International Trade Committee on Feb. 1st, 2024

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

I call this meeting to order.

Good afternoon, everyone. Welcome to meeting number 90 of the House of Commons Standing Committee on International Trade. Today's meeting is taking place in a hybrid format. Pursuant to the Standing Orders, members are attending in person in the room and remotely using the Zoom application.

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Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, October 17, 2023, the committee is continuing its study on Canadian businesses in supply chains and global markets.

I would now like to welcome our witnesses. We have with us: from the Canadian Association of Importers and Exporters, its past chair, Kim Campbell; from the Canadian Chamber of Commerce, Matthew Holmes, senior vice president, policy and government relations, and Robin Guy, vice-president and deputy leader, government relations; from Supply Chain Canada, Michael Whelan, board chair, national board of directors, is attending in person, and Martin Montanti, chief executive officer and president, is joining us by video conference.

I thank and welcome all the witnesses.

We will start with opening remarks and then proceed with rounds of questions.

We will start with you, Ms. Campbell. I invite you to make an opening statement of up to five minutes.

[Kim Campbell, Past Chair, Canadian Association of Importers and Exporters]

Thank you, Mr. Chair and members of the committee, for including the Canadian Association of Importers and Exporters, I.E. Canada, on your agenda to allow for input on this important topic.

My name is Kim Campbell. I am the past chair of our association. We appreciate the opportunity to appear before this committee to share our thoughts on programs, tools and measures that could support the growth of Canadian business here and abroad.

I.E. Canada is a national trade organization that has been speaking on behalf of Canadian trade for almost 90 years. Our members include importers, exporters, Canadian manufacturers who both import and export, wholesalers and distributors, and retail importers and exporters in Canada. As well, we represent both the largest and small and medium-sized businesses. Our members import and export across most commodities and product lines.

I.E. Canada endeavours to be a trusted facilitator between business and government, to inform and influence outcomes of policy and real-world application for the movement of goods across Canada's international borders. The private sector needs transparency, predictability and ease of use in all our interactions with government, but this really is more so at the border.

The current business environment remains challenging for our members as we continue to recover from the pandemic, and we have had subsequent border disruptions such as B.C. floods, protests and port and rail labour disputes. Each one validates the importance of an open and fluid border. When only one part of it is disrupted, it causes increased costs, lost sales, food insecurity and economic hardship across the entire supply chain.

Canada has set ambitious targets for increasing its overseas exports, with a goal of achieving a 50% increase by 2025. To meet these targets and ensure we have a properly functioning border, we believe the Government of Canada must do something different.

We need more collaboration and coordination, with a strong mandate to create a best-in-class supply chain. This can only be achieved with industry inclusion in the mandate and a voice at the table. Too often, we are disappointed at the lack of engagement and dialogue. We must do better. It is our belief that there must be accountability and oversight to ensure we are achieving our desired outcomes. Having agencies and departments work in silos with no overarching mandate has not proven effective to date.

We would like to share some current challenges that we believe impact the supply chain and the unused opportunity to leverage CUSMA, which provides a framework for customs and trade facilitation.

CARM has been described by the Canada Border Services Agency as a digital innovation that aims to transform the process of assessing and collecting duties and taxes on commercial goods imported into Canada. This initiative is a multi-year project that will change how duties and taxes for imported goods are collected and managed. It was to reduce the cost of importing to trade chain partners.

Unfortunately, we have a project that is vastly over-budget, late and missing key registration and performance targets. Businesses continue to absorb unnecessary costs trying to implement due to CBSA's inability to follow a recognized IT project methodology. CBSA continues to change plans, which has forced industry to reinvest multiple times. Policy decisions will add direct costs that importers do not have to contend with today.

The solution itself is complicated, confusing and layered with manual processes that are currently automated. Despite not proving the CBSA is ready to implement, because we are missing policies, regulations, implementation plans and have not achieved acceptable testing results, they will implement this project on May 13, 2024, with a big bang approach.

Their decision to make it a requirement for importers to create a portal account and obtain their own financial security for the goods to move past the border without payment of duties and taxes is expected to cause large-scale border disruption. Today, almost 100% of shipments move unimpeded past the border, and all processes are digitized. On May 13, for those shipments that do not meet the new criteria, they will be forced to release their goods at the border by paper and to pay duties and taxes.

CBSA has recently implemented a mandatory filing of a dataset before goods enter Canada. This is required to be done by freight forwarders, who play a critical role in the logistics industry by ensuring the smooth and efficient movement of goods from point of origin to the final destination.

Penalties are now being assessed when CBSA believes their policy is not being followed. The penalties are significant and escalating. Although CBSA continues to state that AMPs are not punitive, industry does not agree. Unfortunately, many freight forwarders are now having to consider bankruptcy and, in addition, many transportation companies are reconsidering Canada as a place to transport goods because the stakes are too high.

The downstream impacts are significant, as importers and exporters have fewer options for shipping goods into and outside of Canada. Industry continues to raise this with CBSA, but to date—

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Ms. Campbell, please conclude your presentation.

[Kim Campbell]

Thank you.

I will just offer some final potential suggestions.

In 2019, in collaboration with CIFFA, the trade association that represents freight forwarders, we put forward a white paper on a path to a smart and secure commercial border. Five years later, the content and recommendations remain the same.

We believe there is an opportunity to try something different by working together as legislators, regulators and industry to create a world-class border that will ensure the health, safety and security of our economy.

We would encourage you to read our white paper.

Thank you.

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Thank you, Ms. Campbell.

Mr. Holmes and Mr. Guy, I invite you to make a statement of up to five minutes.

[Matthew Holmes, Senior Vice President, Policy and Government Relations, Canadian Chamber of Commerce]

Thank you, Mr. Chair.

Thank you, honourable members, for the chance to appear before you today.

The question before this committee is a significant one. When the value of two-thirds of Canada’s GDP is based on trade activity, how we manufacture and move goods across the country, how we prioritize and protect our critical trade infrastructure and the markets we choose to focus on—whether next door in the U.S. or as far away as the Indo-Pacific—have outsized impacts on the health of our economy, opportunities for our businesses and the quality of life of everyone in the country.

While our supply chains have largely recovered from the worst of the pandemic’s disruptions, many of our members continue to face disruption, inconsistent supply and persistent inflationary pressures. According to the most recent Canadian survey on business conditions, a quarter of businesses still identify supply chain challenges as a key concern and one that over 60% of them expects to persist.

The evolving role of transportation and logistics is critical to Canada’s competitive success, but our supply chains remain only as strong as their weakest link. The challenges and costs presented by climate shocks, such as frequent floods and wildfires, have demonstrated how fragile many of our supply chain systems and structures are. In the context of a highly restive labour environment, key points in our trade corridors have experienced repeated or prolonged strikes, putting further strain on a precarious system and compromising our reputation as a reliable place to do business.

Canadians are frustrated by the affordability crisis. They want to see products move and prices remain stable. This requires business and government sharing the common goal of a functional supply chain and a growing economy.

To do this, we need to see long-term investment in Canada’s trade infrastructure. Businesses need to be able to get their goods to market reliably. We can’t simply look to address the needs of today, but the challenges and opportunities that we see 20 and 30 years from now.

[Robin Guy, Vice-President and Deputy Leader, Government Relations, Canadian Chamber of Commerce]

While government isn't solely responsible for infrastructure investment, a federal commitment to major, strategic, long-term investments is key to building Canada’s trade infrastructure.

The government's national trade corridors fund is a positive step forward. While it is supporting worthwhile projects, the government must work to increase the speed at which projects receive funding. It must work with business on ensuring transparency for projects and by continuing to demonstrate how funding is helping to address the supply chain challenges of both today and tomorrow.

We need government to lead the development of a vision for Canada's trade infrastructure. This committee's 2019 report on the topic included a number of important recommendations, including protecting industrial lands along trade corridors, the need for regulatory harmonization across jurisdictions and the imperative to ensure environmental assessment timelines do not hamstring our ability to move goods across the country.

A 2021 European Court of Auditors comparison of frameworks for large transportation projects in Canada, Australia, the United States, Switzerland, France, Norway and the European Union noted all but Canada had an overarching transport infrastructure strategic framework.

In addition to vision, we need government to protect our critical supply chains from predictable and preventable threats. While government can't solve all of our supply chain issues, it must put in place policies that will enable trade and strengthen supply chains.

The introduction of Bill C-58, which aims to prohibit the use of replacement workers during strikes, suggests that the government actually wants to move away from preserving stability. In fact, it is doubling down on Canada being seen as an unreliable and unstable trading partner.

Lastly, we need government to commit to accelerating its regulatory modernization agenda.

Regulatory modernization continues to be a growing concern. Businesses who trade interprovincially cite increased red tape and differing certification and technical standards as major obstacles to doing business within Canada. Unfortunately, Canada has a complex network of overlapping regulations from all levels of government that diminish competition, discourage open trade and make everything more expensive.

Regulatory effectiveness is integral to a competitive environment and requires smarter regulation to attract new economic opportunities to Canada. We believe it is imperative that regulators and businesses work together to share perspectives to develop optimal regulatory approaches. An economic lens mandate for regulators would add a new tool that would encourage stable, manageable regulations that support economic growth.

Thank you for your time. I look forward to your questions.

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Thank you very much.

I apologize to Ryan Greer, whom I forgot to mention in my opening remarks. Mr. Greer is vice president of public affairs and national policy at Canadian Manufacturers and Exporters.

I'll turn it over to you, Mr. Greer. You have five minutes, as well.

[Ryan Greer, Vice-President, Public Affairs and National Policy, Canadian Manufacturers and Exporters]

Thank you.

Thank you for having me here today on behalf of Canadian Manufacturers and Exporters. Since 1871, CME has been helping manufacturers grow, improving the well-being of their workers and the communities in which they operate. We are pleased to participate in your study on the contributions of Canadian companies to domestic and global supply chains.

Members of this committee will know better than most that the global supply networks that Canadian firms participate in are in a state of continuous transformation under the influence of complex technological, geopolitical and environmental factors. Amidst this ongoing change, CME continually surveys our members and the domestic and international conditions in which they operate to provide the best advice possible to policy-makers. CME recently released our latest findings and recommendations to revitalize Canada's manufacturing sector in a report entitled “Manufacturing Canada's Future”. We will share that with this committee to support your work. “Manufacturing Canada's Future” provides a comprehensive set of recommendations on how governments can help Canadian manufacturers seize the opportunities presented by the current global environment.

In the next few minutes, I will quickly touch on a couple of issues that we believe are critical to your study.

The first is that Canada must take action to change the trajectory of business investment in the manufacturing sector, which has been weak relative to our global peers for the last two decades. Capital investment is critical for long-term growth and for being competitive in global markets. Increasing our domestic manufacturing capacity will increase our exports. In fact, Canada's investment in the manufacturing sector over the last 20 years has been so sluggish that it has been unable to compensate for the depreciation of existing plants and assets. The stock of capital in Canada's manufacturing sector peaked in 2000 and has been trending down ever since, whereas it continues to climb to record highs in the United States. This is another worrying sign that Canada's manufacturing sector is becoming less competitive on the global stage.

While the federal government can take a range of tax and regulator steps to help incentivize manufacturing business investment, the single most urgent step is to accelerate Canada's response to the Inflation Reduction Act. The race to build and lead the transition to a clean economy is one of the most significant global economic transformations since the Industrial Revolution. The IRA is reordering global supply chains. As budget 2023 correctly noted, “without swift action, the sheer scale of U.S. incentives will undermine Canada's ability to attract the investments needed to establish Canada as a leader in the growing and highly competitive global clean economy.”

CME is pleased that the government has taken many of our direct recommendations and worked closely with the manufacturing sector in developing Canada's response, specifically the five investment tax credits announced in budget 2023. However, Canada must act with more urgency to get these ITCs in place, specifically implementing the clean technology, carbon capture and utilization, and clean manufacturing ITCs. Notwithstanding the eligibility dates for these tax credits, industry is still waiting for the application and policy guidelines. Businesses cannot yet apply, and this uncertainty is impacting business decisions. Global and North American supply chain opportunities are being missed, and they will continue to be until these tax credits are in place.

The second critical issue I'd like to raise, to echo some of my industry colleagues at the table, is around the challenges facing Canada's transportation networks that manufacturers rely on for their inputs and to reach their customers. Recent labour disruptions, capacity constraints and extreme weather-related events have impacted the speed, agility and resilience of our transportation infrastructure and manufacturing supply chains.

Infrastructure that enables transportation and trade is one of the single best economic investments that any government can make, because it makes all the users of that infrastructure more productive. However, unlike many of our competitors, Canada's investments in transportation infrastructure have been made sporadically rather than on a sustained and strategic basis. CME has been working with industry partners and is supportive of the proposal for a Canada trade infrastructure plan to develop an integrated and long-term transportation infrastructure investment strategy.

Lastly, as this committee considers its recommendations for net new supports, programs or other interventions, we would strongly encourage you to reconsider current government initiatives that will harm manufacturers' ability to attract and retain new customers. Specifically, we too have concerns with Bill C-58, the legislation before the House of Commons that will ban the use of replacement workers in federally regulated workplaces. Having just conducted meetings on the economic and reputational impacts of last year's work stoppage at the port of Vancouver, we hope that members of this committee will oppose this or any other measure that will create an imbalance in the collective bargaining process in this country.

Bill C-58 will result in more strikes, and strikes that last longer. These stoppages have significant costs that will be borne by Canadian manufacturers, their workers and their families. More labour disruptions that last longer will mean lost customers and a further decay in Canada's reputation as a reliable trading partner. At a minimum, we are hopeful that the report coming out of this study will acknowledge the negative impacts of Bill C-58 on the manufacturing sector's ability and contributions to global supply chains.

There is a range of other supply chain—

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Mr. Greer, I would ask you to conclude your remarks, please.

[Ryan Greer]

—and trade issues that this committee is looking at as part of this work, and I'd be pleased to discuss them as we continue.

Thank you, and I look forward to your questions.

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Thank you, Mr. Greer.

Mr. Whelan, I now invite you to make your opening statement. You have five minutes.

[Michael Whelan, Board Chair, National Board of Directors, Supply Chain Canada]

Hello, and thank you again for the invitation to speak with you today.

I'm Mike Whelan, chair of Supply Chain Canada's board of directors. I'm joined virtually today by Martin Montanti, the president and CEO of Supply Chain Canada.

I would like to begin with an introduction to Supply Chain Canada and our association.

With its roots dating back to 1919, Supply Chain Canada, also known as SCC, is one of the oldest and largest supply chain associations in the world. Supply Chain Canada is a national organization that provides critical skills, networking opportunities and advocacy for its members.

Supply Chain Canada is one association with multiple parts. We are composed of eight institutes across the country, and through our eight provincial and territorial institutes, Supply Chain Canada grants the supply chain management professional, or SCMP, designation, the highest achievement in the field and the mark of a strategic leadership in a supply chain. Leaders from our institutes and from the national office form our federation council, bringing different perspectives from all parts of the country from coast to coast to coast.

With over 4,000 members across Canada, our goal is to provide leadership to the Canadian supply chain community and to work with government to address the ongoing needs of Canada's end-to-end supply chain. With our membership, we work to generate and share ideas to improve the supply chain system and ensure that Canada is a strong and competitive environment for domestic and international investment.

In 2022, Supply Chain Canada was pleased to see the Government of Canada move forward with a supply chain task force and was ready and willing to participate. We believe that this is a vital step in addressing some of the most pressing issues across our supply chains. Supply Chain Canada was honoured to provide valuable insight into the creation of the supply chain task force report—“Action. Collaboration. Transformation.”—which outlines specific goals across the supply chain.

In 2023, Supply Chain Canada held a town hall with its members across the country to review the report by the supply chain task force. Our members welcomed the opportunity to react and share their expert advice on how to ensure that the goals in the report are met in a timely and efficient manner.

Through our ongoing collaboration with the supply chain task force, Supply Chain Canada was able to provide our members' highest priorities to ensure that Canada addresses the needs and shortcomings of our supply chain. Supply Chain Canada members provided the task force with recommendations on three core themes: automation and technology, supply chain disruptions and labour shortages.

Under automation and technology, it was discussed that we need to introduce government grants that encourage automation at ports and other key points in the supply chain to support increased efficiency and reliability; prioritize the development of guidelines to ensure that our supply chains are safe from cybersecurity threats; and create jobs through the modernization and optimization of Canada's aging infrastructure to further increase Canada's economy.

Under supply chain disruptions, it was recommended to ensure that disruptions—environmental, protests, cybersecurity, etc.—are mitigated through intergovernmental partnerships. This would not only help to ensure stability across the chain but would specifically help to mitigate external and international threats related to our cybersecurity, whether they are caused by natural disasters, human mischief and/or labour disputes. Risk mitigation strategies must be developed. We also need to guarantee that new technology and automated infrastructure has a reliable cybersecurity network to make Canada a reliable global partner. As well, we need to introduce an intraprovincial communication channel for proactive messaging to enhance collaboration between provinces and territories on supply chains.

Under labour shortage, we provided recommendations such as familiarize high school students with a basic understanding of our supply chains and the ways they affect people across Canada and around the globe; ensure that Canada's training programs and designations are in line with the realities and experiences of modern supply chains; and shift toward a balanced training approach by ensuring that training programs return to in-person, ultimately allowing professionals to get hands-on experience during their training. Other recommendations were to address the elimination of red tape to ensure that foreign workers can fill labour gaps by obtaining timely work permits, including in sectors where domestic talent might not exist; explore accrediting qualified permanent residents and student visa holders to address some of our short-term as well as long-term labour goals; and promote professional careers across the supply chain to create competitiveness and increase investments in the manufacturing, distribution and production of goods and services.

Each of these recommendations can be found in the report entitled “Transforming Ideas into Action”, which was submitted to the supply chain task force in 2023.

Through the town hall with our members, it became clear that Canada's labour shortage is based on a skills shortage. Through its many training and skill development programs, Supply Chain Canada is poised to train and fill labour gaps through our competency benchmarking tool and education program. It can benefit both the practitioners and organizations in the supply chain industry, and it can be used to identify strengths, analyze skill gaps and benchmark the individual against peers.

It can be used to get an extensive look across functional skills, and for individual practitioners, there are more than 400 individual competencies that have been carefully chosen and laid out. Whether the individual wants to advance within their organization or pursue new opportunities, the competency benchmarking tool offers a clear road map to ensure—

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Thank you, Mr. Whelan.

I now invite the members of the committee to ask the witnesses questions.

Mr. Seeback, you have the floor for six minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you, Mr. Chair.

Canada is a trading nation. I think we all know that. Our GDP is about 70% from trade, but it depends on the year. It fluctuates. The United States' GDP is about 20% to 25% from trade. If we look at the overall infrastructure ranking in 2014-15, Canada was 14th in the world and the United States was 18th. The United States is now ranked 12th and Canada is ranked 27th.

That is based on 2019 numbers. This is from the Canada West Foundation. It's on a steep decline and I assume it's gotten worse. It's the same thing with the U.K., which was 29th in 2014-15 when Canada was 14th. The U.K. is now 10th and Canada is 27th. Looking at China in the same period, Canada was 14th and China was 73rd. Canada is now 27th and China is 33rd.

We have a report from this government—the supply chain report. Canada needs to invest $4.4 trillion in infrastructure. They've budgeted $4.6 billion between 2017 and 2028, whereas it would appear we need $88 billion a year to continue to increase our infrastructure for exports. We are an exporting nation. I find these numbers shocking. We've been going absolutely in the wrong direction over the last eight years on the quality of our infrastructure for transportation.

I wonder whether the Canadian Association of Importers and Exporters, the Canadian Chamber of Commerce and Canadian Manufacturers and Exporters want to comment on these numbers. Are you as shocked as I am at how rapidly our infrastructure is declining, given the importance of trade to this country?

Whoever wants to go first.... How about the chamber goes first?

[Matthew Holmes]

I can speak on that quickly. Thank you for the question.

I think these sorts of investments are, by their nature, long-term investments. What we're seeing in other jurisdictions is an acceleration and a real intentional buildup of the infrastructure critical for trade. You can look at it across multiple sectors. In the U.S., for example, look at LNG exports. Ten years ago, there wasn't a sector there. Now they are a major player in the global export market for that one sector. That's something Canada has not chosen to develop and build out. We go through the line and see lots of opportunities and missed opportunities for investment.

The time frame for those, again, though, is a long-term one. My colleague here, in raising the framework many other nations and regions have.... That's a first step. We need a plan and a framework. Then we can get to work building.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

In the United States, only 20% to 25% of GDP is from trade, yet their infrastructure has gone from 18th to 12th. They see the importance, whereas Canada is at 70%, but we've gone in the exact opposite direction in the last eight years.

To the other two, I find this extraordinarily concerning for an exporting nation. I wonder whether you want to comment on that.

[Kim Campbell]

I would be happy to comment on that.

We would 100% agree with you. We're talking about increasing to 50% by 2025, which was the goal. Our thoughts are that we need a plan, as our colleagues have already talked about. Layered in that, there would have to be a government and industry commitment. That's one of the things we feel are largely lacking. There is no plan or overarching mandate to get us all to where we need to be.

[Ryan Greer]

I would add that we're not shocked by it, but only because we've been talking about this for a long time, dating back to even before the Asia-Pacific gateway and corridor initiative, the predecessor to the NTCF that existed. We've been calling for a long-term framework to make these investments.

As I mentioned in my remarks, this kind of infrastructure makes all of its users more productive. When we talk about Canada's declining productivity, there are lots of things we can do to address that, such as significantly increasing our investments.

The only thing I would add is that, as I said, we make these investments sporadically. We have programs, companies and organizations apply for them and work with all levels of government, but there is no strategic framework that describes what the single most important export infrastructure projects are in this country. I would love to know what the federal government, working with its provincial and municipal partners, sees as the top 20, 25, 50 and 100 trade-enabling projects that are important for our prosperity for the next several decades so that we can harness all the resources—not just the funding but regulatory and otherwise—to get them built.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

There's a lack of federal leadership in figuring out what these priorities are. That's the sense that I'm getting.

Now we have a trade minister who's going around saying we're going to sign all these new trade deals to try to increase Canadian exports. However, if we don't have the actual infrastructure to do it, it seems to me like the left hand doesn't know what the right hand is doing on these things.

Would you agree that appears to be what's happening?

[Ryan Greer]

I'll jump back in just to say a comprehensive strategy that works across all departments and all players is entirely necessary, but it's not just linked to your investments. It's not just linked to your FTAs. It's how you get the skilled labour required to support those supply chains. It's how we prevent labour disruptions. You can have all the infrastructure in the world, but if you don't have the people to help move the goods along it, it doesn't get you anywhere.

It can't be a siloed approach. It has to work across all departments and agencies and all levels of government because it's so critical to the future prosperity of our country.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I think the port of Vancouver is ranked second-worst in the world for efficiency and productivity. When we talk about an Indo-Pacific strategy to expand trade, it doesn't seem like there's any sort of urgency to improve the efficiency of the port of Vancouver as well, which to me is a huge problem.

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

I'm sorry, but there's not enough time for an answer. You can come back to this in the next round, if you wish.

Mr. Arya, you have the floor for six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Greer, I'm happy that you brought up the transformation that is happening in the global supply chain. Though Canadian trade is dominated by our trade with our U.S. partners, because of the complex nature of the global supply chain, if Asia sneezes, we catch the cold.

[The Vice-Chair, Bloc, Simon-Pierre Savard-Tremblay]

Mr. Arya, I'm being told that the wrong microphone is on.