Finance Committee on Oct. 22nd, 2009

[John Dewar]

Let me get to that.

Let's say you can purchase that ship in China for $24 million and it costs a little over $75 million to build that same ship here. On the $24 million, you add a 25% vessel import duty—to which you're referring—which is $6 million. Now you have the price up to $30 million, and frankly, it still looks pretty attractive compared to a price of $75 million. So that vessel import duty, by itself, is not enough, given the rest of the policies.

As it turns out, and I'm sure my colleagues in the shipowners association will say this, it's really just a fine to them for having the audacity to purchase overseas.

[Mike Wallace, Conservative, Burlington, ON]

I agree.

[John Dewar]

The rest of this you can apply against that, and it actually decreases the price to the customer on the Canadian side.

The structured financing facility can buy down the total cost of that project by about 15%, and 15% of $75 million is going to be something in the order of $10 million. Now the difference is down to $65 million compared to $30 million. It's approaching the right direction.

The other is that the accelerated capital cost allowance to the owner is also worth about 15%, but you can only pick one or the other.

[Mike Wallace, Conservative, Burlington, ON]

Right. If you combine them, that would make it a 30-point deduction in the price.

[John Dewar]

That's right, yes.

[Mike Wallace, Conservative, Burlington, ON]

That's even though the price differential is relatively stiff, even after the 25% they have to pay as an import tax.

[John Dewar]

Today it is, yes. But if you look at the prices in 2006, the ship you can get in China for $25 million or $24 million today would have been about $40 million, because they weren't going to let that margin go. In those conditions, the difference actually came to a wash, or very close to it. The market price is not always going to be where it is. I think you'd be naive to think that. You have to put policies in place that are going to allow the playing field to be levelled out.

On the issue of occupational health and safety, I'll just give you an idea of the magnitude of that. When we looked at the cost of building that ship in China, applying our health and safety standards to that price would increase the price of that ship by about one-third. So there's a lot to this.

If you want to have a shipbuilding industry in Canada to build those built-in-Canada federal ships, something has to be done to improve the conditions now.

[Mike Wallace, Conservative, Burlington, ON]

I don't disagree, and we're not here to argue about marine issues. But if the government of the day had made the decision 30 years ago, or longer, that we were going to be in the shipbuilding business--because a laker hasn't been produced in this country since about the mid-1980s--policy should have been developed then. Now we're kind of behind the eight ball this far out.

Would you not agree?

[John Dewar]

Yes, I think conditions are pretty desperate for building it. One of the things you have to bear in mind is that these old service shipyards that are capable of building ships are essential to the marine operators to maintain and repair the ships they have. So you have to find some way to preserve that capability, even if there's not shipbuilding available for new construction.

[Mike Wallace, Conservative, Burlington, ON]

I'm going to ask two more questions.

First, I want a clarification from the investment group. Your brief has six items, I think, and your presentation today had three.

Are those three your priorities?

[Debbie Pearl-Weinberg]

Those would be our top three priorities.

[Mike Wallace, Conservative, Burlington, ON]

If I'm reading it right, you don't want the HST applied to investment brokers. Is that what you're saying in that last piece?

[Debbie Pearl-Weinberg]

It was specific to the management piece.

[Mike Wallace, Conservative, Burlington, ON]

You don't want it applied. It is not applied now, I don't believe. You don't attract PST at this particular moment, right?

[Debbie Pearl-Weinberg]

No.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

My last question is more philosophical. You brought it up, so I thought I'd ask.

I hear a lot from Canadians who ask how we can let a company go. Somebody else is buying it. Dofasco for example, which was a good, solid steel company in Canada, was bought by Belgians. We have other companies purchased by foreigners.

I often push back a little bit and say that maybe Canadian business leaders aren't aggressive enough. Why didn't Dofasco get out in front of the curve and start buying up other steel manufacturers around the world? Most companies see what's happening within their industry.

Do you believe there's something missing in the educational aspects of our business leaders so that we're not as aggressive as we should be as Canadians?

[Debbie Pearl-Weinberg]

I'd love to have a long conversation with you about it. I will confess that in a previous life I was a deputy minister for economic development and trade for about 10 years or so in the Ontario government, so I'm obsessed with this issue.

Yes, I do think we have a problem in Canada. I do think we have a problem with being entrepreneurial. I do think we have a problem with management, with risk. I think we're risk-averse. I think we need to manage risk. I think we need to accept risk and I think we need to look at the levers.

One of the things I don't see is a lack of entrepreneurship in students. I don't see risk-aversion in students. You know, somehow they come in....

We want them to accept risk. And the creativity is amazing.

What we need is, firstly, the capacity to get them doing research. It's one of the things, by the way, that the University of Toronto--not being parochial for a minute--does extremely well. Because of the excellence of faculties, every student has an opportunity to do research.

So it's getting those juices going. That begins to do it, but you really need a better system of faculty-student engagement. You need to make sure that when they do research, it doesn't cost the institution.

I will take 40 seconds and just speak to that issue. It sounds odd when people say, “What are you talking about, the full cost of research?” What I will say is it's the research that will help us be competitive internationally. Researchers get grants, and those grants go to the research. What they don't get is all the overhead.

So it's like saying, “I'm going to give this to you, but I'm not going to give you the lights, I'm not going to give you the power, I'm not going to give you the chairs to sit on, and I'm not going to give you the desks.” This is real. Where does it come from? It comes from the operating grants to the university to support the research, and that's why “full cost of research” is what we're talking about.

Now, to be fair, the province does give 40¢ on the dollar. But the federal government gives 20¢ on the dollar. This has been a long problem: you get a grant, but it's on the backs of the undergraduate experience to pay for the research that's going on.

That's why it's a real problem. It's a serious problem. It's not a money grab here. It's a serious problem.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

We'll go to Mr. McCallum, please.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

Thank you all for joining us. This is our last session in our last city across the country.

Ms. Wolfson, I notice you're very adept at turning a question around to advance your main cause.

[Voices]

Oh, oh!

[Judith Wolfson]

I learned it from you.

[Voices]

Oh, oh!

[John McCallum, Liberal, Markham—Unionville, ON]

I'll raise a question with you to begin with.

As you know, or you may not know exactly, I have spent twice as many years in academia as in politics, so I'm naturally quite sold by the thrust of your argument. Mine is a more specific point, where you talk about removing commercialization activity from those entities that are not market-facing and never will be.

We had a person in here earlier today who was saying that to get a research grant, you should get extra points and be favoured if it led to commercialization. I kind of reacted against that.

What is your view, or the University of Toronto's view, on commercialization? Where does it fit? Should there be incentives to do more of it, versus what you might call pure research?

[Judith Wolfson]

We need to commercialize more in this country. There's no question. Our view is that the primary role of the university is not to commercialize, it's to create discovery, and then to help in getting that knowledge transferred. It's the private sector's job primarily to do the commercialization, but you have to have bridges.

So the more we can have technology-transfer bridges, the more we can have the MaRS discovery districts of our world, where you bring the folks together. That's the proper role. But it isn't the role of a professor; with the greatest of respect to academics, they're not primarily there as business people.

So I think what we need to do is ensure that they discover and they transfer knowledge and that we have receptors.