Finance Committee on Oct. 1st, 2014

[An hon. member]

We're paid by the word.

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

We'll go to Mr. Adler, please, for a five-minute round.

[Mark Adler, Conservative, York Centre, ON]

Thanks to all the witnesses for being here this afternoon.

We have a unique responsibility here at the finance committee during these pre-budget consultations, insofar as we have to submit a number of recommendations on how to use what we anticipate will be an upcoming fiscal dividend. It's very important that we are able to separate the wheat from the chaff when we submit our recommendations at that point.

I want to begin with you, Mr. Petrou, if I may. We are at a very critical crossroads in the aerospace sector here in Canada. We saw that with the Emerson report, which highlighted all of the difficulties and the challenges we have going forward.

I have a number of avenues I want to go down with you, but initially, could you talk about how competitive the international marketplace is in the aerospace sector right now? If we don't get on that train which is leaving the station now, we're going to be in a lot of trouble.

[Andrew Petrou]

The numbers speak for themselves. We're seeing many countries come to life. We know it's projected there will be a need for 35,000 new planes, which is a value of $4.8 trillion, between 2014 and 2032.

We're in the perfect storm. You have the Asian market, I'll call it, emerging with a middle class that's demanding to travel. We're seeing countries like China and India building massive runways to facilitate that. In the same breath, you have the U.S., whose whole fleet is getting to the end of life, so they need to replenish that fleet as well.

It has become a rush. You're seeing countries emerge that have never been in aerospace starting to build hubs, Mexico being one of them and Brazil being another. Singapore has thrown a lot behind this. The U.K. has thrown two billion pounds behind a hub. We're seeing many of these countries starting to emerge because of this demand.

[Mark Adler, Conservative, York Centre, ON]

We're also seeing India and China getting on board, too, which is remarkable.

A number of my colleagues came back recently from the Farnborough air show. They went there not really knowing what to anticipate when they got to the show, but their minds were just blown away by the level of interest on the global scene in the aerospace sector. This is really important for us as a country.

Could you talk about the skilled workforce? You broached this a bit. Bombardier is in the riding of York Centre, which I'm so privileged to represent. Right now they have 4,000 direct jobs and people employed at Bombardier. The problem is an aging workforce. The average age is something like 54 or 55. Those people are going to retire. Where are the people going to come from to replace those people who are on the cycle of retirement?

[Andrew Petrou]

The critical point is that we need to skill our youth to replenish this demand. One of the members of DAIR, Centennial College, simply listed an opportunity for potential positions of 60 seats for training just on assembly, and over 350 people showed up. It is this opportunity that is there for us, but we need the key factors, the equipment and tools to do that training and have it at a high level.

We must remember that Canada leads in understanding aerospace and the training of the industry because of the cost and also our knowledge, but what's happening is that if we don't keep moving and keep our students and graduates current, we will lose out to these emerging countries.

[Mark Adler, Conservative, York Centre, ON]

Putting all of these different facilities on one site, into one hub, would go a long way to do that. It would be critical to its success.

[Andrew Petrou]

It would accelerate something we have never seen before. For example, if you have a university and a college talking about hybrid programming with an industry partner on site, imagine walking students on their first day of class into Bombardier's 4,000 employee facility to watch planes being assembled, to the point where if Bombardier had a plane out of service, instead of landing it in Arizona to be chopped up, they donated it to an institution so the students would have the latest in technologies.

It would create such a micro ecosystem that would accelerate productivity on every level, which we have never seen before.

[Mark Adler, Conservative, York Centre, ON]

How critical is this to the success of Canada's future aerospace sector, and what does it mean for our national economy?

You mentioned that 80% of the product that is produced right now is exported.

[Andrew Petrou]

I think it's make or break. If we do not expedite the opportunity for this hub to come together—

[Mark Adler, Conservative, York Centre, ON]

—now—

[Andrew Petrou]

—now, then we're going to be looking in the mirror saying that we've missed out on this incredible opportunity. The opportunity is now.

[The Vice-Chair, NDP, Nathan Cullen]

Thank you, Mr. Petrou.

Thank you, Mr. Adler.

Mr. Brison, for up to five minutes, please.

[Scott Brison, Liberal, Kings—Hants, NS]

I would like to begin with Mr. Hamdullahpur.

In your presentation you discuss some of the challenges from a funding perspective in terms of research and granting councils. Federal funding for the tri-councils has not been keeping up with inflation in recent years. Accounting for inflation, SSHRC funding has dropped by more than 10% since 2007. NSERC is down 6.4%, again, accounting for inflation. CIHR is down 7.5%.

What is the impact of these cuts on the ground for the research community? What kind of trade-offs are your members making when it comes to research and innovation to account for that?

[Dr. Feridun Hamdullahpur]

While we are accounting for innovation, we also recognize that our economy has gone through a major crisis. Overall, at universities, we were, I wouldn't say extremely pleased, but comfortable with the fact that our research grants, or grants from the tri-councils, did not experience major cuts.

We are looking at the entire continuous system, and in this system there are emerging elements that are making our researchers excited, like Banting's and the Canada first research excellence fund, and other initiatives.

When we look at the trajectory, I think our researchers at universities are still quite optimistic that the research environment is on an upward trajectory.

[Scott Brison, Liberal, Kings—Hants, NS]

What do you see as the biggest gaps to be addressed in Canada's digital infrastructure?

[Dr. Feridun Hamdullahpur]

Our biggest gap right now is our focus for lack of investment in that area, not just monetary investment, but our universities, and also investment in terms of our resources, and talent investment.

We need to bring our collective heads together to ensure that we are allocating enough resources and providing the kind of environment so that this gap will close very fast.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

Mr. Nantais, it's nice to see you back at committee. We recognize the incredible importance of the automotive sector to our economy.

What are the best programs that you've seen, in terms of examples of federal government leadership, in terms of helping the auto sector create jobs in Canada? Perhaps you could give us a couple of examples of what you have seen of federal government-led best practices from the past that have worked in creating jobs here in Canada.

[Mark Nantais]

I'll give you three, and then one proposed.

First off is the automotive investment fund. Certainly the top-up of that fund was extremely important. Certainly, we wouldn't be where we are right now if it wasn't for that fund, as well as SR and ED, as well as the accelerated capital cost allowance. These are all things which are very positive in terms of moving new investment along.

There is now the Canadian Automotive Research Institute, CARI, proposal. The reason we are so supportive of this proposal is that while other parts of the system deal with basic research, or peer research, the key thing—and this is why other jurisdictions are getting so much of the new investment—is that they're responding to industry's needs on the innovation, product development, and commercialization side.

This is something where we lack. It is what we call the valley of death. I heard that earlier today. It's that valley of death that is being filled by other jurisdictions in the programs they are putting in place. That's what is really critical here. They do that because they're going to keep the jobs there.

It's important, particularly at our critical juncture where we have new GHG regulations for vehicles. These are technology forcing. There is going to be no single technology pathway. There are going to be multiple pathways. Innovation is going to take us there, and this is a program that is going to be very helpful.

[Scott Brison, Liberal, Kings—Hants, NS]

The SR and ED program was very important to your sector, and it would be a good idea to bring it back and address some of the issues with it, but to bring it back.

[Mark Nantais]

These are programs in response to what other jurisdictions are doing and they need to evolve. Some changes were made to the SR and ED program that actually diminished the value of the program to our companies. That needs to be addressed. The AIF money is very helpful but it needs to evolve in response to what other jurisdictions are doing as well.

Those are the key things here, evolving and being responsive to what other jurisdictions are doing to attract new investment.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you all for coming.

Mark, I want to keep on going with you. I want to talk about some other good things, the good news coming out of Ford today, actually great news. Ford is an interesting company. As you know, I'm from the automotive industry in a past life, and I remember the old Fords. What they did is nothing short of spectacular, in a short period of time, by creating a whole new line and being competitive at the world stage.

If I understand this correctly, the plant in Brampton—I believe it's in Brampton, the one with 1,000 workers—will be able to export cars from Canada into jurisdictions other than North America. Am I right?

[Mark Nantais]

It's the Oakville Ford plant. The key thing with new investment and product mandate is to have a global platform so that we can actually export from Canada.

Yes, our companies generally build where we sell, but the idea now is to maximize capacity utilization, find global mandates, and export product from Canada.