International Trade Committee on Nov. 18th, 2022

[Meg Gingrich]

Thanks for the invitation to speak today.

I'm here on behalf of the United Steelworkers. My name is Meg Gingrich. I'm the assistant to the Canadian national director of the United Steelworkers—that's currently Marty Warren—and I work out of our national office in Toronto.

Our union represents 250,000 members in Canada and 800,000 in North America. We're in every sector of the economy, and that includes 20,000 members in steel and aluminum and another 15,000 in mining. We're a proud international union, with members working in vehicle and clean energy supply chains—among many others—in both the United States and Canada.

Generally, we have a positive view of the Inflation Reduction Act, particularly the pro-union labour provisions and some of the buy clean components, which we believe will benefit the North American aluminum, steel, cement and mining sectors. The IRA included these elements in no small part as a result of the influence of the United Steelworkers and the rest of the U.S. labour movement.

However, we do have concerns about the potential impact on Canadian natural resource extraction and, to some extent, on manufacturing. To ensure that the U.S. doesn't gain too strong of a competitive advantage in clean energy and manufacturing, Canada must develop concurrent policies—for example, on buy clean—which we have started to see.

The United Steelworkers are pleased with the North American content requirements for electric auto and battery producers. We believe this will provide many Canadian firms, including those that employ our members, with some opportunity, and will help create and maintain jobs in Canada in the long term.

However, we do have some concerns that the IRA's incentives for firms to invest in clean technology, absent any carbon tax, provide a double advantage to U.S. steel producers, for example. Because the steel sector is an energy-intensive, trade-exposed sector, as an immediate response, we believe the carbon tax should not be increased at this time. We are also supportive of border carbon adjustments.

None of this eliminates the need to reduce the climate impact of heavy manufacturing. The United Steelworkers supports significant investment in clean steel and other manufacturing technologies and green steel procurement policies. While Canada has made some decent commitments and investments on this front, we must note that decarbonization efforts that have any workforce impacts should be done in consultation with unions. This has not always been the case.

Furthermore, with regard to green steel and trade, we support the U.S. approach linking climate and trade policy. We advocate in favour of taking a similar approach to the United States and the EU on the green steel and aluminum pact, which would have the effect of restricting carbon-intense steel and aluminum products from taking precedence over domestic production.

We also express some concern about the impact on critical mineral sectors in Canada. The IRA sets sight on access to critical minerals. The critical minerals provisions of the IRA could prove a boon to Canadian mining. However, the worry really lies in value-added manufacturing after the extractive and immediate processing stage.

Canada must not be relegated to being a site of resource extraction with minimal additional development of downstream manufacturing capabilities. On this front, Canada must work to create markets and supply chains and to incentivize domestic manufacturing. While Canada has taken some initiative on this—for example, the Stellantis battery plant, the Umicore cathode plant and the strategic green investments that we've seen at ArcelorMittal and Algoma Steel—we need to do more on this front and, again, in a way that includes workers.

The announcements in the fall economic statement by Minister Freeland are a good starting point as a response to the IRA. However, we need more comprehensive action. On this point, it may be worth looking at what a Canadian advanced manufacturing production credit might look like.

Canada and USW members in the mining sector are well placed to supply the critical minerals needed to take advantage of the IRA critical minerals provisions. The steel sector and manufacturing generally, however, face some challenges via the 100% U.S. iron and steel requirement for domestic energy projects and the sizable—at around 55% in 2024—domestic manufacturing components requirement. The U.S. has pegged its climate policy not only to its trade policy but really as the linchpin of its renewed industrial policy. It wants to ensure that its manufacturing and steel industries not only survive the green transition but thrive.

Canada needs to follow suit if we also want our manufacturing and steel industries to not only survive but thrive, with comprehensive policies and an industrial strategy that will work in the Canadian context, combat climate change and create jobs. With the current geopolitical realities, if Canada can't get this right now, then when will we?

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Carrie for six minutes, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Madam Chair.

I want to thank the witnesses for being here for this extremely important meeting.

I will start with Mr. Kennedy.

Mr. Kennedy, on November 1, we had the Canadian Manufacturers and Exporters here, and there was a sense of urgency. As many of our witnesses have stated, Canada seems to be playing catch-up. This IRA—a renewed Build Back Better Act—was horrible. One witness, Flavio Volpe, from the parts sector, actually said the IRA is the correction to that, but we're still running catch-up.

The Canadian Manufacturers and Exporters said something that was extremely concerning to me, coming as I do from Oshawa, where manufacturing has a great history. They're concerned that because of the IRA, we're going to see a flight of capital investment out of Canada into the United States, which could reduce the number of manufacturing jobs in Canada.

Those witnesses on November 1, before the fall economic statement, said that this was urgent. They wanted to see action. Everybody has been very polite, and we're saying it's great that the government recognizes it, but there doesn't appear to be anything in the fall economic statement that is really going to be taking action now.

Can you please elaborate on that? Can you give us some advice for the next budget on what needs to be done promptly so that we don't see this flight of capital investment out of Canada? We have all the tools here, as Ms. Gingrich said, for the value-added part of it, and we don't want to be just sending minerals down there. We want to be building here. Can you please give us some good advice on that?

[Trevor Kennedy]

I think I'd repeat what others have mentioned before.

On the move from build back better to the IRA, we agree that now we're inside the tent. The IRA did make Canadian content, North American content, count for some of the EV credits, for example, or the incentives. That's a positive development from build back better, but the risk we face now is that if you are an investor, whether you're in Canada or an international investor looking at investing in North America, you're not facing a level playing field because of the IRA and because of the generous programs in place.

In the fall economic statement, some interesting programs were announced, but there are a lot of details we need. Our response to it is that we are looking for a budget early next year to clarify what these programs will look like. Every day is important. We know that countries around the world are looking at Canada and looking at the United States, and they're making decisions now that will impact our trade for the next several decades. Really, time is of the essence, I think.

That's the way I'd answer that question.

[Colin Carrie, Conservative, Oshawa, ON]

I think we would agree with that. We had Toyota here on November 1 as well and they mentioned the urgency, because companies can't just ramp up overnight. They need to have certainty in policy. They mentioned they wanted to see that firms manufacturing here are not penalized for choosing to build vehicles and batteries in Canada.

Could you please elaborate on these planning decisions that companies have to make? How far ahead do they have to make these decisions before they make the investments in Canada? If we don't get it right in the spring, this could be devastating for economies like the one my community depends upon.

[Trevor Kennedy]

Well, I think we're seeing very rapid change in this sector, particularly in the auto sector, but many other sectors are making, as I noted, a once-in-a-generation change. The next several years will be really critical. The IRA set out a very clear path for how the United States plans to attract investment into their economy and we're seeing a lot of interest.

There was a lot of interest in Canada, and I think there still is, but now there are questions about how we plan to respond. Answering those for companies, whether they're from Japan, Korea, Germany or elsewhere, is really critical to make sure that we attract the next generation of investment.

[Colin Carrie, Conservative, Oshawa, ON]

The next question is for Mr. Krogmeier. Thank you very much for your comments.

You were talking about the importance of a convergence of government policy. I know that when we were in government, we worked hard to make sure that the regulatory environment between Canada and the U.S. was as consistent as possible.

Could you please comment on the competitiveness issue if we don't have a congruent or convergent regulatory environment? Also, what threat does that play in capital being lost to the United States?

[Ryan Krogmeier]

The crux of the issue is one of competitiveness. It's been said already that the ability to attract capital investment here in Canada with this unlevel playing field is a big issue.

In the space of renewable fuels production or biofuels production, which will be a critical component of decarbonizing over the next several decades, we will have the ability to convert all the natural resources here in Canada—forestry residue, fish oil residue, tallows and canola oil, for example—into a usable, renewable, low-carbon fuel that we can put back into farmers' and consumers' gas tanks. There is a virtuous cycle there that we will not be able to achieve if we cannot attract the capital investment needed to fund these types of projects.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Arya, you have six minutes, please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

In Canada we are prosperous. We have a high standard of living because of our international trade. I think 65% of our GDP comes from trade, and the bulk of our trade is with the U.S.

Whatever the U.S. does on the economic front will certainly affect us. We have to be cognizant of that fact. I am glad that we are looking in detail into the U.S. Inflation Reduction Act and seeing the consequences for Canada.

In my view, in addition to this very important act, I think we should simultaneously consider the CHIPS and Science Act of 2022, passed by the United States. That's a $280-billion act. Though it is popularly known as the CHIPS act, with $52 billion going into CHIPS production, $200 billion is going toward setting up 20 technology centres. They're CHIPS-related energy transition biotechnology centres.

Those investments are what the U.S. experts call “the most significant investment in industrial policy that the U.S. has made in the last 50 years or more.” That is also important. We have to look into how that affects Canada in various spheres of the economy here.

A few days back, the U.S. Secretary of Commerce stated, “This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development.” Having said that, we are focused on the U.S. Inflation Reduction Act. The talk is on trying to match whatever the U.S. is doing.

During the last meeting, we had several witnesses, and I think two key points that were brought out were from the president of Canada's Building Trades Unions, Sean Strickland. He mentioned that we cannot “respond line by line”, but we should respond “smartly”. That is what I think we should focus on.

We are talking about the flight of capital and how Canada is losing all the money that will go into the U.S. At the same time, we are forgetting that a few weeks back, the U.S. military was exploring how it can invest in Canadian mineral projects and critical minerals. That was a surprise for many, but not to several of us. We know that the defence production sharing agreement from 1956 considers all Canadian companies to be U.S. domestic companies for defence purchases.

We have certain significant areas of strength in Canada. For the strategically important things we have in Canada, I think we can focus on and respond smartly to those sectors.

Recently, the Government of Canada signed an agreement with the Ontario provincial government for the Ontario regional table. This is the ninth regional table agreement that the federal government has signed with a province, wherein we try to align resources, work on the timelines and plan to work on the regulatory process so that we can jointly develop the smart electricity grid and the critical minerals supply chain, and we can do things related to nuclear technology and sustainable forestry.

I would like to ask Mr. Kennedy of the Business Council what his thoughts are on these regional tables. What are the key things for which we can adopt a team Canada approach, similar to how all the political parties in Parliament, the provinces and the industry bodies worked together when it came to the NAFTA renegotiation? In the same way, what can we do in the context of these regional tables? What are the key things we need to address jointly?

[Trevor Kennedy]

I'd be happy to share, but maybe more in a general sense.

I think it's critical that industry and government work together. We are facing a very competitive global environment, and we are seeing our partners, but also sometimes our competition, around the world really taking an aggressive approach towards securing future supply chains and dominance in certain sectors.

For Canada to remain competitive, we need to have a close partnership. I'll go back to my previous message around the need for urgency in light of the challenges we're facing globally.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Kennedy.

[The Chair, Liberal, Judy Sgro]

You have 40 seconds left, sir.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Montgomery, time is quite limited, so for you it's the same question, if you can give me your input.

[Chris Montgomery]

As far as the regional tables go, I think industry hopes that the provinces and the federal government can work together to remove particular barriers to emission reductions in the sector. For our sector, those would be a combination of electrification and CCUS.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, go ahead for six minutes, please.

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

Thank you, Madam Chair.

I'd like to say hello to the witnesses and my colleagues, and thank the witnesses for their presentations.

Mr. Kennedy, after the last update, your senior vice-president Robert Asselin published a rather critical editorial. In it, he pointed out, among other things, that for several budgets now, the government has been spreading itself too thin by creating all kinds of funds, and we've yet to see a credible, well-crafted industrial strategy in Canada for the advanced technology sectors. He also lamented that there seems to be no sense of urgency.

In your view, how could we get around this scattered behaviour? How do we come up with a well-crafted industrial strategy? What should that strategy include?

[Trevor Kennedy]

My colleague Robert Asselin would certainly be a good person to speak to in the future. My focus is more on international trade and our competitiveness, so I'll have to answer in a very general sense.

This goes back to a comment I made previously about looking at the United States in particular. It has approached industrial policy in a very aggressive way to secure its leadership in the key critical sectors that it's identified. Canada needs to have an adequate approach—

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

Madam Chair, we haven't had any interpretation since Mr. Kennedy started answering my question.

[The Chair, Liberal, Judy Sgro]

Could you just hold on while we check the interpretation?

Please start your response again, sir.

[Trevor Kennedy]

Sure. I'll try to repeat it the best I can.

Is the interpretation working now?

[The Chair, Liberal, Judy Sgro]

No.

We'll have to suspend for a moment while we clear up the interpretation issue.

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

Madam Chair, the interpreter says we can do a test.

[The Chair, Liberal, Judy Sgro]

Can you repeat your answer again?

[Trevor Kennedy]

The third time's a charm. I'll do my best to answer.

My focus at the council is more on the international policy side. My colleague Robert Asselin would be much better positioned to speak about industrial policy at length.

I'll repeat a message that we've communicated, looking at the United States in particular given the IRA. CHIPS was referenced too, as were other key activities.

The United States is aggressively approaching industrial policy in a way to secure its dominance in certain key sectors. We think Canada needs to look closely at how our partners and competition around the world, principally the United States, are leading the way with industrial policy, which is often a close partnership between industry and government to ensure that they have the technology, innovation and environment needed to lead in the future economy.

I apologize that I won't be able to go into too much detail beyond that given my area of expertise, but I certainly think it's a very important topic to look at in the context of our trade relationship with the United States and how we remain competitive over time.