Thank you very much, Mr. Chair, and thank you to the committee for looking at this very important and urgent issue for two of the most important sectors of the Canadian economy, the manufacturing and exporting sector, and for all those service jobs that depend on a strong manufacturing and exporting sector. I think it also shows the importance and the urgency of implementing the recommendations of the House of Commons industry committee that were tabled earlier this year.
I speak on behalf of Canadian Manufacturers & Exporters, but I also speak on behalf of the 37 industry associations that are members of the Canadian Manufacturing Coalition. We cover the entire manufacturing sector, and we've distributed the letter that we've written to the Prime Minister outlining our policy priorities for manufacturing over the year ahead.
I've distributed this presentation to all members of the committee as well. You'll be glad to know that I'm not going to go through it page by page in this presentation, but it does show the impact the Canadian dollar is having on manufacturing sales, on pricing. It draws from the 1,014 manufacturers we surveyed earlier this year who have said that the appreciation of the dollar is their most pressing concern, and it shows here what their response is.
The very rapid appreciation of the Canadian dollar, of course, acts like a price cut on export sales for many companies that are either pricing their exports in U.S. dollars or having to adjust their prices to remain competitive in their major market in the United States. We have companies that are exporting 85% to 90% of what they're producing into the United States. If you look at the impact that's having on producer prices, you'll see that finished goods prices have fallen 6%—this is over the last five years. Consumer products prices are down 12%. Machinery and equipment product prices are down 14%. Automotive prices are down 32% over that period of time. Much of that is driven by the impact of the dollar appreciation.
But the two factors that are driving the dollar up are also having a major impact on investment decisions and on the bottom line for manufacturers and exporters. Of course, as regards the higher commodity prices and energy prices that Jim was referring to, manufacturing is the largest consumer of commodities and energy, so that's driving up costs as prices are coming down. That squeeze on the bottom line means that, last year, out of an average eight-hour production shift, Canadian manufacturers had about six minutes to make money, after they paid depreciation, operating costs, taxes, and financing expenses—six minutes to make money, and that's the money they needed to invest in new products, new technology, reorganization, new market development, and skills upgrading. Those are the things they have to invest in, in order to remain competitive.
So the number one problem right now is cashflow for companies. The problem, though, is this surge in the Canadian dollar, a 25% increase that we've seen over the last six months alone—or actually since February, so I guess we're at eight months now. That rapid surge has meant that on contracts that were put in place earlier this year, companies are getting paid now, but they're getting paid something like $800,000 on a million-dollar contract. The appreciation of the Canadian dollar simply overwhelmed their pricing strategies and overwhelmed their ability to adjust costs. We're in a situation right now where many companies are simply in a loss position on their export sales and export contracts.
That's the major problem--cashflow--right now, but it's also the other problem we're seeing: the weakness of the U.S. dollar caused by a weakening performance in our key industrial markets in the U.S., in housing, automotive, and consumer markets in particular. What we're seeing is an increasing rate of plant closures—Jim referred to that—but there's a common story here. There are conditions of overcapacity in the North American market. Companies are consolidating, and with the high Canadian dollar, Canadian operations, as good as they are and as efficient and as world class as they are, are being closed because it's no longer productive to remain here.
I just want to go to the very end, the policy recommendations, which are also outlined in our report to the Prime Minister.
We recommend that the two-year writeoff window for investment in manufacturing equipment be extended to a five-year period. But I think it's also important at this time, under these very extraordinary circumstances, to consider measures that would enable manufacturers to be able to monetize the loss they're incurring, to provide some form of either a loss carry-back for companies that were profitable over the previous number of years or some kind of investment tax credit that could help them to monetize their loss at the current time.
We've recommended making R and D tax credits refundable. This is the time when companies should be innovating, but if they're not making any money, they can hardly take advantage of the R and D tax credits. So the refundability is important.
We've also recommended the implementation of a trading tax credit that could be creditable against EI premiums. All of these target cashflow, and at this very urgent time for manufacturing and exporting, and all of the other sectors that depend on it, that's what is necessary.
Thanks.