Please accept this letter as the Business Council of Canada’s (BCC) submission in response to Global Affairs Canada’s consultations on the operation of the CUSMA. Since coming into force four years ago, the CUSMA has benefited Canadians and the Canadian economy significantly. It has provided the certainty, stability, and predictability necessary for Canada’s large job creators and employers to make long-term investments needed to enhance our country’s productivity and prosperity.

The CUSMA has proven to be an effective successor to both the North American Free Trade Agreement (NAFTA) as well as the original Canada-U.S. Free Trade Agreement. The continuity afforded by these agreements has improved the lives and livelihoods of Canadian families and solidified Canada’s place as one of the world’s great trading nations. Despite a rising tide of protectionism and deglobalization, CUSMA remains the gold-standard of free trade agreements.

Given its existential importance to our economic security, the Government of Canada must do everything in its power – between now and July 1, 2026 – to ensure the successful review of the CUSMA. To be clear, there is much that Canada can do on its own initiative which would improve the likelihood of all three countries agreeing to extend the life of the CUSMA beyond 2036. Most of these actions can be taken immediately, pre-empting and preventing disruptive renegotiations.

For the past three years, the BCC has urged the government to take a ‘clean hands’ approach to the CUSMA review. Put simply, the government must ensure Canada both is and is seen to be complying with all its commitments. Where issues and irritants exist between Canada, the United States and Mexico – whether they are covered by the CUSMA or are collateral to the Agreement – the government should proactively, on an expedited basis, propose solutions to address them.

There are three key areas where the government must act. First, it must respond to U.S. concerns with regards to Canadian digital policies. After CUSMA was signed, the federal government introduced a series of digital policy changes which the U.S. government insists are inconsistent with our CUSMA commitments. The two most frequently cited by the Biden-Harris Administration and Congress are the Online Streaming Act (C-11) and the unilateral digital services tax (DST).

In late August, at the strong urging of Congressional officials in both the House of Representatives and U.S. Senate, the U.S. Trade Representative (USTR) formally requested dispute consultations on the DST. If no agreement is reached between Canada and the U.S. before mid-November, the USTR will seek to establish a dispute resolution panel. Canada cannot allow this dispute to escalate in the immediate aftermath of the U.S. elections as a new Administration comes to office.

The BCC had repeatedly called on the government to delay imposing the DST until the multilateral OECD global tax framework negotiations were concluded. Yet, the government chose to proceed unilaterally. Consequently, the BCC has had no choice but to call on the government to revoke the DST, remit any amounts paid to date, and recommit to the multilateral OECD negotiations alongside the United States. This can be done in the Fall Economic Statement or in Budget 2025.

To be clear, senior Biden-Harris Administration and Congressional officials have been explicit with the BCC and other Canadian stakeholders that if the DST issue is not resolved before the formal CUSMA review process begins, they would use their authority to prevent the Agreement from being extended. This includes many who will retain their positions regardless of the outcome of the upcoming U.S. elections. Opposition to Canada’s DST is a rare area of bipartisan consensus.

While the BCC has not intervened on Bill C-11, we note the broad consensus among trade policy experts that Canada’s triggering of the cultural exemption under the CUSMA as its justification for enacting the Online Streaming Act now enables the U.S. to take retaliatory measures of equivalent commercial effect immediately, should it choose, without first requiring dispute resolution proceedings as in the case of the DST or other disputes. This would have a devastating impact.

The second irritant between Canada and the U.S. which the government should address promptly relates to the allocation of the tariff rate quota (TRQ) for dairy. In the short time the CUSMA has been in force, the U.S. has established two dispute resolution panels on TRQ. Not only has the USTR expressed dissatisfaction with the outcome of those proceedings, she made clear she will seek to leverage the CUSMA review to force a solution on what she views as a ‘political’ problem.

The ‘political’ nature of the TRQ allocation issue has been exacerbated in recent months by the Parliamentary debate on C-282 – the Private Members’ Bill amending the Department of Foreign Affairs, Trade and Development Act. While there are different perspectives on what impact C-282 would have if enacted without amendment, the BCC is among those who have raised concerns that it risks complicating the CUSMA review absent a mutually acceptable resolution on the TRQ.

The third irritant between Canada and the U.S. which has the potential to frustrate a successful review of the CUSMA is not a market access issue but, rather, the government’s continued refusal to honour Canada’s commitment to invest the equivalent of two per cent of our GDP on defence. A number of U.S. officials, including some who sit on the Congressional and U.S. Senate Committees with oversight over the USTR and trade policy, have privately pointed to linkages with the CUSMA.

More specifically, U.S. officials have warned that Canada’s refusal to honour its two per cent defence commitment calls into question our reliability and dependability as an economic security partner. This includes our failure to invest sufficiently in our integrated defence industrial base, stockpiles of strategic resources (e.g. critical minerals), protection of cross-border critical infrastructure and networks, procurement of military and/or dual-use goods, as well as research and development.

This underscores an important consideration for the government. The CUSMA review is not seen in the United States as occurring in a strictly legalistic trade policy vacuum, but instead within a much broader geopolitical context. There are a number of extraneous factors that could either help or hinder the successful review and extension of the Agreement. The government cannot discount or dismiss how domestic political trends in the U.S. will influence or determine outcomes.

Canada has a choice: It can do nothing between now and the launch of the formal review process in the United States next October or it can take proactive steps to eliminate the obstacles to the successful review and extension of the Agreement. If the government does nothing, it will increase the risk of full-on renegotiation. If the review becomes a renegotiation, the certainty, predictability, and stability afforded by the CUSMA will be undermined resulting in less investment in our economy.

For more than 35 years, Canada has championed a strong, integrated North American economy. At a time when we are facing growing supply chain disruptions, increased global insecurity and pervasive protectionism, it has never been more important for us to reinforce the resilience of our continental partnership. A successful CUSMA review, resulting in the extension of the Agreement beyond 2036, is essential to our collective prosperity. Canada must do all it can to make it happen.

The CUSMA and Canada’s economic future are at risk because of certain domestic policies, and those risks are too great to ignore.

Yours very truly,

Goldy Hyder

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Dear Senator,

Please accept this letter as the Business Council of Canada’s written submission in relation to the Senate Standing Committee on Foreign Affairs and International Trade’s ongoing consideration of Bill C-282 An Act to Amend the Department of Foreign Affairs Act. We are grateful to the Committee for this opportunity to offer our perspective.

Since its founding almost fifty years ago, the Council has advocated in support of sound public policy to strengthen Canada’s position as a trading nation. This includes the work the Council initiated which led to the successful negotiation of the original Canada-U.S. Free Trade Agreement as well as the North American Free Trade Agreement.

Consequently, the Council and its members hold steadfast to the principle that Canada should demonstrate extreme caution in considering any measures which might impede the free flow of goods and services. As Bill C-282 would impact cross-border commercial business operations, we have given the legislation our careful consideration.

Recognizing the intended effect of Bill C-282, the Council respectfully submits that the legislation, as drafted, might have serious and significant unintended consequences. Specifically, as currently worded, Bill C-282 could potentially cause Canada to abrogate certain commitments previously made under existing trade agreements.

If the Minister cannot make any commitment with respect to the tariff rate quota status quo, it could undermine the review of the Canada-U.S.-Mexico Agreement (CUSMA), the ratification of the Canada-EU Comprehensive and Trade Agreement (CETA) and accessions to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Tariff rate quota allocation has been an issue or irritant central to the implementation of the CUSMA, CETA, and CPTPP. If the Minister is prevented from making any commitments with respect to tariff rate quota, it could prevent Canada from fulfilling its obligations in a number of scenarios including the exercise of trade dispute resolution mechanisms.

Having followed the debates on Bill C-282 closely, both in the Senate of Canada and the House of Commons, we do not believe it was the intent of Parliamentarians to undermine existing trade agreements. Rather, our understanding is Bill C-282 was introduced in an effort to constrain the exercise of the Minister’s power in future trade negotiations.

Whether any Minister of International Trade should be restricted in terms of the future exercise of their powers is, as a matter of principle, something we would question irrespective of the nature of the specific goods or services involved. Here, however, we submit the Minister must not be prevented from implementing existing agreements.

Canadian businesses of every size and in every sector require certainty, stability and predictability when it comes to the laws, regulations, and trade agreements. If Bill C-282 is passed without clarifying amendments, it would introduce a disruptive degree of uncertainty regarding the future implementation of the CUSMA, CETA, and CPTPP.

Yours very truly,

Goldy Hyder

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Dear Minister Ng:

Re: Global Affairs Canada’s economic security consultation

I am pleased to share with you the Business Council of Canada’s (“BCC”) views on your department’s economic security consultation.

The BCC appreciates the opportunity to participate in this important consultation. We have long advocated for the Government of Canada to work collaboratively with Canada’s business leaders to safeguard Canadians’ economic security, which is increasingly threatened by mercantilism, economic coercion, and other unfair trade practices.

As we asserted in our 2023 report, Economic Security is National Security:

Canada and its allies adhere to a common set of market values – such as the rule of law – that ensure that economic competition takes place on a level playing field.

Strategic threat actors reject these globally recognized rules. They are increasingly adopting mercantilist practices aimed at giving their state champions the advantages necessary to replace imports with domestic production, climb global value chains, and seize dominant global market share in strategic sectors.

The catalogue of predatory practices is lengthy. It extends well beyond generally accepted support for home-grown industries, to include manipulating local currencies to give their state champions an unfair price advantage in foreign markets, requirements for foreign firms to transfer advanced technology to state champions as a prerequisite to access their markets, and the showering of massive industrial subsidies on state champions that allow them to engage in unprofitable activity that wipes out foreign competition.

These mercantilist interventions mean that Canadian firms are not competing with a typical commercial company. Instead, they are operating on a skewed playing field, competing with the full strength and resources of a foreign state…

This, in turn, destroys domestic industries and gives Canada no choice but to rely on state champions for critical economic inputs.

That reliance is especially problematic. The blurred lines between state policy and private pursuits means that even ostensibly private firms often have no choice but to support their government’s national security objectives. This includes providing support, assistance, and cooperation to intelligence agencies.

In addition, we warned:

Our reliance on international trade makes also us vulnerable. Strategic threat actors seek to expand their global influence by weaponizing Canada’s dependence on trade to pressure, induce, or influence the Government of Canada into taking actions that conform with their national priorities.

Strategic threat actors use diverse tactics to coerce the Government of Canada. They can restrict the movement of critical goods for which there are no substitutes, withhold reciprocal access to domestic markets, and subject Canadian goods to onerous import inspections and conditions.

With Canadian exports supporting more than one out of every six jobs in the country, weaponized trade can directly threaten the livelihoods of Canadians…

Weaponized trade may also have broader societal costs. As Russia’s unprovoked invasion of Ukraine has highlighted for our European allies, overreliance on a strategic threat actor for critical economic inputs, especially one with systemically divergent values and interests, can prove both costly and deadly for society during a crisis.

Canada is dependent on strategic threat actors for a broad range of commodities vital to Canadians’ safety, security, and prosperity…

To mitigate these and other serious economic security threats identified in our 2023 report, the BCC urged the Government to adopt a new national security strategy, one that for the first time puts economic security considerations at its core. To flesh out this strategy, we further offered the Government nearly 40 detailed policy proposals.

We are pleased to see the Government has followed our advice by announcing that it will soon publish its first national security strategy in over two decades. We are also pleased to see that the Government has adopted many of our detailed policy proposals, including amending the Canadian Security Intelligence Service Act to authorize CSIS to proactively share threat intelligence with Canada’s private sector, and modernizing the national security provisions of the Investment Canada Act to better target and screen out malicious foreign investments.

However, several key recommendations from our 2023 report – which have direct relevance to your department’s current consultation – have not yet been addressed. We urge that you reconsider these proposals.

Specifically, we recommend that:

• To blunt the impacts of mercantilist practices, the Government should create new legal mechanisms to block the import of foreign goods and services that have benefitted materially from unfair economic practices. The Government’s initial focus should be on blocking strategic threat actors’ market access to critical industries where they are using illegal means to catch up and surpass Canada.

• To safeguard our continued access to critical economic inputs while strengthening the Government’s capability to act independently on the global stage, the Government should work with sectors vulnerable to economic coercion to strengthen the depth and resilience of critical supply chains. This should include conducting vulnerability reviews, sharing threat information, developing robust mitigation strategies, curbing excessive dependence on strategic threat actors, and increasing availability of free-market alternatives.

• To help Canadian companies compete on a level playing field with strategic threat actors in developing and commercializing emerging and disruptive technologies, the Government should complement the economic and innovative capacity of Canadian companies with a modern industrial strategy. More specifically, the Government must identify and support advanced technologies that are foundational to spurring economic growth, strategic from a national security perspective, and where companies on their own are not yet able to make the investments needed to develop and commercialize such technologies. 

• To reinforce the rules-based economic order, the Government, in partnership with other like-minded allies, should:
  
  • Strengthen the multilateral trading system with the World Trade Organization at its core;
    
    
  • Strengthen or join international frameworks promoting free and fair trade and investment among market-oriented countries, such as the Comprehensive and Progressive Trans-Pacific Partnership and the Indo-Pacific Economic Framework; and
    
    
  • Create and enhance plurilateral measures to collectively deter, withstand, and counter economic coercion and other unfair trade practices, such as through a “NATO for trade” whereby allied nations agree to come to the aid of each other when they are economically threatened. As a part of this initiative, Canada should leverage its economic advantages, such as in the production of energy, food, and minerals, to help reduce our allies’ trade dependencies on strategic threat actors.
    

• To ensure that any new economic security measures are implemented in an effective and timely manner, the Government should create a dedicated planning, decision-making, and coordination unit within the Privy Council Office to engage Canadian businesses and to organize, coordinate, and direct the Government’s responses across the numerous government departments and agencies with competing economic security mandates and responsibilities.

In addition to these recommendations, we note the consultation materials asked stakeholders to comment on potential new measures to improve the competitive standing of Canadian critical minerals projects and related supply chains. Specifically, the materials suggested that the Government may be contemplating additional incentives for the critical minerals sector as well as financing measures to address price volatility and supply chain diversification. The BCC generally agrees that additional attention is needed in this area.

That said, the BCC believes that the competitiveness of Canada’s critical minerals sector could best be enhanced through project approval and permitting reform. The unpredictability and uncertainty of Canada’s regulatory approval and permitting processes is the single greatest disincentive to invest in new critical minerals mining projects. This extends to both the approvals for mines and the critical infrastructure needed to support their operations and access to foreign markets.  

While this consultation asks important questions about Canada’s critical mineral supply, we strongly urge the department to take a broader view to ensure that the country’s diverse energy interests, inclusive of oil and gas, are factored into its work. The strategic importance of our oil and gas sector should not be overlooked, especially at a time when our allies and trading partners are looking to Canada to provide a safe and stable supply of energy in the decades to come.

Lastly, the consultation materials underscore the importance of compliance with international obligations, including those set out in Canada’s various trade and investment agreements. The BCC agrees that this must be a priority – especially for Canada.

As we stressed in our 2023 report:

[The Government’s approach to addressing economic security threats] must be balanced. While it must be capable of tackling the threats facing Canadians at home and abroad, it must also remain consistent with Canada’s democratic values as well as ensure that the domestic and international environment remains conducive to beneficial cross-border activities, such as trade and economic immigration, which are central to our national interests.

In other words, protecting Canada’s economic security should not be used as a veiled excuse for the Government of Canada to undermine Canadians’ rights, adopt protectionist trade and investment rules, or decouple its relations with certain foreign states altogether.

Indeed, if the Government expects foreign states to adhere to the rules-based international economic order, then it is incumbent upon Canada to honour the commitments it has made to its trading partners.

Unfortunately, the Government has taken measures which our closest trading partners believe violate the letter and spirit of our international economic agreements. This includes, most recently, the Government’s decision to unilaterally impose a digital services tax on foreign technology companies which very likely violates Canada’s critically important trade agreement with the United States and Mexico.

Economic coercion, mercantilism, and other unfair trade practices represent a clear and present danger to the economic prosperity of all Canadians. While urgent government action is required, the Government must ensure the measures it takes do not jeopardize Canada’s relations with its closest trading partners. As a trading nation, these partners have, and will remain, essential to protecting Canadians’ economic resiliency and prosperity.

Yours very truly,

Goldy Hyder

c.c.:

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Mister Chair, committee members, thank you for the invitation to take part in your study of Bill C-70.

As an organization representing Canada’s most innovative and successful businesses, I will restrict my comments today to the portion of the bill that has most direct relevance to the Canadian private sector. That is clause 34(3), which seeks to amend the Canadian Security Intelligence Service Act to enable CSIS to disclose threat intelligence to stakeholders outside the Government of Canada for the purpose of increasing their awareness and resiliency against foreign interference.

However, before commenting on this clause, I want to make clear that Canada’s business community is broadly supportive of Bill C-70. From the establishment of a foreign influence transparency registry to the creation of updated sabotage offenses for attacks directed against essential infrastructure, this urgently needed bill will help protect Canadians’ lives and livelihoods by providing our government with the tools needed to build a stronger, more secure country.

I will start my substantive remarks by noting that while the current discussion in Canada surrounding foreign interference has been focused on the integrity of our democratic processes and the safety of targeted ethnic and cultural groups, it is important for us all to acknowledge that state actors actively target all aspects of Canadian society to advance their strategic interests. This includes the Canadian economy.

Indeed, in an era of growing geopolitical rivalry, in which supply chains, infrastructure networks, and technological innovation, increasingly determine strategic advantage, Canadian businesses are often the primary target of our foreign adversaries.

This should concern all Canadians. 

Economic security threats are not abstract, nor do they exist in a vacuum. These threats target the critical infrastructure needed to heat and power our homes. They target the supply chains that provide our families with low-cost food and medicine. They target the intellectual property that creates good jobs and pay our bills.

In short, these threats put Canadians’ very safety, security, and prosperity at risk.

To be sure, businesses and governments invest billions each year to keep Canadians safe from these and related economic attacks. However, if we want to be truly effective in protecting to our way of life, then we must replace our independent efforts with collective action.

Key to building this partnership is the sharing of threat intelligence.

Unlike the domestic security agencies of Canada’s Five Eyes partners, such as the United States’ FBI or the United Kingdom’s MI5, who possess modern authorities allowing them to share detailed threat intelligence with their respective business communities, CSIS is presently prohibited from sharing all but the most generalized information with the Canadian private sector.

This represents a considerable gap in Canada’s defences. Despite CSIS having both the knowledge and expertise to help Canadian companies withstand growing threats, CSIS’s outdated legislation means Canadian businesses are left fending for themselves.

It is for this reason that the Business Council strongly supports clause 34(3).

With new threat intelligence sharing authorities, CSIS could communicate more specific and tangible information with Canadian companies. This would give business leaders a clearer understanding of the growing threat, as well as the protective measures that could be taken to better safeguard their employees, customers, and the communities in which they operate.

The use of these new authorities would also benefit the Government of Canada by helping CSIS build greater trust with the Canadian private sector.

This would encourage business leaders to share more with Ottawa about the threats they are seeing, which would better inform government policy as well as improve CSIS’s ability to respond to threats.

Of course, the granting of any new powers must be consistent with the values we share in our democracy, including respect for individuals’ rights and freedoms. On this front, we are very pleased to see that the Government of Canada has incorporated rigorous safeguards into clause 34(3), such as to ensure that disclosures protect Canadians’ privacy interests.

Before concluding, I want to stress the need for urgency. The Business Council agrees with many lawmakers that the protections contained in Bill C-70 must be put into place before the next general election. The preservation of our democratic system is of upmost importance.

However, I will add that when it comes to strengthening the resiliency of our economy, Canada is falling far behind its allies.  

This not only exposes Canadians to unnecessary risks, but by failing to move in lockstep with our closest allies, we risk being perceived as a “weak link”.

This could jeopardize our country’s relationships with its closest allies — especially the United States — at a pivotal moment when the global order is being reshaped and partnership matters most.

I’ll conclude by noting that Bill C-70 is just one of many economic security reforms that must be urgently undertaken to protect Canadians.

As a priority, the Business Council urges that the Government of Canada complement clause 34(3) with a formalized threat exchange to securely receive and disseminate CSIS’s threat intelligence broadly across the Canadian economy.

This and nearly 40 other much-needed reforms are included in the Business Council’s recent report, Economic Security is National Security. That report is publicly available on our website.

Thank you for the opportunity to speak. I look forward to your questions.

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Mister Chair, committee members, thank you for the invitation to take part in your study of Bill C-26. 

Founded in 1976, the Business Council of Canada is composed of approximately 170 chief executive officers who run Canada’s most innovative and successful businesses.

As an organization representing a broad cross-section of Canada’s critical infrastructure sectors, I will restrict my comments to Part 2 of Bill C-26, the proposed Critical Cyber Systems Protection Act.

I will begin my remarks by underlining that Canada’s leading businesses are committed to maintaining a strong and resilient security posture in the face of growing cyber threats. Indeed, in a survey of our members, every single chief executive officer indicated that cybersecurity was either a “high” or “very high” priority for their business.

Our members are backing their commitment to cybersecurity with significant resources. In critical infrastructure sectors, most of our member companies each invest well over $150 million in Canada per year on measures to prevent, detect and respond to cybersecurity incidents. A plurality invests over $500 million annually on the same.

As cybersecurity risks to the country grow, so too do the resources that our members plan to devote to protecting Canadians. Over the next two years, over two-thirds of our members plan to increase both their cybersecurity spending and personnel staffing by at least 25 per cent.

However, we cannot lose sight that defending Canadians against cyberattacks is very much a “team sport”, requiring close coordination between government and industry.

That is why the Business Council of Canada supports the objectives of recent government cybersecurity initiatives. This includes Part 2 of the Bill, which if properly drafted and implemented, could improve the overall cyber resiliency of Canada’s economy by establishing a baseline of cybersecurity across critical sectors.

It is also important to stress that the enactment of Part 2 would bring Canada’s cybersecurity framework in line with best practices amongst our closest security partners.

In a period of growing global tensions, Canada must move in lockstep with its closest allies in strengthening its cyber resiliency. Otherwise, Canada risks being perceived as a “weak link”, which could have dire consequences for Canadians’ future security and prosperity.

Of course, no public or private sector initiative is perfect. It should therefore be no surprise that Canada’s business leaders would like to see targeted amendments to Part 2.

In the interest of time, I will highlight three of the most common suggestions for improvement that I have heard from our members.

First, Part 2 should be amended to adopt a risk-based methodology, which would impose regulatory requirements on designated operators proportionate to their level of risk. By imposing fewer and less onerous obligations on low-risk operators that have well-established cybersecurity programs, they can spend more of their finite resources on incident prevention activities. Regulators, on the other hand, could dedicate more of their finite resources towards high-risk operators that pose the largest threat.

Second, Part 2 should be amended to place fair and reasonable limits on Cabinet’s power to issue cybersecurity directions. In the absence of statutory safeguards, Part 2 would allow Cabinet to issue any direction regardless of whether such measure would be effective in reducing a risk to a critical cyber system. Directions could also be issued without Cabinet first consulting with impacted provinces and territories; negotiating in good faith with a designated operator; or considering relevant factors, such as the potential cost of the direction, whether reasonable alternatives exist to issuing the direction, or the potential consequences of the direction on competition, services or customers.

Third, and lastly, Part 2 should be amended to define key terms more precisely, such as “cyber security incident” and “critical cyber system”. The current definitions of these terms are overly broad. This will likely result in reporting inconsistencies as well as the over-reporting of immaterial incidents which could overwhelm government authorities.

I’ll conclude by noting that Part 2 is just one of several national security reforms that must be urgently undertaken to protect Canadians.

As a priority, the Business Council of Canada urges that lawmakers also amend of the Canadian Security Intelligence Service (CSIS) Act enable CSIS to proactively share actionable threat intelligence with Canadian companies where it is in the public interest and subject to all necessary safeguards and oversight.

This and nearly 40 other much-needed reforms are included in the Business Council of Canada’s recent report, Economic Security is National Security. That report is publicly available on our website.

Thank you for the opportunity to speak. I look forward to your questions.

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Mr. Chair, thank you for the opportunity to speak to this committee about the Russian invasion of Ukraine and implications for global peace and security.

The Business Council of Canada is composed of 170 chief executives and entrepreneurs of Canada’s leading enterprises. Many members lead global businesses with extensive trade and investment interests around the world. Following Russia’s brutal invasion of Ukraine, companies quickly severed ties with Russia and have steadfastly supported Ukraine. Canadian businesses have also worked hard to alleviate supply disruptions stemming from the war.

Canadian potash producers like Nutrien increased output to help many of our partners to reduce their reliance on Russian and Belarusian suppliers. Cameco is supplying Ukraine’s energy utility with nuclear fuel to safeguard its energy security and independence for years to come. These are just a few examples among many.

Rebuild Ukraine

As this war rages on, it is important that Canada remain engaged to support Ukraine and Ukrainian businesses. We cannot wait for the war to end to start rebuilding the country and to strengthen our economic ties. As Ukrainian ambassador to Canada Yulia Kovalev has said – Ukraine’s economy is the “third front” in the war.

That is why the Business Council of Canada is proud to support the Canada-Ukraine Chamber of Commerce for the second Rebuild Ukraine Business Conference taking place this week in Toronto. Our President and CEO, Goldy Hyder, as well as other members of the business community will participate in this important and timely conference to highlight the needs and opportunities to rebuild and modernize Ukrainian infrastructure.

Canada-Ukraine Free Trade Agreement (CUFTA) Modernization

We also support the recent modernization of the Canada-Ukraine Free Trade Agreement. This agreement brings in important new chapters and provisions to our bilateral trade agreement, including covering trade in service. It will create an environment of predictability and stability for our bilateral trade and investment flows.

Our Ukrainian friends and partners have been clear how important this deal is to demonstrate to Canadians that Ukraine is open for businesses, and that businesses can have confidence in the market in the long term. We agree and urge parliamentarians to swiftly ratify this deal.

Export Development Canada

We have also urged Export Development Canada to put in place war risk insurance and 2-year export credits to help support Canadian companies who wish to trade with and invest in Ukraine.

As our CEO wrote to EDC two weeks ago, credit agencies from Germany, France, Japan, the United Kingdom, Sweden, Poland, and the Netherlands are now all providing political and/or war risk insurance for companies from their respective countries who are investing in Ukraine. Similar programs have been established by both the United States’ International Development Finance Corporation as well as the World Bank’s Multilateral Investment Guarantee Agency.

Canada has promised its full support to Ukraine, and we agree with EDC President Mairead Lavery that Export Development Canada can play a pivotal role in Ukraine’s long-term reconstruction.

Defence Commitments

The conflict in Ukraine and deteriorating global situation highlights the need for Canada to step up and play a more active role in supporting peace and security.

We welcome Canada’s materiel support to Ukraine. The war also underscores the importance of the NATO alliance in safeguarding Europe and North America. Canada must at a minimum meet its 2 per cent defence spending commitment. It was once commonplace across the alliance to miss this target, but following the war, many NATO members have either increased spending or have outlined plans to increase spending to reach this level. Canada cannot be an outlier.

Canada in the world

This war marked a turning point in the global economy. Economic security is now a priority across the world, and many nations less blessed with natural resources than Canada are preoccupied with securing a safe reliable supply of energy, food, and other natural resources.

Many likeminded partners are looking to Canada to be a reliable and safe supplier.

In summer 2022, German Chancellor Olaf Scholz visited Canada and clearly stated his country’s interests in Canadian energy, including LNG, as well as hydrogen and critical minerals to power its economy today and into the future.

This visit was followed by South Korean President Yoon Suk Yeol in September 2022 and Japanese Prime Miniter Kishida Fumio earlier this year. In both cases, North Pacific leaders expressed clear desire to enhance their economic and energy security through closer economic linkages to Canada.

Finally, when European Commission President Ursula von der Leyen visited Canada in March this year, the EU outlined how important Canada is as a partner as it pursues a reliable supply of energy and raw materials. Among other issues, leaders committed to a Canada-EU Working Group on Energy Transition and LNG to identify and advance medium-term solutions. As European leadership returns to Canada for the Canada-EU Summit this week, we hope to see some concrete progress toward supporting our partners and allies in Europe.

We believe Canada has an important role to play in ensuring Ukraine wins this war and thrives in the years ahead. Canada also has an important role to play as a stabilizing force in world. Business leaders are eager to partner with government whenever possible to support a more peaceful and prosperous world.

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Remarks by Robert Asselin to the House of Commons Standing Committee on Finance in pre-budget consultations.

Mr. Chair,

The state of the world today reminds us of the inherent fragility of our international order and the global economy. For a country such as Canada, geopolitical shocks such as these have a deep impact. The global environment is only further compounding the challenges we were already experiencing domestically.  

Here at home, Canadians are feeling the weight of high interest rates, low productivity, and persistent inflation.  Canada’s GDP per capita has been trending down for several quarters, and without our natural resources, Canada’s trade deficit would be structural and significant.  Our population is also aging fast.

Going forward, private sector economists’ forecasts point to no growth in 2024 and very weak growth thereafter. Whether there is a technical recession will be of little comfort to Canadians as interest rates are expected to remain high for the foreseeable future. For the federal government, debt servicing costs will continue to be much more prohibitive than previously forecasted in Budget 2023.

Instead of working in concert, the government’s three core economic policy objectives — growth, equity, and price stability — could become increasingly in conflict. Growth rates that are lower than interest rates will have a dramatic impact on fiscal policy. Governments can no longer run permanent large deficits without fear. This fiscal year, the federal government will use as much of its revenues to service the debt than providing health care transfers to provinces and territories.

This is why we continue to urge the government to adopt a new and credible fiscal anchor, one which would limit debt servicing costs to a maximum of 10 per cent of revenue going forward. By doing this, we think it will preserve the government’s capacity to fund programs Canadians rely on and not put an excessive and unfair fiscal burden on future generations. The more the federal government spends on servicing the debt, the less it has to fund its core missions. 

More deficit-financed spending at higher interest rates will eventually and inevitably lead to levels of indebtedness that will force future governments to cut spending and raise taxes. It will lead to a weakened economy with considerable uncertainty for businesses looking to invest, hire and grow in Canada. It will also put in jeopardy the social programs Canadians value. This is precisely what we must avoid.

We are not of the view new spending is required in the next budget.  Over the last few budgets, the federal government has introduced many measures that have yet to be implemented. We also urge the government to move ahead with a real, comprehensive program review as well as implementing measures announced in Budget 2023, such as the commitment to outlining a concrete plan on permitting reform by the end of this year and accelerating the implementation of measures and incentives towards the energy transition.

In the aftermath of last week’s Supreme Court ruling on the Impact Assessment Act, it is essential that the government move quickly to provide clarity, certainty, and predictability on the rules for major projects. We must not lose out on once-in-a generation business investments that are necessary to reduce our emissions and foster economic growth for the benefit of all Canadians.

Thank you.

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The federal government has set a goal of achieving a 40-to-45 per cent reduction in carbon emissions by 2030 and net-zero emissions by 2050. These are substantial commitments that will require ongoing cooperation between governments and the private sector. There is urgency to getting this right. Absolute emissions in Canada need to drop by roughly 32 to 37 per cent in less than seven years while our GHG intensity per capita remains amongst the highest in the OECD^1,2.

Other nations are working hard to establish a comparative advantage in climate-friendly technologies. Just last month U.S. President Joe Biden celebrated the one-year anniversary of his trademark legislation, the Inflation Reduction Act (IRA) that positions the country to be the global magnet for clean technologies for the foreseeable future. The speed and scale of the

U.S. approach to unlocking investment should not be underestimated. In fact, a recent analysis highlights that there have already been 270 new clean projects announced in the U.S. stemming from the Act, with more than $130 billion USD expected to be invested in the next two years³. When all is said and done, the IRA is expected to inject trillions of dollars into America’s energy transition⁴.

Investments required to achieve Canada’s net zero ambition are estimated to be approximately $2 trillion, but year over year investment levels remain well off the mark and need to increase by 5.5 to 8.5 times from where they are today^5,6. A close partnership between governments and the private sector is necessary to enhance the competitiveness of Canada’s natural resource and manufacturing base, and to create the opportunities for clean technology innovators to grow their market share, both domestically and abroad. The time is now for Canada to take a leadership role in the global effort to address climate change.

The Business Council of Canada agrees with the growing consensus among experts, thought leaders and economists that the government must focus its limited fiscal capacity on economic competitiveness and the country’s most pressing decarbonization needs. Through Budget 2023 and previous work, the federal government has provided some guidance in terms of where the private sector can compete for capital by offering investment tax credits (ITC) in five specific areas: carbon capture utilization and storage (CCUS), hydrogen, clean technologies, clean technology manufacturing and clean electricity.

While important, ITCs on their own cannot generate the level of investment that Canada needs to meet its climate goals, nor are they the basis of a bold economic policy designed to drive sustainable economic growth and improve the competitiveness of Canadian firms. Canada has all the ingredients to be a go-to destination for green investing that can reduce emissions here and abroad, but it currently lacks the clear policy and fiscal incentives to attract the capital necessary to support its emissions reductions goals. Fulfilling the country’s true potential will require a broader view where numerous policies are working in concert to drive investment, grow talent and develop skills, expedite project approvals, and ramp up spending in research and development and applied science.

Nonetheless, the proposed ITCs do provide an important opportunity to bridge or at least narrow the gap between the economics of building out new decarbonization projects in Canada versus other jurisdictions. Their success will hinge on their ability to unlock an unprecedented level of private sector capital and position firms in Canada as cost competitive producers of innovation and clean technology. Central to their success is the need for the government to offer clear and achievable terms and conditions that allow businesses to secure the full benefits offered by each ITC. Of equal importance is the need for the government to clarify its intentions to support operational expenditures through tax, carbon pricing policy or public financing guarantees.

While this consultation is focused on a specific set of ITCs, the Business Council urges the government to work closely with industry to confirm its intentions to support clean growth opportunities through tax policy or other programs in markets such as biomass, biofuels, sustainable aviation fuel and for critical minerals such as aluminum and uranium.

Finance Canada’s consultation provides an immediate opportunity to clarify several aspects of the emerging ITC regime. We respectfully provide the following comments on behalf of our members.

There is an urgent need to finalize the ITCs

The federal government has committed to developing ITCs for clean technologies in its last three budgets. As of today, none are in force, minimizing their ability to support final investment decisions in the near term. For example, the government committed to developing an ITC for CCUS in Budget 2021. This commitment was met with enthusiasm and represented a chance to close the economic shortfall of carbon capture investing in Canada versus other jurisdictions.

Companies, interest groups and other stakeholders rushed to participate in numerous consultations and exercises to help shape the design of an ITC that holds the potential to position Canada as a global leader in CCUS technology and deployment. Yet roughly two years later companies and investors continue to wait for answers about how the ITC will treat specific investments (e.g., pre-combustion equipment, investments in transnational projects) while Budget 2023 added a new consultation requirement for labour and prevailing wages.

While draft legislation has been published for CCUS and clean technologies, the ITCs for hydrogen, clean manufacturing and clean electricity (including nuclear) remain conceptual and are of limited use to firms or global investors considering projects in Canada. Delays in finalizing the terms and conditions of each ITC through law effectively freezes capital and diminishes Canada’s ability to achieve its emissions reductions targets and fulfill important commitments such as exporting clean hydrogen to Germany by 2025⁷.

Canada is in a global competition for investment dollars in the low carbon economy, thus timing matters enormously. Tens of billions of investment dollars are contingent upon Finance Canada’s ability to move swiftly to finalize the ITCs and to create the commercial case for clean technology investment in Canada. We urge policy makers to work with companies and the investor community to move expeditiously and finalize the terms for all ITCs.

Ensure simplicity

Just one year after coming into force, the IRA has ushered in billions of dollars of private sector investment into ZEVs and battery technology, renewable energy, hydrogen, biofuels and CCUS. Comparatively Canada’s ITC regime remains nascent with notable investments in the energy transition driven by hallmark programs such as the Strategic Innovation Fund (SIF) and bespoke government spending.

Success under the IRA is not coincidental. Rather, U.S. policymakers deliberately revamped the country’s tax credit structure by designing incentives that provide business with long-term predictability and clarity. With most tax credits in place for at least 10 years, investors, manufacturers, utilities, and developers have enough time to plan and build projects well into the 2030s. Further, ensuring that the full value of credits will only start to decline after emissions reductions targets are met relieves Congress of the painstaking exercise of letting credits periodically expire only to be renewed at the last minute. The broad-based nature of the U.S. regime and the transferability of tax credits to anyone with a tax liability are also key features of the IRA’s success.

The Business Council is concerned that the design features of Canada’s ITCs are overly complex and inconsistent with the objective of using tax policy to attract higher levels of investment. Claw back provisions, differing phase out schedules, narrow and confusing eligibility criteria, knowledge sharing requirements and a high-level auditing risk are just some of the provisions that could discourage companies and investors from using the ITCs. Meanwhile questions remain about the stackability of certain ITCs amongst themselves and with federal programs such as the SIF and projects supported by the Canada Infrastructure Bank, Canada Growth Fund, or provincial governments.

Clean Electricity ITC

The evidence is clear that an electrical grid that is twice as big by 2050 will be necessary to electrify our homes, buildings, businesses, and longstanding industrial practices⁸. Finance Canada should be commended for creating a tax credit to support investment into new electricity capacity, storage, and transmission through the proposed ITC for clean electricity. However, the Business Council is concerned that the requirement for a competent authority to commit to achieving the federal government’s goal of a net zero electricity sector is overreach and unnecessarily politicizes the use of tax policy. Such a requirement will create a political barrier that delays rather than accelerates investment in new forms of electricity capacity or into areas where it is most needed. If not defined properly, the requirement could also exclude independent power producers from investing in electricity projects in a province or territory that has not committed to the federal net zero target.

Of note, the IRA constitutes a paradigm-shifting federal investment in clean power that does not impose a binding emission reduction target or political commitment as a condition of participation. We encourage the government to follow the U.S. example and remove the

proposed requirement for a competent authority to commit to the net zero target. Finance Canada should also simplify the guidance for private companies and independent operators to build new or augment existing assets that reduce emissions and respond to new demands for clean electricity.

Clean Hydrogen ITC

Several Business Council members have a strong interest in pursuing hydrogen production technologies and appreciate the government’s efforts to design a tax credit based on a “cradle- to-gate” life-cycle approach. Finance Canada needs to strike the right balance, setting ambitious carbon intensity tiers for hydrogen that are realistic and flexible, taking into consideration the relative carbon of a local grid. An overly prescriptive approach that permits access to the highest tax benefit based on the lowest carbon intensity could minimize Canada’s potential to be low- cost high-volume producer of affordable hydrogen.

The approach to measure various hydrogen production processes should be technology-neutral and considerate of a broader range of technologies, such as pyrolysis or gasification, providing the appropriate carbon intensity tier requirements are met. Canada’s carbon intensity requirements should be aligned with international best practices and consistent with models widely used and accepted in the U.S. and Europe. This will be especially important given that major trading partners such as the European Union will move forward with their Carbon Border Adjustments policy for hydrogen in September.

Lastly, the design features released in Budget 2023 do not sufficiently address ammonia-related expenses or other derivatives used to transport hydrogen such as methanol. Excluding transportation-related expenses from the hydrogen ITC would be a shortcoming that holds back Canada’s potential to become a major producer and exporter of hydrogen.

Finance Canada needs to send a clear and bankable market signal articulating the details of its ITCs. The sooner it does so, the sooner companies can invest in emerging technologies and equipment.

Keep coverage broad and allow capital formation through diverse partnerships

Clean technology projects are integrated, and no project works without its constituent parts. In real terms, project budgets include costs beyond specific technology.

Finance Canada should ensure that a broad suite of capital assets is eligible under each ITC. Assets should include a range of clean technologies and the equipment and infrastructure required to support major projects, such as dedicated roads, building structures, power, and water treatment facilities. Ensuring that the ITCs capture a broad suite of projects will help level the playing field with the U.S. and can better position Canada as a global destination for investment in emerging clean power technologies.

Companies and investors have a proven ability to create partnerships and consortiums designed to pursue project opportunities. New partnerships have no tax history and will not be able to generate revenues until their projects are operational, which could take several years. Investors seeking to leverage the ITCs may be impeded by the fact that partnerships or consortiums can include entities with varying levels of tax liability. Of all the ITCs, only the Clean Electricity ITC is accessible to non-taxable entities. While this is a good first step, Finance Canada should ensure that all owners and forms of partnerships, including tax-exempt groups such as Indigenous peoples, can benefit from the proposed ITCs. Doing so would unlock the full potential of Indigenous groups interested in pursuing clean technology projects while advancing Canada’s commitment to economic reconciliation.

Reconcile project and ITC timelines

Clean technology projects often have long and unpredictable regulatory, permitting and construction schedules typical of modern infrastructure projects in Canada. The federal government has recognized the challenge to building major projects in Canada and committed in Budget 2023 to outline a plan to improve the efficiency of project approvals and permitting processes by the end of this year⁹.

Unexpected project delays introduce a binary risk that project proponents manage through their relationships with infrastructure lenders and various financial instruments such as non-recourse project debt financing or equity. Securing financing for major projects takes time and evolves over the duration of a project and the risks it is exposed to, altering project schedules and their respective timelines. As currently written, the ITCs include hard cut-off dates and eligibility criteria contingent on clean technologies coming into service.

While these design features are intended to drive near-term project development, they can limit the use of ITCs for longer-lead time technologies and projects that start before and continue after the ITCs wind down, inadvertently discoursing investment. Consideration should be given to developing a safe-harbour provision, similar to what exists in the U.S., where qualified capital expenditures will continue to benefit from treatment after the hard cut-off date.

Only the CCUS ITC permits tax benefits when expenses are incurred rather than when eligible properties become available for use. We recommend that Finance Canada aligns the timelines of all ITCs with the CCUS ITC so that companies can maximize the full value of tax benefits offered by the government. Doing so will allow companies to deploy capital to projects more efficiently and reduce the need to borrow or find other sources of capital during a project’s construction phase.

The Business Council also recommends Finance Canada delay the assignment of a date of expiration of its ITCs until the government has confirmed how it will improve the regime for approving and permitting major projects in Canada.

The business community appreciates that all tax credits are refundable. Estimated project costs can vary, with some exceeding billions of dollars in investment. Quarterly rather than annual remittance can help ensure that project proponents will benefit from a reliable and predictable cash flow.

Labour conditions and prevailing wages

Canada’s major employers share the government’s vision to create good careers and opportunities for Canadians during the energy transition.

Canada’s economic security and climate objectives urgently require a record level of investment, and the proposed ITCs are helpful in this regard. Capital and a strong and nimble

workforce are needed to mobilize projects in support of sustainable growth and in accordance with the country’s emissions reduction targets. Firms deploy a mix of trade and non-trade workers through a variety of collective bargaining agreements negotiated between workers, employers, and unions regardless of trade versus non-trade affiliation.

At the same time, wage growth in Canada is accelerating while the national joblessness rate is amongst the lowest in decades. For its part, Canadian firms employing more than 500 people offer the highest average weekly working wages¹⁰ and the most comprehensive training programs in the country. However, the Canadian labour market is aging, and the construction sector is no exception with its record high vacancy rate leading to shortages of labour and skilled trades.¹¹

We urge the government to think carefully about imposing unduly restrictive labour requirements so that capital can quickly be deployed to projects that create more employment opportunities for Canadians. A race for clean energy talent is underway, with the U.S. already drawing on the international workforce to support projects incented by the IRA. Canada needs to be careful.

The proposed labour conditions include a very narrow interpretation of an eligible labour agreement. We recommend that any collective labour agreement, existing or forthcoming, regardless of trade versus non-trade affiliation, that is registered with a Labour Relations Board of a province fully satisfies the government’s eligibility requirements under the respective ITCs.

Clarity about important items such as how a prevailing wage will be calculated and the work or property it should apply to is also necessary so that project owners can determine their ability to maximize the benefits available under each ITC. Additionally, geographic and demographic conditions may create apprentice shortages where skilled workers are not available to work on a project, limiting a company’s ability to fulfil the proposed requirements for apprentices.

Finance Canada should consider adding a “good faith effort exception” to account for potential labour shortages that are outside an employer’s ability to control. Clarity on how the Canada Revenue Agency will determine ‘gross negligence’ is also necessary.

Labour requirements need to prioritize certainty, clarity and minimize the administrative burden associated with compliance. Requirements need to be flexible and recognize the diverse skillset and availability of trade and non-trade workers in different sectors and in various locations across the country.

As written, achieving the proposed requirements will be challenging and could result in a 10 per cent reduction in the ITC rate, forcing companies to either delay their final investment decision or pay the proposed penalty to access the full credit. Much work remains to be done before the proposed labour provisions become law so that businesses can invest with confidence and unlock the full potential of clean technologies offered through the ITCs.

Reciprocal treatment

The federal government is exploring potential measures to address domestic content requirements and develop reciprocal treatment for countries with mutual agreements or pre- established trade agreements.

Businesses require unfettered access to a diverse supply of equipment and services provided by a fluid global supply chain. Domestic content requirements should be pursued with caution and Canada would be wise to work with its trading partners to create rules that are compliant with World Trade Organization rules, the General Agreement on Tariffs and Trade and respectful of major trade agreements such as the Canada-United States-Mexico Agreement.

Requiring Canadian businesses to source inputs from certain countries over others can significantly increase project costs thereby impacting the business case for proceeding with the project in Canada – undermining the very purpose of the ITCs. In addition, requiring Canadian businesses to source critical inputs outside their normal supply chains increases the risk of costly delay-causing disruptions.

The Business Council urges the federal government to decouple its objectives concerning reciprocal procurement measures from the proposed ITC regime. At a minimum, a domestic content requirement should not compromise a company’s ability to achieve the maximum base rate offered by an ITC.

Conclusion

Successful uptake of the proposed ITCs will require clear terms and conditions that are easy to understand, applicable to companies, and useful for project budgeting and financing purposes. In broad terms, the success of the ITC regime will be judged on the amount of investment it can drive towards clean energy technology projects.

The government’s ability to be disciplined and implement a broader policy framework that focusses on encouraging higher levels of investment will also be key to the successful uptake of the ITCs. New regulations focused narrowly on reducing emissions in specific sectors could jeopardize the government’s objective to level the playing field with the U.S. and discourage the record levels of investment Canada requires in the near term.

1. https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas- emissions.html
2.  https://ourworldindata.org/per-capita-co2
3.  https://business.bofa.com/en-us/content/bank-of-america-institute/sustainability/IRA-ripple-effect.html
4. https://www.brookings.edu/articles/economic-implications-of-the-climate-provisions-of-the-inflation-reduction-act/
5. https://thoughtleadership.rbc.com/the-2-trillion-transition/
6. https://www.budget.canada.ca/2023/report-rapport/chap3-en.html
7. https://www.canada.ca/en/natural-resources-canada/news/2022/08/canada-and-germany-sign-agreement-to- enhance-german-energy-security-with-clean-canadian-hydrogen.html
8. https://climateinstitute.ca/reports/big-switch/
9. https://www.budget.canada.ca/2023/report-rapport/chap3-en.html#a7
10. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410021701 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410021701
11. https://cibccm.com/en/insights/articles/in-focus-if-they-come-you-will-build-it-canadas-construction-labour-shortage/

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Dear Deputy Prime Minister,

Please accept this letter as the Business Council of Canada’s submissions in response to the government’s consultations regarding the draft Digital Services Tax Act. Given the Council’s primary concerns about Canada’s unilateral imposition of a DST are based on trade priorities not tax policy, our comments do not seek to address any of the technical aspects of the draft legislation only the coming into force provisions.

The BCC would have been forced to oppose the introduction of the draft Digital Services Tax Act if it had the legal effect of requiring the government to impose the tax on January 1, 2024. Yet, our reading of s.123(2) – the second subsection (2) in bold type found in the Legislative and Regulatory Proposals Relating to the Digital Services Tax Act consultation document – is the Act would not have that legal effect.

This second s.123(2) of the draft Act says regulations will come into force “on the day that is fixed by order of the Governor in Council, but not earlier than January 1, 2024.”  We note this language differs from that found in other draft legislation, also the subject of ongoing departmental consultations, which states those other acts or regulations shall “come into force or is deemed to come into force on January 1, 2024.”

In addition, s.123(2)also requires that in fixing the date for the coming into force the government must consider the intent of the Organization for Economic Co-operation and Development (OECD) statement in support of a two-pillar solution to address tax challenges arising from the digitization of the economy; Canada’s preference for a multilateral approach; and the status of the international negotiations.

Our interpretation of s.123(2), then, is the government is expressly preserving the option of deferring the imposition of any DST until a date after 2024, which would be consistent with what was agreed to by the vast majority of OECD countries earlier this summer. If this interpretation is correct, we support the government’s chosen direction as we urge you to defer imposing a DST pending the ongoing OECD negotiations.

As we have written to you previously, we are concerned Canada’s unilateral imposition of a DST in 2024 would undermine our vitally important bilateral trade relationship with the United States. The Biden Administration has made clear, with the support of leading Democrats and Republicans in Congress, that if your government does so it would leave them “no choice but to take retaliatory measures in the trade context.”

Any retaliatory trade action would severely harm our national interests.

Yours very truly,

Goldy Hyder

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Madam Chair, committee members, thank you for the invitation to take part in your meeting on Canada-U.S. softwood lumber trade.

The Business Council of Canada is composed of 175 chief executives and entrepreneurs of Canada’s leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses.

Since our establishment more than four decades ago, the Canada-U.S. partnership has always been a top priority for our members. We played a critical role in the supporting the development of the first trade agreement in 1987 and its expansion into NAFTA, as well as with our new framework, CUSMA.

Today, Canada and the United States enjoy a strong, mutually beneficial trade and investment relationship. 2022 was a record year for exports, and in the big picture, the future of bilateral trade looks bright, in large part due to the greater certainty provided by the CUSMA.

Unfortunately, this certainty has not extended to the softwood lumber industry nor to the various industries that rely on lumber inputs, such as homebuilders.

Softwood Lumber Agreement

We believe the only workable long-term solution to provide certainty and stability for the industry would be a new softwood lumber agreement.

We are disappointed that eight years after the expiration of the last softwood lumber agreement, there is no new agreement in its place, nor are there active negotiations toward a one.

A new agreement would clearly be in Canada’s interest, but also in the interest of American consumers as well.

We understand that there has been resistance by certain industry groups in the United States to negotiate a new deal, and as a result, this has not been a priority for the administration.

However, we know there are many supporters as well. Just last year, Members of Congress called on the United States to return to the negotiating table.

We were especially encouraged to see United States Senators Menendez and Thune, a Democrat, and a Republican, respectively, call on the administration to negotiate a new deal to benefit industry and consumers, particularly to reduce home building and housing costs.

Following up on this initiative, the Business Council of Canada sent a letter calling on the government to work with these congressional leaders, as well as other supporters in the United States, to build some renewed pressure toward a new deal. This is still possible, and we encourage Canadian officials to intensify efforts with likeminded partners in the United States to make progress toward negotiations this year.

Extending CUSMA

Securing a deal becomes more important as we approach the review and what we hope will be a smooth extension of CUSMA in 2026. While there is still considerable support for the agreement across a range of stakeholders, we should not take support for granted.

To create the conditions for extension, it should be a priority for Canada to reduce the number of irritants and disputes facing the trilateral trade relationship. Reaching a long-term solution for softwood lumber would certainly improve this discussion.

WTO

Another challenge in resolving this dispute has been the state of the WTO Appellate Body. This concern extends well beyond softwood lumber, but this dispute also demonstrates how important this institution is for Canada.

We were encouraged that at the 12^th Ministerial Conference the United States and other WTO members agreed to restore full functionality of the dispute settlement system by 2024.

We urge Canada and its partners in the Ottawa Group to work closely with the United States this year to overcome longstanding concerns and restore this important system.

Buy America

The recent expansion of Buy America rules to include a broad range of construction materials further threatens to harm Canada-U.S. lumber trade. We reiterate the importance of Canada securing a carve into any proposed restrictions placed on government procurement.

Conclusion

We urge Canada to prioritize securing a softwood lumber agreement. The Business Council of Canada and its members stand ready to support efforts to build a more stable and prosperous Canada-U.S. relationship and a competitive North America. Once again,

Thank you for this opportunity. I look forward to answering your questions.

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