International Trade Committee on Nov. 15th, 2022

[David Adams]

I said 85% of production is currently exported. We would expect that would be the case when vehicles are electrified as well. The majority of the production would go to the United States.

[Ed Fast, Conservative, Abbotsford, BC]

With the incentives that the IRA now establishes, which will presumably increase the demand for ZEVs in the United States, will that not exacerbate the problem of having more and more Canadian production exported and Canadians being left without the availability of zero-emission vehicles for purchase?

[David Adams]

Actually, I don't think so. I think, at least in the short term, it will likely be exactly the opposite because, as other speakers have noted, it will take a lot of time for the capacity to be built up in the United States to meet the provisions under which a consumer can access the rebate with respect to both critical minerals and battery production. Right now, whereas 70 models used to be eligible for the EV incentive, there will only be 20 or 25 models eligible for the incentive in the United States.

I guess you could also build an argument that in that circumstance if there is an abundance of EVs out there, which currently there is not, Canada might have an advantage in securing more EVs because of both the federal and in some cases the provincial incentives that are in place.

[Ed Fast, Conservative, Abbotsford, BC]

Would you acknowledge that Canada presently has a shortage of EVs available for purchase by Canadian consumers?

[David Adams]

I would say there is a shortage of all vehicles currently, whether they are EV or ICE vehicles. With respect to EVs, the reality is that it's not one country versus another. The reality is that the world is transitioning and building up both battery facilities and vehicle production facilities, and it will take time for more robust allocations of vehicles to be available on a global basis.

[Ed Fast, Conservative, Abbotsford, BC]

I have a question for all of our witnesses. Jump in if you can.

Is there anything in the IRA incentives for EV and battery production that would violate either our trade agreement with the U.S.—the USMCA—or the WTO trade rules?

[Daniel Breton]

That's a question I'm asking myself, actually. In my initial presentation I did mention this, because I think the fact that they're giving incentives only for U.S. battery production can be a concern. It is something to look into.

[Ed Fast, Conservative, Abbotsford, BC]

I would suggest that this would also be the case for any responses our Canadian government comes forward with. We have to make sure that we comply with our trade obligations under both USMCA and the WTO.

I have a question for Mr. Billedeau.

The IRA introduces half a trillion dollars Canadian in new spending. That's on top of several trillion dollars' worth of U.S. spending that occurred during the COVID pandemic. Has your organization done any analysis of the impact this additional spending will have on inflation in Canada? We know that when the United States spends, that spending often sloshes over the Canadian border. Have you done any analysis of whether that will have an impact on our inflationary pressures?

[David Billedeau]

I have two points, but perhaps I could first respond to your previous question very quickly.

It's worth noting that the European Union is carefully examining whether the Inflation Reduction Act does violate WTO rules. A number of tax credits, I believe inclusive of electric vehicle tax credits, might indeed violate those WTO rules. I would keep a close eye on the actions of the European Union on that file.

To your question regarding inflationary pressures, this is an area of focus that the chamber is currently examining. We already know that inflationary pressures are making labour conditions in Canada much worse. With the added pressure of the nine million anticipated jobs being created by the Inflation Reduction Act, labour conditions are going to be exacerbated. I suspect that the cost of operating will be challenged as well, going forward.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Sheehan for five minutes, please.

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

Thank you, Madam Chair.

Thanks to all our presenters. This is really good information for us to have.

What a difference a day makes. At the beginning, when we were discluded from many of the buy American strategies, it sort of reminded me again of the section 232 tariffs that were launched on steel and aluminum and that kind of protectionism. But we know that our economies are so integrated. I'm from Sault Ste. Marie, a good steel town, and we were on the front lines of the first round. I thought it was like déjà vu all over again.

For my first question—I won't go further than this guy on that—I'm going to ask my friend from the aluminum producers about the SIF programming. We heard testimony on how important the strategic innovation fund programming is to the steel industry.

Jean, I'd like to ask you about the SIF funding. Did you take advantage of it? I guess the question is whether you could use more of it.

[Jean Simard]

Thank you.

We have been using the SIF program. I would say that the first iteration of the SIF program lacked, in our evaluation, the required agility and speed of delivery, but it worked. This is what backed the ELYSIS project initially, to develop the inert anodes that will bring us to produce without any CO2 emissions in the future. It's been very strategic to the aluminum industry.

We are still benefiting, for other projects in the industry, from the SIF program. We think it's a very well-designed program. It's WTO-compliant. It's accessible. It's probably a little burdensome in terms of paperwork and follow-up and everything, but at the same time, these are big sums of money. It has to be well proofed to ensure that citizens' money is well invested and well spent.

Of all the things that lie around the federal landscape in terms of programs, this is certainly one of the jewels of the crown.

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

Thank you very much.

Mr. Strickland, before I was an MP, I used to work for the Ministry of Training, Colleges and Universities. I was the “T” in that, so I did a lot with apprenticeships. There were a few announcements recently, including the labour mobility tax credit for people particularly in the construction industry. Could you make some comments on it?

It's a $4,000 fund, for those who are listening. I think it's really good, because you have people moving all across the country to where the work is.

Could you comment on that?

[Sean Strickland]

Sure. Thank you for the question.

The labour mobility tax deduction treats a worker more fairly than a tax credit would, so we were really pleased that the tax deduction was included in the last federal budget. Previously, construction workers weren't allowed to deduct travel expenses for going to work or for accommodation when they had to travel for work. They weren't able to deduct those expenses, unlike many other Canadians who are allowed to deduct those expenses. We were really pleased to see that change.

We've been working on that change for quite some time. It will help to improve mobility so that workers can go to where the work is and put in that claim when their living expenses aren't covered by collective agreements. There are some collective agreements that will cover those living expenses.

We're pleased with that.

There are also lots of comments about the fall economic statement. In the fall economic statement, there were discussions around enhanced credits for a variety of initiatives to reduce greenhouse gases, which also included language around “prevailing wages” and creating good middle-class jobs, and also around supporting apprenticeships.

There's a whole host of avenues and policy levers that we need to address labour availability and labour mobility in Canada, and we're pleased with some of these developments that have occurred.

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

Yes, and tying it in with the green in the fall economic statement I think is really good too. Thank you for that.

[The Chair, Liberal, Judy Sgro]

You have 34 seconds, Mr. Sheehan.

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

On the union training, can you describe in 30 seconds what kind of impact the doubling of the union training would make?

[Sean Strickland]

Union training innovation programs have a tremendous impact in terms of tens of millions of dollars in investment in union training centres across Canada. We have over 195 of them. We invest over $250 million of industry funds to train journeypeople and also apprentices. The union training innovation program has helped us to purchase more equipment to help us position our workers for the new technologies of the future to help with decarbonization.

[The Chair, Liberal, Judy Sgro]

Thank you.

We'll go to Monsieur Savard-Tremblay for two and a half minutes.

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

Thank you, Madam Chair.

In all likelihood, this is the final round of questions and the last opportunity I will have to speak. My questions will therefore be for all the witnesses, and I'd like everyone to give me an answer within the two minutes I have left.

A little earlier, Mr. Breton proposed amending the wording of the 2022 United States Inflation Reduction Act to replace the word "American" with "North American". What other changes or improvements should we be suggesting to the U.S. Congress?

[Jean Simard]

I believe we should use the expressions "North American" or "signatories to the free trade agreement". The agreement will certainly not be amended, but it could be referred to.

[Sean Strickland]

I would leave it to the industry experts, who have done a much deeper dive into the different segments of the Inflation Reduction Act.

I would put a different spin on it. What we need to do in response is adopt some of the language to make sure we create good-paying union jobs and good middle-class jobs.

[David Adams]

I guess I would say that we need to be strategic, as other commentators have said, about where we leverage our investments, and certainly perhaps increasing the SIF funding and those types of measures would allow us to be strategic in how we try to secure investment for Canada.

To Mr. Fast's point, I think we do need to be careful of our trade obligations internationally as well.

[David Billedeau]

Maybe I'll just echo some of the previous comments.

I think the focus really should be on the Canadian response to the Inflation Reduction Act and how we go about not only continuing to collaborate with the United States but also addressing some of these non-tariff barriers to the U.S. market. Federal subsidies in Canada for things like CCUS are basically about half of what's now on offer in the United States, so it's time to get moving on our response here.

[Daniel Breton]

I'd like to suggest something else with respect to government tenders, at any level of government, which is that instead of accepting the lowest bid, preference should be given to green bids.

That would not be incompatible with international free trade agreements and it would give Canada an advantage. I therefore think that it's important for Canada to move in that direction.