International Trade Committee on Nov. 1st, 2022

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

I call to order meeting number 34 of the Standing Committee on International Trade.

Today's meeting is taking place in a hybrid format pursuant to the House order of June 23, 2022. Therefore, members are attending in person in the room and remotely using the Zoom application.

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

Please wait until I recognize you by name before speaking. When speaking, please speak slowly and clearly. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking.

With regard to interpretation, for those on Zoom, you have the choice at the bottom of your screen of Floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

As a reminder, all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can, and we appreciate your patience and understanding in this regard.

Go ahead, Mr. Tremblay.

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

Madam Chair, could you confirm that the witnesses have completed the required sound checks so that there will not be any problems with interpretation?

[The Chair, Liberal, Judy Sgro]

Yes, they were.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Should any technical challenges arise, please let me know. We will suspend for a few minutes to ensure that members are able to participate fully.

It's great to see some of our witnesses physically here with us.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, September 20, 2022, the committee is beginning its study on potential trade impacts of the United States Inflation Reduction Act of 2022 on certain firms and workers in Canada.

We have with us today, from the Automotive Parts Manufacturers' Association, Mr. Volpe, president, by video conference. From Canadian Manufacturers and Exporters, we have Matt Poirier, senior director of policy and government relations. From the Canadian Steel Producers Association, we have Catherine Cobden, president and chief executive officer, and Daniel Kelter, director of trade and industry affairs. From the Canadian Vehicle Manufacturers' Association, we have Brian Kingston, president and chief executive officer. From Toyota Motor Manufacturing Canada Incorporated, we have Scott MacKenzie, director of corporate and external affairs, by video conference. Finally, from Unifor, we have Angelo DiCaro, director, by video conference. He comes to see us often from the research department.

Welcome to all of you. Thank you so much for making the time to see us today.

We will start with opening remarks from everyone.

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

[Flavio Volpe, President, Automotive Parts Manufacturers' Association]

Thank you, Madam Chair. I thought I had the whole two hours to do this, so now I'll have to abridge it. I'm teasing, of course.

It's always a pleasure to be invited to committee, and it's always a pleasure to speak with the committee and my colleagues about the impact of trade policies, especially U.S. trade policies, on the Canadian industry.

The Inflation Reduction Act of 2022 is a correction to a proposal in the build back better plan that scared the hell out of the industry in Canada. I'll speak for the part that I represent: the automotive parts manufacturers industry.

We represent hundreds of companies with just over 1,400 factories that employ 1,000 people in the direct manufacture of parts, systems and tools in Canada. Approximately 52% of what we produce in a normal, non-COVID year goes to factories producing vehicles in Canada, and about 48% of that goes to exports. In a normal year, 95% or more of exports go to U.S. automotive production. That's important context because about 85% of the cars made in Canada that we supply get exported to the U.S. market. Even though two million cars get made in Canada in a normal year and two million cars get sold in Canada in a normal year, there isn't a very strong relationship between the consumer market and what we manufacture.

The most important metric to find out how healthy the Canadian auto parts and tooling sector is going to be in any given stretch—short, mid or long term—is what the U.S. market is going to do. In the U.S. market in 2021, the U.S. President announced that their targets for EV adoption would be 50% of the market by 2030. Then, in the build back better plan, there was a proposed extension for 10 years, from 2021 to 2031, of a $7,500 EV cash credit. Added to that was a $4,500 credit for vehicles produced only in U.S.-based, labour-organized shops and an extra $500 for vehicles with battery cells that come from U.S. locations. The grand total of that was to be $12,500 for any vehicle purchased, or approximately one-third of the average vehicle sale price in the U.S.

On that timeline, in 2027, all of those pieces—the three pieces of that $12,500—would only be applied to vehicles made in the U.S. Therefore, for automotive parts suppliers who supplied production in Canada and relied on those investments being solid in Canada, where more than half of our production went, it was a sign that by 2027, a lot of our production and prospects would disappear if American consumers were incentivized at this unprecedented level to buy American-made cars.

Never mind that it violated the spirit of the new NAFTA, the CUSMA. It also violated the spirit and letter of WTO obligations. We spent a lot of time meeting in Washington with senators and congressional representatives from other auto states. I met 10 of them in person, most of them Republicans, hoping that the Senate vote might tilt in a different direction. We met with the White House economic advisers as well, and we joined this team Canada effort with a whole bunch of people who are on the screen with me today, as well as Minister Ng, Minister Freeland and the Prime Minister, in an effort to flip it around.

The new act adds one word, “north”, to “must be made in America”, and it changes that threat for us. Canadian cars and Canadian production having a home with an American consumer who dictates our future is the most important part.

There is one piece of the bill that gives us some concern, and we will continue to study, monitor and meet with our colleagues in the U.S. on it. It is credits for the production of battery cells, battery modules for critical materials and electrode-active materials that right now create a highly competitive advantage for the attraction of battery manufacturing investments in the U.S. versus in Canada. We're in direct contact, of course, with our Canadian government as well as our automaker customers on the implications of that and on how we make sure that Canada remains competitive in the case of battery investments.

The bottom line is that the IRA changed the threat of build back better, or what I call the biggest existential threat to Canadian parts production in a generation. I'm very happy to see the changes.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Volpe.

Mr. Poirier, please go ahead for five minutes.

[Matt Poirier, Senior Director, Policy and Government Relations, Canadian Manufacturers and Exporters]

Good morning. It's my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss the impacts of the U.S. Inflation Reduction Act on Canadian manufacturing.

The manufacturing industry directly generates 10% of Canada's GDP, produces nearly two-thirds of Canada's value-added exports and employs 1.7 million people in high-paying jobs across the country. Canada's manufacturing industry is highly integrated with that of the United States, and so much so that we really do not trade with each other; rather, we make stuff together. This is why it is vitally important that we maintain a level playing field between Canada and the U.S. when it comes to business incentives. If we do not strike that balance, investment will simply flow south of the border.

I'm joined on the panel today by my colleagues from many of Canada's key manufacturing industrial sectors and from organized labour. We are all united in our concern with the Inflation Reduction Act. We are concerned that this bill, in addition to other American initiatives that were recently announced, has radically increased the amount of money the U.S. government is pouring into their manufacturing companies. We're concerned that this could trigger a flight of capital investment out of Canada and into the U.S. We're also concerned that this could result in fewer manufacturing jobs here in Canada.

If we allow this to occur, we will undoubtedly see a decrease in Canadian manufacturing input. Seeing as two-thirds of Canada's global exports are manufactured goods, the economic losses would be felt dearly on the trade front.

Here's how we stop this from happening.

Number one, the government must eliminate the gaps between new U.S. incentive programs and their Canadian equivalents. We can get into details on these in the Q and A, but there are several key areas in the Inflation Reduction Act that must force a Canadian response. These are the extension of advanced manufacturing tax credits, in section 48C;the enhancement of the carbon capture, utilization and storage tax credits; new clean energy incentives for emission reductions; and, finally, modified U.S. domestic content provisions.

We know that the federal government is crafting the Canadian response. That's good, and CME strongly supports this work. Ideally, the fall economic statement on Thursday will take the opportunity to announce our government's matching programs. At a bare minimum, we urge the government to signal to industry that a fix is on the way.

Number two, the government must redouble their diplomatic efforts with the U.S. to tamp down buy American threats and promote buy North American approaches. Building on our industry's recent successful collaboration with the Canadian government to fight the Build Back Better Act, we need to adopt our team Canada approach once again.

Number three, the government should extend and expand the reach of the accelerated investment incentive—also known as the ACCA—in the fall economic statement. This investment vehicle has been used by manufacturers to make critical investments into their businesses. We were not able to take advantage of the entire five-year span of the program because of the pandemic. Extending and expanding the scope will give industry a much-needed leg up on their U.S. competitors.

Last, we must grow Canadian manufacturing to grow Canadian exports. As CME has said here before, our lacklustre export performance is tied to the fact that Canada's manufacturers are at capacity. We must get the government to partner with industry to tackle our biggest challenges. If we can reduce our labour shortages through more immigration, alleviate supply chain disruptions by investing in critical trade infrastructure and incent our manufacturers to invest in their net-zero transition and in productive automation, then we will grow our manufacturing industry and, by extension, our exports.

In conclusion, manufacturers are very concerned with the negative impacts of the Inflation Reduction Act's incentives. Unless Canada matches them, our sector's ability to compete with the U.S. on an even footing will be weakened. We must quickly introduce a suite of incentives that will narrow this gap. This will be seen as a sound investment in our industrial competitiveness, which will set us up for economic success for years to come.

Thank you. I look forward to the questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Ms. Cobden, please go ahead for five minutes.

[Catherine Cobden, President and Chief Executive Officer, Canadian Steel Producers Association]

Good morning. It's wonderful to be back in person. Good morning to those out in virtual land. Daniel and I are very pleased to be here with you.

I'm here to talk about Canada's steel sector and the implications we see with the IRA, but just to remind you, we support 123,000 jobs across the country and play a very strategic role in the North American economy. We are an advanced manufacturer of a 100% recyclable material, and we are a critical supplier to many key North American sectors, including automotive, energy, construction and many other manufacturing applications.

As this committee knows well, we're highly integrated across North America, and the North American steel industry benefits from CUSMA and from steel products being traded fairly across our borders. The North American steel industry, however, is highly trade-exposed to unfair trade practices with an excess steel capacity of over 600 million tonnes, meaning that a lot of extra steel is looking for a home.

Canada's steel producers also embrace the green agenda. We make some of the greenest steel in the world, but we're not standing still. Recent announcements suggest that we're going to be over 45% below 2005 levels by 2030, and these are tremendous advancements.

The Inflation Reduction Act signals an important shift by our largest trading partner towards both fostering energy security and addressing the climate challenge. It builds significantly on policies and approaches that we must pay attention to. These developments will create opportunities for and threats to Canada, and it's very good to see this committee investigating.

To state the obvious, the IRA takes an enabling approach to the climate change challenge. A carbon price is not envisioned. In contrast, over the next eight years, the Canadian steel industry will face significant increases in carbon costs with carbon pricing rising to $170 a tonne by 2030. While Canadian and U.S. producers share a very strong track record of being the greenest and strongest climate performers, U.S. producers will be getting the benefit of the IRA investments and climate subsidies without facing an equivalent carbon cost, which will be in the billions of dollars.

Given the scale and breadth of the incentives in the IRA, we're also facing the increasing risk of failing to attract the significant investments required to decarbonize. While we have announced over $3 billion in investments in partnership with the federal and provincial governments, we still have a long way to go to reach our mutual goal of net zero. We are definitely competing in a global race to attract this investment so we need to take note.

We don't expect a dollar-to-dollar response with the U.S., but we do believe that Canada must further incentivize our capacity to both adopt and operate climate solutions such as hydrogen, renewable fuels, cleaner grids and so on, while at the same time looking to create market pull for green products.

We note that the IRA incentivizes additional green procurement policies, and it's built on top of domestic content requirements that create market pull for U.S. steel and other products while the Canadian ones are at a disadvantage. By contrast, we do not yet have procurement policies in Canada, and as a result, green steel is losing market share today to high carbon-intensive imports from foreign jurisdictions. We also see the U.S. directly linking trade policy to climate policy. A notable example is the global arrangement on sustainable steel and aluminium.

The U.S. has signalled climate change is a priority, and many of our products share a strong green track record, so I ask, is this an opportunity to further strengthen our relationship?

In summary, we think the IRA provides Canada with an opportunity to both reimagine our relationship with the U.S. and rethink here at home whether we struck the right balance between the regulatory side, investment supports and the full suite of policies we need to deliver climate action.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Cobden.

Mr. Kingston, please go ahead for five minutes.

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

Good morning, and thank you for the invitation, honourable members and Madam Chair, to be part of this very important study on the Inflation Reduction Act.

The Canadian Vehicle Manufacturers' Association is the industry association representing Canada's leading manufacturers of light and heavy-duty motor vehicles. Membership includes Ford, General Motors and Stellantis, which is also known as FCA Canada.

The auto industry is responsible for over $13 billion in annual economic activity, 117,000 direct jobs and 371,400 jobs in the aftermarket services and dealership networks. It's Canada's second-largest export sector, with over $36 billion in exports last year. The overwhelming majority of that, of course, was destined for the United States.

The IRA is the most significant development for Canada's auto industry since the passage of the Canada-U.S.-Mexico trade agreement. The commitment of more than $370 billion U.S. to fight climate change, including major new incentives and tax credits to support ZEV manufacturing, plant retooling, the development of a domestic U.S. supply chain from mining to battery cells, consumer supports and charging infrastructure, is really the underpinning of a new American approach to industrial policy. It must be carefully considered as Canada navigates its own transition to a zero-emissions future.

The funding included in the IRA is in addition to $110 billion U.S. in climate and energy spending that was signed into law as part of the Infrastructure Investment and Jobs Act. These two acts combined dedicate $41 billion U.S. to transportation. That includes EV adoption and things such as charging infrastructure and incentives, as well as $71 billion U.S. to advanced manufacturing. This includes EVs and battery manufacturing.

As we've heard from other witnesses, Canada may not be able to match the U.S. on a dollar-for-dollar basis when you look at the size of those incentives. We believe that incentives and policies targeted at the right segments of the EV supply chain are necessary to level the playing field. We're recommending action in three specific areas to respond to the IRA and ensure that Canada remains competitive in this transformation to electrification.

The first area is EV adoption. We will urgently need a comprehensive plan in Canada to boost EV adoption if we are to keep pace with the United States. The IRA extends consumer tax incentives for the purchase of EVs. It extends an incentive for the installation of home charging infrastructure. It introduces an incentive for used EVs and commercial vehicles. It also earmarks funding for the construction, modification or repowering of generation and transmission facilities. We're urging the federal government to develop a comprehensive plan to build a public charging network; invest in clean, affordable and reliable electricity generation and grid infrastructure; and enhance consumer incentive programs to make EVs affordable for everybody.

The second area is critical minerals. The IRA has several powerful incentives to support critical mineral investments, including a 10% advanced manufacturing tax credit for a variety of minerals. It has new criteria for the existing federal EV tax credit that specify where minerals used in EV batteries are sourced. In addition, the U.S. Defense Production Act includes measures to encourage the U.S. production of minerals required to make batteries for EVs and long-term energy storage. We recommend that the government increase funding for critical mineral production with accessible, user-friendly mechanisms to seize on the advantage that we have over the U.S. in a number of areas, including cobalt, graphite, lithium and nickel. These are all minerals that are used in advanced batteries and EVs.

The last area is batteries. The IRA puts Canadian battery production at a significant disadvantage. Section 45X, the advanced manufacturing tax credit, provides companies that manufacture battery cells and modules in the United States with an annual refundable credit of up to $45 per kilowatt hour. To give you an example of what that means, for a typical facility with 30 gigawatt hours of capacity, we're talking about an annual refundable tax credit of well over $1 billion U.S. for every single facility in the United States.

We recommend that the federal government provide supports for companies that can be leveraged and compared against the IRA's production tax credit for battery modules, cells and electrode-active materials. This could be achieved by using existing programs, such as the the strategic innovation fund. You could expand the mandate specifically for auto projects. You could increase funding. You could simplify and accelerate the approval process.

I'll conclude with that. I look forward to any questions. Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. MacKenzie, please go ahead for five minutes.

[Scott MacKenzie, Director, Corporate and External Affairs, Toyota Motor Manufacturing Canada Inc.]

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

I'm here on behalf of Toyota Motor Manufacturing Canada, and I have a responsibility for corporate and 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. This past summer we built the 10 millionth vehicle in our history. We've been the largest automotive manufacturer in Canada over the last five years, and last year we were responsible for nearly 40% of all vehicle manufacturing in Canada, employing more than 8,500 Canadians across our facilities in Cambridge and Woodstock, Ontario.

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 to the U.S. market, first through the Canada-U.S. FTA, then through NAFTA and now through CUSMA.

Our success is dependent on us remaining competitive and having access to both the Canadian and U.S. markets. More than 85% of our production is exported to the United States, and last year we worked alongside the Canadian government to fight the build back better bill in the U.S., which, if passed, would have significantly if not fatally damaged our ability to serve both markets as our industry transitions through increasing levels of electrification.

While the defeat of build back better should rightly be celebrated, the subsequent Inflation Reduction Act, or IRA, is a double-edged sword. On the one hand, consumer tax rebates now include Canadian-produced vehicles on a footing equal to those produced in the United States. This is great news. On the other hand, manufacturing tax credits available to U.S.-based manufacturers of certain clean technologies, including the batteries that go into electrified vehicles, are subject to a refundable tax credit of up to $45 per kilowatt hour of battery output. While the implementing legislation still needs to be finalized to understand the true impact of the bill, as currently written, it could amount to more than $1 billion U.S. annually for companies wishing to invest in gigafactory-scale battery operations in the United States, and would subsequently undercut our ability to attract these investments to Canada, despite already generous incentives on offer from our federal and provincial governments.

While the IRA is being presented in many quarters as key legislation to fight climate change, in reality it is an act of trade protectionism, forcing the onshoring of future powertrain production within the borders of the United States at the expense of all other countries, including Canada. As governments, including our federal government, race to implement legislation that increases or even mandates the sale of zero-emissions vehicles in their respective markets, limiting where those products can come from or defining where their powertrains can originate may support the industrial policy of those respective nations, but it will not make it easier for consumers to get their hands on an electric car, and it certainly won't make it less expensive. Furthermore, the uncertainty related to the IRA is causing companies to pause planning activities until the true impact of the IRA is understood. This delay is shortening our window between when investment decisions need to be made and the point in time when those investments need to be in place to support a positive policy outcome.

Much like build back better, Canada needs to take a similar course of action with respect to the IRA, working with like-minded partners in Europe and Asia with similar concerns, to ensure that companies are not penalized for choosing to build vehicles and batteries in Canada, either to support our domestic market or for export to the United States or elsewhere. Similarly, we need to look at the consumer incentives available on our zero-emissions vehicles to make sure they are in line with those available in the United States. This obviously impacts the uptake of those vehicles, making them affordable to more consumers. However, incentives distort the marketplace and can create unintended consequences like cross-border arbitrage, as well as impacting resale values.

Toyota remains interested in working with the Canadian government to ensure the best outcome for the Canadian automotive industry through this transition to vehicle electrification.

I thank you for your time and would be happy to take questions at the appropriate time.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. MacKenzie.

Mr. DiCaro, go ahead, please.

[Angelo DiCaro, Director, Research Department, Unifor]

Thanks very much.

Good morning, Madam Chair and members of the committee. I'm grateful, as always, for the invitation to speak with you today.

I'm here on behalf of Unifor, which represents 315,000 working people across the country in virtually every major sector of the economy. This includes approximately 40,000 of our members, who work in the automotive industry.

Canada's auto sector supports more than 500,000 jobs throughout the economy and makes an outsized contribution to GDP and Canadian exports. The auto sector is also a source of good union jobs, which are highly skilled, highly productive and the economic lifeblood of many communities. This sector's shift toward electrification makes it even more important as a contributor to greenhouse gas emission reduction efforts.

Our federal government has demonstrated that it understands the opportunity this EV shift presents to Canada, with major investments to celebrate, including in various unionized assembly plants, with hopefully more to come. However, a lot of Canada's future success depends on how the government understands and responds to the U.S. Inflation Reduction Act.

The good news, as others have mentioned, is that the IRA resolves what's been nearly a two-year dispute centred on consumer vehicle purchase incentives that were only applicable to U.S.-assembled EVs. Cutting Canada out of that incentive program would have devastated the industry, with a cloud of uncertainty hanging over scheduled EV investments at various Canadian assembly plants.

There are many positive policy developments in the IRA that are worth noting. The act tailors incentives for EVs, batteries and battery parts to those built in North America. This is a novel approach, possibly the first-ever example of a buy-continental policy, which may present pathways to resolving other lingering disputes around local content provisions. The act creates progressively stricter demands for automakers to use responsibly sourced critical minerals and rare earth elements to qualify for the purchase incentives. That not only builds greater accountability into the supply chain, but it presents major opportunities for Canada to develop this upstream segment of the market. The act also lifts automaker sales incentive caps for EVs, which will help bolster new EV production on both sides of the border.

From a top-line market access perspective, the IRA is, in fact, quite good news for Canada. However, the IRA does present some important challenges of which policy-makers have to be mindful. For instance, the IRA establishes new manufacturing tax credits for clean energy production—a mess of new supports that can offset, in some cases, 30% of investment in new factories, including for batteries. Included in this is a $35-per-kilowatt-hour subsidy for U.S. battery cell production, as well as additional subsidies for battery cell packing and mineral processing on a scale we've not seen from the U.S. federal government, frankly.

To put the battery cell subsidy into perspective, a Ford F-150 Lightning contains a battery capacity of up to about 130 kilowatt hours. Under IRA terms, that equates to a subsidy of at least $4,500 per vehicle for the cells, and more if we include the battery packing. Put another way, a plant the size of the new gigafactory that is scheduled to come to Windsor would be subsidized at around $1.5 billion just on that program alone. It speaks to the very aggressive competitive landscape for these investments.

It's also important to get a bead on the time scale of these IRA provisions. The act requires a significant share of critical minerals to be sourced domestically or from partner nations, which will rise to 80% by 2027. Despite Canada sitting on stores of known mineral deposits, it will take many years before those products are mined, refined and EV-ready. Whether and how Canada can benefit from this condition and what bearing it will have on Canadian investments in this space is still unclear.

What we do know is the IRA offers a much brighter future for Canada's auto sector than what was initially presented through the build back better plan. Canada has to take advantage of the certainty the IRA provides and be emboldened to set its own ambitious industrial strategy to maximize growth potential, to grow good jobs and to transition affected workers along the path to net zero. However, let's not pretend the IRA is anything other than a bill that advances U.S. interests first.

Our union is very encouraged by the comments we've heard from Minister Freeland and Minister Wilkinson, and by assurances that Canada is prepared to respond to these investment concerns, as required. That is very good news.

Once again, I appreciate the invitation to speak and to share these thoughts. I look forward to any questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. DiCaro.

Now we'll go to questions from the members.

Mr. Carrie, go ahead for six minutes, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

Thank you to the witnesses for being here. Your input is extremely important. I come from Oshawa, and you know our history of auto manufacturing. We have Gerdau just next door.

Some of the things I've been hearing, though, at the last few meetings are concerning. Canada seems to be the afterthought. We're being very reactive, and we've heard from witnesses here today about Canada's response. Well, there was a time when Canada was in the room.

As Mr. Volpe put quite bluntly, the IRA is a correction for build back better. Why are we wasting our time on corrections when we should be in the room to get it right in the first place? Mr. DiCaro mentioned that we have to start looking at ourselves as a continent as far as our competitiveness goes.

You brought the issues forward, and I would like to see what your thought processes are, because you talked about the gaps in programs and investments and the protectionism.

Mr. Kingston, because you represent somebody in my riding, I'll ask you this. How important is it for the government this Thursday to get a correction, as Mr. Volpe was saying, in the budget for our competitiveness going forward?

[Brian Kingston]

It's absolutely critical. We need to see a strong signal in the fall economic statement that the government has a plan to respond to the IRA. Fortunately we have programs that are quite powerful, like the innovation fund through ISED, but it needs to be enhanced and needs to be more nimble.

We have to ensure that we're part of these investment conversations before decisions are made and that we put a competitive package forward. If we can't do that, as we've outlined and as some of the others have outlined, the IRA and these production credits, which are absolutely massive, will create a serious competitive challenge for Canada.

[Colin Carrie, Conservative, Oshawa, ON]

I agree.

I believe, Mr. Poirier, you mentioned, when you were in front of the finance committee, the supply chain bottlenecks. We're talking about opportunities in Canada. What frustrates me is that in Canada we have the ability to take the minerals out of the ground, process them, build them, put them into a part, put them onto a manufacturing product and then export them for all the value-added chains.

With these critical minerals, you mentioned in your testimony that according to a CVMA survey, already nine out of 10 Canadian manufacturers report encountering supply chain issues. It seems again that Canada's reactive approach, instead of a proactive approach, is putting us at a disadvantage competitively.

Mr. Poirier, perhaps you could give us an idea.... I believe it was Mr. DiCaro who mentioned mines. We have the minerals. Could you please let us know how long it takes to get a mine up and running so that we can supply minerals to Canadian supply chains? Do you have any idea? I think Mr. Kingston mentioned some lithium, nickel and cobalt opportunities, but how many of these mines do we have up and running for the amount of materials we're going to need to put into these cars?

[Matt Poirier]

If we don't have the mines up and running already, the timelines or time horizons for a new development are years if not decades sometimes. These are big, long-term investments. The concern that we have right now is that the incentives are so big in the IRA in the U.S. that we won't even get out of the gate to start those year-long processes and develop them if all the investment rushes to the United States.

For us in industry, when we look at it, it's table stakes at this point just to match what the U.S. is doing. I know that Canada won't be able to match dollar for dollar, but it's been suggested by others that we need to be strategic. Yes, we need to do that, but that stresses the importance of the diplomatic angle and redoubling our efforts to partner with the U.S. and coordinate with them. We have chapters in NAFTA designed to do this, so we should take advantage of them.

[Colin Carrie, Conservative, Oshawa, ON]

This is the thing. We just renegotiated CUSMA, and it seems that we're not at the table. Even the minister was in front of committee in regard to softwood lumber. She said she's waiting for the right time or environment, but I don't think we can wait. I think we need to be more aggressive.

I think Mr. MacKenzie was the one who said that this is active trade protectionism, and we really have to challenge it. I'm not sure that we're prepared for it. I'm really concerned that just as you said, Mr. Poirier, these investments have to be made now. If I'm an investor, I think the United States is looking a little bit better. I don't want that to happen.

Mr. Kingston, you mentioned competitiveness and the importance of the programs for EV adoption, as well as critical minerals and battery manufacturing. I think you've spoken before about our infrastructure here for charging stations. How far behind is Canada compared to a jurisdiction like California as far as charging stations go?

[Brian Kingston]

We're quite behind. The federal government intends to mandate electric vehicle sales in this country and has chosen a target that is out of sync with the United States, which is problematic because, as we've heard, we're operating in a highly integrated market. To achieve those levels of adoption, the single biggest barrier is charging infrastructure.

As it stands right now, the federal government has committed to building 84,500 chargers, but there are only 2,500 operational. We are behind, and the ratio of EVs on the road to chargers that has been chosen is far less ambitious than what you see in jurisdictions like California. This is a real concern.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you.

[The Chair, Liberal, Judy Sgro]

We'll carry on with Mr. Sheehan for six minutes, please.