Evidence of meeting #24 for National Defence in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was china.
A recording is available from Parliament.
Conservative
Cheryl Gallant Conservative Algonquin—Renfrew—Pembroke, ON
Okay.
Last week, the Minister of Natural Resources did not rule out Chinese state-owned companies from buying up Canadian oil, gas and critical minerals companies.
What would be the consequence if this government were to approve such a sale?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
At the moment they can do it anyway, and I want to give you an example.
There has been an outcry because of First Quantum Minerals, which, as you may recall, owns a copper mine in Panama. Everybody has been saying that this is a Canadian mine that was nationalized by Panama. However, 20% of First Quantum Minerals stock is owned by a Chinese company. It is the majority stockholder.
What I'm saying is that many of the mines that we consider to be Canadian are essentially Chinese anyway.
Conservative
Cheryl Gallant Conservative Algonquin—Renfrew—Pembroke, ON
What is the threat of Chinese state-owned companies taking up a stake in infrastructure or leasing it in the way that they did with the port of Darwin in Australia? Are there any indications that the safeguards would extend to Chinese control of our infrastructure?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
I think there's always a risk. You may be aware of the port of Zambia in Africa. When the government defaulted on a loan, China took back the port.
Conservative
Cheryl Gallant Conservative Algonquin—Renfrew—Pembroke, ON
The port of Darwin in Australia was leased to a Chinese company for 99 years in 2015. The Australian government is trying to reclaim ownership, and China has threatened them with vague measures.
China has long used economic coercion to defend its interests. What kinds of measures could they impose on countries taking back ownership of their infrastructure?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
It is very difficult politically, because China does not play by the same rules as the west.
Deputy Director and Senior Fellow, Americas Program, Center for Strategic and International Studies
Can I answer that, in that context?
I'm primarily Latin Americanist. Chinese control of infrastructure, particularly ports in Latin America, is a very big concern for the United States, because some of these things, including the megaport in Chancay in Peru, are being built with dual use specifications. In the event of a crisis, they can restrict trade flows, not only within the region but also to North America. Potentially they can be used for denial of area, operations or refuelling, etc.
Not only do they own and operate; they have the exclusive, almost sovereign, right to some of these areas. Allowing that kind of penetration is a huge risk.
You've seen the U.S. government recognize that with tactics that I don't agree with, but it's certainly a concern in, for instance, Panama, with Hutchison Ports controlling two of the four major ports on both ends of the Panama Canal. The Panamanian supreme court ruled two weeks ago that the contract would be null and void because the company basically didn't fulfill its contract.
The Chinese control energy systems. They control the electrical grid in Lima, Peru. They control a portion of critical infrastructure—not just ports, but other things as well—that countries in Latin America have not paid enough attention to and are thus vulnerable to economic coercion, should they try to pull back.
Liberal
The Chair Liberal Charles Sousa
Thank you, Ms. Gallant.
I know Dr. Byers' hand is up.
I'm going to pass the floor over to Mr. Watchorn. Maybe he can engage with you in this respect, but it's your time, Mr. Watchorn.
Liberal
Professor, University of British Columbia, As an Individual
Thank you. I will keep it brief.
I agree that some Latin American countries have not paid sufficient attention to Chinese investments and infrastructure. This hasn't happened in Canada with regard to major infrastructure like ports. I do believe that if a Chinese company wished to buy the port of Vancouver, the purchase would be blocked under the Investment Canada Act. It's an issue, but it's not yet an issue in Canada, at least not to that degree.
The other thing is that I want to suggest very briefly that you should distinguish between Chinese investments in mining operations located within Canada and Chinese investments in companies that are incorporated in Canada but whose mining activity is taking place overseas. The majority of the world's mining industry is incorporated in Canada, but an awful lot of those operations do not involve our territory. There's a distinction there.
We should still be concerned about those operations overseas, but my main concern is with mines located here in our territory.
Liberal
Tim Watchorn Liberal Les Pays-d'en-Haut, QC
Thank you, Dr. Byers.
My question is more focused on Quebec.
I am most familiar with two graphite mines. There's the Nouveau Monde Graphite mine, located in Saint-Michel-des-Saints, which is in operation. I believe a processing plant is going to be built in Bécancour, which will follow the graphite production chain.
There's another mine closer to here. The La Loutre mine is not yet in production. This project is facing significant citizen and environmental opposition, in many forms.
Professor Steyn, how do we reconcile the critical aspects of the mines we want to bring into production with public opinion on mining, which is often very negative?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
We're talking about the Lomiko mines development. This is a very contentious mine, and I find it extremely ironic, because for once we don't have first nations opposition but a cottage community's opposition. I'll just leave it at that.
Of course, there has to be responsible mining. There have to be sustainable mining industry practices. It is important. We are not engaged in a competition to mine to the bottom. We understand that.
I am quite familiar with the Lomiko operation. I believe that they have crossed all their t's and dotted all their i's. It is unfortunate that in some occasions you will have people who are opposed. It is the not-in-my-backyard situation, but if we want things, we will have mining. If we want to have sovereignty within our country, then we must have mining within our country. Whether it is urban mining, by which I mean recycling, or greenfields mining, such as the Lomiko project, there have to be mining and processing and refining in the country. We have to make certain compromises.
Liberal
Tim Watchorn Liberal Les Pays-d'en-Haut, QC
It's been said that foreign investment in mines is problematic. In the case of Lomiko Metals in La Loutre, $8 million was invested by the U.S. Department of War for exploration.
Should we consider this particular project as a red flag for us?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
I don't think so, because that was invested without an equity stake and without an offtake agreement. I get very concerned when there are offtake agreements involved. When it is just an investment....
That was really under the minerals security partnership. It was a good example of the functioning of the minerals security partnership. That one really does not concern me. It is the most recent tranche of investments by the department of war that concerns me.
Liberal
Tim Watchorn Liberal Les Pays-d'en-Haut, QC
I had the chance to visit the Abitibi—Témiscamingue region to see the state of the abandoned mines, the ones where the environmental situation is poor. The Government of Quebec often contracts out the rehabilitation of contaminated abandoned mine sites.
I would like you to reassure us and tell us that modern practices are much better than those used in the abandoned mines of the 1960s and 1970s, which polluted the rivers of Abitibi in extraordinary ways. I've seen rivers that have had toxic chemicals spilled into them, making them alkaline. The water looked nice, but no fish could live in it.
I would like you to tell us that things are better today than they were before.
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
I can reassure you that mining today is a completely different game from what it was even in the eighties or nineties. It is simply not possible to operate in that way anymore.
Mining, unfortunately, had a number of very poor operators in the past. As you know, tailings, or the residues of mining, have been pumped into rivers. We've seen that in Abitibi and areas like that. It is an unfortunate legacy.
One of the things that I've mentioned is circular mining, getting value from waste. The idea is that we can rehabilitate these abandoned tailings, these abandoned mines, by getting minerals like rare earths and cadmium and scandium from those tailings.
Liberal
Tim Watchorn Liberal Les Pays-d'en-Haut, QC
Mr. Hernandez‑Roy, how do we reconcile a community's opposition with the need to extract minerals so that people really feel they've been consulted when there's a project like this?
Deputy Director and Senior Fellow, Americas Program, Center for Strategic and International Studies
You'll forgive me for answering in English. If we were in a more relaxed setting, I could probably converse fully with you in French.
How do we determine the balance? In the past, the balance was achieved because if there was sufficient opposition to something, there were other sources of a particular mineral. This is one of the reasons that China was able to dominate the critical minerals refining and mining space, particularly the refining. It was willing to accept the environmental damage, the environmental externalities, that come from that.
Now we know that we can't rely on China. Not only can we not rely on it but also it's actively using its monopoly against the west—when it suits it. Now we don't have that choice, and we must look at sources in Canada and in allied countries and develop them as responsibly as possible.
Canada is developing, for instance, some refining technology. The Saskatchewan Research Council has this. There's an outfit in Kingston with proprietary technology to refine rare earths in a much cleaner manner. Therefore, we are trying not only to develop rare earth capacity in Canada but also to develop rare earth capacity that's cleaner than anything that's made in China.
Liberal
The Chair Liberal Charles Sousa
Thank you.
Monsieur Savard-Tremblay, you have two and a half minutes.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot—Acton, QC
Thank you, Mr. Chair.
Ms. Steyn, let's continue the discussion where we left off earlier, namely, the effort to draw the line for powers that could be considered concerning powers, even in peacetime, such as the People's Republic of China.
I briefly asked you earlier whether what's been done was sufficient. Dr. Byers, who is appearing by video conference, told us that the Investment Canada Act might be sufficient on its own, without even invoking the strategic aspect. Even without the strategic aspect, it might be enough.
That said, should we use the same approach as the United States, at a time when the United States itself is also giving us cause for concern? Should we follow exactly the same process used in recent years, when efforts were made to exclude China from the most sensitive sectors?
Associate Dean, Graduate Studies, Faculty of Law, University of Calgary
I would like to caution a little, because the U.S. is a lot closer than China. I wouldn't overly antagonize the U.S. by invoking the Investment Canada Act. What I think we should do is something more subtle, and that is that we should be investing in our own. We have a lot of defence money that we need to invest in defence. Under the NATO agreement, there is no reason that we cannot invest this money into feedstock, critical minerals and our own mining. If we do that, then the U.S. can't do it.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot—Acton, QC
Did you want to add something, Mr. Hernandez‑Roy? I'm listening.
Deputy Director and Senior Fellow, Americas Program, Center for Strategic and International Studies
Critical minerals in Canada need to be looked at within the broader context of the U.S.-Canada relationship. Critical minerals are one of the aces in Canada's hand when it comes to the United States. The government has rightly not given away an agreement on critical minerals, as the Mexicans have already done, ahead of the CUSMA renegotiation.
Given that geography will join the United States and Canada forever, and given that the United States has to be our friend whether we like it or not, critical minerals have to play an important role in that. There may be certain very narrow investments that could rise to the level of some sort of a review. However, all in all, this is an area where Canada has a strength to play in our broader economic relationship with our largest trade partner, which is going to remain our largest trade partner, despite the political problems now, for the foreseeable future.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot—Acton, QC
Dr. Byers, you had your hand up, so go ahead.
Professor, University of British Columbia, As an Individual
Thank you.
I want to add briefly that this might be a situation where delaying negotiations with the United States might be the best strategy.
I've mentioned, and so have the other witnesses, that the fact we've delayed for the moment is good and that this can be part of the CUSMA renegotiation. However, I wouldn't want to see Canada locked into anything with such an unpredictable administration as the one in Washington right now. We've heard the threats concerning the 51st state. We've heard the repeated claims regarding Greenland and a desire to acquire that entire island, notwithstanding the wishes of the people who live there.
To adopt a Canadian position, we should be ragging the puck right now, when it comes to critical minerals and the United States. While we're doing that, we should be supporting Canadian industry. I mentioned having a price floor. Perhaps there's room for grants here. There's certainly a lot of room for building infrastructure like roads and ports to make the investor community more attracted to having Canadian mines owned by Canadians.
Thank you.