International Trade Committee on May 1st, 2023

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

Thank you.

I'm going to turn back to Mr. Harvey again, because he has this background in the mining sector.

You mentioned some disputes involving investments. When I hear of international disputes with Canadian mining companies abroad, they often seem to centre around taxes, local taxation and countries trying to get some benefit from those mines in their own country. I don't know the details of most of those, obviously, but I have heard of situations of Canadian mining companies abroad opening a post office box in Luxembourg, for instance, and then work it so that their tax is in Luxembourg, not in Canada or in Mongolia or wherever they are actually working. The people in Mongolia don't get any money and the people in Canada don't get any tax benefits.

I wonder if you would consider those to be non-tariff barriers. How do Canadian companies working abroad decide where they're going to pay their taxes and whether they pay taxes in a fair way or not?

[Michael Harvey]

The tax regime in every country is different. I can assure you that in the countries where we work, we definitely pay taxes.

What often happens in the mining industry is that the decision to invest is made at a point where the risk related to the investment is very high. Agreements are reached about what the level of taxation will be for the operation. The operation then becomes an electoral issue, in that the opposition may complain that the government in power is not extracting the right amount of taxation from the company, or the government looks at the risk analysis, which is quite different after the mine has already been built and is producing from how it was before the mine was built, when the risk was much higher. Alternatively, quite simply, the local authorities decide that more tax should be coming, maybe because the price of the mineral has changed.

Dispute settlement around these taxation issues is often related to what commitments were made and whether the commitments are being upheld.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

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

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us today.

I'm going to begin with Ms. MacNeil.

I'd like to start by reading into the record a letter of request that you had put in to appear here. In that letter, you wrote:

...for a nearly two-year period, Tree of Life was unable to bring cream into the Canadian market, despite there being no domestic supply – which came at the expense of our thousands of customers. Tree of Life was finally granted supplemental cream TRQ in 2021, after a lengthy, costly and administratively burdensome process.

As my colleague had referenced earlier, it seems that the non-tariff barrier facing your operations is more on the regulatory administrative issue around the TRQs here from the Canadian government.

How do we fix it?

You talked about a TRQ review that started in 2019. Can you provide some of your suggestions on how we can go about fixing that?

Who have you spoken to in the government? Have you spoken to departmental officials? Have you spoken to the minister's office?

[Lisa MacNeil]

Thank you.

There were lot of questions in there.

I'll start with the solutions. It really is about the administration. It's about the allocation and fixing the allocation.

First, I'll go to the CPTPP and the fact that only 10% of the allocation is given to distributors. Our recommendation would be that we triple that so that when we're able to use the CPTPP in 2025, distributors will have the ability to actually import enough product to help in the Canadian market.

From a WTO perspective, I would say that changing the two-tiered system to one would allow a separation for those high-fat-content creams that I talked about. The cream that we're importing from the U.K. has a 55% fat content, just below butter. We're in the same TRQ as the 10% cream that we're pouring into our coffee. It's too broad a range. If we could tighten that up, it would be great.

Then it's just about ensuring that the TRQ review resumes in short order and that the allocation method is fixed.

In answer to your second question, yes, many folks have been gracious enough to take our meetings and listen to our story of being an orphan among the dairy quota category.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

In terms of that allocation, the Canadian government takes that approach on the division of the allocation. They negotiate the market access, and then it's up to the federal government to then determine—

[Lisa MacNeil]

They determine how it's allocated, absolutely. It's 100% the Canadian government's decision.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you for that.

I'll go to Mr. Harvey.

You had mentioned earlier about steel and aluminum and CUSMA. Currently there is a 70% North American content provision. Melt-and-pour provisions apply to the steel, but not to the aluminum.

In my riding, I have a General Motors powertrain division that makes engines with aluminum heads. They have to compete and they're using Canadian aluminum for that. In Mexico, they don't have those same requirements because of that.

Is that a deterrent or a barrier that they may face? Mexico could be bringing in scrap aluminum— ingots from China—to create the automotive engines that they're creating.

[Michael Harvey]

It could be.

What I referred to specifically wasn't CUSMA in this case; it was a recent WTO decision. The United States had said it implemented its quotas because of national security reasons. You might remember that from President Trump. The WTO basically said no, and the United States just responded that it's a national security issue, so the WTO has nothing to say about the matter.

To that I would say that in a broad sense, it's always better when we have these dispute settlement mechanisms of the kind we have in the WTO. That doesn't mean it's necessarily solved, because countries might not implement—

[Tony Baldinelli, Conservative, Niagara Falls, ON]

That wasn't my question.

My question revolved around CUSMA and the 70% North American content. The melt and pour extends to steel, but it doesn't extend to aluminum. By not including that, there are ways for Mexico to get around some of the provisions and therefore use China-based ingots for aluminum, whereas a GM facility in North America has to use North American-produced aluminum. In fact, their costs are a little higher than they are for those engines it has to compete against that come from Mexico.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Baldinelli.

Do you want to give a brief answer, Mr. Harvey?

[Michael Harvey]

I don't have much. I mean, obviously that's a question for the negotiation inside CUSMA. To the extent that there are disputes, it's better that we have mechanisms of the kind we do inside CUSMA.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Sheehan, you have five minutes, please.

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

It's a good segue: section 232 tariffs.

I represent Sault Ste. Marie, where Algoma Steel is located. Certainly those section 232 tariffs are an example of something that was made up, quite frankly. We were never a national security threat to the United States. When I wake up in the morning, I look out my bedroom window and I see the United States. There's a little river in between us. I don't see any gunships in there. There's no barbed wire. It's not mined. We are integrated.

I'm glad that we're studying these non trade-related barriers, these little trick shots that are used by different countries. I remember that when I was in Sir James Dunn high school in Sault Ste. Marie, the then trade minister Jim Kelleher talked about these barriers. It was very interesting to hear that as a teenager. He pointed out that sometimes what the United States will do—and other countries do this as well—is they'll pick on say, a vaccine that we're using on swine or pigs. He used that as an example. They say, “Well, we haven't tested it” or “We have not completely finished our testing”, and it allows them the time to keep the swine out of the United States. There are all these little tricks and such.

Recently we had the Minister of Transport in Sault Ste. Marie and we had a round table. At it, there were our large employers, like Algoma Steel and Tenaris, and Rory Ring, who is the head of the Chamber of Commerce for Sault Ste. Marie. We had a really good discussion. Because we're a border town, we always talk about transportation. We spent a lot of time talking about a national transportation strategy, which is identified in budget 2023. There was a lot of discussion about the importance of that.

Through you, Madam Chair, to our presenter, I would like to get your perspective on how important a national trade transportation strategy is, and what should be in it, in your opinion, to help alleviate some of these pressures and issues related to trade for Canada.

[Michael Harvey]

Sure. In a broad sense, we've argued regularly that the way Canada can most contribute to international peace and security in these quite unstable times is to be able to export more. We talk a lot about food, fuel, fertilizer, critical minerals. A lot of the time what Canada needs to do is to make decisions inside Canada to be able to export our products to the world and contribute to international peace and security—not just the peace and security of our allies like the United States, but also the countries of western Europe and countries like Japan and South Korea.

I was with Mr. Beatty two weeks ago now, in Japan at the B7 summit, where we were talking a lot about G7 solidarity. Mr. Beatty insisted that from our perspective, Canada can do more in terms of stepping up and exporting more of these products that our allies need. A lot of that is to get rid of some internal barriers, some things inside our country that are preventing us from reaching our full potential in that sense.

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

It's very important that we have the opportunity to get not just our critical minerals but our various finished products to market with any value added that we can.

Thank you for that, Mr. Harvey.

I'm going to switch to George, from the nuclear folks.

Recently I had a meeting with the Power Workers' Union. They were talking about nuclear power, obviously, and what's in budget 2023, and how important it is for this government to recognize the importance of nuclear power in this whole mix of decarbonizing our economy.

On the same kind of thought process, Algoma Steel is where it is because of hydro and a lot of green energy. The province is going to hook us up into the power grid in particular as we go forward.

During that conversation, I also mentioned about the opportunities—and I'm going to talk about northern Ontario—for the small nuclear reactors, in particular some of the developments that are happening throughout northern Ontario, as well as indigenous communities that are looking for sources of power.

Could you comment on opportunities in northern Ontario, in particular with indigenous communities, around tapping into these small nuclear reactors?

[George Christidis]

Yes, absolutely.

I think the opportunity for northern communities and indigenous communities in northern Ontario but also beyond will be on what makes sense for them, right? They'll be taking a look at multiple technologies. One might be a very small reactor, and there are some that will be coming onto the market that could be applicable to them. If they are interested, there will be hydro opportunities. There will be renewable opportunities. Whatever it is, the whole point is that on this suite of technologies that will be available to communities, they can then decide what's best for them. That's the most important thing.

In terms of technology and small modular reactors, there are very small reactors of about five megawatts, 10 megawatts and 50 megawatts that are being looked at. Whether it's for small communities or remote communities or resource development opportunities, whether it's mining or oil sands development, a number of applications could come from those.

Those are being looked at with a slightly longer time frame. For example, Ontario Power Generation is building one at Darlington in 2030 that will enable on-grid opportunities in Saskatchewan. Synthos in Poland is actually looking at that. Again, that's a bit of a larger reactor, but some of those very small reactors could be applicable to northern communities, indigenous communities or the resource development sector, based on their technology needs and what's best for them.

That's ultimately our view.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

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

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Thank you, Madam Chair.

I would also like to thank the witnesses for being here today.

Mr. Harvey, you talked a lot about the importance of engaging in discussions and improving communication. If we have a trade deal and we find out along the way that it's not what we originally intended, could we be more proactive in trying to fix it, if the discussions were better and more up-to-date?

[Michael Harvey]

I would say yes. It is better to have a less than perfect agreement than no agreement at all. It's through discussion that you work out the problems in order to get to what you want. So it's better to have an agreement that frames disputes than to have disputes without an agreement.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Would you say that the government could be more proactive in the area of trade to correct this type of situation?

[Michael Harvey]

You can always be more proactive. It's a question of how you use your resources and the energy you put into it.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

In terms of the trade balance, will the fact that our exports are going down and our imports are going up have a big impact on upcoming negotiations or on our non-tariff barriers? If I'm not mistaken, our exports have fallen since January. So will the negotiations have to be conducted differently?

[Michael Harvey]

That will depend on which negotiations are involved. Normally, we do not seek to achieve a perfect balance between imports and exports with any given country. Indeed, in the global trading system, we sometimes want to import more here or export more there. We don't necessarily seek a perfect balance with every country.