International Trade Committee on Nov. 15th, 2022

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

I call this meeting to order.

Welcome to meeting number 36 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.

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Welcome to our witnesses today and to all our colleagues. It's nice to see everybody back at the table rather than on Zoom.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, September 20, the committee is resuming its study of 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 Aluminium Association of Canada, Jean Simard, president and chief executive officer; from Canada's Building Trades Unions, Sean Strickland, executive director; from the Canadian Chamber of Commerce, David Billedeau, senior director, natural resources, environment and sustainability, by video conference; from Electric Mobility Canada, Daniel Breton, president and chief executive officer; and from Global Automakers of Canada, David Adams, president and chief executive officer.

Again, welcome. Thank you so much for sharing your time with the committee today.

We will start with opening remarks and then proceed with rounds of questions.

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

[Jean Simard, President and Chief Executive Officer, Aluminium Association of Canada]

Honourable members, Madam Chair, thank you for inviting us as a witness on the IRA.

IRA is full of opportunities for Canada as it onshores demand from within USMCA: solar power, nuclear power, advanced manufacturing, home energy supply improvement, home energy efficiency upgrades, EV incentives and U.S. postal service electrification. There is nearly $400 billion U.S. in new and accelerated market opportunities for a primary metal producer like Canada, which exports 90% of its world-class production to the U.S.

As North America moves from onshoring to friend-shoring in its value chains restructuring, from critical elements and materials to strategic suppliers base, Canada stands in a class of its own.

We have the critical materials, including aluminum, to enable the green shift in the U.S. economy. We have both the human and carbon footprints to meet best-of-class criteria, including the democracy criteria, as shown in the slide with our brief that was produced from data developed by the Economist Intelligence Unit. When aligning aluminum-producing countries along with their carbon intensity, supply chain surety and democracy score, we stand above the pack with Iceland, Norway and Australia.

As shown in the second slide, authoritarian regimes represent 78% of the total production in the world. Coupled with carbon considerations, it makes the addressable supply for buyers increasingly limited, thus highlighting Canada's unique combination of qualities.

However, in order to reap the rewards of these developing opportunities, we will need to accelerate existing assets modernization. Our governments, both federal and provincial, should seize the moment to leapfrog into the future by setting forth an enabling fiscal environment to incentivize massive industrial modernization.

As we shared with the House Standing Committee on Finance, the staying power required to remain in the forefront of the best-of-class will come through increased competitiveness in a fast-changing global industry. Government must look over and beyond traditional loan programs and grant access to some existing fiscal provisions, such as accelerated depreciation of capital expenditures, while revamping existing trade-compliant programs.

At last, this is not a race to the bottom; it's a race to the top and towards the future. Let's rise to the occasion.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Simard.

We'll go on to Mr. Strickland, please, for five minutes.

[Sean Strickland, Executive Director, Canada's Building Trades Unions]

Thank you very much, Madam Chair and members of the committee. Thank you for the opportunity to address the committee on the potential trade impacts of the United States Inflation Reduction Act on workers in Canada.

My name is Sean Strickland and I'm the executive director of Canada's Building Trades Unions, part of North America's Building Trades Unions. We represent 14 international construction unions, with offices in Washington, D.C. and Ottawa. The combined membership of NABTU and CBTU includes over three million unionized construction workers, of which 600,000 are in Canada.

The international unions that make up the building trades have a long history of working closely on issues that affect members on both sides of the border. In partnership with our employers, we operate over 1,900 apprenticeship programs and annually invest almost $2 billion in training programs, producing the best, safest and most highly trained skilled trades workers anywhere in the world. We advocate for good union jobs that pay family-sustaining wages and offer benefits and a pension to ensure that folks can retire in dignity.

As you know, the recently passed Inflation Reduction Act includes over $300 billion in energy tax incentives for clean energy infrastructure. This is an international game-changer that incentivizes businesses to create union jobs and to hire apprentices, because it offers expanded tax credits. Up until the IRA was passed, Canada was leading the charge on the transition to net zero using existing subsidies for carbon to make investments and technological advancements in renewables, but with the passing of the IRA, the U.S. is clearly in the driver's seat. What happens next will set up the Canadian economy for the next several decades, which is why we need to respond vigorously, intelligently and quickly.

I am very much aware that the department has briefed you very thoroughly on all of the elements contained within the IRA, things like the nuclear power credit, for example. The credits are increased to five times as much if the taxpayer meets prevailing wage requirements. In the case of the clean electricity investment credit, it is also increased to five times as much if prevailing wage and apprenticeship requirements are met. The hydrogen production credit will be increased 500% if certain prevailing wage, apprenticeship and other requirements are satisfied. The same is true for the energy-efficient commercial buildings deduction and the carbon capture and sequestration credit.

On the electric vehicle front, you will hear from some of the witnesses today on the changes there and on how those may impact the production of Canadian electric vehicles.

The Inflation Reduction Act also establishes “make it in America” provisions for the use of American-made equipment for clean energy production, something we have to pay close attention to.

What the U.S. has effectively done is to position itself to be a very attractive market for investments in clean energy infrastructure. Incentives make it attractive to private equity while at the same time improving the lives of American citizens by ensuring that union wages are being paid and that more people have opportunities to start an apprenticeship in the skilled trades.

It's the view of the Canada's Building Trades Unions that we need to look very closely at these incentives and respond in kind, but respond in ways that are smart and recognize our competitive advantage. I think it would be very difficult for us to respond line by line to all of the incentives contained in the Inflation Reduction Act, but are there areas in which we can exercise and amplify our competitive advantage—in mining, for example, or hydrogen production or carbon sequestration, which is already happening? There are lots of examples of where we already have a competitive advantage. Small modular reactors and lots of projects are in development in Canada right now. How do we use incentives and create a regime in which we can compete and respond to the Inflation Reduction Act but respond smartly?

As my colleague here said earlier, it's not a race to the bottom, so we need to be smart about it and also exercise the competitive advantage we have in our labour force. We have good skilled trades workers right across Canada. We need to continue investing in recruiting and training. We also need to attract more people to the skilled trades in Canada. Making changes to the immigration streams and easing cross-border mobility, for example, are some ways in which we can respond to the increased demand for trades right across the country.

One of the biggest challenges we're going to have as we go through just transition is that, according to some reports, Canada could lose up to 450,000 jobs in the oil and gas sector between now and 2050, so how are we going to replace those jobs with the new energy jobs of the future? This is a very important question, and how we respond to the Inflation Reduction Act is a big part of the answer to that question. We have to make sure we don't leave any workers behind, so when we transition out of oil and gas, we need to replace the jobs of those workers with good, union-paying jobs in the new energy sources of the future—hydrogen, carbon sequestration, small modular reactors, traditional nuclear, etc.

Also, if we're going to offer attractive incentives so that the private sector remains competitive on this front, Canadians should expect that these generous subsidies are tied to the creation of good middle-class jobs to provide family-sustaining wages, health and welfare benefits and pensions. The amounts of tax incentives and credits that we are considering in response to the Inflation Reduction Act are in the tens of billions of dollars. I think the Canadian public would expect—and I would hope that parliamentarians would expect—that any of those kinds of incentives would be tied to the creation of good, sustaining jobs.

On behalf of the over three million skilled trades professionals who belong to North America's Building Trades Unions, and our 14 affiliated international unions and the 60 trades we represent, I want to thank the committee for this opportunity to present. I look forward to any questions you may have.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Strickland.

Next is Mr. Billedeau for five minutes, please.

[David Billedeau, Senior Director, Natural Resources, Environment and Sustainability, Canadian Chamber of Commerce]

Madam Chair and honourable members, thank you for the opportunity to attend today's discussion on behalf of the Canadian Chamber of Commerce.

While the Inflation Reduction Act of 2022 presents opportunities for Canadian businesses, we must also recognize challenges facing Canada's private sector. To that end, I'll tailor my remarks today to focus on automotive manufacturing, critical minerals, clean tech and labour.

With respect to automotive manufacturing, the act introduces and extends EV tax credits. Notably, eligibility for these credits ultimately requires EV batteries to be 100% made in North America by 2029. This creates considerable opportunities for Canada's natural resources and manufacturing sectors. However, given the protracted timelines that build upstream and midstream mining infrastructure, as well as the lead times to modify automotive supply chains, it will be difficult for automotive manufacturing firms operating in Ontario to meet credit eligibility requirements in the near term.

This brings us to critical minerals. Global demand for certain minerals is expected to increase by up to 600% by 2040. This presents a rare opportunity for Canada, and the chamber believes that Canada can serve North American and global demand for minerals required for electric vehicles and clean technologies. To match domestic mineral production and processing with increasing demand, it's vital to focus attention on facilitating resource development in Canada, where it takes an average of 15 years to move mining projects from discovery to first production. These lead times will impact Canada's decarbonization efforts while limiting opportunities to develop new and existing mining and manufacturing facilities across Canada.

On the topic of clean technologies, the Inflation Reduction Act contains supports for domestically produced alternative fuels, such as hydrogen and biogas, as well as clean technologies like CCUS. Further, the act contains credit multipliers for products meeting domestic content and local human resources thresholds. Such incentives will make it difficult for Canadian clean-tech firms to compete in the U.S. market.

While Canada's recent fall economic statement has provided investment tax credits for clean technologies, Canada must take further measures to secure a level playing field and to secure opportunities for Canadian workers.

Lastly, we have a few comments on labour availability.

A study conducted by the BlueGreen Alliance indicates that the Inflation Reduction Act will create over nine million climate tech jobs in the United States by 2032, largely in STEM fields. The skyrocketing demand for labour in the United States will place pressure on Canada's ability to attract and retain skilled workers to drive its own green economy. This is concerning, as the competition for talent is already a major pain point here in Canada, with around one-third of Canadian businesses experiencing labour difficulties.

With these factors in mind, I would like to table the following recommendations for your consideration.

First, to further develop our mining, clean technologies and advanced manufacturing sectors, Canada must be able to compete for major capital investments. This requires securing venture capital for early-stage mining projects; accelerating the implementation period of the strategic innovation fund; expanding fund allocation for critical minerals; and ensuring that incentives within the Inflation Reduction Act do not serve as non-tariff barriers to Canadian businesses.

Second, to reduce mining project lead times, the Government of Canada must work with a broad spectrum of stakeholders to responsibly expedite development and permitting timelines.

Third, Canada needs a green job strategy that brings together all levels of government, as well as private sector stakeholders and secondary and post-secondary institutions across the country, to develop the domestic capacity and skilled workers needed to drive our economy and build the projects that will get us to net zero.

In closing, the Canadian chamber encourages the committee to carefully examine the regional economic implications of the Inflation Reduction Act while also looking towards the boundless potential for Canada to drive global transitions to net zero.

Thanks again for your time and consideration. I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Billedeau.

We will now go to Mr. Breton for five minutes, please.

[Daniel Breton, President and Chief Executive Officer, Electric Mobility Canada]

Thank you, Madam Chair.

I'd like to thank the members of the Standing Committee on International Trade for taking the time to listen to what we have to say about the United States Inflation Reduction Act of 2022.

My name is Daniel Breton and I am the president and chief executive officer of Electric Mobility Canada, an association that has over 150 members.

These members include manufacturers of light, medium, heavy and off-road vehicles, suppliers of electricity and charging infrastructures, mining companies, technological corporations, research centres, cities, universities, vehicle fleet managers, unions and environmental NGOs. In short, we are the national voice of transportation electrification.

According to a report published by the International Energy Agency in August 2022, approximately 50% of the energy jobs in the world, in 2019, were in clean energy, which includes clean transportation. Even in North America, where there is an important fossil fuel industry, clean jobs represented almost 50% three years ago, before the big push for the EV industry in Canada led by federal and provincial governments.

In the past six months, the Government of Canada has secured more than $15 billion of investment and tens of thousands of jobs in Canada's electric vehicle ecosystem. Canada is now developing an innovative electric mobility industry—from mining to assembly, infrastructure, education, electricity production and distribution—and more needs to be done, as this is the fastest-growing industry in the world.

Now let's talk about the Inflation Reduction Act. When we delve into section 45X, the advanced manufacturing production credit, we find that if a manufacturer wants to manufacture batteries for electric vehicles, they can get $45 per kilowatt hour for every battery over seven kilowatt hours.

To quote David Booth, “If that doesn’t sound like very much money, then it’s probably worth reminding you that US$45/kWh represents about one-third of the total cost of manufacturing an automotive battery, the most expensive component...in an EV. More to the point, the average EV sold in North America has about 80 [kilowatt hours].” If you look at that, it means that you can get an additional rebate for manufacturing the vehicle of between $3,500 and $6,000: “And remember, that's money directly in the automaker's pocket.... On a grander scale, that 30-gigawatt-hour plant could net BMW some US$1.35 billion. And that’s not a one-time payment. That’s annually, as in every year ’til the end of 2032.”

I want to remind everyone that in 2021, President Biden and Prime Minister Trudeau “agreed to work together to build the necessary supply chains to make Canada and the United States global leaders in all aspects of battery development and production. To that end, the leaders agreed to strengthen the Canada-U.S. Critical Minerals Action Plan to target a net-zero industrial transformation, batteries for zero-emissions vehicles, and renewable energy storage.”

To go back to battery manufacturing, we're not talking about batteries being manufactured in the U.S., Canada or Mexico—just in the U.S. To get that incentive of $45 per kilowatt hour, it has to be built in the U.S.

A few weeks ago, the federal government published its policy regarding foreign investments from state-owned enterprises in critical minerals under the Investment Canada Act. The policy said, “The Critical Minerals List was announced on March 11, 2021, and includes 31 minerals considered critical for the sustainable economic success of Canada and our allies—minerals that can be produced in Canada [and] are essential to domestic industry and security”.

On November 2, the federal government ordered three companies to divest from Canadian mining interests since these investments could “threaten our national security and our critical minerals supply chains, both at home and abroad”.

On November 12, a few days ago, Bloomberg New Energy Finance published its battery supply chain ranking, which saw:

Canada rise to the second spot this year [after China], which reflects its large raw material resources and mining activity, as well as its good positioning in environmental, social and governance factors...and infrastructure, innovation, and industry. A lack of significant cell and component manufacturing capacity means that most of the value of these resources is realized outside of the country, although recent announcements from the likes of BASF, General Motors and Posco show an increase in battery investments.

Considering this, the fact that many of the critical minerals needed for EV batteries, propulsion systems, renewable energy and the military are in Canada, what can we do to ensure that Canadians take advantage of our strategic position and do not end up being, once again, just a simple supplier of natural resources to another country, in this case the U.S.? Does the AMPC constitute a violation of the CUSMA accord?

Canada has the critical and strategic minerals, the entrepreneurs, the skilled workers, the research and development capacity, the universities, the clean energy, and, now, the political will. We need to ensure that these workers and future workers can make the transition by guaranteeing them a future in the electric vehicle, and electric vehicle components, manufacturing industry. It is therefore important for the United States Inflation Reduction Act of 2022 to remain compatible with what we want to do.

To conclude, we don't want the United States to be our competitor. We want to partner with the United States, but the 2022 act is problematic for the manufacturing of electric vehicles and electric vehicle components, and batteries in particular.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Breton.

Next is Mr. Adams, please, for five minutes.

[David Adams, President and Chief Executive Officer, Global Automakers of Canada]

Thank you, Madam Chair and members of the committee, for the opportunity to speak to you today on behalf of the 15 members of the Global Automakers of Canada.

Our manufacturing members Honda and Toyota represent 55% of Canadian light duty vehicle production through September 2022, while all members, as the exclusive Canadian distributors of some of the world's largest global automakers, were responsible for 62% of Canadian sales in 2021.

I appreciate the opportunity to add my comments to the comments of those who have already appeared before the committee with respect to the impact the U.S. Inflation Reduction Act potentially could have on the automotive industry in Canada.

Canada's automotive manufacturing sector is at a crossroads. We can compete and win against the best in the world, but as others have noticed, the United States has introduced some truly massive subsidies in the Inflation Reduction Act that will pull manufacturing's clean-tech investment away from Canada.

The clean technology manufacturing credit, known as “45X” under the IRA, could amount to as much $3,600 to $6,300 per vehicle battery, as you've already heard, a spectactularly large subsidy that goes directly to the battery manufacturer. The Government of Canada urgently needs to match or exceed the subsidy in order to avoid all battery production investment being diverted or relocated to the United States.

The second critical challenge is the advanced energy project credit, known as “48C”, which offers a tax credit of up to 30% on investments into the production facilities across a wide range of clean energy technologies, including facilities that produce components of electric vehicles. This vastly exceeds the investment credits offered by Canada. Again, it is critical that the government look at whether we can match or exceed these credits.

On the incentive side, we're pleased that the IRA provides certainty that Canadian electric vehicles will qualify for the $7,500 U.S. EV incentive, provided North American critical minerals provisions are met and battery components are manufactured and assembled in North America. However, these North American restrictions mean, at least in the short term, that far fewer models—only 25 of 70 EV models—will qualify for the EV incentives in the United States, owing to the fact that the mining of critical minerals and North American battery production are both in their nascent development stages.

Purchase incentives, whether in Canada or the United States, remain important drivers of EV adoption and, as such, these complicated restrictions on EV incentives are likely to slow EV adoption in the United States, potentially slowing the sale of EVs built in Canada and destined for the United States, given that 85% of our vehicle production ends up in the United States.

We are recommending that Canada double the federal EV incentive to match what is being offered in the U.S., but without imposing the restrictions that the IRA has included. Quite simply, EV mandates in Canada are so aggressive that our only hope of achieving them is with generous incentives to encourage consumer adoption.

Looking at the big picture, the U.S. is pursuing an aggressive industrial policy to maximize employment and investment in the auto sector and is willing to spend large amounts in order to do so: $20 billion in loans to build clean vehicle manufacturing facilities; $30 billion in production tax credits to, among other things, accelerate critical minerals processing and batteries; and $2 billion in grants to retool existing automotive facilities to manufacture clean vehicles.

We were encouraged to see in the fall economic statement that our government is promising a robust response to this challenge. We are urging the government to go well beyond the launch of the Canada growth fund and forthcoming investments in Canada's advanced manufacturing competitiveness.

Canada cannot let this generational reinvestment in the automotive industry pass it by. We need urgent action by the government to provide a level playing field and to protect Canadian workers. In our pre-budget submission, we will be tabling detailed recommendations as to how the government can work to mitigate the investment drain into the United States arising from the provisions of the IRA.

Madam Chair and members, thank you for the time. I look forward to answering any questions you may have.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Adams.

We now have Mr. Carrie for six minutes, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I'm going to jump right in with Mr. Adams, because he did mention the urgency.

Mr. Adams, we had some of your colleagues here on November 1—Mr. Volpe, Mr. Poirier and Mr. Kingston, whom you know very well—and the consensus was that we needed an urgent response. My concern is that we had the fall economic statement, and I don't see the sense of urgency in the government's response.

You and your colleagues put out an automotive industry report card on the federal budget six months ago. The government has had six months to work on this. In the report card, you were talking about commitments to make a difference. I'm just wondering if you could update the committee on the fall economic statement.

It seems that Canada is always running behind in responding to the United States. Could you please comment on how we did with the fall economic statement in regard to things like the regulatory alignment with the United States; the commitment to building hydrogen fuelling infrastructure for fuel cell vehicles; eliminating the luxury tax; the commitment for building charging infrastructure in urban centres; and four million public charging stations?

How did the statement do in addressing the issues that you brought forth in your report card?

[David Adams]

Thanks very much for the question, Mr. Carrie.

What I'd like to start with in answering that question is going back to your comment about playing catch-up with the United States. We're running behind the United States. I think a core area of focus is that, as a nation, we need to do a much better job of continuing to build bridges and continuing to build dialogue with the U.S., so that we can have that truly North American approach to clean technology development.

I think what we've seen is that, too often, we've been caught in the crossfire of some of these, frankly, overtly protectionist moves by the United States to shore up their own industries and clean-tech industries.

With respect to the report card that we issued, there's certainly a long way to go. With everything in the space of developing our electric vehicle ecosystem in Canada, everything needs to be done yesterday, and this is with respect to charging infrastructure, through to the comments that Mr. Billedeau made about expediting our environmental assessment process and processes to get mining on track. There's a raft of things that need to be done as quickly as possible. I would characterize, overall, that more needs to be done in terms of the report card.

With respect to the fall economic statement, I would say that we appreciated the clean growth fund and the opportunity—at least that was enunciated several times in the fall economic statement—to put in place initiatives to do whatever Canada can to be competitive to ensure that the clean-tech drain does not to go the United States.

[Colin Carrie, Conservative, Oshawa, ON]

I'm extremely concerned. Mr. Poirier mentioned that there is a flight of capital to the U.S. We were told the fix is on the way and we have to craft a Canadian response, but it seems that we're always running behind. Instead of being proactive, we're being reactive.

I was wondering if you could comment on something that comes across repeatedly. At the end of the day, it's going to be consumers who need to buy these electric cars. In the press release you put out in March 2022, Mr. Reuss, who is with the dealers, said, “In order to do so, individual consumers will need to have the confidence that the products and the supporting infrastructure—including the ability to charge at home and work—meet their everyday needs”.

In the fall economic statement, can you point to anything that we could see to meet those charging needs and improve the grid? I believe we need four million of these charging stations. How are we doing with the response from the government in the fall economic statement with regard to charging?

[David Adams]

I can't point to anything in particular in the fall economic statement—although I haven't taken that close a look at it for the charging infrastructure—but I don't believe there was anything in that regard.

However, I will go back to the government's commitment in the budget to allocate $400 million to Natural Resources Canada and another $500 million to the Canada Infrastructure Bank to put in place 50,000 charging units. The concern is that, even with the initial amounts that have been afforded to Natural Resources Canada to put in around 35,000 pieces of charging infrastructure, our understanding is that to date, only about 2,500 to 3,000 of those charging stations have been turned on and are operational and functional. It's not only the speed in getting money out the door; it's the speed in getting the charging infrastructure put in place.

We can debate what the number is, but I think we can certainly say that 50,000 pieces of charging infrastructure across the country are not enough, and that the number is going to have to increase exponentially if we're going to be driving toward a situation where in 2035, 100% of all new vehicles are going to be zero-emission vehicles. It's even more critical as we move to 60% in 2030.

There's a lot of work that needs to be done to build out that infrastructure.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. Carrie. You have 15 seconds left.

Mr. Arya, you have six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

Mr. Sean Strickland, welcome to committee.

This Thursday, I will be visiting one of your facilities to make an announcement on the apprenticeship service program. Because the announcement has not been made, I will not comment on that now.

Mr. Breton, welcome back. It's nice seeing you again. During the last advocacy day, I didn't meet you, but I did meet two of your members.

Mr. David Billedeau, I will go to you on the thing you mentioned about the mining projects and the time required from conceptualization to the actual production of a mining project, which takes about seven years to 10-plus years. I want to pick your brains on the Ontario regional table that was recently announced. That's part of the nine regional tables announced by the federal government jointly with the provinces to work on the resources, timelines and regulatory approaches to develop critical mining, clean hydrogen, nuclear and sustainable forestry.

However, before that, we are glad that we are talking about the Inflation Reduction Act. In my view, in addition to this act, we should also concurrently look at the CHIPS Act of 2022. It is called the CHIPS and Science Act of 2022, which was passed by the United States. It is a $280-billion legislation.

The focus has always been on the chips production, but out of $280 billion, while $52 billion goes for the chip production, $200 million is going to regional technology centres to focus not just on the chips, but on the energy technologies, biotechnology, etc. In my view, that act is basically a new industrial policy statement of the U.S., and that will affect us if we don't focus on that too. My view is that we have to look at both the Inflation Reduction Act and the CHIPS and Science Act of 2022.

Canada is prosperous because of our trade. Trade accounts for 65% of our GDP. As we all know, the U.S. is our major trading partner, so our prosperity, standard of living, everything is dependent on the trade with the United States. That makes it very critical for us to look at things that are happening in the U.S. and to take measures.

Mr. Strickland, you mentioned two things that are very important. You said that we can't respond line by line, which is very true. We can't match dollar for dollar every dollar that the U.S. invests, but as you mentioned, we have to respond smartly. That is what Canada has been doing. In the last seven years, as a member of Parliament and as a member of this trade committee, I have seen that political parties, whether they are Liberals, Conservatives, NDP or Bloc Québécois, all work together when it comes to critical things on which we have to deal with the United States, like trade with the United States, which we saw in the last NAFTA negotiations.

There was a report just two days ago that the U.S. military is considering funding Canadian mining companies. That was a surprise. Why is the Pentagon investing in Canadian mining companies? Many Canadians are not aware that Canadian companies have been considered to be U.S. domestic companies for the different purchases by the U.S. Pentagon for a long time. In fact, the defence production sharing agreement that Canada has with the U.S. dates back to 1956. Now, under that, we are seeing the U.S. responding to the possible investment in critical minerals in Canada today, which is a good thing.

Before going to the Chamber of Commerce representative—Mr. Simard, I am glad you are here—I have some questions that are not directly related to that, but this is my first opportunity to talk to you.

The aluminum industry, as we know, is key. It is one of the critical minerals. However, what I have seen is that during the last 15 to 20 years, there was no increased production capacity in Canada. We have seen news announcements coming up in other parts of the world, including the Middle East. However, except for one small smelter, nothing new has come in. In fact, the production of aluminum in Canada from 2011 was slightly below three million tonnes. Now, in 2020, the numbers are higher, with slightly more than three million tonnes. Basically, we are stagnant in the capacity to produce aluminum. Maybe the reason is that out of the 10 aluminum smelters we have, nine are owned by Rio Tinto and Alcoa.

Does the foreign ownership of Canadian aluminum companies consider Canada just as a branch office to cater only to the United States because 90% of your production goes to the United States as exports, while we have signed a free trade agreement with the European Union and have the CPTPP with the Pacific nations?

Why are we not seeing aluminum production, installed capacity for aluminum production, going up so that we can use the cheap and clean Canadian power that is available to produce aluminum and to export to Europe and the Asia-Pacific countries?

[The Chair, Liberal, Judy Sgro]

Mr. Arya, you have 23 seconds remaining in your time, sir, so I'm not quite sure how any of those witnesses are possibly going to [Technical difficulty—Editor].

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

Madam Chair, there is no interpretation.

[Jean Simard]

China took over the planet's aluminum in the past 15 years. It went from 10% of the world's production to 56% of the world's total production. It's taken over the markets with subsidized metal.

Today, 76% of the world's aluminum production capacity is state-sponsored around the world. We have three world-class producers in Canada that are public companies, not state-owned and not subsidized as is the case in China. Over those 15 years, the U.S. has lost most of its production capacity and so has Europe.

In Canada, we've invested $15 billion in those same years to modernize our plants. That's the situation.

[The Chair, Liberal, Judy Sgro]

Thank you very much for that great answer. You put the answer we thought you were going to give us into a very brief few seconds.

Now we'll go on to Monsieur Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

I'd like to thank all the guests for being here. I want to ask them some questions, because after all, they are the guests. We are here to listen to what they have to say, and not the other way around.

Mr. Breton, In the economic statement released two weeks ago, it was implied that there would be compensation tied to this 2022 U.S. Inflation Reduction Act. Do you think there would be enough compensation, or should we try to get the Americans to amend the act?

[Daniel Breton]

If, as President Biden and the Prime Minister said in 2021, Canada and the United States truly want to be partners in the development of critical minerals and the battery industry, then it's impossible to say that electric vehicle batteries can only be manufactured in the United States in order to be entitled to tax credits.

It's a real problem. It's as if the Americans were saying that they wanted our critical minerals because they don't have any, but that the value-added products would be made in the U.S. That would simply repeat the business model of recent decades, or even centuries. According to this model, raw materials like wood, aluminum and oil came from Canada and Quebec, but the value-added products were manufactured elsewhere. After all, only a few months ago, 99% of lithium mined in Canada was going directly to China.

I was very pleased with the Canadian government's announcement that they would limit access to our critical minerals for national security reasons. I was talking about electric vehicles, but there is also the military sector and renewable energy. If we want to develop an industry, then we can't just dig holes and send what has been mined to other countries.

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

Exactly. It's important to think strategically about how to manage our resources. There are also many other crucially important sectors.

Let's do a comparison with the former Build Back Better bill, which contained an obviously litigious provision given more extensive coverage by the media than the current United States Inflation Reduction Act of 2022. The provision, which would have required companies to relocate their operations to benefit from a tax credit, was replaced by a North American clause. Only time will tell whether it will pass the free trade tribunals test, and I'm not convinced it will.

What should we be emphatic about in connection with the 2022 United States Inflation Reduction Act? What should our position be? If we have to ask the Americans to move so much as a comma in the wording of the act, what might that be?