I am calling the meeting to order of the Standing Committee on International Trade.
Pursuant to the order of reference of Thursday, February 6, 2020, we are studying Bill , an act to implement the agreement between Canada, the United States of America and the United Mexican States.
Welcome to our fourth session.
The witnesses with us this afternoon for this panel are, from Dajcor Aluminum, Mike Kilby, president and chief executive officer, by video conference from Chatham, Ontario.
From KTG Public Affairs, we have Brian Topp.
From Syndicat National des Employés de l'Aluminium d'Arvida Unifor-Local 1937, we have Donat Pearson, president, and Éric Gilbert, vice-president.
Monsieur Pearson, I will turn the floor over to you.
Good afternoon, everyone.
The Syndicat national des employés de l'aluminium d'Arvida was founded in 1937. The first primary aluminum production facilities were constructed in Arvida after the First World War, around 1926.
Currently, our union is made up of nine certified units. They are: the Complexe Jonquière—hourly and office workers, the Arvida Research and Development Centre, the Laterrière plant—hourly and office workers, the spent pot lining treatment plant, Transport Ferroviaire RS Alma, the Petits Lingots Saguenay plant, and the Énergie Électrique Sud section. Our organization represents around 1,500 active workers and more than 4,000 retirees.
Since 2006, a lot has been done, including the implementation of a new business model—the use of subcontracting—taking over the new salary-funded retirement plan and the drug insurance program for active and retired employees, in order to maintain activity at the Centre Électrolyse Ouest, and to provide a transition to the AP-60 pilot plant. That project currently has 38 pots, from a possible 200 pots and more.
The lack of protection for Canadian aluminum in the Canada—United States—Mexico Agreement, or CUSMA, is putting into jeopardy the expansion projects for phases 2 and 3 of the new AP-60 technologies.
We know that Mexico produces no primary aluminum. However, nothing prevents them from buying aluminum from countries like China, Russia, and so on, at a low price and then flooding the American market, our principal importer. About 85% of Saguenay—Lac-Saint-Jean's aluminum production is exported to the United States, a large part of which goes to the automotive industry.
I now want to talk about the impact of the agreement on the workforce.
The Centre Électrolyse Ouest will have no operating permit after 2025 and is scheduled to be closed in the coming years. All the projects that are put on ice will affect several hundred direct and indirect jobs providing good working conditions. The direct and indirect impact on jobs affects workers from Rio Tinto, subcontractors, construction workers, local suppliers and regional equipment suppliers.
Any phases of the projects that Rio Tinto does not bring to completion have a number of impacts on the workforce.
According to a study commissioned by our union, the city of Saguenay, the city of Alma, the Syndicat des travailleurs de l'aluminium d'Alma, and the Aluminum Valley Society, creating and maintaining jobs is very important, if you refer to the table. We can come back to the table later to explain what it shows.
In 2024, the year halfway between 2020 and 2029, we can see that the operations of phase 2 and 3 of the AP-60 plant in Jonquière, not considering the possible closure of the Arvida plant—the old plant—will generate, across Quebec, a total of 600 direct jobs in plant activities, 580 indirect jobs with suppliers and 326 induced jobs at the consumption end, for a combined total of 1,506 jobs in person-years, and $505.1 million in new expenditures in the Quebec economy in 2024.
The average annual salary is $81,125 for direct jobs, $62,953 for indirect jobs and $40,828 for induced jobs, for a total payroll of $98.5 million in 2024 or an average salary per job generated of $65,404 per year.
In closing, ratifying this agreement with no protection for the aluminum sector will have major negative impacts on our workers.
Our expertise in aluminum, the greenest in the world because of its low carbon footprint, as well as our research and development centres, are major assets that need to be protected.
For all those reasons, we are asking the Government of Canada, as well as the opposition parties, to establish a traceability mechanism for aluminum produced and cast in North America. The steel industry must be protected in a similar way to the steel industry.
Thank you, committee members, for allowing me to attend remotely. This accommodation is much appreciated.
The brief I've submitted has to do with the elimination of the 70% North American-sourced aluminum content for the automotive industry.
In my industry of aluminum extrusion, China has shown an unrelenting desire to dump aluminum extrusion into the United States market and the Canadian market. The European Union initiated its own anti-dumping investigation in February 2020. Both Canada and the U.S. have anti-dumping and countervailing duties in place to stop this dumping.
Mexico is a non-producer of aluminum. Mexico does not have aluminum extrusion anti-dumping duties with China. Therefore, Mexico doesn't have an inherent interest in seeing the aluminum content not being sourced in North America.
The automotive market is the largest and fastest-growing market for aluminum extrusions as well. Aluminum sheet and castings are also impacted, as is raw aluminum, as you've just heard from the previous witnesses.
Several events of tariff circumvention by China have been discovered and stopped through our industry association, the Aluminum Extruders Council, a U.S.-based association that most extruders in North America belong to. There are more in process.
The elimination of the 70% aluminum content requirement for autos will open up a very big back door for those Chinese extrusions to enter the U.S. and Canadian markets and will directly impact jobs in the extrusion manufacturing, parts manufacturing and primary metal-producing industries in Canada and the U.S.A.
That's all I have in my notes. The rest is contained in my brief.
Let me begin by thanking you, Madam Chair and members of the committee, for inviting me here today. My bet is that I was invited to come and talk to you because I was serving on the minister's advisory committee on this matter with a bunch of others. Let me also begin by telling you that I had quite an interesting ringside seat in these negotiations. That being so, it's quite a pleasure to see that you all get to join me in all this fun and decode these issues and address them in the public interest. I'm grateful for this opportunity to share a few reflections and, if I may, offer the committee one piece of advice.
I have two opening compliments. My first compliment is to say that I really do think, having watched these negotiations, that Canada was extremely well served by its negotiating team. They deserve to be thanked for their work. Canada, in my view, had the most experienced and thoughtful and prepared and competent set of officials at the table. I'd say our officials had the important comparative advantage of being rationally led. If I can say this across the partisan fence, did an excellent job in her role and thoroughly earned her recent promotion. It was a pleasure to watch her work.
My second opening compliment is to my own tribe's trade critic, the honourable Daniel Blaikie from Elmwood—Transcona, who is apparently talking in the House right now. Last week's agreement between the NDP opposition and the government over ratification was another nice piece of bargaining, in my view, but it's also something else. It's an example, which I hope you're all watching, of how empowered, well-informed and responsible members of Parliament can take advantage of their leverage during periods of minority government to open the windows and turn on the lights in this place and renew accountability and transparency and democratic debate; nicely done.
About this agreement, I recommend that this committee refer USMCA, the son of NAFTA, to the House of Commons for ratification. I recommend this for three reasons. First, I think this agreement should be ratified because it captures an extraordinary moment in history. It's an extraordinary moment when the President of the United States, the Senate of the United States, the House of Representatives of the United States, the Republican Party and the Democratic Party all agree that cheap-labour-seeking, race-to-the-bottom trade agreements have gravely hurt American workers, have therefore gravely hurt the United States, and are therefore bad ideas that need to be fixed.
That's a true revolution in world trade after decades in which American governments of all hues set the tone around the world by pursuing a very different agenda. They aggressively pursued rules that drove the offshoring of North American jobs for the purpose of capturing low wages and standards overseas, driving down incomes, pensions and terms of work here in North America. In lieu of that, here we have a trade agreement, much improved by the U.S. House of Representatives, that takes some first steps towards raising standards, raising incomes and improving access to unionization and free collective bargaining. It actually intends to enforce these steps. That, I submit, is something that we should grab. It is something that we should build on.
Second, in my view, this agreement should be ratified because it frees Canada from chapter 11 of NAFTA. This committee is familiar with the arguments. I won't rehearse them here, but let's keep this point clearly in view. The public interest in achieving this is hard to overstate. Our sovereignty was in some respects fundamentally undermined by this now quietly buried investor-state dispute settlement mechanism. I don't think Canadian exporters to the United States are going to miss it much, given how much leverage the United States government could bring to bear against Canadian companies who tried to use it south of the border. I'll return to this point about leverage in my one piece of advice to you.
Third, in my view, this agreement should be ratified because it abolishes the proportionality clause in the energy chapter. This clause was one of the principal American gains from the original free trade agreement and from NAFTA. It was a highly problematic constraint on Canadian sovereignty that Mexico exempted itself in NAFTA, and we're well shot of it. That said, the quiet death of the energy proportionality clause, and the fact that our American partners don't value it anymore and have quietly let it die, says something important about the underlying realities of Canada-U.S. trade. That gets us to my piece of advice for you.
I strongly advise you to say the following to your colleagues in Parliament, in addition to recommending ratification: If there's any lesson in this whole USMCA story, a renegotiation that Canada didn't go looking for, it's this. We are far, far too dependent on trade with the United States, nowhere more so than our energy trade, which our American partners felt they no longer had an interest in guaranteeing.
We, therefore, have dangerously little leverage when the random clock-spins of politics south of the border put our economy at risk. Thus, we must, as a matter of urgent and pressing necessity, aggressively and systematically invest in our new trade agreements with the EU and with the Asia-Pacific, backed up by a real, coherent plan that weaves the federal government, the provinces and territories and the private sector together in joint effort, and pursued with determination for many years to come, even when it's not fashionable.
We need better leverage. We need to re-empower ourselves in North America by growing and deepening our trade relationships with partners outside North America.
We got lucky this round. The target was Mexico. Then we got doubly lucky. Amazingly, the goal was to leverage up instead of leverage down. However, counting on luck isn't a wise strategy for any country. Having bought some time, we shouldn't go to sleep because what just happened with the USMCA wasn't just a bullet that we skilfully dodged and that Parliament can quietly celebrate by quietly ratifying this agreement. It was a big wake-up call.
Thank you, Madam Chair.
Mr. Topp, you said exactly what is quite obvious, but nobody wants to acknowledge that we are too dependent on the U.S.
I come from a business background. In business the fundamental thing is that we have to survive to grow, and we have to grow to survive.
The noise that we heard during the negotiations was from the sectors that just want to survive with this market alone, the automotive sector, the steel sector, the aluminum sector.
Let's take aluminum. Our friends are from the aluminum industry. No new additional capacity has been set up. No new smelters have been set up in Canada for the last 15 years. If my numbers are correct, 90% of aluminum exports go to just North American markets.
I spoke to the Aluminum Association when they were here as witnesses. I don't see any one of them even contemplating using the strength of the North American market, which is basically a captive market for them, as a centre to export to other parts of the world. That I did not hear.
In the steel sector 20 years back, the production was around 16 million or 17 million tonnes. Today it's around 15 million or 16 million tonnes.
Let's go beyond the aluminum and steel sectors. The trade between Canada and the U.S. during the last, say, seven years, is basically the same at around $320 billion of exports. Even today it is around the same, maybe $322 billion. The imports from the U.S. are still around the same, around $290 billion.
The market is there. It is a big market by any standards, but this market is not growing, and our industry is not even surviving. If you ask me, it is contracting. I did ask the Canadian Manufacturers & Exporters president if the manufacturing sector is a sunset industry here. Obviously he said no.
With your background, the political background and the background in administration, and you have been involved with this, and you know different sectors, I want to know if there is any sector in the Canadian economy that you can see that can increase investment and increase capacity to take on other markets in the world using this argument as the strength.
Thank you for the question.
Sitting as I am on a panel with a CEO from an aluminum company and with colleagues from the trade union movement for the aluminum company, you will understand if I will not comment on the aluminum industry and maybe let them do so, since they know their business.
Maybe I can offer you a few thoughts to begin with by talking about a sector I got to know fairly well recently, which is the Canadian energy sector. Just to underline my point, bearing in mind that energy is our largest export, you would really have to work hard to be more dangerously dependent on one market than we are in the Canadian energy sector on the United States.
The province got to live this when it was dealing with the consequences of carrying capacity shortages and had to go through a round of curtailment a year ago to deal with a grotesque discounting of Canadian energy in the United States market, because basically they could. They had a monopoly control over our supply and could basically state the price. Canada had to turn down its exports to tighten up the market and try to deal with a brutal price shock.
Just quickly to wrap up, what we saw in these negotiations was, with that kind of monopoly control over that big chunk of our export markets, the Americans don't care about it anymore. The reason they don't care enough about it to have a finger on it in these trade agreements is that they are now net exporters and are our principal competitors.
Our commodity exports, like energy, which is what the economy is built on, are obviously where we begin this discussion of trade diversification. Right now we are hard-wired to export even raw commodities to only one market with the consequences we can see, including the price shock in our largest commodity. We have to address that and, of course the Government of Canada is doing that with the Trans Mountain pipeline and taking other measures—
Madam Chair, committee members, my name is Jamie Pegg, and I have the privilege of representing the 160 employees of Honey Bee Manufacturing as their general manager.
I have with me here today, Mr. Scott Smith, one of our employees who has been integral in bringing to light our requests and concerns.
We want to thank you for the opportunity to express our support for the new trade agreement and to address some requirements that our business sector will need.
Greetings are extended to you from all of the Honey Bee employees, as well as from the nine different small-town communities these people call home in southwest Saskatchewan.
Greetings are also offered from Donna Boyd, the chairwoman of Agricultural Manufacturers of Canada, and their 240-plus members.
Honey Bee Manufacturing was established in 1979 by two brothers, Greg and Glenn Honey, who started to manufacture agricultural innovations that they developed on their farm in Bracken, Saskatchewan. They innovated a swather. Their neighbour wanted it, and then the farmer down the road wanted it. After 40 years, farmers from over 26 nations have used Honey Bee equipment to harvest their crops more efficiently and effectively so more people can eat.
The key products Honey Bee produces are combine headers, to be used on almost any combine manufactured worldwide, and swathers that attach to either tractors or power units to cut and dry the crop before the combine comes to harvest it.
Original equipment manufacturers, OEMs, like John Deere, Case, New Holland and AGCO have all recognized the value of Honey Bee innovation in harvesting. At different times, they have entered into partner agreements with Honey Bee to produce either brand name headers and swathers or a Honey Bee branded table.
The innovation that has defined Honey Bee products has supported hundreds of employees at the facility in Frontier, Saskatchewan, with a population of 300. Honey Bee is the key economic driver in southwest Saskatchewan, covering a radius of over 100 kilometres.
Today, if you look around the main operations area, as well as research and development, you will see employees who represent four and five generations of farming in the local area, as well as new Canadians from the Philippines, India, Venezuela, Ukraine, Syria and Germany.
We are a global company in terms of the people we work with as well as the markets we sell to. Over the last two years, Honey Bee credits Canada for 40% of its sales and relies on the rest of the world for 60% of its sales, including 33% to the United States of America.
Being a global company, we rely on and support free trade agreements that Canada participates in. They are a necessity in our industry.
One only needs to look at the last two years of tariffs and closed borders to see the negative impact they have on our industry. We estimate that these measures cost Honey Bee millions of dollars and closed the door on a lot of job creation. That is not taking into consideration the additional cost that farmers needlessly absorb when they have to buy new equipment because of the increased price of metals and components required to build our equipment.
NAFTA was a continuation of the excellent trade relations that agricultural manufacturers enjoyed with the United States. We are hoping CUSMA will be the same. The key take-away from our testimony today is that our industry is placed on an uneven playing field versus the United States.
Honey Bee's opportunity to capitalize on intellectual property is based on our ability to operate with OEM platforms. Interoperability means that a Honey Bee harvest header can “plug and play” with the OEM combine. Historically, this has been provided in a straightforward and obvious way, just like the way a keyboard plugs into a computer. Today, we are starting to see encrypted digital interfaces on the OEM products that block us from connecting and operating our harvest headers on these OEM platforms.
Further, there is no technical information or parts forthcoming from the OEM to achieve the required adaptations independent of their direct involvement with Honey Bee engineering teams. The net result is “authorized use only”. This is controlled by the OEM digital locks and keys that are unavailable to implement manufacturers. Instead of spending our research budget on innovation, we are burning it on adaptation.
The vast majority of these machinery platforms are manufactured by companies in the United States and sold worldwide. In order for Honey Bee to continue to participate locally and globally on these platforms, we need to have the ability to connect the two and operate them in a straightforward manner.
According to Stats Canada, Honey Bee is about one of 1,400 manufacturers in Canada that develop implement products that attach to large OEM platforms. About 500 of these companies are agricultural implement manufacturers. We are dependent on the OEM platforms to host our innovation.
The impact of a technical lockout by the OEM will be the death of the Canadian implement industry and will decimate our communities. Most of the 500 agricultural implement manufacturers in Canada are located adjacent to smaller rural communities where they tend to make a significant contribution to jobs and the funding of essential services. This would be lost. The Canadian manufacturing supply chain would also be greatly impacted.
Interoperability issues affect equipment in all Canadian industrial implement sectors, which include ag, mining, construction and forestry. OEM platforms are the engines of industry that provide the power to perform work, including combines and tractors; load, haul and dump equipment; excavators and forestry forwarders.
Innovation is characterized by the traits of meeting specific user requirements that are not met by the OEM one-size-fits-all offering. Honey Bee innovation caters to the specific needs of our many markets and considers their unique operating environments, farming practices and crop diversity. Meeting these challenges is a global requirement that brings Canadian innovation to the world.
Securing the ability to commercialize innovative products in Canada is at risk today. Legislation and the trade agreement, CUSMA, don't address this, and they should. Canadian industry should have the freedom to innovate commercially on OEM platforms.
New IP clauses in the CUSMA do not place U.S. and Canadian implement manufacturers on the same footing. U.S. copyright law makes exceptions for legally modifying motorized agricultural equipment for the purpose of interoperability. Canadian copyright law does not provide for these exemptions, making it illegal for Honey Bee, or any Canadian company, to reverse engineer OEM platforms to achieve interoperability. Canada has no exception for motorized land vehicles, such as a personal automobile, commercial vehicle or mechanized agricultural vehicle, as per U.S. exemptions. The current U.S. copyright law allows for you to attach to products in the U.S. but not in Canada. This means that products made in Canada cannot be legally adapted in Canada, putting Canadian manufacturers and farmers at a disadvantage for no reason other than the lack of clarifying language.
We also seek to have changes to domestic law that mandate that the OEM equipment platforms sold in Canada interoperate with any of the implements available for use by farmers in Canada. Honey Bee desires that the CUSMA adopt some form of mandate to this effect.
Canada leads the world in agricultural innovation. From high-performance seed varieties to soil management, seed planting, and crop nutrients through to harvest tools, crop processing and farm technology, Canada stands tall in global agriculture. According to the Government of Canada trade data online, the agricultural equipment industry in Canada exports over $2.3 billion of agricultural equipment a year. The United States accounts for about $1.9 billion of this. Therefore, it is very important that Canadian agricultural equipment be able to interoperate with American platforms for this continued success.
It is crucial that the CUSMA ensure that it protects and allows the Canadian agricultural industry to not only maintain its status as a world leader, but promote industrial growth within Canada and Canadian brands around the world. At the start of this testimony, I offered you greetings from our 160 employees and their families. My desire is to see the number of employees and families increase as the company grows.
Because of the pro-Canada decisions made around the CUSMA, my fear is that we have not been heard today and, in the not-too-distant future, I will have to address those same employees and tell them that they no longer have jobs. That will be the impact if we do not address the discrepancy between the Canada and U.S. copyright exemptions in this agreement.
I also want to highlight that Honey Bee is a very small player on a very large stage. If unaddressed, there will be hundreds of businesses, employing thousands of people supporting numerous communities, that will diminish or vanish. At a minimum, the requested exemption that gives us parity with our U.S. counterparts on reverse engineering for interoperability needs to be added to the Copyright Act prior to signing the CUSMA. It is an imperative for the Canadian agricultural manufacturing industry in Canada.
Thank you for your time. We're open for questions.
Good day. I'm Todd Stafford. I'm the president of Northern Cables in Brockville, Ontario.
Northern Cables is a 24-year-old Canadian owned and operated manufacturing company based in Brockville, Ontario. We are the remainder of what was once a large domestic aluminum wiring cable manufacturing industry in Canada. Gone are Canadian-owned companies like Alcan, Canada Wire and Cable, and Phillips Cables. These businesses were supplied mainly with primary aluminum produced in the province of Quebec.
In 24 years Northern Cables has grown to three manufacturing facilities of 275,000 square feet and 250 full-time employees. Our company processes materials sourced only in North America. Northern Cables purchases the bulk of its cast aluminum rod from the province of Quebec and exports about 50% of its finished products out of the country.
Since the economic cycle in 2007 when copper reached a price of $4.20 U.S. per pound, the popularity of using aluminum as an alternative material in power cables has increased dramatically. The U.S. government has attempted to apply tariffs on aluminum and steel products originating from outside of the United States, specifically aimed at China. Unfortunately, these measures are easily avoided by applying connectors to cables and reclassifying goods as other products, such as by selling aluminum in cast animal shapes.
Part of the tariff actions reflected concern with material being shipped to other transshipment countries before entering the United States. Statistics Canada shows significant imports of aluminum wire in the form of stranded conductors—bare, insulated and assembled cables coming from China, India, Turkey and the United States. An action by two large U.S. domestic manufacturing companies resulted in a finding by the U.S. Department of Commerce that Chinese imports were sold in the U.S. at 58.5% to 63.4% below fair value. Chinese exporters received countervailing subsidies at the rate of 33% to 165%.
Since this hearing is about the new Canada-U.S.-Mexico free trade agreement, Northern Cables has four points we'd like to raise to protect the domestic manufacturers from being harmed.
First, enforce that landed prices of competing foreign manufacturers arrive at fair market value in Canada.
Second, enforce that Canada not become a transshipment country into which aluminum is dumped, causing displacement of other aluminum.
Third, strengthen our customs import codes so that products cannot be mislabelled or repackaged in such a way as to circumvent our import rules and permit below-market prices entering Canada.
Last, support Canadian manufacturers' interests on CSA and UL wire and cable committees and standards, in which harmonization by the other two countries could reduce existing Canadian safety standards. A little example of this is the need for -40°C-rated cables in Canada rather than the -25°C-rated cables available in the United States.
Thank you, Madam Chair.
I would like to express our thanks to the Standing Committee on International Trade for allowing us to address you today.
My name is Leigh Smout. I'm the executive director of the World Trade Centre Toronto at the Toronto Region Board of Trade.
I'd like to make a few comments.
Canada is a trading nation. Because of our small population, we're much like a small island nation. We cannot grow that international trade. Trade results in three main things, prosperity, growth and jobs, and it's as true for any small business as it is for our geographically large, but small population nation. Without international trade, Canada cannot accomplish any of these objectives. One in five jobs depends on trade. In Ontario alone that is 1.3 million jobs, and the U.S. and Mexico are our closest major trading partners with a geographic connection that is unique to Canada. The U.S. alone is responsible for buying 75% of our exported goods and services. We are a highly important partner to the U.S., but we are far less important to them than they are to us, and this puts us at a disadvantage in negotiations with them.
Our next closest trading partner, China, is not even 5% of our exports. The World Trade Centre trade services arm of the Toronto Region Board of Trade has two mandates: grow Canadian businesses through international trade and help Canadian businesses diversify their markets away from the U.S.
Both mandates are a long game. Our trade accelerator program, TAP, helps SMEs from coast to coast develop their export plans and connects them to all the resources that can help them trade, including the trade commissioner service, Export Development Canada and Business Development Canada, as well as the private sector experts in legal, tax, process, finance, etc.
An example is Core LED. They're a company that came through our very first TAP back in 2015. They were happily doing three million dollars' worth of business in retrofitting places with LED lighting and they didn't see the need to grow their business. They had enough sales, but they didn't see how they had the capacity to operate in larger numbers. Through TAP they met RBC and BDC, which were able to help fund the growth of their production capacity.
Not having any thought of international trade to service their sales domestically, they decided that since they had the capacity they would take a look south of the border. They found two large $5-million contracts. One was retrofitting a military base, the kinds of things they had never thought of. They were helping [Technical difficulty—Editor] at that point. When they came to talk to us a year after the TAP, they said that taking a look at international trade had changed the view of their business. A year later, from being a $3 million revenue company, they were going to do $12 million that year, and they expected to do $20 million the following year because they had decided they would look further afield than the U.S., and then $50 million eventually.
International trade, including starting in the U.S., has completely changed the path of that business. Without our free trade agreements, they would not have had the competitive advantage they had in the United States.
Although TAP companies focus a much improved 70% of their efforts into markets other than the U.S., and we will shortly graduate our one-thousandth company, this can only make a small dent in our dependence upon the U.S. The Board of Trade has over 13,000 business members and our community tells us they need CUSMA in place. We need it ratified by Canada, as has already happened in Mexico and the U.S.
It is our understanding that the business community feels it has been consulted to a degree that's unparalleled in free trade negotiations. In developing the details our voices have been heard.
Although our sense is that the new agreement may not be as favourable to Canada as NAFTA, we nonetheless think it is a much better situation than living with the truly destructive results of a lapsed NAFTA . We also worry about current U.S. political volatility. Therefore, we're hopeful and we respectfully request that all political parties see the value and necessity of ratifying CUSMA as soon as it can be accomplished.
In our own efforts to continue to break down barriers for businesses of all sizes, we submitted a proposal to the Department of Finance for the unilateral elimination of 101 low-yield tariffs. That can save businesses $773 million in duty and compliance costs every year in two priority sectors: manufacturing and clean tech. The real cost is compliance; it's not the tariffs. The tariffs are not netting a great deal of money for the Canadian government, but compliance is costing companies significantly.
Overall, import tariffs cost both Canadian consumers and businesses, harming our nation's competitiveness by increasing input costs and drowning Canadian businesses in red tape. Our proposal identifies several compelling reasons for unilateral tariff elimination, demonstrates international leadership in reducing trade barriers, cuts costs and red tape for business, boosts competitiveness and economic growth, supports growing industries, and reprioritizes border resources, all the things we need in our future agreements, for instance, and in CUSMA as well.
In addition, once we have CUSMA ratified, the government needs to support organizations like our own across Canada to ensure that we have the capacity to help Canadian businesses understand the changes from the NAFTA rules, with which they are familiar. A focused and concentrated effort should be undertaken so that the uptake of the agreement is not skewed in favour of our trading partners in the same way that has occurred with the Comprehensive Economic and Trade Agreement , CETA, with the EU, such that European countries have grown their exports to Canada much more rapidly than Canadian companies have grown our exports to Europe, leading to a trade imbalance and leaving us to play catch-up.
Thank you again for allowing the World Trade Centre to address this illustrious committee today. I look forward to any questions.
[Witness spoke in Ojibwa and provided the following text
Aanii, Tabatha Bull n'indignikaaz, Nipissing n'indoonjibaa, Migizi Ndoodem.
[Witness provided the following translation:]
Hello. My name is Tabatha Bull. I am from Nipissing First Nation, and I belong to the Eagle Clan.
Thank you, Madam Chair and all the distinguished members of the committee.
I want to begin by acknowledging the Algonquin peoples for hosting this meeting on their ancestral and unceded lands.
I am the chief operating officer for the Canadian Council for Aboriginal Business, CCAB. I'm honoured to speak here on behalf of our association regarding Bill .
CCAB supports corporations and governments to engage directly with indigenous businesses so that they may take advantage of mutually beneficial opportunities. Our work is backed by data-driven research, recognized by the OECD as the gold standard on indigenous business in Canada, on the barriers and opportunities for indigenous businesses, business capacity and supply chain analysis that has informed both government and corporate policy.
Through our research, programming and events, CCAB has earned the confidence of both indigenous and non-indigenous businesses in Canada, established a leading procurement platform and achieved meaningful results for indigenous companies over the past 37 years.
Our research work has led to a threefold increase in corporate commitments to improve indigenous relations and procurement—over $100 million in provincial government funding commitments to indigenous businesses.
We currently have close to 1,000 indigenous and non-indigenous business members working toward a more prosperous and diverse Canadian economy.
We were very pleased to be invited to participate as a member of the Global Affairs indigenous working group on trade.
We were also extremely pleased to see the involvement of National Chief Perry Bellegarde in the renegotiation of NAFTA and in the invitation to us here today.
As a result of this inclusive approach to trade negotiation, this work resulted in the most inclusive international trade agreement for indigenous peoples to date.
I echo the comments by National Chief Perry Bellegarde, when he testified on June 18, 2019, and those of Judy Whiteduck and Risa Schwartz, when they testified on February 20, 2020, that this agreement is not perfect but to date it is the best we have in Canada.
With the ratification of the Canada-United States-Mexico agreement, we would take a step to make international trade more aware of and more equitable in its treatment of indigenous peoples, and especially indigenous women entrepreneurs.
The aboriginal trade interest is not presumed but instead strongly asserted through the positive economic trends that have been observed by the CCAB within the aboriginal private economy.
In 2016, aboriginal peoples contributed over $30 billion to Canada's GDP, $12 billion of which was generated by aboriginal businesses.
Through trade agreements and treaties, the Canadian Council for Aboriginal Business finds immense value in promoting and supporting the distinct demand of the aboriginal private economy to facilitate and substantiate economic growth.
By reducing barriers and creating fair, equitable and inclusive trade conditions, the aboriginal private economy will be provided with equal footing to Canadian and North American business and service providers through trade exclusions, intellectual property and provisions and by expanding labour mobility policies to honour the unique barriers and operations of aboriginal service providers and enterprises.
With the levelling of the economic playing field through targeted trade policies, aboriginal enterprises and service providers can benefit from increased market access, procurement and investment opportunities.
Importantly for the CCAB, we believe that with specific preferences to carve out procurement benefits and other opportunities for indigenous businesses and service providers, there is also a promise of future co-operation to enhance indigenous businesses.
Procurement is of interest for the CCAB, as our research has found that indigenous businesses can supply 24.2% of the goods and services purchased by the federal government annually.
We appreciate that the Government of Canada has committed, through the mandate letter to the , to have at least 5% of federal contracts awarded to businesses managed and led by indigenous peoples. This target is achievable, and the CCAB wants and is willing to work with the Government of Canada to meet and exceed this target.
CCAB believes that trade with the United States is directly tied to the future economic success for aboriginal business and hence directly tied to the prosperity of indigenous peoples across Canada.
Our research with Global Affairs Canada showed that indigenous businesses are twice as likely as non-indigenous businesses to export. Of indigenous companies, 24% export today, which means more than 13,000 indigenous firms are exporting. As well, indigenous women are more likely to export than indigenous men.
While the Canada-United States-Mexico agreement is a new example of the difference it makes to engage with indigenous people at an early stage, there must be increased opportunities for participation of indigenous peoples not only in international trade negotiations in decision-making as per UNDRIP but also in trade missions.
Programming and support need to be provided to indigenous communities and leaders to build capacity in trade to ensure that their participation is meaningful and resourced appropriately. The CCAB looks forward to continuing our important work on the Global Affairs indigenous working group to support the inclusion of language in Canada's current and future trade agreement negotiations, including with Mercosur and the Pacific alliance countries.
The CCAB also welcomes the opportunity to be more actively involved in the planning and execution of trade missions to increase indigenous exports.
Thank you for the time. Meegwetch.
Madam Chair, I would like to thank the committee for the invitation to speak and for all of the hard work you are doing to make this important agreement as robust as it possibly can be.
My name is Bridgitte Anderson. I am the president and CEO of the Greater Vancouver Board of Trade.
I would also like to recognize that we are on the traditional territory of the Algonquin people.
For over 130 years, the Greater Vancouver Board of Trade has worked on behalf of our region's business community and our over 5,000 members to promote prosperity through commerce, trade and free enterprise. Our mission is to work in the interests of our members to promote, enhance and facilitate the development of the region as a Pacific centre for trade, commerce and travel.
British Columbia's economy relies on its trading relationship with the U.S. Our natural resources, including lumber, oil and gas, and metals and minerals, are some of our largest exports. The value of B.C.'s top five exports to the U.S. is $22 billion a year.
A wide spectrum of industries benefit from our trading relationships in two B.C. examples. B.C.'s tourism industry employed 138,000 people in 2017. It generated $5.4 billion in export revenue, an increase of 7% from 2016.
Film and television is another bright spot in our economy that is experiencing rapid growth. B.C. is now the third-largest motion picture production hub in North America. The sector's GDP increased at an average annual rate of 15% between 2010 and 2018, five times the economy-wide pace. The creative sector contributes over $6 billion to the B.C. economy, with a workforce of nearly 110,000.
B.C. has the most diversified trading relationships in Canada, but the U.S. is still our largest trading partner. As of 2017, just over 50% of our exports in goods went to the U.S., followed by China, Japan, South Korea, the EU and India.
Our country is a small trading nation that relies on access to other markets. Our economy depends on trade and on the trade agreements that help bring our Canadian goods to international markets. International trade is especially important to B.C., where we experience a double benefit from trade from selling Canadian goods and from moving the goods by means of our gateway sector, including port, rail, air and road.
Our gateway sector in greater Vancouver alone contributes $20 billion to the national GDP, supports nearly 185,000 jobs and contributes $2.4 billion to the Canadian government in taxes.
The Greater Vancouver Board of Trade supports the ratification of CUSMA and the passage of Bill and offers the following reasons for support and recommendations for the committee to consider.
First is certainty. The new agreement will bring much needed certainty to Canada's business community. Over the last few years, global trade has been disrupted by the rise of protectionist measures, particularly from our most important trading partner.
The uncertainty has only been intensified by the protests and blockades we've seen across the country over the last few weeks. Shutting down rail access, roads, ports and bridges has hurt and continues to hurt the livelihoods of thousands of people, communities and virtually every sector of our economy. In greater Vancouver alone, right now there are 60 to 70 ships sitting in port waiting to move Canadian goods. It will take weeks, if not months, to recover.
In addition, the effects that coronavirus, or COVID-19, will have on our small trading economy are still yet to be seen. These examples emphasize the importance of a predictable supply chain.
In light of these unfortunate and disruptive circumstances, our businesses need certainty so they can take the lead and propel the economy forward through commerce and trade. Above anything else, CUSMA would avoid the breakdown of our trade relationship with our most important trading partners and thereby help to remove much of the uncertainty facing Canadian businesses.
CUSMA will continue to guarantee tariff-free market access to our most important trading partner, to provide preferential access to commercial opportunities and to allow our businesses to sell more goods. This means more business, more jobs and the movement of more goods. When we move more goods across borders, our businesses can thrive. Ratifying CUSMA in a timely manner to lock in guaranteed market access with the U.S. is more important than ever in light of recent claims that suggest the U.S. is considering raising its WTO-bound tariff rates.
If implemented properly, CUSMA will unlock vast potential for greater Vancouver and Canadian businesses to compete effectively for jobs. These benefits can only be achieved if there is a similar amount of attention paid to non-tariff-related trade barriers.
CUSMA includes provisions on customs administration and trade facilitation to standardize and modernize customs procedures throughout North America to facilitate the free flow of goods, but we cannot stop there. We recommend that government continue supporting and working with industry on initiatives such as the beyond preclearance initiative, which is doing important work around ensuring Canada's gateway cities can build improved processes and border policies to take full advantage of CUSMA.
We also recommend that government continue with initiatives to reduce and remove red tape, and regulatory burdens more broadly, to help business thrive. There is a growing perception in Canada that it is difficult to get things done, especially with jurisdictions in the U.S. that are routinely removing barriers and making access for business easier and simpler. Efforts like this will help ensure we increase competitiveness.
This brings me to my third point. The new agreement will help underpin North Americans' competitive advantage through its new chapter on competitiveness and its chapter on good regulatory practices. The preferential market access and integration with the American and Mexican markets will open opportunities for growth and foster robust supply chains and fair competition that will sharpen the competitive edge of Canadian businesses.
The fourth point is that the new CUSMA modernizes NAFTA by including provisions for digital trade, which reflects the rise of e-commerce and other aspects of the digital economy that didn't exist when NAFTA was negotiated. In addition, CUSMA includes language on protecting gender and indigenous peoples' rights, which is an economic imperative.
The provisions for digital trade and cross-data flows included in CUSMA are based on the provisions in our most modern trade agreement, the CPTPP. This makes CUSMA a trade agreement of the 21st century and prepares us for what will become an increasing part of our economy.
CUSMA supports Canadian SMEs that want to tap into international markets. The World Trade Centre Vancouver finds that 95% of SMEs that go through its trade accelerator program choose the U.S. as one of their first export markets. The U.S. is particularly important for SMEs for its size and its geographical and cultural proximity. Many Canadian SMEs use the U.S. as their export beta market where they test and grow their export capacity before targeting other markets.
Last, we recommend the following keys for success.
First, B.C. is the largest Canadian exporter of softwood lumber to the U.S. As you all know, it is a challenging time for B.C.'s forest industry, which supports approximately 140,000 direct and indirect jobs. Thousands of jobs have been lost to mill closures and layoffs due in large part to high tariffs. Bringing CUSMA into force will ensure that the continued chapter 10 protections are available to the B.C. forest industry as it stands up for fairness and ensures that the trade of softwood lumber can continue to support B.C. jobs. We recommend that the government continue working towards achieving a negotiated softwood lumber agreement and defending the industry against any potential trade sanctions brought by the U.S.
Second, there is a critical need for continued investments in trade-enabling infrastructure in Canada, such as container capacity at terminals. In addition, greater Vancouver has a unique challenge in availability of industrial land to support trade-enabling activities. Our vacancy rate is at a record low of 1.2%. Collaboration and leadership is required to ensure growth of our region.
As the Canadian economy becomes more weighted towards services, we should consider a plan to grow Canada's service exports, including making it easier for professionals to work across borders. Our 2018 regional export framework report shows that global demand for service sectors will continue to grow.
Ninety-eight per cent of all businesses in B.C. are small businesses. In order to leverage the benefits of trade, we need a plan to support small businesses as they start to export and grow their exports.
Finally, another important item will be the uniform regulations, which is the fine print of the agreement, including the details that companies must follow to facilitate trade on a daily basis. Businesses are eagerly awaiting these details, especially given the 90-day implementation phase. We hope they can be made available as soon as possible.
I would like to conclude by imparting a sense of urgency to the committee to lock in the benefits I have listed. We recognize that no trade agreement is perfect and that no trade agreement is made without compromise. We support the passage of CUSMA and hope all parties vote in favour of ratification.
Thank you for your time today and for the opportunity to appear before the committee. I welcome any questions you may have.
I want to thank all the witnesses for joining us in person or by videoconference.
My first question is for Ms. Anderson.
Ms. Anderson, you referred to the softwood lumber industry. You said that CUSMA provides protection. I must confess that I don't see any protection. Instead, I feel that this issue has been completely left off the negotiating table.
As we know, recurrent crises have occurred in recent years. The American method has always been to establish punitive tariffs. Even though the courts ruled against the United States, while punitive tariffs were in effect, the industry was gradually heading toward bankruptcy.
However, despite the time limits under the former NAFTA, and I believe that the time limit was 325 days to resolve a dispute of this nature, we know that things were always done through the back door. For example, it took time for the United States to appoint arbitrators, and that way, they gained time.
Wouldn't this have been a real opportunity, during the negotiations, to regulate as many practices as possible so that this type of thing would no longer be possible? We could then have really taken sound legal action with regard to the softwood lumber issue.
Thank you, Madam Chair.
Ms. Bull, I can certainly attest to your statement that the access to capital is one of the major barriers.
Before joining politics I was in a small high-technology company focusing on exports and I can tell you that the company survived only because of the personal financial sense of the founders. Otherwise, the company could not have grown, nor could it have survived.
Another point is that many people don't know that the bulk of the exports, almost two-thirds of the exports from Canada, are done by foreign-owned firms. I am not against foreign capital. I love foreign capital coming in and investing in Canada. The bulk of the exports from Canada, 66% to 67% of the exports, are from foreign-owned firms.
However, Canada, is just one of their branch offices. Their major objective is to go after the North American market. They may not have so much interest in supplying or exporting to other markets in other parts of the world, whether it's the Asia-Pacific or Europe.
Right now, only about 12% of small businesses are in exports and even there, it is just an average of 5% of their sales that are in exports.
However, access to capital is a different subject for a different time. Maybe when it comes to Export Development Canada or BDC, that's where we should take it.
Mr. Smout, you did mention in your January 27 statement that the economic growth has been fuelled by trade and foreign direct investment, and our ongoing prosperity relies heavily on the swift ratification of CUSMA.
As I mentioned earlier, yes, foreign direct investment is very important because of the impact on exports. On the North American market, our exports to the United States, through the earlier NAFTA, have been quite stagnant for the last 10 to 15 years. It has been holding around $320 billion of exports and around $290 billion of imports.
I have some numbers that show the importance of foreign direct investment for Canadian GDP. In fact, it says we are tied with the U.K. on the FDI-to-GDP ratio, which is quite significant.
My only concern is, are we making policies that are catering more to foreign direct investment, or should we have specific policies to encourage Canadian entrepreneurs, mostly small-sized firms, that can export outside the North American markets?
Thank you. I am in Halifax because we are away at our first trade accelerator program on the east coast today.
Our entire focus is on convincing companies that they should look at trade internationally. We also want to get them to diversify markets, because it's uncomfortable being so dependent upon one single market. However, that single market is the closest to us culturally. It's miles across the border. It has similar rule of law. It's the easiest place, in many ways, to trade. It's challenging in other ways because each state is also a place unto itself and the rules and regulations can be different in each one. However, it's still easier than trying to sell into China and trying to sell into Africa and trying to sell into distant markets.
We feel that the government needs to, first of all, ratify this agreement. We don't want to go backwards in terms of tariff-free trade with the U.S. Second, it needs to continue to support, because the federal government through ISED does support the expansion of the trade accelerator program that we are running. We started in Toronto, but now it runs literally across Canada now that we're in Halifax. They have supported that expansion. I think they saw the value in developing capacity in companies to trade and encouraging them to develop the capacity.
The third thing that's really critical is that you have to get them into market. We tell people who come in that if they don't like to travel, they shouldn't get into international trade. You actually have to go to the markets. You have to learn to work with these people. It may seem that the U.S. is similar to us, but if you're trying to sell something into Texas, you're going to find the culture is a bit different there than it is here. You have to go there and learn how to do it. You have to go to trade shows. You have to take advantage of those.
We would encourage the government to do all the things it's doing and to put more emphasis on helping businesses get into those markets. The trade commissioner service has wonderful, amazing people and resources in all sorts of countries around the world. What we need to do is to get more of our companies over to see them and to get their help connecting with opportunities in those markets.
That's where I'd place the emphasis.