International Trade Committee on Feb. 7th, 2022

[Chris Lewis, Conservative, Essex, ON]

Thank you very much, Madam Chair, and I thank the minister. I know she just left, but it was very good of her to come to committee.

I don't know who to address these questions to. I'll ask the question and whoever would like to pick it up, I'd appreciate it.

I found the discussion with regard to 400 meetings with our U.S. counterparts intriguing. Through you, Madam Chair, I also found it intriguing that the senators didn't know about the EV tax credit with regard to it being in the Build Back Better legislation.

After 400 meetings, how was this possible?

[Michael Grant, Assistant Deputy Minister, Americas, Department of Foreign Affairs, Trade and Development]

Madam Chair, if I may, I'd be happy to respond.

[The Chair, Liberal, Judy Sgro]

Please go ahead.

[Michael Grant]

Indeed, on the EV matter, there have literally been hundreds of meetings, and as you can imagine, not just from the Prime Minister and ministers who have travelled to Washington and who were engaged over the phone, but also from our embassy in Washington, D.C., and from our network of consulates general in the U.S. who were engaging both in their territory and also with the members of Congress on the Hill. You can see how it quickly adds up

Now indeed, in a number of instances in raising our concerns over the EV tax credit with a particular member of Congress or a particular office of a member of Congress, there were a number of instances where they weren't familiar with the details of the tax credit. As you can imagine, the Build Back Better legislation was a rather enormous endeavour, and in some instances there would be members who just didn't have it as a priority.

One thing we've done over the last several months is ensure that all are fully aware of the details and also fully aware of the integrated nature of the automobile industry and the impact that such a measure would have on the U.S. industry and the U.S. economy.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Grant. I appreciate that.

Of those 400 meetings, is somebody able to table with this committee exactly who the minister met with?

[Michael Grant]

Not at this moment, but I'm sure that is something we can provide through the chair.

[Chris Lewis, Conservative, Essex, ON]

I think it would be really good to know that, so that when all sides of the House are working with our U.S. counterparts we can work collectively on that. I would like to see that, Madam Chair, if we could.

I'm going to switch gears here. Let's talk auto for a moment.

Let's talk about the chip shortage. I was very surprised that the minister didn't address that. I know that there's only so much time for the minister, but let's talk about the chip shortage with regard to auto. One million units were not built in Canada last year due to that. What discussions have happened between the minister's office and her counterparts in the U.S. to ensure that this shortage is not going to be an issue going forward?

[Michael Grant]

What I can say generally is that in the minister's meetings with her counterpart and with members of Congress, all aspects of the auto industry and the importance of moving forward have been raised. I would note that coming out of the summit that was held in November, between the Prime Minister and the President, a supply chain working group was established. It has a number of sectors that it looks at. One of them is specifically semiconductors.

In terms of the detail that you're looking for, I'm afraid I don't have an answer to that question. I'll see if any of my colleagues may, but I doubt that they would today.

[Chris Lewis, Conservative, Essex, ON]

I only have 30 seconds left, so I'm going to make this very quick. It's with regard to the border and getting Canada and U.S. on the same page.

What I mean by this is that historically speaking.... I guess this is more of a statement than a question. Historically speaking, Canada is always a week behind the U.S. or the U.S. is a week behind Canada; it would be really good to know when we're speaking out of the same side of our mouth. I, along with Mr. Masse—I'm almost done, Madam Chair, thank you—live next to the busiest international border in North America, and it would just be really good if we were all on the same page.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Lewis.

We go now to Mr. Virani.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Madam Chair.

Thank you to the officials for being here.

I want to raise a couple of things that dovetail with some of what we heard in the first hour.

To the officials, we heard a little bit from the minister about how critical it was when renegotiating CUSMA to retain the dispute settlement processes. We heard in response to specifically something that Mr. Patzer raised about rules of origin.

We know that Mexico has initiated consultations under chapter 31 of CUSMA, under that dispute settlement process. They requested the establishment of a panel on January 6, and we've decided to join that as a complainant.

Could you talk to us about that decision and what the next steps in that process will be with Canada's participation?

[Arun Alexander, Associate Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development]

Yes, Canada and Mexico have requested a panel. Mexico requested a panel, and Canada joined that panel request. The issue is the interpretation of the rules of origin for core parts for automobiles.

The United States and Canada and Mexico have different interpretations. During the negotiations of the agreement, we shared the same interpretation. The text of the agreement, we think, very much aligns with ours. Basically, the short of it is—and I always find this a bit confusing—that there are two sets of rules of origin: one for core parts, which includes things like transmissions, engines, and batteries; and then one for the general automobile.

Generally, in rules-of-origin law and rules-of-origin processes, once a part is declared originating, meeting the rules of origin, then it's originating for all processes. For Canada and Mexico, we believe that when a core part is ruled as originating, then when we're doing the overall regional value content of an automobile, that part should be considered originating. The United States disagrees, so that's where the dispute lies. We believe we have a very strong case here based on the text of the agreement itself and also the interpretation and communication we had with automotive manufacturers during the negotiations.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Mr. Alexander. That's very helpful.

I think what's important is that we have that settlement mechanism to resort to when we see fit. Despite the fact that we're still in litigation over some parts of the trade, we heard the minister say that actually bilateral trade has never been higher.

Can one of you speak to how high it is numerically? Can you provide us with some observations as to why the trade is so robust at this stage?

[Arun Alexander]

I don't have the specific numbers. I apologize for that, Madam Chair.

I understand that for trade last year, there were record numbers between Canada and the United States. The pace is continuing this year. We do over $2 billion worth of trade across the border every day. That speaks to the strength of the bilateral economic relationship. We do have some irritants, as you said, honourable member, but we do have a mechanism to deal with those and we're using that effectively.

I don't know, Michael, if you have specific numbers on the trade.

[Michael Grant]

Unfortunately, the number I have is from 2020. It was $614 billion in two-way trades in goods and services.

[Arif Virani, Liberal, Parkdale—High Park, ON]

If I may, I have one last question just quickly.

We heard a little bit from Mr. Sheehan about the issue of the EV tax credits and about what we're doing here on the Canadian side here and the fact that the credit our government has put in place—a $5,000 credit—benefits Americans. What we're looking for is reciprocation, with American tax credits benefiting Canadians because of the integrated nature of the auto supply chain.

Can you comment on the fact that when we have tax credits, they're beneficial, and what, when tax credits that were previously in place—and I'm thinking about at the provincial level—are rescinded, that does to Canada's position generally with EV and on climate action, and in terms of our bargaining position with the United States?

[Arun Alexander]

Maybe I'll turn to my college from ISED, who probably will be able to speak to that better than I can.

[Mary Gregory, Associate Assistant Deputy Minister, Industry Sector, Department of Industry]

I think it is important to ensure that we're remaining competitive in terms of these credits and offerings, which is why we are so concerned with the Build Back Better legislation that's currently suspended.

Federally, we have had tax credits. Provinces obviously can take their own actions in those areas as well. We're tracking that information carefully as provinces offer those things, but if the U.S. implements something that is much more generous, it will be difficult for our country to remain competitive and maintain its attractiveness for investment.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go to Mr. Savard-Tremblay for two and a half minutes.

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

Thank you, Madam Chair.

The dispute settlement was addressed in a previous question. The minister said earlier—and this is also in the public record—that a complaint would be filed because of the Americans' decision to impose tariffs on softwood lumber. We know that, whenever Canada files a complaint, it succeeds. The courts have never ruled against Canada in this type of case. The issue is the amount of time that it takes. Industries have time to go bankrupt and suffer financial and job losses before the legal proceedings take place. We know that one of the American tactics is to delay the outcome of these types of legal proceedings for as long as possible in trade disputes.

Why wasn't CUSMA seen as an opportunity to better manage dispute processes?

[Arun Alexander]

I could answer that question, Madam Chair.

I think CUSMA has a much more effective dispute settlement mechanism than under NAFTA. We've improved it greatly. Under NAFTA, the United States or another party could frustrate the system by refusing to participate, perhaps by not responding to a request for consultations. This would frustrate the ability to establish a panel.

Those impediments have now been removed under CUSMA, so panels are automatically established. Furthermore, the timelines for the decisions of the panel have been reduced, so they will become faster.

I believe the new CUSMA dispute settlement system is a good improvement on the NAFTA one, and also it's faster than the WTO.

We're hopeful that we will see the resolution of some of these cases and we do have a number of the cases before panels quickly.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Masse, you have two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

I'm going to follow up with regard to the provincial incentives, as well, for EV vehicles versus the States'. Has there been an inventory done of the states offering incentives? I'm familiar with the Canadian ones and some of the American ones, but has there been an overall inventory done? That really makes it highly effective.

Right now I know in Ontario, for example, for Teslas and other vehicles, you can still get an incentive in Quebec. So what's happening is that some people are buying vehicles in Quebec and then taking them to Ontario to sell them after they've actually gotten the rebates, because there isn't the requirement to hold the vehicle for three to four years, which there was in the past.

I'm wondering whether there's been work done on that across the United States, and whether we could get access to some of that. I'm just curious as to that aspect, because it affects our overall position.

[Mary Gregory]

I guess I can answer, Madam Chair.

I'll start from my department in innovation. We track what's going on in the provinces and some of the states, as well. Things change rather quickly. As you noted, there have been incentives in place and sometimes they get changed. I don't have an answer of the top of my head in terms of what the situations are today, but I'm happy to follow up if that's helpful.

Thank you.

[Brian Masse, NDP, Windsor West, ON]

Could you get that back to the committee sometime? It would be appreciated. I think that's important for our overall look at the issue, because I understand that's been the bane of the auto industry in terms of even investment.

A lot of people talk about the United States' so-called “free market economy”, but I can tell you this much. For as long as I've been elected, between municipal and federal—and that's 25 years— municipal, state-level and federal-level incentives from the United States have been the common denominator in terms of trying to take away our auto jobs. In fact, they've been quite successful, because we've gone from third in the world in manufacturing and assembly to tenth now.

I see the same type of thing coming with EV vehicles, as well, especially as we're getting into battery and other types of components.

If I can follow up with the dairy—