EVIDENCE

Standing Committee on Industry, Science and Technology NUMBER 003 1st SESSION 43rd PARLIAMENT Monday, February 24, 2020 Le lundi 24 février 2020 Standing Committee on Industry, Science and Technology CANADA [Recorded by Electronic Apparatus] EVIDENCE February 24, 2020 Committee NUMBER 003 NUMBER 003 NUMÉRO 003 03 24 02 2020 2020/02/24 08:05:00 House Of Commons Comité permanent de l'industrie, des sciences et de la technologie Standing Committee on Industry, Science and Technology INDU Chair Mrs. Sherry Romanado 1 43

(0805) [ English ]

The Chair (Mrs. Sherry Romanado (Longueuil—Charles-LeMoyne, Lib.)) :

Good morning, everyone. Happy Monday morning. We are meeting today at the Standing Committee of Industry, Science and Technology to study clauses 22 to 38 and clauses 108 to 122 of Bill C-4 ,

an act to implement the Agreement between Canada, the United States of America and the United Mexican States. With us this morning we have Mr. Lawrence Herman, who is joining us by video conference from Toronto. We also have with us Mr. Matthew Poirier from the Canadian Manufacturers & Exporters; Mr. David Cassidy, UNIFOR Local 444; and Jonathon Azzopardi, from the Canadian Association of Mold Makers. Since we have a large panel, we will ask that you each present for approximately five minutes. At the end of the testimony, we will then move into a rotation for questions. We will start with Mr.

Herman, who is joining us by video conference. Just in case we have a technical problem, we want to make sure we get his testimony on the record. With that, Mr. Herman, please feel free to begin your testimony.

Mr. Lawrence Herman (Counsel, Herman and Associates, As an Individual) :

Thank you very much. I'm happy to be able to provide some views. I should make it clear that I'm not representing any particular party or any particular interest. I've been asked to appear in my personal capacity. To give you a bit of my background, I'm a trade lawyer by profession, but I used to be in the old Department of External Affairs. I've been involved in international trade at the GATT and the WTO, and in Canada-U.S. trade for many years. I deal regularly—every day—with trade policy issues. I'll be very brief.

This is a bill to implement an agreement that has been concluded, signed and ratified by two parties, the United States and Mexico. It is now up to Canada to ratify this deal. The deal is done. It is not open for renegotiation. It is totally impractical to think that the United States Congress would be prepared to change anything in an agreement that they have approved and the President has ratified. What we're talking about here—and I think the committee understands this—is changes to Canadian laws to bring our laws into line, where necessary, with a concluded agreement.

When you look at the clauses you are examining, you will find that they are consistent, at least in my view, with everything that has been agreed to in the CUSMA. The task is to approve legislation to make some adjustments, if necessary—and frankly, I don't think I see any areas where adjustments are needed—to bring our laws technically into line with what has been concluded in the trade agreement. As I said, in every practical sense, the agreement is not on the table for renegotiation.

What is necessary on Parliament's behalf is to enact legislation that, where necessary, brings our laws into line with what has been agreed to with the United States and Mexico. Some of these adjustments are purely technical. They are nothing more than some moderate tweaking of Canadian statutes to comply with the agreement. There are some substantive provisions, as you all know, dealing with customs matters, tariffs and rules of origin, but that's something Canada has agreed to in CUSMA and now it is up to Parliament to pass the necessary implementing legislation.

As a final word, if Parliament were to reject this bill or to refuse to approve the Canada-U.S.-Mexico agreement, it would be unprecedented and, frankly, would set our economic trade and political relations back many years. It would be an astonishing result if Canada did not proceed with ratification. Those are my views.

(0810) The Chair :

Thank you very much. Next we will move to Mr. Matthew Poirier.

Mr. Matthew Poirier (Director of Policy, Canadian Manufacturers & Exporters) :

Thank you, Madam Chair. Good morning, everyone. It is my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters, and our association's 2,500 direct members, to support Bill C-4 ,

an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA. Before I begin, I'd like to commend the efforts of the Prime Minister , Deputy Prime Minister Freeland , Chief Negotiator Verheul and all their staff for negotiating CUSMA. Being part of the process, we at Canadian Manufacturers & Exporters, or CME, understand how difficult these negotiations were. It was crucial to achieve a positive outcome for Canadian businesses and all their employees, and we did just that. As such, CME fully supports this bill.

We urge the government and all parliamentarians to ratify CUSMA as soon as possible. My goal today is simple. I want to explain why free trade is important to manufacturing and how CUSMA will improve on NAFTA. Why is free trade so important? Simply put, North American trade is the basis upon which Canada's manufacturing industry is built. Our sector alone employs 1.7 million workers in every community across the country. In 2019 we shipped 455 billion dollars' worth of merchandise exports to the U.S. and Mexico. This represented 77% of our total exports to all countries that year.

Two-thirds of these exports, worth about $305 billion, were manufactured goods. The numbers simply speak for themselves. You see, Canadian, American and Mexican manufacturers don't really compete with one another. Rather, we build stuff together in a continental manufacturing ecosystem bound together by integrated supply chains. North American free trade is therefore a pillar of our national economy. It is why the manufacturing sector produces the bulk of Canada's exports. It is how the sector can compete against the rest of the world. This is why CUSMA—NAFTA before it—is so important.

Without this agreement and without integrated production with the U.S. and Mexico, we simply would not have the scale necessary to be a global player. Canada's ability to take advantage of any other trade deal is only possible if North America continues to manufacture and grow. How does CUSMA improve on NAFTA? CUSMA preserves the integrated manufacturing operations that allow the relatively free flow of goods and services between our three markets. Going into the negotiations, our members made it clear that the primary objective of Canada must be to do no harm to this integrated manufacturing economy.

CUSMA accomplishes this. In fact, CUSMA preserves many of the key elements of the original NAFTA that were targets of the U.S. for elimination. This includes the dispute settlement mechanisms and business traveller visa exemptions. This was by no means assured at the outset, but there they are, alive and well. Importantly, CUSMA updates critical areas of NAFTA, dragging it into the 21st century. This alone will significantly enhance North American trade. For example, the new digital trade

chapter recognizes that the Internet is a thing, and establishes a framework for e-commerce in North America. The customs administration and trade facilitation

chapter will also go a long way in modernizing borders throughout North America, enabling the free flow of goods. Lastly,

chapter 26, the new competitiveness chapter, has not garnered a lot of attention, but in our estimation it is one of the biggest accomplishments. Why? It sets up a framework for three sovereign countries to become a unified trade bloc. It will do this by promoting better coordination and integration of our manufacturing industries so that it can tackle global trade challenges together. This is a significant accomplishment. We have consistently urged the government to start work on implementing the parts of the agreement—parts like

chapter 26—that do not require legal changes. We should be looking to make early progress by establishing committees for North American competitiveness and good regulatory practices, as outlined in the agreement. This would show Canadian leadership, signal to our other partners that we take CUSMA seriously and let us hit the ground running. Once CUSMA is the law of the land, we need to pivot towards helping manufacturers and exporters take advantage of the new deal. The U.S. is, and always will remain, our largest export market.

We must leverage such excellent government resources as the trade commissioner service and Export Development Canada to help companies transition from NAFTA to CUSMA.

(0815) Limited access to the U.S. government procurement market is also a big challenge. This is how government can play a positive role in helping companies capitalize on CUSMA once it's in force—

The Chair :

Your time is up. Can you wrap it up quickly?

Mr. Matthew Poirier :

Certainly. In the final analysis, CUSMA is a good deal for Canada and, given the very challenging negotiations, it's an impressive achievement. Thank you. I look forward to the discussion.

The Chair :

Thank you very much, Mr. Poirier. Mr. Cassidy, I'll invite you now for your presentation.

Mr. David Cassidy (President, Unifor Local 444) :

Thank you. Good morning, Madam Chair and members of the committee. My name is Dave Cassidy. I'm the president of Unifor Local 444 in Windsor. Local 444 represents just under 10,000 active members working across a range of industries including gaming, long-term care, aerospace, energy and transportation. Of course, we also do auto assembly and make auto parts. Our local represents approximately 6,500 workers at the Fiat Chrysler Windsor assembly plant, producing vehicles like the Grand Caravan, the Voyager and the Chrysler Pacifica.

We also represent thousands more workers at nearby feeder plants, right down the supply chain. I want to thank you for the opportunity to address you today with respect to Bill C-4 on the implementation of the Canada-United States-Mexico trade agreement. As the committee members will know, our union international president Jerry Dias took a very active interest in NAFTA renegotiations. I can tell you, coming from Windsor, that reopening, or even getting rid of NAFTA, has been top of mind for workers ever since that original deal came into force back in 1994.

I know the terms of NAFTA stretch beyond just the auto sector. It's a deal that touches nearly every good and service that crosses our continental borders, yet among them the auto industry seems to grab the headlines, and for good reason. Building and developing an advanced auto industry is lucrative business. It is also a tool for significant economic development. Canada is fortunate to have invested heavily in the auto sector. Every one job in auto assembly helps generate 10 others throughout the economy. An auto assembly plant is like a centre of gravity for additional manufacturing investments.

Supplier parts, whether seats, doors, wheels or other components, are intentionally located nearby to help meet production schedules and demand. This is exactly the case in Windsor where the auto industry is still a vital cog in the local economy, this despite years of devastating closures, plant reallocations, job outsourcing and layoffs. In 1994 NAFTA changed the terms of trade and redefined the North American supply chain. It is no surprise that automakers and parts manufacturers started relocating production to low-wage Mexico or in some cases the low-wage U.S. south.

We used to have a $3.5 billion auto trade deficit with Mexico for cars and parts. The deficit is now nearing $30 billion. We expected this would happen. This is part of the reason Canadian auto workers have long been opposed to NAFTA. Over time and through our collective bargaining, we've managed to secure decent wages and benefits for our members doing very difficult, repetitive and skilled labour, but all that gets undercut as Mexican factories pop up and workers are paid a wage that's a fraction of what we earn.

I don't know if you know this, but a new Audi assembly plant located in Mexico, producing a $40,000 luxury SUV, for instance, will pay workers around $2.25 U.S. per hour. Canadian workers will not, and should not, have to compete with that. I'll tell you there is rarely a time when Canadian auto companies fail to point out these disparities when they're trying to lower our wages, trim our benefits or overhaul our pensions. This is NAFTA's effect on working conditions in Canada.

As I said, our union put a lot of time and resources into engaging in NAFTA renegotiations and working with federal officials to make meaningful changes. No one was under any assumption that tinkering with NAFTA would, by itself, undo decades of damage and neglect, but certainly, meaningful changes were made, and we recognize that. Under CUSMA there is now a much higher threshold to determine a North American-made car than there was under NAFTA. Giving tariff preferences to carmakers that build a car actually made from North American components strengthens the integrity of the deal.

This is far different from the approach the Harper government took when renegotiating the TPP wherein they committed to weakening the NAFTA threshold. Under TPP, which Unifor strongly opposed, more than half a car didn't have to be built in a trade zone to receive tariff preference.

(0820) It's good news that under CUSMA the trend is reversed. We think that this could help locate production of tier-1 and tier-2 suppliers into Canada as carmakers attempt to meet the new rules. CUSMA also strengthens rules of origin on key component parts over and above the original deal. For the first time, there are auto rules of origin that apply to steel and aluminum resources, requiring OEMs to purchase at least 70% of these materials in North America.

The Chair :

Your time is up. Thank you.

Mr. David Cassidy :

Okay. I'm just trying to figure out where I'm going here. I was told I had 10 minutes. I'm sorry, Madam Chair.

The Chair :

I'm sure that once we get into the questions you'll have an opportunity to address this and add more comments.

Mr. David Cassidy :

Perfect. Thanks.

The Chair :

Thank you.

Mr. David Cassidy :

In the CUSMA text, there are provisions to give automakers some reprieve from these labour rules. R and D spending, for instance, certainly can help them lower the 40% commitment. Labour value content can be shaved down to as low as 25% if the right conditions are met. Let's work to streamline investment supports between the federal and provincial governments like Ontario's rather than work at cross-purposes. Let's commit to comprehensive oversight of new auto rules to ensure that things like the labour value content are being properly applied.

Also, let's have this industry committee undertake a detailed study on the future of auto production. Let's fully assess the gaps in Canada's supply chain and the skills needed to lead the electric and autonomous vehicle transition—

The Chair :

Mr. Cassidy, I'm sorry.

Mr. David Cassidy :

Thank you for the invitation to speak.

The Chair :

Thank you. What I'll do when we're getting close to 30 seconds remaining is lift up a paper, just to give you a cue. The next presentation is from Mr. Azzopardi. Thank you.

Mr. Jonathon Azzopardi (Director, International Affairs, Laval Tool & Mold Ltd., and past Chairman, Canadian Association of Mold Makers) :

Good morning, Madam Chair and committee members. Thank you for the opportunity to appear before you. My name is Jonathon Azzopardi, past chair of the Canadian Association of Mold Makers. I am the current director of international affairs for the association and president of Laval, a mold and part manufacturer in Windsor, Ontario. Our association is 100 members. There are 216 mold manufacturers in Canada, as well as 14,000 skilled workers, over 230 associate members and over 1,400 companies just in southwestern Ontario alone in manufacturing.

I have to start out by saying that I don't admire the position you're in. A committee that is asked to push through ratification that's already negotiated, but that's trying to put the structure together to be able to create a net to be able to capture those opportunities, does not have an easy task, but it is necessary. We're here to support the ratification of Bill C-4 , or CUSMA. To be a manufacturer in Canada is not easy, but it is a privilege. It comes not without its many challenges.

I won't take my time to mention all those challenges, but I will say that if you make things or grow things in Canada, exporting is critical. I will take the 10 minutes—or the five minutes—to show you the ways in which this agreement can help us and create leverage or a springboard. I believe it is important that we start with a timetable. In 2015 Donald Trump, at the time the president-elect, announced that he was going to renegotiate NAFTA. I have to admit that when you fast-forward to 2016, when the president-elect became President, it sent a shock wave through our industry.

That shock wave, through its uncertainty, real or unreal, caused a lot of disheartenment among workers and companies. At the time, our industry was under a great amount of pressure because it wasn't a fair trading relationship. Made in America was causing enough problems, not to mention the fact that 85% of our exports going to the United States were already under pressure from low-cost countries like China that do what we do at a fraction of our costs. We have the blessing that this agreement was negotiated quickly.

I believe our U.S. trading partner made sure that the rules were in their favour, but dragging out ratification can only hurt us more. We only lose more opportunities every day. Why is ratification important? It will dispel the uncertainty. You have to understand that we've been in this uncertainty since 2015, which is nearly five years, losing opportunities every day. You also have to understand that because of our cycles and our agreements with our clients, we won't see all of the bad news until five years after ratification. The second reason I want to talk to you today concerns future investments.

Future investments in Canada, because of this agreement, will fall very heavily on tiers one, two and three. It's very important that you understand that the further down the supply chain in the auto sector, the less likely you have to be in the United States. By moving this agreement forward, all assembly factories—over $20 billion in investments in the United States since 2016—will now become our new clients. That's if this ratification happens quickly. The next point is that I represent the mold-making industry, which is typically a tier-two industry. This is very important.

We must mirror our trading policies with our largest trading partner. For example, in December of 2019, a 25% tariff was imposed on molds coming into the United States from China. This is an example of where, if Canada is not adopting mirroring policies, we will become a dumping zone for Chinese products. It's important that, in stage two, upon ratification, Canada adopt mirroring policies for U.S. steel, aluminum and molds. Without doing this, without adopting these policies, you will begin to erode our manufacturing sector from the inside out.

The last point I'd like to make concerns our vulnerability regarding CPTPP. Without the new CUSMA agreement, I agree with David, this agreement is a disaster waiting to happen in Canada. CPTPP has no apparent value for Canadian manufacturers without CUSMA. It will not help us but actually hurt us, because we'll become a dumping ground for companies wanting to gain access to the U.S. If Canada does not adopt strong RVC policies, it will be an opportunity missed. We'll actually lose ground.

Canada needs to ratify CUSMA as soon as possible, and create protective measures to protect against this dumping by mirroring U.S. protective measures within our own country so that we can take advantage of this agreement fully. One way to protect this is to expand the list of products and strengthen the methods of calculating RVC. Mirror trading policies with the U.S. and get this agreement in place as soon as possible. I'd be happy to answer all your questions and also to play an active role in helping you move this forward. Thank you.

(0825) The Chair :

Thank you very much. We'll begin our round of questions with Ms. Gray. You have six minutes.

Mrs. Tracy Gray (Kelowna—Lake Country, CPC) :

Thank you, Madam Chair. Thank you for being here. I have a question for you, Mr. Poirier. Your organization had a press release on December 10, 2019. In that press release, you stated that you were looking for a better understanding of “the potential impacts of concessions” on our aluminum industries. Would you say that your concerns have been addressed since that time? What can the federal government do to better address those concerns?

Mr. Matthew Poirier :

At the time of that release, I think everyone was wondering what was going on because there weren't a lot of details out in the media. Now, with the new exigencies put forward in NAFTA for steel and aluminum content in auto, that's certainly a win for the industry and, hopefully, will bring back investment into Canada for those industries.

The Chair :

Do you want to share your time? You have five minutes remaining.

Mrs. Tracy Gray :

Yes, I'll share my time.

Hon. Michelle Rempel Garner (Calgary Nose Hill, CPC) :

Thank you. I'll direct my question to Mr. Poirier. I understand that there's a greater degree of benefit to Canada in this agreement. My concern is less with that and more with the lack of information in terms of long-term economic impact. We've seen reports recently, over a few days, especially from the C.D. Howe Institute and others, saying that perhaps this will have a long-term detrimental impact. I also saw a quote from Jared Kushner earlier this month, who was talking about the fact that the sunset clause, and basically the re-review clause, would allow for the United States to exert leverage.

Are you at all concerned that this particular provision perhaps is going to chase away long-term investment in Canada, given that six years is barely a blink of an eye in terms of investment, perhaps not in your industry but in industries where we're dealing with intangibles such as data or intellectual property?

(0830) Mr. Matthew Poirier :

I have a few thoughts on that. You're right. I think that having a review mechanism is good, but the six-year timeline is pretty short. In what we just got over with the negotiations, what we learned is that once we're renegotiating, there is all this uncertainty that hits the market, and where does the investment go? It goes to the safest harbour, which is typically the United States, not Canada.

That's a concern, but that said, this negotiation was a fight for dear life to try to maintain the basic access we had to that market and all the protections in NAFTA that we currently enjoy, so given that this was what we were up against, where we ended up is pretty good. That thought about the renewal and the uncertainty of every six years notwithstanding, where we could have ended up could have been really bad for the industry. We're pleased with what it is and, under that alone, we're very supportive of CUSMA.

Hon. Michelle Rempel Garner :

Would you characterize this less as a victory and more as a concession that allows us to continue the status quo-ish...?

Mr. Matthew Poirier :

What we maintained under the status quo is a victory for sure, but also, all the new chapters that we're doing, the modernization of the agreement, is stuff that was long overdue and that we got in this as well. I'm thinking particularly of the competitiveness chapter. That's something that's specific for manufacturing and that will let the three countries act as a trade bloc. That wasn't in there before, and that's something that has a lot of potential going forward. Yes, we maintained, but we got a lot of new good stuff as well.

Hon. Michelle Rempel Garner :

Sure. I'm sitting at the table, and we have very important sectors of the economy represented here today, but I'm also questioning what our economy will look like 10 years from now for intangibles. Your industries represent production of tangible goods. Is that right? Mr. Poirier, did your industry liaise with any associations, or did any of your member associations talk about the fact that intangibles—data, IP, etc.—might be under threat the way that this agreement has been negotiated, especially given the six-year renegotiation clause?

Mr. Matthew Poirier :

Certainly for manufacturing it's a win, this agreement. Other sectors have concerns and we share those as well, from just a general business perspective, but the way we look at it is where this could have gone. What stability it returns to the market is the good thing. Other than that, based on those merits alone....

We can always be concerned about the other issues that are plaguing investment in Canada in general, and we could sit down and have a long discussion about all of those, but as for what we have within our control, that is, this trade agreement and passing it to remove at least one level of uncertainty, we should do it. For everything else that we can't control beyond our borders in terms of economic challenges, let's park that. We can control this.

Hon. Michelle Rempel Garner :

Just to follow up on that, because I'm running out of time, do you think the six-year provision—

The Chair :

That's your time. Thank you. We'll now move to Mr. Ehsassi. You have six minutes.

Mr. Ali Ehsassi (Willowdale, Lib.) :

Thank you, Madam Chair. My first question is for you, Mr. Herman. First of all, thank you very much for appearing before our committee. You come at this with a wealth of experience, so we're very grateful that you made yourself available. Mr. Herman, on several occasions you emphasized that this deal is concluded, signed and ratified. You said that the deal is done, that it's essentially a fait accompli . For the sake of my colleagues, would you explain to us what would happen if any amendments were proposed? Would we not risk losing all those hard-fought advantages that we gained during the negotiations?

(0835) Mr. Lawrence Herman :

First of all, Mr. Ehsassi, in response to your questions, before you entered politics you were in the trade law field. You and I know one another from days gone by, when we were both practising international trade, so you have an expertise as well. Let me say this. The bill that you are examining, particularly the clauses that you're looking at, are in line with the negotiated agreement. Parliament can look at implementing legislation and can tweak or make modest changes where necessary to adjust the legislation so that it complies with the negotiated agreement.

Were Parliament to make changes to the bill that were inconsistent with the negotiated agreement, Canada would not be in a position to ratify. Canada can only ratify an international treaty—which this is—when it is in a position to fully comply with the provisions of that treaty. If changes were made to the bill that were inconsistent with what Canada has concluded, signed and not yet ratified, the Government of Canada could not ratify. If the bill were rejected, Canada could not ratify.

The committee has to consider the implications of the non-ratification of an agreement that was painstakingly negotiated under very difficult circumstances, that has been approved by the U.S. Congress through all of those machinations that you all know about, and that has been signed and ratified by the President of the United States. It would be unprecedented in Canadian history, unprecedented—I have to emphasize that—for a trade agreement to be refused by this committee or by the House of Commons or by Parliament in general. It has never happened.

It would be an astonishing result, and it would negate, in my view, not only our trade and economic relations with the United States but long-term political relations with that country. Also, it would put in doubt the future of the NAFTA, because without this trade agreement we'd be relying on the NAFTA, and whether the NAFTA would survive if Canada did not ratify this agreement is doubtful. Those are my views.

Mr. Ali Ehsassi :

Thank you. I have another question. In the event that we were not to ratify this, am I correct in assuming that the United States and Mexico could proceed without us?

Mr. Lawrence Herman :

Yes, they could and I believe they would. It is in the interest of the United States to conclude a deal with Mexico because of the provisions that Mr. Cassidy outlined in terms of increasing U.S. content in auto production and disciplining the Mexican side in terms of auto production. The U.S. and Mexico could, and I believe they would, leaving Canada very much out in the cold and putting the future of our trading and political relationships at great risk. There should be no doubt about that, Mr. Ehsassi.

Mr. Ali Ehsassi :

I'll now turn to you, Mr. Poirier. At one point during your testimony, you emphasized that you were “part of the process”. Were you satisfied with the consultations that were taking place between the government and your organization during the year that we were negotiating or renegotiating CUSMA?

Mr. Matthew Poirier :

Yes. We deserve to have a seat at the table when we're talking about manufacturing and trade, just by the sheer number of jobs the industry represents, but I think so. We were cognizant of the fact that the government had to simplify the task and go and negotiate the deal. At that point, only a few people could do it, but in the process leading up to that, we felt we were adequately consulted, certainly, and part of the process. I know that a great number of other groups, not just business stakeholders but also from society, felt that they were more included in this agreement.

(0840) Mr. Ali Ehsassi :

Thank you. Mr. Cassidy, you also indicated that Unifor poured a lot of resources into these renegotiations. Were you satisfied with the consultations?

Mr. David Cassidy :

Yes. We were part of the discussions. Unifor welcomed, obviously, NAFTA's renegotiation. There was a myth perpetuated in the business world that NAFTA was too delicate to touch, and that's why it was very important to us, but it was bologna, to tell you the truth, that NAFTA was too delicate to touch. We had an opportunity at the time. We were very happy that we were there and were part of the solution in terms of where we are today.

The Chair :

Thank you very much. [ Translation ] Mr. Lemire, go ahead.

Mr. Sébastien Lemire (Abitibi—Témiscamingue, BQ) :

Thank you, Madam Chair. My first question is for Mr. Herman. Mr. Herman, you talked about the importance of quickly ratifying this agreement, but what is done quickly sometimes leaves traces that can disadvantage some parties in that agreement. What are your thoughts on that? Second, is it possible to protect the aluminum industry by harmonizing Canadian legislation? How do you think we could do that?

Mr. Lawrence Herman :

Concerning aluminum, there is a certain level of protection in this agreement that is very important for the aluminum sector. Regarding molten and cast aluminum, we have reached an agreement with the Americans that will make it possible to revisit this issue within a few years. I'm sure you are aware of that, Mr. Lemire. In that case, I think the aluminum sector is well protected, but we will have an opportunity to reopen the issue of molten and cast metal within a few years. This is a very important outcome for the aluminum sector, especially in Quebec.

Mr. Sébastien Lemire :

I would like to put my next question to Mr. Azzopardi on this issue. As you are involved in manufacturing, can you compare the repercussions this agreement will have on the steel industry with those it will have on the aluminum industry? In terms of production and supply, what would you say are the constraints imposed by this free trade agreement?

[ English ]

Mr. Jonathon Azzopardi :

With regard to the effects on production and supply in this agreement, as long as they go into finished goods, I believe it will help. When we're using Canadian or U.S. aluminum or steel for finished goods, I believe the agreement has lots of opportunities. From a raw product standpoint, I believe the agreement has good provisions, but I don't necessarily think the government at this time can uphold those provisions when it comes to RVC. We have a concern that steel and aluminum dumping will still continue as long as Canada does not adopt stronger measures to protect against that dumping from low-cost countries.

There are examples already of where Canada as a country is receiving those products and RVC isn't necessarily being calculated correctly. We believe this is an area that should see some focus after the agreement is in place.

[ Translation ]

Mr. Sébastien Lemire :

In terms of manufacturing, my understanding is that there is a difference between the origin of aluminum and the origin of parts. In the free trade agreement, the famous percentage of 70% is often brought up. When it comes to aluminum, for you, 70% of aluminum is different from 70% of parts, isn't it? Are you able to recognize this?

[ English ]

Mr. Jonathon Azzopardi :

We recognize that, and very much so. The raw product itself has one classification, but it changes classifications once it becomes a fabricated product. The way in which you calculate the regional value content is very important. It's very easy for a manufacturer, let's say from a low-cost country, to establish themselves in Canada, make minor adjustments to that product and call it Canadian origin.

We're suggesting that Canada adopt a longer and more detailed list of products, use a more defined way to calculate regional value content, and then put in a stronger methodology for manufacturers to use in order to strengthen the ability to stop countries such as China from dropping in product, simply making small adjustments and changing the value. This is an area that we would actively participate in, from this point forward, to help the government with those products on an individual basis. It is definitely an area that we're seriously concerned about.

In the past, this has been taken advantage of by low-cost countries.

(0845) [ Translation ]

Mr. Sébastien Lemire :

Thank you, Mr. Azzopardi. Mr. Poirier, first off, do you speak French?

Mr. Matthew Poirier :

Yes.

Mr. Sébastien Lemire :

The issue of the Buy American Act is often part of your battles. As Canadians, wouldn't we have benefited from using the same protectionist strategy for certain aspects of the negotiations?

[ English ]

Mr. Matthew Poirier :

The buy America provisions are a big issue for the manufacturing industry, simply because it creates this bizarre situation in which, if one side implements buy America and you don't retaliate in kind, it creates the incentive for businesses to locate in the jurisdiction where it can have access to both markets and not the other way around. We have always been a strong proponent for free trade, for free and open markets, but if one side's not playing fair, it's incumbent upon us to respond in kind.

Certainly, we would have loved to see more access to the government procurement market and to start to crack down those buy America and buy American provisions. We understand that it was a difficult negotiation. However, the government and all parliamentarians should be working on increasing that access, because that government procurement market is huge in terms of being able to increase the growth of Canadian manufacturing, if we can tap into it.

[ Translation ]

Mr. Sébastien Lemire :

Thank you, Mr. Poirier. I may have enough time to ask a second question quickly. Mr. Cassidy, I know that the Unifor union also handles the forest industry. I know your presentation was not about that, but do you feel that this agreement will address the timber crisis?

[ English ]

The Chair :

Be very quick.

Mr. David Cassidy :

I'd have to defer that question. I'm not well enough versed in softwood lumber. Auto is my baby.

[ Translation ]

Mr. Sébastien Lemire :

Okay. I tried my luck, as I am interested in this. Thank you, Mr. Cassidy.

[ English ]

The Chair :

Thank you very much. The next round of questions will go to Mr. Masse.

Mr. Brian Masse (Windsor West, NDP) :

Thank you, Madam Chair, and thanks to our guests for being here. Quickly, this is for Mr. Azzopardi and Mr. Cassidy. There have been a lot of auto investments in the last 20 years, just not in Canada. Detroit is up to $16 billion with the recent investments in the last five years. In Ontario it was $6 billion for the last five years. I just want to give a chance for you to highlight some things. I know, Mr. Azzopardi, you mentioned a couple of things, but what more can be done?

I'm fearful that the impression is that if we just sign this agreement, there will be labour and environmental improvements that will allow our workers to compete more fairly than before. However, if we just leave that for this agreement, I'm concerned about our future. Perhaps you could outline a couple of things that we might need to do. Speaking of reciprocity, Mr. Cassidy, you might want to raise the issue with regard to Michigan and the United States' single-events sports betting whereby thousands of jobs are at risk as well, because we won't have reciprocity with the products that they have over there. Mr.

Azzopardi, could you answer first, please?

Mr. Jonathon Azzopardi :

For a long time I've tried to answer that question from both sides: from the OEM and from the tier-one, tier-two and tier-three levels. Recently, I've changed my viewpoint. I think they actually have to be broken apart because they're two different strategies entirely. Tier ones, tier twos and tier threes need to adopt more advanced manufacturing, which means they need to compete. That will help to grow that sector. I believe this agreement will actually help us to be able to strengthen those relationships because of the supply-chain integration we already have.

Parts—and this is no joke—will cross that border seven times between the tier ones, tier twos and tier threes before they even get to an OEM. The investment you make in that lower tier is actually exponentially growing, because we have access to all the OEMs. I believe this is the area that Canada can grow the most. The effect of a dollar from the government dropping into these lower sectors is actually multiplied due to the fact that we have access to all of these investments in the United States. Investing in an OEM is good and shouldn't be abandoned—don't get me wrong—but they're only one brand.

I have access to 44 different brands. It's a huge opportunity in that lower sector, so the strategy needs to be different. We've been trying to attack the strategy in the same way for both, but they're actually different. We need to adopt more advanced manufacturing to make us more competitive. We need to adopt more manufacturing foreign trade policies so that we can take advantage of more markets using the U.S. as a springboard. That's how you grow manufacturing in Canada in those lower tiers. OEMs are actually a simpler but more complicated solution.

They're looking for at least good fair-market access, which means more trade agreements, but they're also very cost-sensitive and there are some more difficult questions, which I don't think this committee is prepared to answer, in order to be able to make those decisions. I believe that at some point adopting a manufacturing policy that includes all aspects—advanced manufacturing, energy, labour, trade—is the way to attract OEMs.

(0850) Mr. Brian Masse :

Thank you. Mr. Cassidy, that sounds to me like pushing a national auto strategy.

Mr. David Cassidy :

When the announcement came relative to General Motors and there we were with General Motors beefing up in Mexico at the same time, with the trade.... You know, when you go to the cheapest facility or place that you can.... Right across the ditch from us in Windsor, there are 5,000 jobs being added to FCA today. In my facility, the Windsor Assembly Plant, we're potentially losing 1,500 OEM jobs, which obviously would be devastating to Windsor and Essex County and to our auto parts and so on and so forth. As I said, with one auto job there are 10 jobs in the economy.

It's very important that we do the investing and continue to do it. With CUSMA, even if you look at the yellow unions in Mexico, it's an opportunity where you can bring up that skilled labour and bring up where that number is. That $16 an hour they talk about in the trade agreement is a little fictitious in terms of their going from $2.25 to $16 an hour. In fact, there will at least be provisions there so that they'll be able to check on it. The old NAFTA didn't have that opportunity.

It's so important that we get into the technology that can be done around autonomous vehicles and obviously the R and D and the batteries. Our facility builds the only Canadian-made minivan that there is as far as the hybrid goes. Here we are, with a Canadian-made hybrid vehicle, and we can't get batteries. We have to reach out and get batteries from China, if you can believe it. That's a problem. You mentioned one last thing, Brian, on the single sports betting, if I could just...?

Mr. Brian Masse :

Yes.

Mr. David Cassidy :

That has been around for a decade. For us, relative to jobs in Windsor and Essex, I represent the Caesars Windsor folks. There are 2,600 members there. Just in that facility, this will add 150 jobs, which is important. We're missing the boat again, because Michigan, New York and other states have already moved this forward. If we can get the single sports betting.... It's very important for all of us in Canada. Fingers crossed, I hope this government.... I know that we're not talking about this here today, but I had to make sure that I.... Thank you for lobbing that one out there and me hitting the ball out of the park. Thanks, Brian.

Mr. Brian Masse :

It actually is important because we are talking about equality and reciprocity. The United States is moving ahead with single sports betting while around $10 billion goes into the underground economy in Canada. That means thousands of jobs, not only in our district but across this country. It's tens of millions of dollars for provinces on a monthly basis right now. We're hoping to get that changed. Thank you, Madam Chair.

The Chair :

Thank you very much. That completes our first round of questions. We do have some time to move into the second round of questions, at five minutes each. To begin, we will have Mr. Dreeshen from the Conservative Party.

Mr. Earl Dreeshen (Red Deer—Mountain View, CPC) :

Thank you very much, Madam Chair. One of the things we're talking about, of course, when we're talking about Canada as a country, is that Quebec is really pushing the fact that it has the green aluminum and so on. Those are the concerns and issues that we've talked about. One of the things we've looked at is the Chinese aluminum being stockpiled in Mexico and the issue about what that is. I think that's been a really critical component of this. I believe, Mr. Azzopardi, that you were talking about whether it is molded and what percentage is coming in and in what area. I think that's really an important issue.

Also mentioned was the 25% U.S. tariff on China and the effects that had and how that pushed us into a situation where we all had to pay attention to what was taking place. I want to take it in a different direction for a moment. We produce a lot of coal in western Canada and the northwest U.S. It goes through the Port of Vancouver and then heads over to Asia, where it is being used to create steel, which then comes back and becomes part of this problem that we have. There's no carbon tax associated with that, although we see our problems as far as dumping is concerned.

I think that really becomes a critical aspect of this. How do we ever expect, then, that we are going to be competitive under those circumstances? We see some of the other things that are happening with some of the review provisions that we have. How can we be expecting that we are going to be able to have an easier time to get foreign direct investment coming here into Canada unless we're paying attention to all of those micro-issues I've just mentioned?

(0855) Mr. Jonathon Azzopardi :

I'm glad you brought that up, because we're seeing it as well. We've been seeing it for steel for many years. Aluminum is obviously becoming more popular, so we're seeing it more on aluminum. If this were a panel of Mexican government officials, I'd be saying exactly the same thing. Unless you start to pick up the protectionist measures that the United States is picking up, you will also be the weak link in North America. You have to be. You have no choice. Unless you want to let the erosion continue, you must take on the same policies as the U.S. It's so important. We see it on the ground level all the time.

China has the ability to move product inside Canada through investments. I'll be totally honest with you. Since the agreement has been under question, and then negotiated and ratified, we've actually had more investment opportunities in Canada. The problem now is that you need to filter out those opportunities. Are they going to benefit Canada, or are they going to hurt Canada? A lot of the opportunities are just so they have drop zones, and we're watching those very closely. Those should go away.

On the other hand, I've also had investments from other countries that want access to the United States through Canada. We obviously want more of those investments. The way we filter those out.... We can only do so much at the ground level, and we're trying, but the government has to give us the teeth, to arm us with the ability to stop those. It is critical. This is nothing new, I'll be honest with you. It's not new but it will continue, and actually this is where the provisions in the agreement can hurt us or help us. Right now they will help us if we can stop it from happening.

If we don't put those measures in, those RVC increases that Mr. David Cassidy talked about will start to play against us very quickly. Once they're in place, it will be very hard for us to change them. I actually have a grave concern that if this doesn't happen quickly, they will already be in place and then you'll be trying to push them out instead of stopping them from getting in.

Mr. Earl Dreeshen :

Thank you very much. Of course, that's one of the key parts, as I've mentioned before, about the Quebec green aluminum, because of the way in which they are able to use their electricity. Of course, if they tried to build a dam now, I think it would be a little trickier. That's my other concern as far as our oil and gas industry is concerned. We have sections of this country that talk about how great they are doing, but there are also some amazing things happening in our oil and gas industry.

Unfortunately, we don't seem to be able to move that forward, so my concern is that when you're talking about foreign direct investment, it's going to find its place, but I really believe that when you have the best technology in the world, that should be the one that is being used. Mr. Poirier, we have only a few seconds left. Could you perhaps comment on the aluminum portion I mentioned before?

Mr. Matthew Poirier :

Just in the sense of investment, we can control trade, and that would be good, but we have a lot of other problems to fix in terms of making Canada a competitive jurisdiction to do business in.

Mr. Earl Dreeshen :

Thank you.

The Chair :

Thank you very much. The next round of five-minute questions will go to Ms. Lambropoulos.

Ms. Emmanuella Lambropoulos (Saint-Laurent, Lib.) :

Thank you, Chair. I'd like first to thank all of the witnesses for being here on such short notice and for providing us with their testimony today. While I have questions for all of you, obviously due to time constraints, I'm going to stick to some of the most important ones. Mr. Azzopardi, you stressed the importance of ratifying this agreement as soon as possible and you stated there would be grave consequences, and that every single day we don't ratify this agreement, there are consequences. Can you speak a little more about this?

Mr. Jonathon Azzopardi :

Yes. What I'm trying to highlight there is that we're not the kind of manufacturer that has a purchase order agreement for something that we produce and then it leaves. We have five-year agreements, so if one of my members receives a purchase order from the United States, it's for five years. If somebody in the United States receives that same purchase order, it's also for five years, so that opportunity will not come back to a Canadian supplier or manufacturer for at least five more years. Every day that we wait, that five-year clock doesn't start counting.

We've already lost many opportunities over the last five years. Those are already gone. That's water under the bridge, but if we continue to lose these opportunities.... There are great opportunities that are happening in the automotive space alone with autonomous vehicles and electrification and the structure that supports those opportunities. If we're not in place now, we will have to wait five years before we get a shot at it again.

Ms. Emmanuella Lambropoulos :

Thank you very much. Mr. Cassidy, you spoke about how the NAFTA—

The Chair :

That is all the time we have today for our first panel, but we'll make sure that in the next panel we'll be able to get some more time there for you. I want to thank the witnesses again for their time here today. (0900) [ Translation ] Thank you so much for being here this morning and for your testimony. [ English ] With that I will suspend so that we can bring in the second panel of witnesses. Thank you so much. Merci.

(0900) (0905) The Chair :

We will begin the second panel of the Standing Committee on Industry, Science and Technology. The subject matter is to study clauses 22 to 38 and 108 to 122 of Bill C-4 . With us today we have Roger Boivin, president, Groupe Performance Stratégique. We also have Mr. Scott Smith from Honey Bee Manufacturing, and Mr. Mark Nantais from the Canadian Vehicle Manufacturers' Association. By video conference, we have Jennifer Mitchell, president of Red Brick Songs, for Casablanca Media Publishing. Welcome. Each witness will have five minutes to present, after which we will move into questions.

When you see the little paper move up, that means you have thirty seconds left to kindly wrap up your remarks. I will try to allow as much time as possible but our time is tight this morning. With that, we will begin with Mr. Roger Boivin for five minutes.

[ Translation ]

Mr. Roger Boivin (President, Groupe Performance Stratégique) :

Good morning, Madam Chair. Thank you for inviting us. Good morning, ladies and gentlemen members of the Canadian Parliament. Thank you for your interest in our aluminum industry. I am here to talk to you about it. I am from Saguenay—Lac-Saint-Jean and I am the president of an economic research firm. Saguenay has the largest concentration of aluminum plants in the world. In a 50-kilometre radius, we have five aluminum plants, and they produce more than 1 million of the 3 million tonnes of aluminum produced by Canada. Canada is third globally among aluminum producers.

In addition, our aluminum is the best, the cheapest, and it has the smallest carbon footprint in the world. We have a large corporation, Rio Tinto, Alcan's successor. In 2007, Rio Tinto purchased Alcan, which had projects in Saguenay—Lac-Saint-Jean, including project AP-60 and the one focusing on completing the construction of an aluminum plant in Alma. Rio Tinto, as a trustee, is continuing the work in terms of commitments to carry out those projects.

In July 2019, as the agreement with Alcan was to expire in 2020, Rio Tinto extended the agreement to 2025, giving itself until then to carry out those two projects. In fact, the corporation announced $300 million in investments related to those two projects—the one in Alma and the AP-60 plant. However, three months later, in October, in a dramatic turn of events, Rio Tinto told us that, in light of the new free trade agreement and the new provisions on aluminum, it would put those $300-million projects on hold. We are working on this, but we are not alone. Rio Tinto and engineers are also working on it.

These are large, high-quality projects that were developed over several years. Hundreds of millions of dollars have been invested in them to produce the best aluminum possible. However, owing to a CUSMA provision you are familiar with—the one on rules of origin, which means that aluminum is not treated the same as steel—we are losing our access to the U.S. market. There are aluminum plants in the city of Saguenay.

In the town of Alma, aluminum workers from Unifor and from the United Steelworkers, which represent plant workers, as well as Aluminium Valley Society, which represents the 4,000 individuals working in some 100 businesses involved in the broader aluminum industry, came together to fund a study to assess what would happen if CUSMA remained in its current form. The result is that it would put on hold the development of projects that could produce 850,000 tonnes of new aluminum that would be extremely beneficial in terms of greenhouse gas emissions.

The production of one tonne of Quebec or Canadian aluminum generates two tonnes of greenhouse gas, compared with 18 tonnes of greenhouse gas for each tonne of Chinese aluminum. Our aluminum production generates the lowest gas emissions in the world, as it is based on hydroelectricity in British Columbia and in Quebec. The projects I mentioned would produce 850,000 tonnes of aluminum and would generate $6.2 billion in investment in Quebec in previously announced projects.

An expansion project is planned at Aluminerie Alouette, which has invested $50 million in a prefeasibility study, but the study has been put on hold because of the new provision. The two projects that were already announced in Saguenay have been put on hold. The industry is very worried by that. The world is complex—I don't have to explain this to you, as you work on complex files—and this industry is capable of managing the complex world it is part of. However, this new provision creates complete uncertainty in terms of the entry of any aluminum into the world going through Mexico.

In fact, the current provision enables any aluminum to enter Mexico and to be considered as North American aluminum. We already have an industry that employs 80,000 people in Quebec, and the projects underway could generate $1 billion in additional spending per year, without taking into account the $6 billion for the construction. They would generate 3,000 new entry-level jobs at an annual salary of about $80,000 each. This is an extremely important industry. So here is the straw that will break the camel's back. The association president came here and told you that he supported the agreement reluctantly.

He was saying that, at least, there was an agreement. Afterwards, he told you about a dozen elements that were missing from the agreement. They are extremely worried and they are putting projects on hold. So it is in the national interest to resolve this issue and to close this door. Believe me, we are open to the world. We are a country that is involved in trade; that is clear. Our trade with the French, the British and the Americans has enriched us. We are for trade, but for fair trade. We are from North America, where there are companies. Let's take aluminum for example.

Alcoa, the oldest aluminum company in the world is a company. Rio Tinto is a company. However, in the rest of the world, aluminum is not produced by companies, but rather by governments with legitimate political interests. In Brazil, in India and in China, governments are using aluminum to create jobs, and they are dropping prices. They are dumping. We have affordable aluminum; they have political aluminum. If you let that aluminum in, there is no doubt that our industry will be unable to compete with a government like that of Dubai that will reduce prices.

(0910) That is why it is in the national interest to regulate the access of illegitimate aluminum to the North American market, as stated by the president of the Aluminum Association of Canada. We also support that proposal.

The Chair :

Thank you very much, Mr. Boivin. [ English ] We still have some technical difficulties at the moment, so we will now move to Mr. Smith. You have five minutes.

Mr. Scott D. Smith (Manager, Honey Bee Manufacturing Ltd.) :

Thank you. I prepared for 10 minutes, but I will do it in five. I'm Scott Smith. I have the privilege of representing the 160 employees of Honey Bee Manufacturing. I have with me Jamie Pegg, our general manager. We want to thank you for this opportunity to discuss these matters, specifically with regard to issues on the competition and copyright acts that are addressed by this committee. We have manufactured for over 30 years, since 1979, agricultural equipment that attaches to major brands of OEM equipment—John Deere, Case, New Holland, AGCO and so on. We export our products.

I would say that 40% of our output is consumed in Canada and 66% is for export, with 33% exported to the United States. We are exporting to about 26 different countries, but we face a challenge. The challenge we face is interoperability. Recently, with technical protection measures and so on, companies have started to use digital locks and keys to prevent us from allowing our equipment to interoperate with these major OEM brands. It's a form of protectionism that allows them to own and operate the entire value chain at the exclusion of independent manufacturers.

In Canada we have 1,400 manufacturers of implements that are attached to agriculture, mining, forestry or construction equipment. Of those manufacturers, 500 are for agricultural equipment. That agricultural equipment is primarily manufactured adjacent to small communities in Canada, rural communities, where the majority of that type of manufacturing takes place. It's a challenge for us to achieve the ability to continue to legally manufacture our product and sell it onto these platforms. The copyright act in the United States has provision for circumventing for the purpose of interoperation.

The Canadian Copyright Act does not have this same term in the agreement. We would like to see that ratified prior to the signing of the trade agreement so that we're not on that uneven footing that prevents us from competing legally in the marketplace here and abroad. The combines that we manufacture our equipment for are the same combines that are sold everywhere in the world. There's no variation. So a blockage here in Canada blocks us globally. That represents about $2.1 billion a year of exports on agricultural equipment from Canada, and about $1.9 billion of that is to the United States.

If we don't have the opportunity to interoperate with the American platforms, which are the global platforms in this instance, it has a very serious impact on our communities. We employ 160 people in a town of 300. Our employees come from an area with about a 100-kilometre radius to the east, west and north of us, with Montana on our back doorstep. Our employees come from all over the world, including from Syria, Germany, Venezuela and India, as well as locally. A lot of our employees are fourth- and fifth-generation farmers' children. This is something that we don't want to see die.

It would be devastating to our communities. At a minimum, we need to have a copyright clause that's the same as the U.S. clause that allows for the exception for interoperability adaptations. These types of adaptations are very expensive, and we would have to do it for every single platform. The preferred solution is, in the long term, a mandated legislation that ensures that equipment imported into Canada has open interoperability rather than custom reverse-engineering.

For example, on one product it cost us between $800,000 and $1 million to reverse-engineer and create a workaround solution, or to complete a parallel system, to allow our equipment to interoperate with the OEM equipment. The OEMs have not provided ease of access to this interoperability. The issue hasn't been a problem in the past. It has been straightforward, like plugging a keyboard into your computer, but as they go to these digital locks and keys, we're seeing already on several platforms that they have locked it down. We need to have their permission to do it.

When they do give us permission and they do provide provision for our equipment, then say we are restricted to only selling this product to this market for this customer and no one else. That's not acceptable, and that's what we're looking to deal with here today. You have our full comments in the papers we distributed, which you can review at a later date.

(0915) The Chair :

Thank you very much. We will now move to Monsieur Nantais for six minutes. Thank you.

Mr. Mark Nantais (President, Canadian Vehicle Manufacturers' Association) :

Thank you, Madam Chair. Good morning, honourable members. I'm very pleased to have received this invitation to be here today representing Fiat Chrysler, Ford, and General Motors of Canada. Our members operate four assembly plants, as well as engine and component plants. They invest billions of dollars in the development of zero-emission technologies and advanced vehicle safety technologies. We have about 1,300 plus independent dealerships right across Canada and we contribute to quality employment opportunities for over half a million Canadians.

Passage of the CUSMA is essential to provide certainty to the North American automotive manufacturers. The automotive provisions as well as the side letters that provide protection from U.S.

section 232 tariff actions are critical elements to support automotive manufacturing competitiveness within the North American trade bloc. It's important to remember that, for the auto sector in Canada, the alternative to reaching this agreement would be cancellation of NAFTA, reimposition of tariffs on finished vehicles and parts, and likely

section 232 tariffs on production material inputs. If we are anxious to see the final ratification, that is indeed why. Again, we want to thank the Canadian negotiating team for working so closely with us throughout the duration, and for ultimately ensuring that we maintain Canada's auto sector as an integrated part of the North American industry. This agreement was, simply, existential to Canada's largest manufacturing and export industry.

The agreement reinforces the long-established integration of the industry supply chain, which is absolutely necessary for its competitiveness, and the ongoing need for continued regulatory alignment of vehicle technical regulations with the U.S., which are integral to trade and the environment, while ensuring greater consumer product choice and affordability.

The auto portions of the new agreement, including the rules of origin and the labour value content provisions, and the 232 side letters are things all our members support and can adjust to over a reasonable period of time so we will be compliant, enabling us to continue to enjoy duty-free access to the largest and most beneficial automotive market in the world. As far back as 1965 with the Auto Pact, Canada's automotive industry and its supply chains have become deeply integrated with the United States, and, over time, with Mexico.

Vehicles are built seamlessly on both sides of the border, resulting in deep integration that has led to a more competitive Canadian auto industry, greater consumer choice at affordable prices, and a strong North American trade bloc. When the original NAFTA came into force in 1994, it provided a foundation for a strong, globally competitive trading bloc—you'll see I keep coming back to referring to it as a “trading bloc”, which is really critical.

The geographic proximity of the three NAFTA partners facilitates the multi-billion dollar parts sector, and just-in-time supply chains were critical to the vehicle assembly operations in North America. They also created inherent transportation and supply chain logistics cost advantages. Today the automotive industry represents the second-largest Canadian auto sector, with $54 billion in trade in 2019, which is about 92% of the total value, which was shipped to the United States. The United States is our number one automotive partner.

It's absolutely critical that a trade agreement be in place to provide the foundation for Canadian automotive production and exports. We must always keep in mind that Canada is, simply, one-tenth of a complex, fully integrated long-lead industry. Multi-billion dollar product plans and manufacturing investment plans generally begin over five years in advance of the start of production. Planners require regulatory certainty to make their decisions. They especially need for Canada to maintain fully harmonized safety, vehicle, GHG and criteria emissions standards with the United States.

This remains imperative if we are to continue to be part of this fully integrated long-lead, large investment industry. Put simply, we did not work this hard to modernize integrated-rules trade in North America to then take our eye off the ball and drift away with unique or different regulatory directions. Doing so could put us back to square one and leave us on the sidelines. Canada's officials must also maintain a high degree of engagement with counterparts in the U.S. and Mexico as we go forward.

We cannot relax our efforts to ensure that Canada is sufficiently competitive to win future manufacturing investments that anchor much of the Canadian auto supply chain. Canada must have competitive—or more than competitive, actually—costs of auto operation in Canada, including investment incentives, carbon costs, competitive labour agreements, taxes that keep pace with the U.S., competitive electricity prices, and a competitive regulatory burden environment. It's important to remember that the auto sector is going through one of the driest periods in its 100-year history.

We need to work closely with all levels of government. We fully respect this committee's need to hear Canadians and to ask questions.

(0920) For 36 years now, I've been appearing before various House committees. We certainly understand that and we encourage you in terms of your mandate to make this happen. We've worked with all parties over the last two years to discuss the very complex issues involved, and we appreciate your interest in open dialogue. I thank you again for this invitation, and I'd be pleased to answer any questions.

The Chair :

Thank you very much, Mr. Nantais. Now we will go to Jennifer Mitchell and Casey Chisick in Toronto by video conference. You have five minutes to present. Thank you.

Ms. Jennifer Mitchell (President, Red Brick Songs, Casablanca Media Publishing) :

Thank you very much, Madam Chair and honourable members, for this opportunity. I'm here today with Casey Chisick of Cassels, who is external legal counsel both to Music Publishers Canada and to my companies. I have had the pleasure of owning and running a Canadian-owned independent music publishing business for almost two decades. I'm here to talk to you about the need to fully implement copyright term extension in accordance with the Canada-U.S.-Mexico agreement immediately, completely and with no conditions.

In doing so, small and medium-sized businesses in the music publishing sector and our songwriting partners are able to continue innovating, growing and exporting songs to the world. Canadian music publishing is a $329-million industry, which grows every year because of innovative entrepreneurs who help create value from songs. In today's digital and globally connected age, songs, music and culture have no boundaries, allowing many Canadian songwriters to achieve international success because of the scale of opportunity outside our country.

The market in Canada is simply too small for songwriters and publishers to succeed only within our borders, so music publishers work hard and make investments to help songwriters expand and grow into international markets. In fact, two-thirds of music publishers' revenue now comes from foreign sources, which is a dramatic change from 2005, when only a quarter of their revenue was from these same foreign sources. The key to dealing with changes in technology has been our ability to expand globally.

Music publishers use their relationships in other countries, built over many years, to create opportunities for songwriters to succeed. Music publishing is about championing a songwriter and a song through the lifetime of the writer's career and the song's copyright. We take a long-term perspective, and we work a lot behind the scenes to create value. We are the songwriter's partner. We not only make financial investments in songwriters; we also invest time and leverage our relationships to help a songwriter's career evolve.

This means matching people such as songwriter Jeen O'Brien with partners in lucrative markets like Japan to co-write singles that are released by other artists or used in TV, movies, commercials or video games. It means arranging co-writing opportunities for Dan Davidson in London, England, and China and financing radio promotion. Those efforts led to a top 20 Canadian country radio hit. It means taking a risk to sign emerging songwriter Tom Probizanski, who moved to Toronto from Thunder Bay. We invested in him so he could go to Los Angeles and Denmark to co-write.

He released an EP under the name of “Zanski” and we paid for his blog and playlisting promotion so that he was featured in Clash Magazine, EARMILK and various Spotify playlists. We were able to take these risks and invest that money in Jeen, Dan and Tom only because we could rely on the income of several songs for which my companies hold the copyright.

These efforts were made possible by the value that we were able to create from songs such as Imagine by John Lennon; What a Wonderful World ; My Way ; Y.M.C.A. ; Start Me Up by the Rolling Stones; Skinnamarink by Sharon, Lois and Bram; and even the theme for The Simpsons . This brings us to today. I would like to thank the government for agreeing in CUSMA to extend the term of copyright in works by 20 years. It is critical, though, that this be implemented completely, immediately and with no conditions, rather than waiting the 30 months that is allowable under CUSMA.

Bill C-4 would extend the term of copyright for a few works: anonymous works, audiovisual works and so on. It would add an extra five years to the term of protection for performances and sound recordings, which was already extended in 2015, a welcome development to be sure. However, the bill would not finish the job. It would not extend the term of protection for musical compositions known as songs.

On behalf of Music Publishers Canada and the songwriters and composers I work with, I urge the committee members to amend Bill C-4 to align Canada with its global trading partners by extending the term of copyright protection for all musical, literary, dramatic and artistic works right now, instead of using the 30-month transition period. Why is this important? Many works will fall into the public domain in the next 30 months. That will affect creators' and publishers' ability to reinvest in the Canadian economy.

(0925) As I mentioned, many music publishing companies are small and medium-sized businesses that rely on steady income from hit songs to develop new talent. For a small business like mine—

The Chair :

Ms. Mitchell, unfortunately, that's all the time we have, but I'm sure that once we get into the round of questioning, you'll have an opportunity to add additional comments. I know you've circulated a document to the committee members, which we all have in front of us. With that, we will move to a six-minute period of questioning by each party, and we will start with Mr. Patzer. Thank you.

Mr. Jeremy Patzer (Cypress Hills—Grasslands, CPC) :

Thank you very much, Madam Chair. First of all, I just want to thank everybody for being able to make it here on very short notice to be part of the discussion we're having today. My first question I guess would be for you, Scott. First of all, I just want to say, again, thank you for bringing up the point that agricultural manufacturing is such a vital part of rural Canada. It has employment opportunities, and it's a mechanism for small towns to remain viable because it's such an important social fabric of our communities.

Scott, one thing you were talking about was the copyright laws we have in Canada and what they have in the United States. Could you elaborate on the difference between those particular laws and how they affect your industry?

Mr. Scott D. Smith :

The primary difference is that the U.S. copyright legislation has exemptions to prohibition, to circumvention. Circumvention of people's intellectual property or their copyrighted material is illegal generally, but when an exemption is provided for the purpose of interoperability, it's very viable and important. It was originally put into the act with respect to handicapped persons or people challenged with physical disabilities who require different keyboard input devices, and software had to be modified to allow these types of tools to be used.

In our case, it's not necessary that we have this ability, but it's being decided by the OEMs that this is a requirement because they're closing off the ecosystem for open development. Historically, our products for 30 years just have a couple of wires we hook up and go. The technology that they're adding doesn't change the functionality of the equipment. It's just creating a digital lock and key so they can choose to exclude equipment. If we adopt within Canada the copyright legislation exemption they have in the United States, it would give us the legal basis to make these adaptations without breaking the law.

That's not really ideal, as I said. It's a very expensive process to reverse-engineer and to develop parallel systems, but it's a starting point. It's the minimum that we would like to see, which is already established in the U.S. copyright legislation, that could be transported into the Canadian legislation without argument from the U.S., without bickering about this thing being added or whatever, in advance of signing the trade agreement. The trade agreement is very important to us, but without this, we're dead. We actually can't interoperate with other people's equipment.

(0930) Mr. Jeremy Patzer :

For sure. If the clause goes into the Canadian Copyright Act, will it completely solve the issue, or is it just kind of, as you mentioned, the starting point for it? If you want to elaborate further, beyond this particular exemption of the Copyright Act, what else needs to be done to further solve these problems?

Mr. Scott D. Smith :

This gives us a legal basis to do what we would need to do for reverse-engineering, but it's the most expensive path. For a single platform it costs between $800,000 and $1 million to develop a full technical system that duplicates everything that the tractor systems already do, to plug in, in parallel and switch one in or out, depending on if our product's attached or someone else's is. This is not viable. The farmer doesn't want this. You don't want to hack your keyboard to pieces to plug it into your laptop one wire by one wire, key by key. You just want to plug it in and have it work.

What's really required is some sort of mandate for open interoperability, and this impacts, as I said, construction, mining, forestry and agricultural equipment. They're all in the same boat. It's something about which, over the long term, we've been working with government over the last year through Global Affairs, ISED, Canadian Heritage, Agriculture Canada and the Competition Bureau, trying to get resolution to this matter through existing legislation and channels. Our case with the Competition Bureau was just closed last week for lack of legislation to support the actions that need to be taken.

Mr. Jeremy Patzer :

With a trade deal like this, this is something that definitely could and should have been further addressed. We had a golden opportunity I think to have this addressed in it, and it appears it wasn't.

Mr. Scott D. Smith :

It wasn't, and it should be.

Mr. Jeremy Patzer :

Do any of my colleagues have any questions they'd like to add?

Mr. Earl Dreeshen :

Thank you. Mr. Boivin, you talked about suspending $300 million worth of products or access to the American market. Unifor was here earlier, and there was no discussion from them about any concerns of theirs. That's where I'd like to start. When we see all of these products that have been taken off the table, one of the things I mentioned earlier in that regard was the stockpiling of aluminum in Mexico from whatever countries and the concerns we have about that. We also heard that Canada now has 70% protection in the agreement,

whereas we had zero protection before. Back in 1994 we had 100% because we were the ones supplying it. Could you make a quick comment on that?

[ Translation ]

Mr. Roger Boivin :

Yes. Historically, we of course had protected access. However, the aluminum industry in the rest of the world has developed a great deal these past few years. The fact that foreign countries could sell here remained possible. Economically speaking, Canada's aluminum industry has the lowest production costs in the world, among other things because of the self-generation in Kitimat, but also because of Rio Tinto, in Quebec, and of course the preferential tariffs Alcoa or Aluminerie Alouette benefit from. In terms of the economy, we can compete.

For completely legitimate reasons, in the Middle East, in India, in Brazil and in China, a major aluminum industry has developed. The president of the association talked about $35 billion for a single company. I also have documents to support that. Subsidies of $100 billion have been provided to all the Chinese companies. Those countries encourage aluminum development regionally. It is legitimate, but we cannot be on an equal footing.

The Chair :

Mr. Boivin that's all the time we have.

Mr. Roger Boivin :

You are right. I will conclude by saying that things have changed, and this forces us to get protection now.

[ English ]

The Chair :

We will now move to Ms. Lambropoulos. You have six minutes.

Ms. Emmanuella Lambropoulos :

Thank you. I'd like to thank all the witnesses for their testimony here today and for being here on such short notice. Ms. Mitchell, I know you were cut off and I'd like to give you an opportunity to finish what you were saying earlier. I'd also like to point out that, obviously, the cultural exception was put into this agreement, which I'm sure affects a lot of the creators you work with and represent. Can you speak a little to this as well in your comments? Can you finish what you were saying with regards to copyright as well.

I know you appreciate the fact that we've protected copyright for an additional 20 years, but you mentioned something about the transition. Can you continue on that front?

(0935) Ms. Jennifer Mitchell :

Sure. Just to quickly finish the points I was making, waiting the 30 months to implement the copyright term extension for all classes of intellectual property, particularly when it comes to songs and musical compositions, will create more confusion in the marketplace. My first point was that we were stifling innovation and creativity, export potential and growth for small businesses, but we also risked creating more confusion. Commercial users who license songs typically do so worldwide, which means they need to get a licence for the entire world.

Remaining out of step with all of our international trading partners will continue to complicate licensing for users rather than providing any kind of relief. We also risk introducing even more complexity by extending the copyright term for some classes of intellectual property and not others as Bill C-4 would do.

Mr. Casey Chisick (Legal Counsel, CMRRA-SODRAC Inc. (CSI)) :

The important thing to keep in mind is that this is an international issue at its very heart. We're talking about works by composers like Jimmy Hendrix, Janis Joplin, Duane Allman, the list goes on and on, falling into the public domain during that 30-month period that CUSMA allows for a transition.

To the point of a cultural exemption, it's tempting to say these composers aren't Canadians so it doesn't matter, but it does matter because it's income from compositions by composers around the world that gives Canadian publishers like Jennifer the revenue they need to reinvest in the songwriters and the songs she referred to in her initial testimony. It really is a critical issue.

It's baffling that the government would choose to wait another 30 months and allow hundreds or thousands more valuable compositions to fall in the public domain never to be recaptured by publishers who rely on that revenue for their investment in Canadian culture.

Ms. Emmanuella Lambropoulos :

[ Technical difficulty--Editor ] on the cultural exception, would any of you be willing to comment on maintaining that protection? This is not something that was in the original CUSMA agreement when they began negotiations. Can you speak to the importance of including it in there?

Mr. Casey Chisick :

I'm sorry. We didn't hear the beginning of your question.

Ms. Emmanuella Lambropoulos :

Does the cultural exception in the CUSMA agreement affect your industry? I believe it affects creators of Canadian content and all of the cultural industry.

Mr. Casey Chisick :

Yes, it does, and it affects creators and in a positive way. It's important to maintain the fidelity of the Canadian culture that has allowed the Canadian music industry, among others, to thrive for the last 50 years. Preserving that protection in CUSMA and in its implementation is, of course, key. It doesn't, unfortunately, address the issue that we're here to discuss today, which is the implementation of term extension for copyright.

Ms. Emmanuella Lambropoulos :

Thank you very much for your answers. How much time do I have left, Madam Chair?

The Chair :

You have one and a half minutes.

Ms. Emmanuella Lambropoulos :

My next question will be fore Honey Bee Manufacturing. I know you have proposed certain changes. Obviously, we heard from previous witnesses that if we make many changes, we would not be able to ratify the agreement, which obviously would have severe consequences for the Canadian economy and many businesses that do business with the United States. In general it would have a huge impact in terms of job losses and everything. Can you speak to why it's important that we do ratify this agreement regardless of the changes that need to be made? How would your company and your workers benefit from this agreement's being ratified?

Mr. Scott D. Smith :

We're in support of the trade agreement as it's presented in its various aspects. We manufacture all of our products from steel and aluminum, so all of the issues we have with the tariffs on them really hurt us over the last couple of years. The other issue is with exporting our agricultural output besides our own products, but in general, we've seen the value and importance of a trade agreement. Our urgency on our aspect of it with the copyright legislation is about having to have this exemption included. If it's not, this trade agreement doesn't matter at all to us in our communities.

(0940) Ms. Emmanuella Lambropoulos :

Thank you.

[ Translation ]

The Chair :

We will begin the next round of questions with Sébastien Lemire.

Mr. Sébastien Lemire :

Thank you, Madam Chair. Thank you for joining us, Mr. Boivin. My first question is for you. You talked about a study that mentions the consequences of putting on hold projects valued at $6.2 billion. Consequently, that translates to a disaster for the Saguenay—Lac-Saint-Jean region and the North Shore. Right? I ask that you give short answers, as I have a number of questions.

Mr. Roger Boivin :

Of course, but we mustn't forget that the aluminum industry's production is done on the North Shore, in Saguenay—Lac-Saint-Jean, in Donnacona, in the Bécancour region, as well as in Kitimat, but the processing—in other words, the smelting—is done everywhere. There are thousands of suppliers in Ontario and in Quebec. This industry is of national importance.

Mr. Sébastien Lemire :

The impact on SMEs is significant. Quite a political game surrounds the signature, and one of the things discussed is compensation for the industry. Of course, the industry is satisfied in that respect. Are you worried that the money could simply be taken and then invested in Mexico to build plants to enable Chinese dumping?

Mr. Roger Boivin :

That is another good observation, Mr. Lemire. Indeed, the $1.3 billion in compensation has not been paid by the primary steel producers. It was not Algoma, Stelco or Rio Tinto who paid. SMEs in the processing sector have taken on the burden and invested $1.3 billion in steel and aluminum. It would be indecent at the very least if the $1.3 billion, if it were spent again, were to come back to the aluminum giants, which have their own problems. As a government, you must absolutely ensure that the $1.3 billion would come back to the SMEs who paid it. Otherwise, the wrong individual would be compensated. It would be an aberration.

Mr. Sébastien Lemire :

So it is recognized that the situation is currently creating a tremendous amount of uncertainty. As a result, how can we develop an industry like that of aluminum in the context of that uncertainty if no changes were made and the agreement was ratified as is?

Mr. Roger Boivin :

The industry will adopt a defensive position. We will end up with a second or third-rate industry. It will not die, but it will decline. It will become an industry that is no longer competitive. We have an industry in offensive position that has invested a lot in the development of great projects. This door must absolutely be closed, but not for legitimate aluminum production. We can compete with another country that sells aluminum at a legitimate price, but not with those that receive subsidies for aluminum production. This door that is opening toward Mexico is the straw that is breaking the camel's back.

That is why the industry is going to get back to us in 10 years. There will no longer be any major investments over the next 10 years, aside from investments related to productivity to remain in defensive position. Canada and Quebec need this industry. It is Quebec's second largest industry. It is a very big industry. It is in offensive position, I repeat, and it is developing strategies that perform very well on a global scale.

Mr. Sébastien Lemire :

It is an important industry in Quebec and in Canada.

Mr. Roger Boivin :

Yes.

Mr. Sébastien Lemire :

It is worth mentioning. So there will be an opportunity to review in 10 years. Are there any immediate measures to be taken to try to salvage the free trade agreement?

Mr. Roger Boivin :

Of course. They would involve the monitoring of dumping. The Mexicans are reticent when it comes to that, and we understand them, as it is not in their interest. The authorities must monitor any aluminum dumping and the entry of illegitimate aluminum—that which is not produced in North America. Traceability is required for that. That is what the aluminum industry representatives have asked for in their seven or eight points. They emphasized that. Along with the Americans and the Mexicans, we must monitor dumping and aluminum origin very closely.

On the other hand, as they said, and as the Conservatives and Bloc Québécois members are saying, the amazing value of our aluminum is its low carbon content. Our wood also has a low carbon content. We have to put forward more and more indirect measures in what I could refer to as our “Buy Canada Act”. I don't know what else to call it, but we need something that would enable the government, in its calls for tenders, as was saying the president of the Aluminum Association of Canada, to take into account the low carbon content of our aluminum and to promote that.

We are currently selling our aluminum at the same price as the aluminum whose production, for each tonne, generates 18 tonnes of greenhouse gas. That's because there is no value attributed to that advantage of our aluminum. Therefore, measures must be implemented. However, we do have brains. Let's think of the Department of Industry representatives. We are capable of developing quality measures that benefit not only Quebec and Canada, but the entire world. This industry produces less greenhouse gas emissions than any other. That is what everyone wants.

We cannot let in aluminum whose production has generated, for each tonne, 18 tonnes of greenhouse gas. We will destroy the huge efforts people everywhere are making. It is costly for us to reduce our carbon footprint. It is hard for me to believe that we will let our industry perish like this. I know that none of you want that, but we must absolutely all work together to find solutions, so that the industry can continue to produce this aluminum at a fair cost. What we are asking for is fairness. So there are direct measures to be taken.

(0945) Mr. Sébastien Lemire :

I have one last question for you. The industry's reaction was quite different from that of workers in your region, Saguenay—Lac-Saint-Jean. What interests exactly do you think the industry is trying to protect?

Mr. Roger Boivin :

You'd have to ask the industry people, but I'll try to answer. It may be that the situation puts the industry in an awkward position. Rio Tinto Alcan's largest shareholder is Aluminum Corporation of China, which has made two hostile takeover bids for the company in the past. The Australian government blocked the bids, but 15% of Rio Tinto still belongs to Aluminum Corporation of China. As you know, Australia is the Canada of China. It supplies raw material to China. We think we have a complicated neighbour, but so does Australia. There is no doubt that the industry is a bit uncomfortable with the whole thing. Rio Tinto is very closely linked to Chinese aluminum.

Mr. Sébastien Lemire :

Thank you, Mr. Boivin. My last question is for Mr. Nantais. Mr. Nantais, you talked a lot about the importance of signing the new agreement, but do you really think it's a big improvement over NAFTA?

[ English ]

Mr. Mark Nantais :

Thank you very much for your question. The progress lies in the fact that we've been able to preserve a three-country approach in the agreement. Without that, we will not be competitive as a bloc. Our supply chains won't be competitive if we don't have that, so, as I mentioned in my remarks, it's the consequences of not doing this that one really needs to be concerned about. For our industry we need to have this in place. We need it for our competitiveness. We need it to keep the anchor assembly plants here in Canada and across North America.

Without it, there will be no supply chain as well, so whether it's aluminum, steel or many of our parts makers, the agreement is really critical. But I will say this—

The Chair :

Mr. Nantais, unfortunately, that's your time. Perhaps in the next round they'll ask you that same question.

Mr. Mark Nantais :

Okay.

The Chair :

The next round of questions is for Mr. Masse.

Mr. Brian Masse :

Mr. Nantais, you can finish, and it was no pun intended when you said the bloc?

Mr. Mark Nantais :

Not at the trade caucus.

Voices: Oh, oh!

Mr. Mark Nantais: I will say that the trade agreement, despite it indeed providing opportunities for suppliers and so forth over time, does not offer a guarantee. If we were to lose our anchor plants in Canada or across the U.S., or even in Mexico, the supply chain would be greatly negatively affected by that. This is what I was going to say.

Mr. Brian Masse :

When the original deal was done, it got hung up in Congress when changes were requested. I'm vice-chair of the Canada-U.S. parliamentary association. We were often in Washington during the throes of that. There have been amendments made to the labour and the environmental

section that got the deal through. Does your trade association support that? It appears there is more consistency now on some issues that are creating complications for competition for Canadian workers. We heard a little from the labour side. Are those improvements supported by the Canadian Vehicle Manufacturers' Association?

Mr. Mark Nantais :

If you're speaking specifically about the labour value content aspects provisions—

Mr. Brian Masse :

Yes.

Mr. Mark Nantais :

—yes, we are supportive of them as part of the overall package.

Mr. Brian Masse :

With that, though, you also noted several things and challenges that we face as a country. I'm concerned that the impression is that if we sign this agreement, if we do nothing else and we stop here.... What are your thoughts about auto manufacturing in Canada if we just sign the agreement and continue on without dealing with other issues? Where do you think we'll end up?

Mr. Mark Nantais :

I have very strong thoughts about this. We operate in a high-cost jurisdiction, so whilst we have the agreement in place, one needs to think about the overall backdrop here of the high operational costs in this country. If we do not address those and do not continue to show an effort to address those and actually make progress, then it will come to a point in time when people will look at Canada versus other jurisdictions and ask, how can we be relatively profitable here?

I use the word “relatively” here because we can be profitable now, but it's really a question for future investment as to whether you can be more profitable in other jurisdictions. You're always competing with other jurisdictions, and if we don't address local operational costs or other issues here, then we'll be no better off. One needs to look at this whole thing in a very holistic manner on a continuing basis.

Mr. Brian Masse :

About five years ago, Ray Tanguay was commissioned by the federal government to produce an auto report. He tabled that with the minister in Detroit, Michigan. You mentioned in your remarks that you've been appearing in front of committees for 36 years. Do you think that enough of that report has been acted on, or are there still elements of it that could be advanced for the auto industry and Canadian manufacturing? Is the report too stale now, or are there still some chances in that report?

(0950) Mr. Mark Nantais :

The “Call to Action 2” report has been updated. The “Drive to Win” report replaces it. The report outlines many different things that continue to be necessary. I would suggest that we've probably made very little progress on many of those recommendations. As recently as a couple of weeks back, or 10 days ago, the Canadian Automotive Partnership Council met and re-emphasized the fact that those recommendations need to be pursued and implemented by government.

That includes regulatory co-operation and continuing to align our technical standards with those of the United States, in addition to labour, skills and all of those other things that are in that report. It's an evergreen report and those recommendations are supported by the entire industry, whether it's industry, labour, or government—and when I say “government”, I'm talking about the federal government, the Ontario government and the Quebec government.

Mr. Brian Masse :

Investments are happening. I see them across the river almost every month with regard to Detroit, which show that we actually do have a competitive workforce because much of that workforce is connected to my city of Windsor. It's about having fair conditions. How much time do we have?

The Chair :

A minute and 40 seconds.

Mr. Brian Masse :

Okay, good. Mr. Boivin, you mentioned the $1.3 billion, and the tariff with regard to that. Are there things that you can suggest with that tariff? If we don't refund that tariff or use it, it's just another tax. In fact, it's become an albatross around the neck of my local steel manufacturers and the tool and die makers, and others. What I found is that many businesses gave up on bidding on some contracts that they were actually.... The profit margin was used up for borrowing for money owed from different suppliers because it took too long to get it back. Is that the same experience you're facing?

Mr. Roger Boivin :

Yes, in the aluminum industry it's the same thing.

Mr. Brian Masse :

They've just given up on some, even...because the 3% to 4% in profit is tied up because some of the smaller ones are having a hard time borrowing money to carry over the cost of it.

Mr. Roger Boivin :

Exactly.

Mr. Brian Masse :

Okay.

Mr. Roger Boivin :

I'll switch languages. [ Translation ] It's really important to put that money back in the industry's hands, perhaps through a mechanism that brings together industry associations, to improve the competitiveness of the steel and aluminum processing sector, in accordance with Canadian rules. We play fair. We won't make money improperly. We have the ability to be successful. However, we have to have clear and fair rules, which set the stage for success. That's how we built our country. We can do it.

[ English ]

Mr. Brian Masse :

Thank you. We can control that, too. That's what's frustrating about it.

The Chair :

Thank you very much. Now we will move into the second round of questions at five minutes. The first round goes to Ms. Gray.

Mrs. Tracy Gray :

Thank you, Madam Chair. This question would be for Ms. Mitchell. We're looking at what's in CUSMA with respect to extending the copyright terms to 70 years after an artist has passed. You have to question how this really allows for innovation and creativity within the industry. I would like to refer to the very comprehensive statutory review of the Copyright Act this committee conducted in the last Parliament. It was very comprehensive, with 52 meetings and hundreds of witnesses, briefs and emails.

Once you look through all of that communication, there does not appear to be an overall consensus or an agreement among the artists and people within the industry on how to move forward. I'm wondering if you can comment. I'll give you one quote from a well-known author and composer, Bryan Adams. He commented that extending the terms of the copyright “essentially enriches large firms of intermediaries, without providing money to creators”. Could you comment on that point and on how this would help, overall, the actual creators themselves?

Ms. Jennifer Mitchell :

I think the issue that Bryan raised is separate from the actual extension of the copyright term. To speak to Bryan's issue for a second, the majority of agreements these days, in 2020, negotiated between publishers and songwriters are fair agreements. They're more similar to partnerships. The songwriter and the publisher both share in the publishing and act together as partners. Our interests are very aligned. I really do believe that the paradigm Bryan was describing is an old paradigm that doesn't exist anymore. When I speak to my songwriters about these issues, we are always simpatico. We are always aligned.

On the issue of innovation, which you first mentioned, the money we get from having songs that are steady hits, songs that are going to fall into the copyright domain, is what we use to take risks on new songwriters. When I sign a new songwriter to a copyright, to a publishing deal, and we decide to split the copyright together, I am then investing that money to send them on co-writing trips to other places in the world in the hope that they're going to get those songs recorded by international artists.

I am spending money on their own artistry, on radio promotion and on their having the time to write and create in the first place. They're huge risks. They're big gambles. If I don't have profit from a reliable source of income, I won't be able to make those investments. I won't be able to invest in Canadians. We'll have less Canadian content, and I think that goes to the heart of creativity and innovation.

(0955) Mr. Casey Chisick :

Ultimately, all of those revenue streams generate revenue both for the publisher or the record label, on one hand, and for the songwriter or the recording artist on the other. As Jennifer said, they really are partnerships. It's simply a mischaracterization of the issue for people like Bryan and others to assume that all of the benefit of the term extension is going to companies and not to artists. It just isn't true, and it's a gross distortion of reality.

Mrs. Tracy Gray :

Thank you. I want to ask you about the concept of registration requirement, because I know that was brought up. A number of people in the field felt that having the copyright extension, where people could apply for the other 20 years rather than its being automatic, would allow for a lot more flexibility in how people manage things. I'm wondering if you can comment on the concept of registration requirement.

Ms. Jennifer Mitchell :

I am glad you brought this up. It was in my speech, but I just didn't get around to it. I know there was a lot of discussion about that, but I strongly disagree with a mandatory registration regime. For one thing, our copyright registration regime was designed to deal with an existing system, which is voluntary registration. It's really not equipped to handle the administration of a mandatory registration regime. Putting that aside, registration just isn't necessary. Right now publishers and songwriters register their songs with SOCAN and CMRRA, which cover 99.9% of the market, and that system works very well.

Commercial users who license songs know how to find copyright owners within the existing system, so they properly clear the use of music. Introducing a second registration system that is operated by the government is going to require a significant amount of time, resources and money, and I'm not sure—

The Chair :

Ms. Mitchell, unfortunately, that's the time we have for this round. I'm sorry. We'll now move to Mr. Ehsassi.

Mr. Ali Ehsassi :

Thank you, Madam Chair. I know I have only two minutes left, and so I'd like to go to Mr. Nantais. You have spoken at length about how integrated the auto sector is. As you know, one of the new features of this NAFTA is

chapter 26, which has to do with North American competitiveness. It talks at length about regional economic growth. Is

chapter 26 something that would be of great utility to the auto sector, or would it have no application to the future prosperity of the sector?

Mr. Mark Nantais :

I wouldn't say that it has no application, but the fact of the matter is that we've been deeply integrated since the Auto Pact. We can't go back. We're moving forward on that basis. When you look at the multinationals at the table in North America, they also have plants around the world and so forth, but it's really important that we remain competitive here to support our supply base. That's what's really important for the future—the certainty around that. As I said earlier, it may not offer guarantees for suppliers. If you lose an assembly plant, for instance, generally parts manufacturers gravitate to that assembly plant, and if it's not here, then they'll go elsewhere.

(1000) Mr. Ali Ehsassi :

Thank you very much.

The Chair :

That's all the time we have for this panel. [ Translation ] Thank you very much for being here today and sharing your views. [ English ] With that, we will suspend so that we can bring in the next round of witnesses. Thank you very much.

(1000) (1005) The Chair :

We will begin the third panel. Today we are hearing witnesses on the subject matter study of clauses 22 to 38 and clauses 108 to 122 of Bill C-4 . I will remind folks in the room that no photo taking or video conferencing is allowed. In addition, during testimony, when you see the little yellow card, that means you have 30 seconds to wrap it up. I'll try to give you a little wave to give you the heads-up. Today we have various folks from the Department of Foreign Affairs, Trade and Development. We have Mr.

Steve Verheul, our chief negotiator; Robert Brookfield, director general; Loris Mirella, director, intellectual property; Shendra Melia, executive director; and Nicola Waterfield, deputy director. Welcome to everyone. We will have a 10-minute presentation from the panel, after which we will move to questions from the committee members. With that, I open the floor for your presentation. Thank you.

Mr. Steve Verheul (Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development) :

Thank you and good morning, Madam Chair and members of the committee. Thank you for the invitation to appear before the committee today. We look forward to answering questions regarding the outcome of the new NAFTA agreement, following my opening remarks. The signature of the new NAFTA on November 30, 2018, followed 13 months of intensive negotiations. It brought together a broad range of officials and stakeholders, with a strong partnership between federal and provincial officials. That agreement achieved several key outcomes.

It served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership. On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three countries signed a protocol of amendment to modify certain outcomes in the original agreement related to state-to-state dispute settlement, labour, environment, intellectual property, and automotive rules of origin.

These modifications were largely as a result of domestic discussions in the U.S. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests. Throughout the negotiations Canadian businesses, business associations, labour unions, civil society and indigenous groups were also closely engaged and contributed significantly to the final result. For the negotiations, we need to recall that the NAFTA discussions were unique. This was the first large-scale renegotiation of any of Canada's free trade agreements.

Normally, free trade agreement partners are looking to liberalize trade. In this process the U.S. goal from the start of the negotiations was to rebalance the agreement in its favour. The President had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached. The opening U.S. negotiating positions were, to put it mildly, unconventional.

These included a 50% U.S. domestic content requirement on autos, which would have decimated our auto sector; the complete dismantlement of Canada's supply management system; the elimination of the binational panel dispute settlement mechanism for anti-dumping and countervailing duties, which we've used extensively, particularly for products like softwood lumber; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; removal of the cultural exception; a government procurement

chapter that would have taken away NAFTA market access, leaving Canada in a worse position than all the other U.S. free trade agreement partners; and a five-year automatic termination of the agreement, known as the sunset clause. The U.S. administration also took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum, on the basis of purported threats to national security, for which there was absolutely no evidence of any kind of justification. The U.S. administration had also launched an investigation that could lead to the same result for Canadian autos and auto parts.

In the face of this situation, Canada undertook broad and extensive engagement with Canadians on objectives for the NAFTA modernization process. Based on the views we heard and our internal trade policy experience, Canada set out a number of key objectives, which can broadly be categorized into the following overarching areas. First, we wanted to preserve important NAFTA provisions and market access into the U.S. and Mexico. Second, we wanted to modernize and improve the agreement where possible.

Third, we wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian businesses. With respect to preserving NAFTA, Canada maintained the NAFTA tariff outcomes, including duty-free treatment for energy products. We preserved the provisions on

chapter 19, which is the panel dispute settlement mechanism for anti-dumping and countervailing duty matters. We preserved temporary entry for business persons and the cultural exception. We preserved and improved the state-to-state dispute settlement mechanism. In the area of autos, changes were made to the rules of origin regime to encourage the use of more inputs from Canada, in particular by increasing the regional value content requirements for autos and auto parts, and removing incentives to produce in low-cost jurisdictions. Together with the quota exemption from potential U.S.

section 232 tariffs on autos and auto parts, secured as part of the final outcome, these new automotive rules of origin will incentivize production and sourcing in North America, and represent important outcomes for both our steel and aluminum sectors.

(1010) With respect to modernizing NAFTA, we have modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures; technical barriers to trade; sanitary and phytosanitary measures, as well as a new

chapter on good regulatory practices, including for health and safety. That encourages co-operation and protects the government's right to regulate in the public interest. Commitments on trade facilitation and customs procedures have been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes, which will reduce red tape for exporters and save them money.

New and modernized disciplines on technical barriers to trade in key sectors are designed to minimize obstacles for Canadians doing business in the U.S. and Mexico, while preserving Canada's ability to regulate in the public interest. We also have modernized obligations for cross-border trade and services and investment, including financial services and telecommunications, and a new digital trade chapter. On labour and environment, we negotiated chapters that are fully incorporated into the agreement and subject to dispute settlement.

These obligations will help ensure that parties maintain high standards for labour and the environment, and that domestic laws will not be deviated from as a means to gain an unfair trading advantage. The outcome also includes a special enforcement mechanism that will provide Canada with an enhanced process to ensure the effective implementation of labour reforms in Mexico, specifically related to freedom of association and collective bargaining. There were a number of other outcomes of note.

On supply management sectors, I think it's important to keep in mind that the U.S. did make an explicit and public demand for the complete dismantlement of Canada's supply management system. In the end, we preserved the three key pillars of supply management—production controls, import controls and price controls—and granted only limited access to the U.S.

On intellectual property, obligations cover a broad set of areas, including copyright and related rights, trademarks, geographical indications, industrial designs, patents, pharmaceutical intellectual property, data protection for chemical drugs and agricultural chemical products, and border, civil and criminal enforcement of IP rights, including civil and criminal IP rights enforcement in respect to trade secrets.

Certain outcomes will require changes to Canada's current IP legal and policy framework in certain areas such as copyright, and here we will increase copyright terms of protection as well as provide criminal remedies in respect of rights management information. IP rights enforcement will also provide ex officio border authority for suspected counterfeit or pirated goods in transit, as well as criminal offences for the unauthorized and willful misappropriation of trade secrets.

In many of these areas we negotiated transition periods to implement our commitments, and importantly, under the amending protocol the parties agreed to remove the obligation to provide 10 years of data protection for biologic drugs, meaning that Canada does not need to change its existing regime in this area. The agreement also includes a new digital trade

chapter that requires parties to have regulatory frameworks in place to address such things as privacy protections and fraudulent and deceptive practices, and we will work together to mitigate threats to our cybersecurity. The agreement also includes commitments to address barriers to digital trade, such as provisions that ensure that companies and individuals can move information and data across borders in a reliable and secure manner while ensuring that legitimate privacy and security rights are protected.

Other notable outcomes include that we will no longer have trilateral investor state dispute settlement for Canada. We will not have investor state dispute settlement applying between Canada and the U.S. There will be no government procurement

chapter in NAFTA with respect to Canada. We will maintain our access to the U.S. under the World Trade Organization's agreement on government procurement. In closing, I would like to underline that our objectives for these negotiations were informed closely by Canadian priorities and interests, very close engagement with provinces and territories, as well as a wide range of stakeholders that we consulted on an ongoing basis. This concludes my opening remarks. Alongside my colleagues, we would be pleased to answer any questions you may have. Thank you.

(1015) The Chair :

Thank you very much. With that we will begin our first round of questioning. You have six minutes for each question. I move to Madame Rempel Garner to begin the que