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Mr. Chair, members of the committee, thank you for the opportunity to appear before you to discuss the United States' Buy America jobs plan and the U.S. president's recent executive order.
You have heard from several government officials, including some ministers, that they would not let the Biden administration further restrict our companies' access to the U.S. market and would seek a blanket waiver. One speaker also talked about coming to a sectoral agreement with the United States. Obviously, I can't cover everything in this presentation, but I want you to know that, under international economic law, we have very little room to manoeuvre in response to the measures in the Buy America plan. I will unfortunately be going against the grain of what you have been told.
In my analysis, the United States cannot legally negotiate an agreement with Canada at this time. Nor would it be possible to reach a sectoral agreement. I will explain why.
The United States and Canada are among 48 states in the world that are parties to the World Trade Organization's Agreement on Government Procurement, or WTO GPA. This means that Canada and the United States have agreed to subject their government procurement to international competition.
However, when it comes to government procurement, each state has the ability to restrict its commitment. In other words, each state determines the entities subject to open procurement, the products or services covered, and the amounts above which the agreement applies. In its schedules of commitments, the United States has inserted significant limitations to allow it to continue to favour its suppliers in government procurement. Because of these limitations, therefore, the United States can have measures such as those in the Buy America plan.
Now, can the United States grant a waiver in favour of Canadian suppliers? Unfortunately, the answer is no.
In fact, the WTO GPA provides for compliance by states that are party to the most-favoured nation, or MFN, clause. In law, this clause is simple to apply. If a state gives an advantage to another state, it must extend that advantage to all states that are party to the agreement. In other words, if the United States gives Canadian companies preferential access to government procurement that is subject to the Buy America plan, it must extend that preference to the other 46 states that are party to the WTO GPA.
You may say that the United States had nevertheless agreed in 2010 to a general waiver in favour of Canada following the Obama administration's massive investment plan. But the context has changed.
In fact, there is one exception to the MFN clause I just mentioned: free trade agreements. That is, if states enter into a free trade agreement, they can give each other mutual preferences—that's even the objective—and they can do so without having to extend those preferences to other states. But beware, because, for this exception to come into play, there has to be a proper free trade agreement, which excludes sectoral agreements. I can come back to that during the question period, if you want.
In 2010, Canada persuaded the Obama administration to allow Canadian suppliers to participate in U.S.-only tenders. At that time, we had a free trade agreement, NAFTA, the North American Free Trade Agreement, that covered government procurement. In other words, NAFTA allowed us to have a preferential agreement with the United States on government procurement.
Today, the Canada-United States-Mexico Agreement, or CUSMA, has replaced NAFTA, and this new agreement now applies. It contains no rules on government procurement pertaining to relations between Canada and the United States. So we can no longer avail ourselves of that exception.
In this context, we have a few scenarios available to us. I will not be able to present them all to you, but here are some of them.
First, we unfortunately accept this as a fact of life; we don't have a waiver and our suppliers of goods and services cannot bid on most large infrastructure projects in the United States. In fact, they will be able to bid on some projects within the scope of the GPA, but that's extremely technical. For contracts not covered by the GPA, Canadian and U.S. companies will be able to apply for ad hoc waivers, but it's a very complex mechanism, that, most importantly, provides no predictability for our Canadian companies.
Second, we don't accept that solution and we reopen CUSMA negotiations. Let's be clear: after years of painful negotiations, and given the fact that the U.S. government is quite protectionist at the moment, I don't think that's a good idea.
Third, another solution would be to negotiate a blanket waiver with the United States. However, as I have already said, it would be risky for the Americans because it would go against free trade rules, against their commitments. So that remains to be seen.
Fourth—and I feel we should opt for this scenario when we know more about the specific measures taken by the Biden administration—Canada absolutely must begin a comprehensive analysis of how compliant the measures under the Buy America plan are with the GPA and with U.S. commitments.
This is because it is a good bet that some measures are questionable from a legal perspective. That could provide an opportunity to engage in a fact-based dialogue with a view to limiting the measures arising from the Buy America plan. If no agreement is reached, a dispute settlement procedure could be initiated at the WTO. Obviously, it would not satisfy our desire to move swiftly, but it could put pressure on the United States, especially if other major trading partners like China or the European Union were to join Canada.
This situation is yet another indication of our vulnerability when it comes to trade, and that vulnerability is a direct result of our dependence on the U.S. market. The answer seems simple enough: Canada needs to diversify its export markets. However, that's been slow to happen. We do have free trade agreements with many other countries and with major trading blocs, but, at the level of our businesses, diversification has been slow to materialize. That can likely be attributed to a number of factors. I don't have time to go into them in detail, especially since it goes beyond the scope of the trade relationship with the United States. But I would be happy to address them if you have any questions along those lines.
Thank you for your attention, and I remain available to you.
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Thank you very much, ladies and gentlemen.
Thank you for inviting me to participate in today's session focused on President Biden's buy American executive order.
[Translation]
I was surprised to receive the invitation.
[English]
I think everyone knows that since the inauguration of the Biden administration, the administration has been focused intently on the COVID-19 pandemic and domestic economic issues. It has concomitantly been moving more cautiously on trade issues. In a sense, President Biden's January buy American executive order falls between the two.
I'm happy to talk about the executive order this evening, but I have to emphasize that I'm not part of the administration. I last served in the Obama-Biden administration in September, 2013. I'm speaking to you as a law professor who teaches international trade and pays a reasonable amount of attention to policy developments in Washington.
As you know, the executive order does not change any of the statutory laws that are commonly called “buy American”, or “buy America provisions”. The executive order calls for a general tightening of department and agency implementation of the statutory provisions.
It does this by doing the following. It establishes a centralized process for granting waivers to buy American requirements, such that “a description of its proposed waiver and a detailed justification” of the waiver must be submitted to the White House's Office of Management and Budget. It makes descriptions of these proposed waivers and justifications available on a publicly accessible website. That is clearly intended to be a resource for American manufacturers who might want to bid on contracts that have not yet received a waiver. It allows the Office of Management and Budget to review each waiver, or to decline to review the waiver. The OMB may reject a waiver, in which case it goes back to the agency for further consideration and further analysis of the determination.
All of that is supposed to happen through a new made in America director in the Office of Management and Budget.
The president's executive order also requires the Federal Acquisition Regulatory Council to study and consider changing the very elaborate and detailed federal acquisition regulations in various ways that could increase the amount of federal purchases that have U.S. value added in it. Then—and this should be important to Canada—the executive order also calls for a longer term assessment, agency by agency, of “waivers issued pursuant to the Trade Agreements Act of 1979, as amended, 19 U.S.C. 2511, separated by country of origin”.
We are still in the earliest days of the implementation of the executive order. No made in America director has yet been appointed by the White House. My understanding is that so far the Office of Management and Budget has been gathering information from agencies and departments on waivers that had been granted in the recent past, analyzing those waivers and determining to what extent things can be tightened up.
My purely personal impression is that they have not yet identified as much abuse or looseness in the waiver system as some expected. I also think that—
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I was also getting the French, but I was listening to myself in two languages.
I also think the administration is looking at those waivers, not in terms of the total number of American jobs, which might have been how the prior administration looked at that, but, in my understanding, especially in terms of critical supply chains and strategic production.
As everyone knows, and as Professor Dufour discussed, the U.S. commitment to the WTO government procurement agreement, which benefits Canada at this time, effectively means that buy American rules function as buy from America and friends' rules. Separate from the executive order, I have to be honest with you that in the public statements accompanying the executive order, there is language that was exactly the same as we saw in an August 2020 policy paper from candidate Joe Biden that the new administration would “work with allies to modernize international trade rules and associated domestic regulations regarding government procurement to make sure that the U.S. and allies can use their own taxpayer dollars to spur investment in their own countries.”
As I said in the op-ed piece I wrote a few months ago, anytime a government says they want to modernize international treaty obligations, that's a nice way of saying they want to revise them, which is a nice way of saying they'd like to break them. I think that means that long-term U.S. participation in the WTO's Agreement on Government Procurement is not a foregone conclusion. If you follow Professor Dufour's logic—I agree 98% with everything she said—that is not necessarily a bad scenario for Canada. It could mean revision of the GPA in a way that permitted more regional collaboration, more localization of production, and more acceptance of the desirability of local special rules for procurement.
I know that members of this committee are very concerned about Canadian access to the U.S. market. I look forward to a discussion of these issues, with everyone hopefully keeping in mind that I can only give a close observer's perspective, not any official perspective on what is happening inside the Beltway.
Thank you, Mr. Chairman.
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Thank you for inviting me to appear on behalf of the Trade Justice Network. We are a coalition of environmental, civil society, student, indigenous, cultural, farming, labour and social justice organizations. We came together in 2010 to call for a new global trade regime focused on social justice, human rights and environmental sustainability.
The Canadian and U.S. economies are very tightly interconnected, with many goods, services and even workers crossing the border every day. The planned stimulus from the United States is good news for Canada's economy, and especially Ontario's, because a stronger U.S. economy generally has positive spillover effects on this side of the border too. I know that we're concerned about buy U.S. and buy American agreements excluding us from some of this money, but I think we need to keep in mind that any stimulus the the U.S. federal government is offering within the U.S. will have spillover effects in Canada, and we will likely benefit from it in the long run, even if we don't directly benefit from some of this spending.
Even so, Canadians are rightfully concerned about buy American clauses hurting Canadian businesses and the workers who had hoped to be able to bid on some of these large U.S. contracts. There's also often a lot of confusion in the Canadian public, because we've been told we can't attach buy local requirements to our public procurement, so how is it that the United States gets away with doing this so openly?
As the two previous speakers explained, the answer is quite simple. Canada is one of the very few nations that has given away our right to attach buy local provisions for subnational governments. The United States has never done so and does not intend to bind subnational government procurement to any of the international trade agreements they are a party to at the federal level.
As Professor Dufour said, the trade agreement that applies in this case is the World Trade Organization's Agreement on Government Procurement, or GPA, because there is no chapter covering government procurement in the updated CUSMA. The U.S. federal government must allow Canadian companies to bid on federal infrastructure projects that fall under the GPA. Despite the rhetoric from the government right now, there likely will be projects that Canadian companies can bid on because they fall under this trade agreement. The problem, as I'm sure others have already told the committee, comes when the federal government transfers infrastructure dollars to U.S. state or local governments, which are not covered by this agreement on procurement.
Since Canada has given away our access to subnational procurement under the GPA and also under the CPTPP and the CETA, we essentially have no bargaining chips left to play in offering the United States special access to any Canadian projects in return for special access there. In all of those deals, construction projects over $9.1 million cannot have buy local provisions, and the bar for goods and services is lower: $366,000 under the CETA and $650,000 under the GPA and the CPTPP.
Despite this, I think there is still a way for the federal government to follow Biden's lead, and that would be through setting sustainability criteria on inputs such as cement, steel, iron and aluminum. These criteria in Canada's own infrastructure projects would favour Canada and U.S. producers because our higher domestic environmental standards result in goods that have a much smaller carbon footprint. This would help level the playing field for high-quality Canadian and U.S. producers, while also helping Canada and the U.S. meet their climate targets, something that has been recommended before by Blue Green Canada.
Social criteria, which could also be allowed, could direct money to businesses, workers and populations that are currently underserved by the economy, such as first nations businesses and women-owned businesses and those types of things, allowing these firms to grow in line with Canada's inclusive trade agenda.
The Green Economy Network, which I'm also a part of, has called for $80 billion in green investments over five years in Canada. These investments would help us build national transit, both within cities and between cities. They would help us retrofit buildings across Canada and grow our renewable energy sector. This investment would directly create 200,000 jobs each year and would allow us to meet our climate targets. That would put us in line with the U.S.
Today, in her first speech as the U.S. trade representative, Ambassador Katherine Tai said that, on the environment, “the multilateral trading system has no rules to address the corporate incentive to participate in the race to the bottom.” She continued:
The view that environmental issues are not an inherent part of trade ignores the reality that the existing rules of globalization incentivize downward pressure on environmental protection. This puts countries with higher environmental standards at a competitive disadvantage.
She says that environmental rules are not a social issue. This is actually an economic issue.
If we put Canadian versions of buy American and buy American conditions, such as sustainability and social criteria, on federal transfers to the provinces and territories, that would bring our policy into line with the Biden administration. It would allow us to work together on a North American green jobs and procurement strategy.
The Biden administration has signalled interest in reforming the WTO and the GPA at the WTO to allow nations to get serious about their commitments to the climate, particularly the Paris Agreement. It would be very good for Canada's economy, job creation and environment if we joined the United States as global leaders on this front.
Finally, I want to point out that, as the committee knows, Canada has failed to support a motion at the World Trade Organization that would waive restrictions to ensure that vaccines and other medical supplies for the pandemic are affordable for developing nations. U.S. President Biden is under significant pressure right now to change his position on this issue to ensure that, globally, we can vaccinate as many people as quickly and as affordably as possible.
Canada should work with our U.S. allies at the WTO council to reverse course on this and allow a temporary waiver of IP rights for life-saving technologies and medicines.
Thank you very much.
To take something that Ms. MacEwen said, why not propose to the Americans that we reopen that chapter but with an environmental focus?
Now, it is true, as Professor Dufour would say, that someone looking out might say, “Well, you can't do that. You have to renegotiate the whole thing.” This was certainly a criticism thrown at the United States' limited renegotiation of KORUS, its free trade agreement with South Korea, but that's pretty esoteric.
This is the last thing I want to say. It would be great if there were a genuine effort to make environmental standards as meaningful as labour standards in the agreement such that Canada, the United States and Mexico should be proud—maybe not enough, but proud.
Good evening, everyone.
Good evening to my colleagues and the witnesses.
I will now turn to Ms. Dufour. My thanks for your presentation.
During your presentation, you mentioned the possibility of coming back to some things you didn't have time to elaborate on. I'd like to give you a chance to do that during the question period.
You said we cannot have any sectoral agreements and that we absolutely have to go through the free trade agreement. However, as you so rightly pointed out, renegotiating CUSMA could be politically difficult, after the years we have already spent on it.
That makes me wonder, what is a free trade agreement, if not a collection of sectoral agreements, at the end of the day?
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That's a very good question. I knew you would be the one to ask it, given the last few committee meetings.
It's simple. A free trade agreement can be an exception to the general principles of international trade only if it meets certain conditions of form and substance. We can skip the form, since the substance is more important.
First and foremost, you have to reach a free trade agreement that covers and liberalizes the bulk of trade between states. In practical terms, the WTO has never really defined what “the bulk of trade” means exactly, but it is understood to be about 90% of the trade between different countries. That means you couldn't have a free trade agreement liberalizing aluminum, steel, sugar, or even bananas. We've seen examples of this in the past at the WTO.
We couldn't reach a sectoral agreement on government procurement alone. If we were to reopen negotiations on government procurement with the United States, it would absolutely have to be done within the framework of the agreement we have at the moment, which is CUSMA.
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We must be very careful when it comes to government contracts and environmental criteria.
I can tell you that this is one of my main concerns. I'm currently leading a battle with the Quebec government to require buyers to include environmental and social criteria in government contracts. Right now, in Canada, in Quebec and in several provinces, government buyers aren't required to include environmental criteria. Nothing encourages them to do so or makes their lives easier. However, in the United States, for the past 20 to 25 years, several states such as Maine, Vermont, California, New York and Massachusetts have been implementing these types of criteria in government contracts.
If we want to, we can play this game. I hope that we do. We must. To that end, the Government of Canada must require its government buyers to include environmental and social criteria in government contracts. We need to prepare the industry. You were talking about aluminum and the fact that ours is green. However, a number of our producers make green products. They can't even prove that their products are green at this point. They have never needed to do so since it isn't required in the bidding process.
Both the federal and provincial governments must do their homework, structure the market and give us the opportunity to be more competitive in foreign markets.
I don't know whether I'm answering your question. However, I think that we must be careful about this, because we aren't doing our homework when it comes to sustainable government procurement.
Thanks, everyone, for being here this evening or afternoon, wherever you happen to be across the continent.
I just want to follow up a little more on the theme of how we could use environmental and social criteria as a means not only to achieve important domestic goals, but also to try to access or provide access for Canadian companies to some of the work, not just at the federal level but at the state level in the United States, if we have common cause around.... I think that's one of the opportunities that some of our witnesses have pointed out, that the new administration in the United States is an opportunity to have more common cause around environmental and social goals.
What are some of the ways we might be able to mobilize those common goals in order to secure access to procurement projects in the United States under the spending that we're told is coming?
I know, Ms. MacEwen, you were speaking a little bit to that on the social side. There's a lot of talk in Ottawa and elsewhere about the virtue of community benefit agreements for public procurement. I wonder if that's one of the tools that might be used to define those social goods and how projects would achieve them. I wonder if you could speak a little bit to that.
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Global studies show that the process of greening our government contracts starts at the top, not the bottom. The government must require the addition of sustainable development criteria in government contracts. This can be done in a progressive and flexible manner. There can be short-term and medium-term goals. We don't want everything to be green tomorrow. However, the government must start requiring its own buyers to comply with environmental criteria.
In government contracts, the vast majority of bidding processes currently don't include any sustainable development criteria. It isn't right that this is the case in Canada, when we look at what happens in Europe, in Japan or in Tunisia, for example.
The government must impose obligations. We must develop a culture in our companies.
We know that small and medium-sized enterprises, or SMEs, run on a day-to-day basis. If we don't impose obligations on them as well, they won't change their methods. This isn't because they don't want to. It's because they operate in the here and now. They must develop another culture and change their methods. The SMEs that already have green assets must start documenting them.
I work with the Aluminium Association of Canada and glass producers. They don't always have the data to show that they're greener than other companies. Aluminum companies are really an exception, because they're ahead of many other companies. The most important thing is to give buyers tools. We need to give them the tools to make things easy.
I want to narrow the focus here and get the best advice we can from three very able people.
There's a $2.3-trillion proposal by the President—roughly the size of Canada's entire economy—and it's quite clear that if you look through the various elements in the bill, many of them have nothing to do with buy American or with any difficulties that we might have in the trade relationship. It's also clear that we haven't had a heck of a lot of really good access to the American economy. Even at the best of times, it's something in the order of about $600 million, according to an answer we received from the trade folks.
The real question here is what to focus on. What is your best advice to the Government of Canada in terms of what it should focus on, assuming this bill goes through? It won't go through at $2.3 trillion, but it will go through certainly north of $1.5 trillion. The question, really, that I have is, what is the area of focus, the areas that are most problematic, and the areas where the Government of Canada's arguments are strongest? What are the elements—and I'm not sure who said it—that are legally questionable?
I'd like to start with Mr. Hughes and then go to the two other witnesses for answers to those questions, if I may.
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In a quick answer, I've not studied the initial administration proposal on the infrastructure bill. I don't know what the $600 million statistic is that you cited, Mr. McKay.
I will tell you that the Biden administration officials have told me that in terms of government procurement access, their estimates are that Canadian firms are open to address about $300 billion worth of U.S. federal procurement, versus U.S. entities having about $10 billion available to bid for on the Canadian side. I am conscious that folks in the government in Washington are aware of that differential.
My advice, if I were giving advice, would be to sit down carefully with Washington—because right now Washington is very, very concerned about supply chain issues—and figure out where the holes are in the North American supply chain, and let's jointly fill those. If that means a factory here that's refurbished and a factory there that's refurbished and we jointly do something here—great.
I'm sorry. I'll take just 20 seconds more. In testimony before this committee, you've been talking repeatedly about Ontario automobile plants suspending production because of lack of semiconductors, but the same thing is happening on the United States side. We have this common problem.
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Good evening and thank you, Mr. Chair, and members of the committee.
Thank you very much for inviting me to participate in today's discussion. It is my pleasure to be here on behalf of our association's 2,500 direct members, and 90,000 manufacturers and exporters across the country to discuss buy America policies.
My comments today will aim to reinforce CME's long-standing ask that governments fight buy American policies, and push for the implementation of buy Can-Am policies instead.
It goes without saying that the work of the special committee is timely and of great importance to Canadian manufacturers, not just on today's subject of buy American, but all aspects concerning our special relationship with the United States.
Canada's trade partnership with the U.S. is a core component of our economies and the very lifeblood of manufacturing. Goods manufactured in Canada or the U.S. can cross our shared borders several times during the production process. The majority of trade between our countries are subcomponents that go into making finished goods. As a result, Canadians and Americans don't simply trade with each other, from steel to cars, from computers to robots, from chemicals to medical devices, but also make goods together, and we compete with the world together. In many sectors and with many goods, there is no distinction made between Canadian or American goods. This is the way our trade rules have been developed over decades.
Buy American-style policies create a distinction between locally produced and foreign produced goods for government contracts, and make huge amounts of political and practical sense. The theory is that if government is spending taxpayers' dollars on goods, those goods should stay within the local economy. In addition, in some sectors, procurement can significantly strengthen and develop essential industries.
Politically, the narrative is that these policies are used to protect local jobs and industry against bad, and in some cases illegal, activities from foreign competition. In general, the CME agrees with the theory of this approach and has long argued that the Canadian government should place a higher priority on domestic sourcing of goods through procurement policies. However, not many of the buy American policies have been implemented historically. Rather, we believe that you can take into consideration the economic upside of procurement while recognizing and supporting regional supply chains, and ensuring that taxpayers get good value for their money.
The challenge with buy American as currently implemented is that it tends to be a blunt instrument that doesn't differentiate between integrated supply chains and imported or finished goods, therefore undermining regional supply chains.
Here's an example. During the implementation of the American Recovery and Reinvestment Act in 2008-09, the U.S. implemented a range of buy American policies. A large well-known U.S. manufacturer bid on a contract to supply water pumps as part of municipal infrastructure projects. That company's bid was rejected. Why? Because one simple component, not the finished product, was manufactured in its plant in Oakville, Ontario. This not only hurt its Canadian operations, but the U.S. company's operations as well.
CME has worked on this file with our member companies for a long time. We've researched and have analyzed surveys and written papers on the subject. We have worked with governments on solutions and options including through the ARRA and, more recently, through the renegotiation of NAFTA.
Based on our work, there are generally three options that CME believes are most important in Canada's approach to buy American policies. First, push for buy Canadian procurement policies in the U.S. and implement similar measures here. Second, reciprocity is a must, and must be a fundamental principle in any trade relationship, including with the United States. Canada must not be afraid of implementing retaliatory measures. Third, Canada and the United States should build from existing areas of procurement where domestic production capabilities are needed, especially as it relates to COVID-19 recovery and future preparedness.
In fact, these approaches are all used today in various ways, and they work. The Gordie Howe International Bridge that will connect Ontario to Michigan uses a buy Can-Am procurement model. The Province of Ontario implemented a reciprocal procurement market access provision when faced with the U.S. states threatening to block sales of Ontario-made goods into their markets, and those states backed down. Canada itself implemented similar provisions last year in steel aluminum tariffs. We have seen for over 50 years a joint defence procurement agreement that supports integrated production and procurement in defence industries.
Given the current executive order on expanding buy American policies and the current administration's historical connection to using these policies, CME believes that it is essential for the Canadian government to aggressively push for a bilateral and permanent buy Can-Am deal.
CME understands that this ask comes with significant challenges, but believes the timing is right. The new administration is much more aligned to international co-operation and, in general, to Canadian views on politics and policies.
We are in the process of implementing a new free trade deal. It lacks a modernized procurement chapter for governments on both sides of the border in implementing economic recovery packages that heavily feature procurement spending as a key tool in that recovery.
Thank you again for inviting me to discuss this, and I look forward to the discussion.
:
Good evening, everyone.
Thank you very much, Mr. Chair.
My name is Catherine Cobden, I am the president and CEO of the Canadian Steel Producers Association. I thank you for the opportunity to appear here today to share the perspective of the domestic steel industry on the important economic relationship between Canada and the United States as you deliberate on buy American and the American jobs plan.
Our member companies produce approximately 15 million tonnes of steel and products annually, and support about 123,000 direct and indirect jobs in over five provinces. Our industry plays a strategically important role in the economy as a critical supplier to the North American automotive, energy, construction and manufacturing sectors. We send approximately 40% of our total production to the United States every year, and we meet about 5% of their market needs. In turn, we are a very important customer to them, with U.S. steel making up about 25% of all steel used in Canada. We also benefit from strong and integrated supply chains and markets, and indeed, steel may pass over the border multiple times as it is transformed into specific products required by the marketplace.
While we've had our share of challenges in Canada and U.S. steel trade over the last years, we remain steadfast in our view that we're stronger together than divided. We welcome the renewed collaboration agenda that we have been hearing out of the different bilateral meetings our government has been holding with the United States. Undoubtedly, there are challenges ahead, however, we believe it's crucial to take hold of the opportunity of this goodwill to ensure we maintain and even strengthen access to the United States.
While buy American's damage has been done to steel in previous versions of that program, we are concerned about how things may play out, given changes proposed in the new made-in-America economic plan and the potential implications for its American jobs plan. Our real-life experience is that exclusions or not, customers are driven away from using Canadian steel due to the market chill created by these policies and very practical considerations, such as things like needing to carry different inventories, buy American inventories and non-buy American inventories. We certainly appreciate the efforts and thoughts around seeking exclusions, but we are concerned that this would not at all be a sufficient approach to this challenge.
We would suggest a broad approach in our response to the buy American plan, built upon this collaboration of key priorities and the ability to demonstrate our commitment to make similar efforts in Canada. We have four specific suggestions for your consideration.
Number one, promote Canada as a reliable supplier of green materials in support of the U.S. climate objectives and build back better with their infrastructure programs. The U.S. does not have sufficient supply of its own domestic steel, so it will need trading partners that share common vision and objectives on many fronts. On climate in particular, I'm proud to say that Canadian steel producers are among the greenest in the world. A recent global benchmarking study reports that Canadian steel is number one and number two in the world, depending on production methodology, for the lowest carbon intensity when compared to other major steel jurisdictions around the world.
Number two, demonstrate our commitment to green procurement in our own infrastructure program. This is an important area that continues to be overlooked in Canada's climate and net-zero plans. Canada's steel sector has the green credentials, and I know other sectors do as well, to support this important objective, and we feel it is a bit of a credibility issue to expect this within a U.S. infrastructure program while not pursuing this explicitly in Canada.
Number three, position Canada as an equal partner with the United States in our fight against unfair steel traders through explicit changes to our trade remedy system. Canadian and U.S. steel industries share a deep concern with the growing and significant global overcapacity from China, Iran, Turkey and other areas in the ASEAN region, for example. The U.S. has made significant changes to its trade monitoring and enforcement system to catch and penalize unfair traders, and we simply must keep pace.
CSPA members have made a range of recommended changes, including identifying where steel is melted and poured, improving our monitoring system at the border and addressing the pressing need for an anti-circumvention framework similar to the United States.
Our final suggestion is to continue to support the full implementation of CUSMA. This agreement has been very good for the steel industry. It recognizes the deep integration of our economies and strengthens the competitiveness of the North American industry and our supply chains.
Thank you, Mr. Chair, for the opportunity to provide these comments.
:
Thank you, Chair and committee members, for inviting me to speak here tonight.
My name's Michael McSweeney and I'm president and CEO of the Cement Association of Canada.
We represent five cement companies with cement manufacturing facilities across Canada. Our members are Ash Grove, Federal White, Lafarge, Lehigh Hanson and St Marys Cement. Our mission is to promote and advocate for the environmental, economic and social benefits of building with cement and concrete.
Our industry constitutes, literally, the foundation of economic growth and infrastructure. Virtually all construction across Canada—above ground or below ground—needs concrete. Twice as much concrete as any other building material combined is used. Behind water, concrete is the second most consumed commodity. For every woman, man and child globally, three tonnes of concrete are consumed each and every year.
Throughout COVID, our industry was recognized as essential as provincial officials strived to maintain the construction of infrastructure like hospitals, schools, waste water treatment facilities and public transportation networks.
Over the past five years, Canada’s economy has used approximately 45 million tonnes of cement. In the next five years, it's forecasted that Canada will consume 55 million tonnes of cement. This will yield 400 million tonnes of concrete, which is enough to fill 24 million concrete trucks. Parked bumper to bumper, those trucks would circle the globe four and a half times.
In addition to concrete and cement being indispensable, we are truly the cornerstone of Canada's economy. We have concrete plants right across Canada and in every political riding. There are 1,000 ready-mixed concrete plants, 35 concrete pipe plants, 15 cement plants, 56 precast plants, 12 insulated concrete form plants and 35 concrete block plants. Combined, cement and concrete operations generate over $76 billion in annual economic activity and employ over 158,000 Canadians.
The economic impact of our industry cannot be underestimated, particularly given the role that Canadian cement plays as a strategic export to the United States. It might come as a surprise, but 40% of all of Canada’s cement is exported to the U.S. across the Great Lakes, down the Atlantic seaboard and down the Pacific northwest coast.
All of this brings me to today's topic, which is buy America, buy American and made in America.
The U.S. and Canada have long maintained a mutually beneficial, tariff-free relationship when it comes to trading in cement. The U.S. cannot produce enough cement domestically to meet its demand. To address this gap, the U.S. imports over 16 million tonnes of cement annually, with 35% of that—almost 6 million tonnes—coming from Canada. Our two markets are completely integrated, allowing cement to move back and forth across the border to reach key markets across the U.S. Restrictions to this trade flow, in the form of buy America and buy American policies, risk damaging that long-standing integrated supply chain. With 40% of Canadian cement exported each year, a failure to exempt Canada from rising trade protectionism will result in increased costs and delayed infrastructure projects for the U.S., as well as a loss of Canadian jobs here in Canada.
This would also work against the U.S.'s buy clean agenda. If the U.S. displaces Canada's imports with imports from Asia and eastern Europe, we'll see an increased GHG emission profile of approximately 25% from the transportation of cement alone.
Given that cement is part of the integrated Canada-U.S. market that optimizes manufacturing logistics and regional demand, Canadian exports to the U.S. reduce shipping costs and greenhouse gas emissions. Canada produces one of the lowest carbon-emission cements globally and continues to pursue deeper emission reductions through many new innovations. I might add that the Canadian cement industry can easily reduce five to six megatonnes of GHGs over the next five years.
It's important that Canada make the case to the Biden administration to issue a waiver for Canadian cements as it develops its buy America/buy American plan. Canadian officials must highlight the mutually economic benefits of maintaining a free flow of trade and the importance of available and increasingly lower carbon cement, to buy clean and build back better agendas in both Canada and the United States.
Thank you very much.
:
Thank you very much, Chair, and to the witnesses. It's certainly incredibly awesome testimony. I appreciate it.
I was so happy that all three of you brought up the border issue, which is where my questions will be geared to tonight.
I'd like to start with Mr. Wilson.
I spoke yesterday, Mr. Wilson, to the union president of the CBSA in Windsor, the busiest international border in all of North America. He represents 540 union employees—300 frontline and 240 support services. They don't have vaccines in their arms. Sarnia's employees have vaccines in their arms. Norfolk does. Windsor doesn't.
My first question for you, sir, is this. In the event, and I really hope it doesn't happen, that our CBSA officers, our frontline officers, were to be infected with COVID-19 and we had to shut the border down, what would that do to the manufacturing industry?
Mr. Wilson, this is a Canadian aspect. It's not only about my backyard of Essex and Windsor, although it's very near and dear to my heart. Essex and Windsor probably has some of the greatest and most advanced manufacturing assembly that happens across our incredible country called Canada, but I do realize that not only is it more countrywide, it's global.
Sir, I believe you mentioned in your opening statement that there are some 90,000 exporters. That one really caught my attention as something crazy. I would also suggest, sir, that I do know there's a major issue with.... Many people think about commerce as a good, as a piece of paper, as a carrot, but people are commerce. I've been speaking to so many people on both sides of the border, the Canada and U.S. sides, in Michigan, Ohio, Pennsylvania—Mexico. I know a lot of the people you represent, sir, bring in thick stacks of paper to go across the border to show the CBSA officers, the border guards on the U.S. side, that they indeed are an essential service.
This question, quite frankly, can go to all of our witnesses. Would it be beneficial to the exporters, to our manufacturing, to our advanced manufacturing and assembly, if we had one page—one page—that shows people have been vaccinated within the last two hours, that they are an essential service? They show it to the border guards, and they're not tying up our border guards. They're not tying up commerce. Does that make sense?
I'm trying to get creative here so we can move past this and actually have the discussion to open up our economy.
:
Yes, Mr. Lewis, I really appreciate that question. Thank you very much.
I was trying to point that out in my remarks. I think there is absolutely a need to do more to promote the use of both Canadian, and on their side, American steel. I'm not saying that all importers are unfairly trading, but we are at very high risk. We are a very intriguing market for unfair-traded importers, and when they pour into a market, they really disturb it.
In terms of what we can do to prompt that, we're trying to give you some sense of our advantages. We're very green. We obviously create high employment in the area, and we have good labour practices that would also appeal to the United States. There are lots of places where we're commonly aligned, so we need to continue to pursue that.
Also, don't forget the trade remedies that I've mentioned. We must do more at our border to prevent those importers. Man, those unfair traders are very sophisticated in how they figure out ways around the tariffs that are in place.
Although this study is more about buy America, buy American and those trade policies, I want to thank my colleague Mr. Lewis who has highlighted the vaccination issues. I hope somebody from Premier Ford's cabinet is listening to this to make sure there is vaccination at the border crossings. While others are and his aren't, I think that's a problem that the Premier of Ontario and the health authority of Ontario need to take very seriously. We should maybe point that to the health committee to facilitate that.
In this, I want to thank, first of all, Mr. Wilson, Ms. Cobden and Mr. McSweeney for their testimony. It's very important.
You have emphasized what we all see every day: goods going back and forth. I have AI industries in my riding that fabricate steel, and I remember when the tariffs were put on, we had interesting dilemmas happening where their steel was being tariffed by the U.S., who were saying that it's unsafe, and on the same side we were countervailing and hitting steel where certain parts were coming from the U.S.
With the schools being built in Seattle, some of the steel is coming from the U.S., some is coming from Quebec, and some is fabricated here in British Columbia and then assembled down in Seattle. Therefore, you can see the intricacies of the steel going back and forth, and parts going back and forth. That has really shown it.
Mr. McSweeney, you've talked about it in terms of concrete. Every day we see Lafarge and others shipping cement, going back and forth. Some products made on the other side of the border come over this way. I think it's almost impossible to separate that type of ingredient in it.
What I would like to know, and anyone can feel free to elaborate on this, is if they were to effectively stop Canadian products from being able to be bought in procurement under the U.S. federal plan, what is the dollar value that would be at risk that falls below the 50% American input threshold? What would we be at risk of losing? Does anyone have an idea?
Mr. Wilson, perhaps you might elaborate, as you're kind of the collective on it. I've been trying to get this from many industries and haven't got that number.
:
Here's the problem. I think in the last panel someone mentioned $600 billion in procurement markets in the United States. It's a huge number. We only make about that much in manufactured goods in Canada on an annual basis across all industries, so it's a massive number.
I don't want to put an exact dollar number on it. What I will say is that, whatever you think it is, it's going to be bigger. The reason I say that is that economists will come out and study and say, "In this sector, in this sector and in this sector, this will be what the impact is", and they'll give you a nice round number. Maybe it's a $100 billion, maybe it's $50 billion; I don't know. What you can never calculate is the chilling effect on everything else that you never see.
What we end up seeing is that, when the government starts promoting buy American policies mostly as a way to be against dumped stuff coming in from offshore, they almost always say, "Oh, we don't mean Canada", even though it spills over into every procurement decision that any company and the government make on anything. You can set all the benchmarks in the world—50%, $50,000, $2 million—but whatever number you want to throw out there is completely irrelevant, because what ends up happening at the end of the day is that it spills over into every single transaction that takes place in every single sector, both in the public and private sectors.
There are no easy solutions. We've even had member companies of ours who were involved in this actually buy American companies themselves to get around the buy American restrictions and continue to manufacture the goods in the United States to supply U.S. government contracts, only to be told they weren't allowed to bid on American contracts because they weren't an American company.
I want to thank all the witnesses.
My questions are for Mr. McSweeney from the Cement Association of Canada and Ms. Cobden from the Canadian Steel Producers Association.
You described your respective products and sectors as very innovation-oriented industries at the forefront of green research and development. This aspect is very necessary in this era of climate change. There was also talk of Quebec's aluminum, which is one of the greenest in the world.
Ms. Cobden, you talked about ways to get around pricing requirements at customs. Have you seen any specific instances involving insufficient regulations or pricing, or blatant circumvention?
In other words, are there any attempts to slip through the cracks of the safety net by using semantics or the way in which the regulations are written, or is there simply no safety net?
:
Thank you very much for the question.
Indeed, as I tried to make reference in my remarks, I think that's an important area for us to be pursuing with the United States. We have the credentials, and granted, they're going to get even better in terms of the industry's performance over the long run.
I suggest that we don't want to make perfection the enemy of the good. I think we can start with some interim steps to start documenting, as you say, that performance.
In the steel industry, we happen to have international benchmarks now, which are starting to show some of that....
Obviously, ideally over the long run, we'd go to life-cycle carbon analysis—the full footprint—but I don't know that we need to have all of that in place before we get started.
I think you raised a very important point. This is an aspect we need to move forward on, and I don't think we want to wait until we have spent 10 years perfecting the life-cycle analysis approach.
:
Along the same lines, Mr. Blaikie, a lot can be done from the procurement side.
We should be talking about always conducting a life-cycle assessment, using the building materials that give you the longest life cycle. Secondly, choose building materials that give you the lowest carbon footprint, and finally, use the best available technologies. We have a raft of those in Canada, from Svante to CarbonCure, to Solidia.
In our industry specifically, we have a new cement. It's called Portland limestone cement. It costs the same as regular cement. When you use this cement, it reduces greenhouse gases by 10%, at no cost to the customer. We've been trying for five years now to get this new cement mandated by the federal government, and by provincial governments and municipal governments. Imagine this: I don't say, “build with concrete”. I'd like you to build with concrete, but I don't say “build with concrete”. I say that if you build with concrete, use the cement that's going to give you the lowest carbon footprint at no cost to the taxpayer.
:
First, I agree with my counterparts, Catherine and Michael. They're certainly looking at it from a very specific sector's perspective.
I'll maybe take a step back, though. We've been working on procurement policy with Canadian governments for as long as I can remember. We can't even get governments to look at economic analysis.
I just want to take a little step back here. I agree 100% with where you're going on this, but we also need to have the economic analysis as part of that. The two go together. It has to be an economic and an environmental analysis. None of that really takes place in any government anywhere in the country. There is some of that with infrastructure projects in Ontario and Quebec, but that's pretty much about it right now.
All of that is really important, and this is why we've really been pushing for an overall examination of Canada's procurement policies as part of the recovery action the government is taking. It should be looking at environmental issues and seeing how we can green supply chains and have low carbon input into it, and we also need to look at the overall economic impact, which includes the environment as part of that.
I agree with everything they were saying. I just want to add that little element on top of it, to take a bigger picture look as well.
:
Thank you very much, colleague.
I too would like to thank all of the witnesses for joining us on a Thursday night to talk buy America and trade.
I don't think I have much time, so I'll address this question to Ms. Cobden and Mr. McSweeney. Let me begin by thanking both of you and your industries for the incredible work you do here in Canada, and rest assured that every minister is raising buy America with every counterpart in the United States. We are on this file, but we also want the help of industry.
Ms. Cobden, you mentioned that there isn't enough of a supply of steel in the United States.
Mr. McSweeney, you mentioned that the U.S. imports 16 tonnes of cement from Canada. I assume that's on a yearly basis.
We know that what President Biden is proposing is a $2.3-trillion plan, so it seems to me that there might be opportunities for you to be discussing this with the industry in the United States and with your clients to see what their plans are in order to meet the demands they will soon face. Is there opportunity from the industry perspective to have some pressure put on the United States so that we can all work together towards this one goal of ensuring that we continue to have access to this important market?
:
From a Canada-U.S. perspective there shouldn't be space for any restrictions between friends and allies.
I think, first of all, on the topic of Canada-U.S., they shouldn't exist. We had them exist in the past and they won't exist again, hopefully. To ensure they don't is a very important task.
In terms of dumping, I've tried to address that already. Yes, there is a lot of dumping. We are subject. The risk of dumping changes over time, depending on the conditions of the given market.
I haven't talked about this yet, but we are very engaged in trade cases. It's going after those organizations.
You ask if we see it, and I say yes, we have multiple trade cases going on. We continue to use that trade remedy system to do so.
You can all help us by doing more on the types of measures I've already discussed in improving our ability to see even more clearly the situation that you're painting.