International Trade Committee on Nov. 1st, 2022

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

Thank you very much, Madam Chair.

Thank you to all the presenters. That was absolutely excellent.

For a little history, I sponsored a study of the original build back better plan because we saw right away how.... To my steel friends, we lived through the section 232 tariffs, and many people on this committee actually worked really hard on that.

After that, of course, they came up with the Inflation Reduction Act. I then sponsored this study because we wanted to get ahead of things and take a look at the opportunities and, perhaps, the unintended consequences that are part of any kind of deal that happens. The United States is a very large market that we benefit from.

I'm going to put my first line of questioning to the Canadian Steel Producers Association.

Algoma Steel in Sault Ste. Marie is the second-largest steel producer in Canada. It changes from time to time, but at one point, 60% of their exports went to the United States. They would go into manufacturing, the car industry, oil and gas or what have you, depending on the order books.

My question is for the steel industry. Overall, what are the contrasts between the implications of the previous build back better plan and the Inflation Reduction Act with regard to exports of steel goods to the United States? How do you anticipate the Inflation Reduction Act will affect market access for the Canadian Steel Producers Association when it is exporting steel to the U.S.? Is this unique to the Canadian Steel Producers Association, or do you think it applies to the larger industry as well?

Go ahead, Catherine.

[Catherine Cobden]

It's great to be fielding questions from Terry in person. Thank you, Terry, for all your hard work on behalf of Canadian steel producers.

Indeed, as you point out, the U.S. market is extremely critical for us. We have two critical markets: the domestic market and the U.S. market. We've done a very good job, as described by other witnesses, of banding together across party lines to create a united front with the Americans on issues that are of significant importance to us.

The first comment I'd like to make is to reiterate the importance of continuing to do that to ensure we address the competitiveness challenges, frankly, that the IRA creates for us.

We've talked a lot about investments around this table today, and I think that is extremely important too. We hope to see that signal in the fall economic statement, but we also need to talk about what more we can do to protect our marketplace—in this case I would talk about the North American marketplace—from unfairly traded goods. This is a very important issue for steel, as you well know. It's one of the reasons the U.S. put section 232 in place on other nations. We got caught up in that, unfortunately, and it was ill-deserved.

We need to be ever mindful that in steel, imports that are high in carbon and unfairly traded cause the biggest problems to Algoma, Gerdau, ArcelorMittal Dofasco—you can name all 13 member companies of the CSPA. Ensuring that we're getting that right is an important signal for essentially dulling around the edges some of the impact of the IRA.

Right now, 69% of the Canadian market is not served by Canadian domestic steel producers. That's unprecedented. We need to be ever mindful of that. It speaks to the point you're making about how we continue the relationship with the U.S. It's so crucial, and one thing we have to show them is that we're doing our homework.

In build back better, we saw a lot of discussion, and in the executive order of President Biden, there was a lot of discussion about domestic and green procurement and so on. We have to get that job done in Canada. We have done a lot of really good work together, but we actually have to bring it into full implementation now.

I hope that gives you an answer, Terry.

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

Yes.

My next question will be about the investments the government made recently, including the $420 million at Algoma Steel in 2021 to move from a coal-fired process to electric arc. That is going to secure Algoma Steel for generations to come. Two weeks after I first got elected, it went into bankruptcy protection; it was that close to closing. It's also going to have the effect of taking a million cars off the road. I think that's really important.

One piece where I think there's an opportunity as well.... I would like to get your insight on this. There have been discussions in the coffee shops in Sault Ste. Marie about how this will play into how the whole world, including the United States, tries to get to the green economy and decarbonize the economy.

How do you buy an electric car that is made from steel with coal and that sort of thing? What is the steel industry going to do to use that as an opportunity—in the United States, in Canada and elsewhere—to sell steel?

[Catherine Cobden]

Yes, indeed, the investments made—Algoma is one and ArcelorMittal Dofasco is the other—are generational-impact investments in the sense that they are securing the net-zero pathway and the opportunity for green steel for generations to come in those communities. They also really set us on our course to maintain our leadership in green steel, which we already enjoy today. However, if we sit still, especially with the IRA, we will lose that advantage. We must continue to maintain vigilance.

In Canada, that was brought to you by something called the net-zero accelerator. We talked about the SIF today. I'd like to put on the table that the net-zero accelerator is also a very good tool for industries like my own that are very heavy emitters and require investments at a very significant scale.

When we're talking about moving forward, it's about the comprehensive suite of pieces that we need to be investigating, basically in response to the IRA.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Monsieur Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

I would like to welcome and thank all the witnesses for being here. Hello also to my colleagues.

Mr. DiCaro, earlier you said that you found it encouraging that the Deputy Prime Minister and Minister of Finance expressed her concern and indicated that she intended to make an announcement on this front. We know that the fall economic statement will be out in a few days, that is, the day after tomorrow.

What would you find acceptable, in the current context? In short, what announcement are you expecting?

[Angelo DiCaro]

Right now, we're still mining through where this IRA takes us. We need the full details of how this bill is going to work and how it's going to be implemented. We still have a lot of questions, as I'm sure other panellists do. When we have the full suite of that, we'll form an ideal policy response. Just in the acknowledgement of where this competitive imbalance lies, there are so many areas to explore.

Our focus is on some of the very critical component parts that are going to build out the EV supply chain in Canada. I think the federal government has done a fine job of trying to attract this work into Canada, as it should. An acknowledgement and a recognition of this new gap that has formed in some of these critical battery and battery part facilities could take many different forms: an enhanced commitment to support these investments, additional programs or additional subsidies that are made available.

This could take a variety of forms, but just an acknowledgement of moving in this direction would be very well received by our union and our members.

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

Thank you.

I will ask you another question, Mr. DiCaro, and I would invite Mr. Volpe to provide an answer afterwards as well.

For a vehicle to be eligible for tax credits, the required minimum proportions of critical minerals and vehicle components coming from North America are 40% and 50%, respectively. Since those requirements aren't being met right now, do you have fears of, or do you foresee, a massive relocation to the U.S.?

[Angelo DiCaro]

Was this question for me?

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

Yes, my question is to you, but I would also invite Mr. Volpe to answer afterwards.

[Angelo DiCaro]

Very quickly, this is always the concern. You heard in my remarks that the IRA isn't intended to be a “let's help Canada” piece of legislation to make sure Canada builds out its auto industry. This is about U.S. public funds going to support U.S. workers and U.S. industry. We have been on guard for the past five or six years, I'd say, and every move they make we have to watch extremely carefully. Yes, they want to attract as much of this value-added aspect into the U.S. market as they can, and we will have to respond.

I'll tell you that even beyond what's contemplated in this act, in other pieces of the auto supply chain, including new next-generation powertrain components like electric motors and things of that nature, right now Canada is still lacking in any investments. If we are going to be a player and we're going to have places for displaced auto workers to land so they can continue employing their skills to grow this sector, we'll have to think long and hard about how we're going to attract that among so many other pieces.

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

Madam Chair, does Mr. Volpe have time to answer the question?

[The Chair, Liberal, Judy Sgro]

Mr. Volpe, you have one minute and 48 seconds.

[Flavio Volpe]

Thank you for your question, Mr. Savard‑Tremblay.

I'll try my best to answer in the 45 seconds that are left.

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

Mr. Volpe, I have one minute and 45 seconds left.

[The Chair, Liberal, Judy Sgro]

Thank you for clarifying that.

[Flavio Volpe]

I'm not as concerned about how we interact with the Americans and whether there's going to be a scenario where we're looking at their wish to include more American content in American funding. I'm not extra concerned, because we've been dealing with that for the last 10 presidents. It's the business we do.

As Mr. Carrie pointed out when he talked about Canada's response, when are we going to get to a scenario where we're not responding and we're leading? Certainly when he was in government, we were responding as well. This is what happens when you're dealing with a partner that's 10 times bigger than you.

I think the answer, and the way that you get around some of the concerns you have, Monsieur Savard-Tremblay, is to always continue to do this team Canada approach. It's a multi-party approach. I spend a lot of time with members of the opposition parties in Washington pointing out to the Americans that they're so invested north of the border that any time they draw an imaginary line they shoot themselves in the foot.

What are we expecting to see, or how do you address this in the fall economic statement? Well, that's not the way this industry works with government.

Last week we met with Minister Guilbeault and Minister Wilkinson, and in the last two weeks, we have met twice with Minister Champagne. We're constantly talking with Minister Freeland, whom we hosted at our conference in Windsor last week with hundreds of players in the industry, and she did a round table there.

We don't wait for the fall economic statement. We're always very active, as we were with other governments and as we are with the provincial government. There aren't moments. You're on 24-7, and that's just how it is.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Masse, go ahead for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Thank you to our witnesses. I'd like to ask my questions of Mr. DiCaro, Mr. Kingston, Mr. Poirier and Mr. Volpe.

Generally speaking, what we've had to do in the auto sector is a lot of last-minute negotiation in an attempt to secure products. A lot of things come at the last minute.

Now that the U.S. has a formula that's accountable, public and transparent, would we be better off moving to a similar model to match that? One of the things I've always faced on the Hill is that other members are not familiar with the auto industry. Even when we had the loans, they called it a bailout. Even when we made money on the loans, they called it a bailout. They've called for other industries to get the same, and there hasn't been political support at times.

I'll start with Mr. DiCaro.

If the U.S. moves on this formula, would it make sense for us to consider doing that? I ask because when we don't win a project, we don't know what went on or what we offered. It's never given to the public by the feds or the province; that's never released to the public. I think that's what sticks in the craw of a lot of members and also a lot of the public I hear from. These are secretive negotiations at the end of the day. Now we have one in front of us that's transparent from the United States.

I'll start with Mr. DiCaro, and then go to Mr. Kingston, Mr. Poirier and Mr. Volpe, please.

[Angelo DiCaro]

I think that any time there's a way to build in transparency around how these programs operate, it's always of benefit. Maybe the point I'll disagree on is how seemingly empirical the U.S. model is under the IRA. There are certain quantifiable subsidies that have been presented. You've heard us all throw around different numbers as well because it's complicated and multi-layered. Again, that one-kilowatt-hour subsidy that's been presented is also overlaid with a series of other advanced tax credits and other measures that have been employed.

How we disentangle that I don't know, but I take your point, and I would agree that if there's a way to stabilize that, it would be of value.

[Brian Masse, NDP, Windsor West, ON]

Go ahead, Mr. Kingston.

[Brian Kingston]

It's an excellent question. I would say no, and the reason I say no is that programs like the SIF have been highly effective.

If you just look at the past two years, Ford, General Motors and Stellantis are leading the charge here in Canada in this transformation to electrification. They have invested $13.5 billion, creating thousands of jobs in this country. The SIF has been a key part of that, as well as the provincial government partnering with the federal government.

The SIF is a good program, and it's working. That said, now that the competitive landscape has shifted, we could do more to enhance the SIF. It needs to move faster. It needs to give earlier signals to companies around whether or not they can expect a positive outcome. Obviously it needs more funding too.

There are ways to improve it, but I think the SIF is a good tool. I think the track record speaks for itself.

[Brian Masse, NDP, Windsor West, ON]

Go ahead, Mr. Poirier.

[Matt Poirier]

Just to build on what the others have already said, I note we have a pretty big tool box already here in Canada for the various programs that are needed and have been contemplated in the IRA. It's sort of a mixed bag. We have a program that has just been dwarfed by the U.S. equivalent. To what extent do we have to enhance it so that it matches and doesn't create a discrepancy? The incentive for the manufacturing company to go to the U.S is very enticing. We have to guard against that.

There are so many tentacles to this piece of legislation, so where Canada doesn't have an equivalent program, we'll need to create something or come up with a workaround somehow. It's sort of a mixed approach. This is so complicated for politicians and policy-makers because there are so many angles to it, but you have the resolve of an industry here in Canada that's already in for a penny, so they want to continue this investment.

[Brian Masse, NDP, Windsor West, ON]

Go ahead, Mr. Volpe.