International Trade Committee on Dec. 13th, 2022

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you for that.

Would you like to add anything, Mr. Auer or Madam Green?

[Jennifer Green]

Not at this time, no.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you so much.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll have Mr. Carrie for five minutes, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I would like to get some comments on preferences. I'm going to give an example.

On June 21, 2021, Minister O'Regan launched a call for proposals under the $1.5-billion clean fuels fund. Minister Wilkinson announced some of the potential recipients on November 14, 2022. For just this program, if somebody applies to it and gets a positive response 16 months later, they still have to negotiate the contracts. I'm very concerned about the delays in Canada's response to the IRA.

In the Durham Region, we have St. Marys Cement, a great company and a great employer. As you know, these companies—your members—are international. They can do their work anywhere. American firms, because of the certainty in the United States, are already ordering the big equipment to make these projects. Given the concern with supply chains around the world, if we don't get our act together and if we're waiting until the budget maybe in April.... We had a great opportunity in November to give certainty.

We are up against the biggest competitive disadvantage we've ever seen. We hear comments like what Mr. Robertson said: that we need to get our own act together. We've heard that we should stop the self-inflicted wounds with the naughty or nice list that the government tends to have.

Mr. Auer, maybe you could explain what a reasonable response would be right now and what message the Canadian government could give out to industry as a response to the IRA. How quickly should we put it in place? Also, what suite of policy instruments should we be considering right now?

My concern is that decisions are being made now. There are shovels in the ground in the United States, and if we're waiting another three, four or five months to get this certainty out—if it's even in the budget in the spring—we'll be losing probably the greatest potential investments—generational investments—that we could ever have.

Could you give us an idea of what we need to do now?

[Adam Auer]

I think we have the right suite of instruments on the table, but you're absolutely right: It needs to happen very quickly, and it needs to happen with a level of ambition that matches what the U.S. has done with the IRA.

Canada has a perennial problem around ambition. This is not a new thing that we face here in Canada. We're often very good at getting things started, with excellent R and D in the decarbonization space, health care and all sorts of other fields, but we've always really struggled with the leap from taking that knowledge and expertise and commercializing it to our economic advantage. That's certainly what's at stake in the low-carbon space.

As an industry, we will get to net zero by 2050. That is our global commitment. The question is, how much of a slice of the technology pie will we develop here in Canada and will we do it first? Will we lead or will we follow? I think that's what's ultimately at stake. Speed and ambition are key if we want to lead.

[Colin Carrie, Conservative, Oshawa, ON]

I think the concern, as you mentioned in your opening statement, is that for your industry in Canada it's 1.5% of carbon emissions, but globally it's 7%. Your industry has already done a lot. In talking to stakeholders and understanding the competitive situation here in Canada, we need to send the message out sooner rather than later.

As MP Dhillon mentioned, given the changes in the United States, if I'm a company and I have to make these decisions, I know that what I have right now in the United States is certainty. In Canada, we don't have certainty.

Ms. Green, are you able to tell us what we can do as parliamentarians to help the government send signals to industry that we're still a good place to do business? What can we tell industry so that they don't make these decisions now but give us a bit of time to make sure we have competitive opportunities here in Canada?

[Jennifer Green]

I believe commitments were made in budget 2022, which preceded both the IRA and the fall economic statement. I think it's about making whole on those commitments and ensuring that we run to the end of the calendar year with some reflection on those pieces. There's the Canada growth fund, for example. While it's another program, specific details with respect to the elements of that program are still unclear and could be provided.

You should be able to take lessons from other programs, which you have mentioned, that have taken quite a lengthy time to set up. When you move forward with the Canada growth fund, you should not repeat those mistakes and should make future programs as efficient as possible.

I think there is still time to advance and make clarity for the industry and for investment in Canada.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Green.

Mr. Virani, you have five minutes, please.

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

Thank you very much, Madam Chair.

Let's start with Mr. Auer.

First of all, I want to say thank you for your and your organization's participation in the road map to net-zero carbon concrete by 2050. This is an important initiative.

You were having a discussion with Mr. Cannings about things such as carbon border adjustments, for example. You mentioned issues with ensuring that entities or industries such as yours are protected from potential competition from jurisdictions where there isn't a carbon price.

I want to get your response on two things. One is the broader issue that a carbon price is actually an economic lever that's designed to spur innovation. If you don't act to reduce the amount of the carbon footprint, there's a financial hit. The other is the output-based pricing mechanism, which is a sensitive aspect of the carbon price that I feel not a lot of Canadians fully understand. It's meant to protect industries such as yours—which are trade-exposed and operate at large volumes—from a straightforward application of the carbon price. It's calibrated based on the amount of business you are doing overseas.

Can you comment on those two aspects of the carbon price, please?

[Adam Auer]

The cement sector, as you suggest, is an emission-intensive, trade-exposed sector. In fact, in the federal analyses, it has consistently been in the top three of the most emissions-intensive trade sectors. There is a recognition that our industry is uniquely exposed to the potential downside risks of costs like a carbon tax if our competing markets don't bear the same costs.

The output-based pricing system and all the provincial equivalents, except for the system in British Columbia, have provisions to provide a certain measure of protection to industries such as ours. We believe that in those output-based systems—which, as I said, exist everywhere except British Columbia—we have struck a pretty good balance in the short term.

As for the challenges, we're now entering the next compliance period under the federal system and, by extension, the provincial systems, so there is upward pressure on the price and downward pressure on the benchmarks that we have to meet. At a certain point, if industries are no longer able to stay ahead of what their compliance obligations are under our carbon pricing regime, competitiveness risks will start to come to bear.

The relationship between that and the IRA, of course, is that as an industry we want to stay as far ahead of that curve as we possibly we can. Transformative technologies will be required to get us to net zero and ultimately to make good on the incentives provided by carbon pricing and other measures. The Inflation Reduction Act effectively makes those transformative investments more attractive in the U.S. right now.

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

Thanks.

I'm going to direct my next question to Mr. Robertson.

There has been a lot of discussion from a number of members here about EVs and batteries, and not just about critical minerals coming out of the ground in Canada, but also about them being refined, processed and turned into batteries right here in Canada. People were asking you about tax credits and other incentives.

Mr. Robertson, could you comment on the lay of the land, not just at the federal level but at the provincial level? I, for one, have some concerns that significant tax credits have been removed at the provincial level, particularly in my home province of Ontario.

How does that diminish demand for EVs in provinces like Ontario and for the batteries that could potentially be produced in Canada for those cars? Could you comment on that, Mr. Robertson?

[Colin Robertson]

In Canada, we strive to make Canada a place where we have a competitive advantage. We have the skilled workforce. There are many factors that go into deciding what you're going to do, and incentives are a piece of that but not all of it.

While that is an important piece, what is in many ways more important is whether you have the resources. Do you have the know-how to do it? Do you have the workforce to do it? The investments we make in education, in worker training and in the technology to allow us to do these things are just as important in many ways as the incentives for anything.

There are many factors involved in what we're talking about, but we have natural advantages in Canada and they usually extend to our resources and workforce.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Savard-Tremblay, for two and a half minutes, please.

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

If you don't mind, Mr. Robertson, I'd like to pick up where we left off.

When we ran out of time earlier, you were saying that we should keep making the case to our U.S. counterparts that, in order to achieve their aims, Canada shouldn't be collateral damage in their war against China. When I look at other actions, though, mainly the U.S.'s introduction of punitive tariffs on softwood lumber and aluminum, Canada isn't at all seen as a victim of collateral damage of those actions.

Correct me if I'm wrong—and you, yourself, said it earlier—but the new makeup of Congress is going to make things difficult for President Biden's administration. It seems that protectionism is sometimes used as a partisan weapon, unfortunately.

Would you say that's an accurate assessment of the situation?

[Colin Robertson]

Protectionism is shared by both parties. It used to be primarily in the Democratic Party, but with Mr. Trump, it has now extended into the Republican Party, so there are protectionists on both sides of the aisle.

For that reason, we have to make the case in the United States—again with the team Canada effort I talk about—on a daily basis that the relationship with Canada works to their advantage. That involves going there, meeting with each member of Congress and pointing out what Canadian investment and Canadian trade do, because in most cases we are their largest trading partner.

We don't have money or votes, but we can talk jobs. We are creating an awful lot of jobs in the United States, and that's what gets you a hearing with members of Congress. That usually convinces them to leave this relationship as is.

Again, you have to do it on a daily basis because the Americans don't appreciate that.

[The Chair, Liberal, Judy Sgro]

You have 20 seconds left.

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

I'll use the 20 seconds I have left to simply thank you, Mr. Robertson.

Thank you, as well, to all the witnesses.

[The Chair, Liberal, Judy Sgro]

Go ahead, Mr. Cannings, for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Is Mr. Marshall still with us? I don't see him on the screen.

[The Chair, Liberal, Judy Sgro]

Apparently Mr. Marshall has problems with his Internet connection. We've been trying to reconnect him for the last five minutes or so.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay. Then I'll turn to Mr. Robertson and ask him the same question.

Mr. Marshall mentioned that the IRA builds on other existing programs in the United States, and I just want someone to perhaps expand on that. What other advantages were there before the IRA came in? How does Canada stack up against those other programs?

[Colin Robertson]

The big legislative package that came before the IRA was of course the CHIPS and Science Act, which also has a lot of incentives, particularly targeted to encourage the development of the semiconductor industry in the United States with other tangential technological investments.

This is a trend we're going to see. The IRA is not the last of these kinds of programs, and it may be one area on which the Democrats and the Republicans can agree. I said earlier that I don't think we're going to see big legislative achievements, but one area in which the Republicans and the Democrats are in agreement is how America is best able to counter China. You can fashion legislation in that regard, which will inevitably include incentives, because we're going to see more of that and should just be prepared for it.

Again, as I pointed out, Americans have practised protectionism since the founding of the republic.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I was going to ask you about that again. If there are proposals in the United States that advance protectionism legislation, they may go ahead.