and ensure it's happening?

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Brian, I think you said there's a new American approach to manufacturing and industry. The IRA is not just a bunch of tax incentives. To me, it's an overhaul of how they're doing business. I think we need a similar approach in this country that's not just reactive with some tax credits here and there.

[Brian Kingston]

Yes. The U.S. is taking a new approach to industrial policy, and that's what we see articulated in the IRA.

I would argue that we have to go even further than a strategy when it comes to auto and the EV transformation. We need action. We know what needs to be done. We need to double our electricity capacity. We need far more charging infrastructure. We need to provide incentives to consumers. It's not as though we need to come up with a new strategy. We need action on the things that have to be done to make this transition possible and feasible.

There has to be coordination among all the different government departments with a role to play in this—Environment Canada with advancing a sales mandate, Transport Canada with incentives and NRCan with charging infrastructure. Let's pull that all together and start moving with some urgency to make this transition happen.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Go ahead, Matt.

[Matt Poirier]

I think I was going to get whiplash nodding in agreement.

For years now, CME has been calling for an overarching industrial strategy for Canada. To Brian's point, we have that.

The Monique Leroux report consulted with industry and all the players last year. It's on the shelf collecting dust right now for some reason. There's a blueprint included in there to give Canada the industrial strategy it needs to coordinate all this activity. We can move away from the reactive, responsive “chasing cars” attitude or standpoint of industrial policy and actually have a plan so that when these things come, it's just about calibrating and reacting rather than having a whole “the sky is falling” attitude.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

You're saying that the road map exists and what we actually need is action.

[Matt Poirier]

Yes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

We had CN here, and it took 10-plus years to get a container yard done. How much of a problem are the gatekeepers that are making all these projects almost impossible to put forward?

I'll take a quick answer from any one of the three of you, or from all three

[Catherine Cobden]

I can take this.

We don't build new steel plants, unfortunately. Perhaps it would be great to do so. What we hear from people who supply to us is that the approvals process is highly problematic and takes decades. It needs to be reviewed for us to find the right balance among engagement, consultation and finally execution.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I know I'm out of time.

Matt, could you please submit that report you mentioned to the committee?

[Matt Poirier]

Yes.

[The Chair, Liberal, Judy Sgro]

Thank you.

Ms. Dhillon, please go ahead for five minutes.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you, Madam Chair.

I'll start my questions with Mr. Volpe.

As you know, Minister Ng always works to ensure that Canada has reciprocal trading relationships with its trading partners. In the automotive sector, during the manufacturing assembly process, parts cross the Canada-U.S. border numerous times.

Can you please tell the committee what prior concerns the automotive parts manufacturers had that were alleviated with the signing of the Inflation Reduction Act, and about the changes you saw before and after?