Finance Committee on March 12th, 2015

[Ron Watkins]

As you know, it's an issue before the tribunal even as we speak. There was a recent determination by the CITT to establish anti-dumping duties in relation to three other countries. Our industry is prepared to compete in that market on a fair market basis, on the basis of market economics. What we find we can't compete with is foreign governments and foreign dumping practices, and that's why the trade remedy system is important.

The B.C. market is served somewhat by our members, but it's served by imports from several other countries, including the United States, and as long as that trade takes place on market-based principles, then we simply have to compete.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Cannan.

Mr. Côté, you have the floor.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I would like to thank all the witnesses for coming to our meeting.

Ms. MacEwen, in his presentation this morning, Mr. Myers stated that the change in the environment of the Canadian economy was not such a good thing to the manufacturing sector. Namely, he said the following:

More generally, plunging oil prices are a signal that all is not well in the global economy. It is a reflection of uncertainty, and uncertainty is not good for investment.

Do you agree with Mr. Myers?

[Angella MacEwen]

That's true. If you look at the geopolitics going on right now in oil-producing countries like Russia and countries in the Middle East and at the decision of OPEC to increase supply, absolutely it looks as if the reason for the price of oil is global political instability, and that is of grave concern. Also, in terms of trade and growth, Europe is unstable, and the United States is uncertain and unstable with regard to how they're going to respond to that crisis. I would agree that certainly has to be taken into consideration when manufacturers are making decisions.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

It seems that we have missed a wonderful opportunity to invest in order to be better positioned to take advantage of current conditions. Investment was not all that great in the manufacturing sector. There is a huge trade deficit in terms of non-energy exports. Some sectors have performed well, but overall, it is a big problem.

I re-read an open letter from a renowned economist, Joseph E. Stiglitz, published in Project Syndicate, where he said that the austerity recipe and the mix of corporate tax cuts associated with lower spending weakened the economy and had practically no effect on investment. He said that, on the contrary, higher taxes are not an obstacle to business investment, especially as most corporate investment is in any case financed by debt and interest payments are tax deductible.

Obviously, we have been in the grip of magical thinking in recent years. We really missed the boat; we got left behind.

[Angella MacEwen]

Yes, absolutely. For the past three or four years, I think, the Canadian Labour Congress has been calling for using taxes to raise more revenue to make public sector investments in the common good. Again, that's to shift to the economy of the future that we're going to be needing, with green infrastructure, the increases in public transit that the mayors across Canada are calling for, increases in retrofits to make homes energy efficient, and also to train workers to do these types of jobs that we're going to need in the future, and to make sure that workers in industries that are shifting and the industries that are shifting have the support they need to transition to a different kind of economy.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

My question is for you, Ms. Blake. Thank you very much for participating in our meeting by video conference.

I do not want to stir things up, but I must say that at the time, when your former MP Brian Jean spoke about the lightening fast development of the oil sands, he mentioned infrastructure problems. You mentioned that. I think your positive attitude is quite appropriate. However, the challenge is enormous, both in terms of road infrastructure or the infrastructure associated with providing services to people.

Mr. Jean wondered about what decision should be taken in terms of hospital services in your part of the country. He clearly stated that the management of the oil sands operations was not a federal issue but a provincial one.

Are you inclined to agree with him?

[Melissa Blake]

Very generally I am, and I think this is a significant investment in natural resource development. The fact that I have some 40,000 people who come to our region from all parts of Canada makes me believe that there is some evidence the Government of Canada is not only benefiting from it but should also contribute to some of these more collective projects. I look at the airport. That's a fine example of what would be a good investment for Canada.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much.

Mr. Watkins, I am the member for Beauport-Limoilou, which is one of the five urban ridings of Quebec City. Many important debates are held in our beautiful city, including debates on infrastructure. A streetcar project was put on hold for a while. As Ms. MacEwen said, we must consider investing in an adequate infrastructure program to meet the challenges facing our municipalities and intercity transportation.

Given the current climate of economic restraint, independent of the level of government, the project was scaled down to become smaller and less costly. However, experts are protesting and saying that, on the contrary, this is the time to invest in infrastructure that is truly substantial and heavier, and especially more efficient in terms of public transport and traffic flow.

Considering the impact this could have on your industry, should we be much more active in terms of investing in infrastructure at different levels? This could also involve intercity transportation with a high-speed train.

[Ron Watkins]

Time is tight, but to answer the question very quickly, as I mentioned earlier, infrastructure or construction broadly is a significant end-use demand for steel products, and investments in physical infrastructure certainly pull steel demand, frankly, so that is very much an area of activity that's important to our industry.

We've been supportive of efforts by both federal and provincial governments to put in place long-term infrastructure plans and do everything we can to encourage the procuring agencies to give every consideration to Canadian suppliers.

[The Chair, Conservative, James Rajotte]

Thank you.

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

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

Thank you to all of you for being here.

Following up on Mr. Côté's statement about austerity and the lowering of taxes as being a drag on the economy, I wonder if we could get an opposing view, or if there is an opposing view from the other three members. Do you feel that it's a bad idea to lower taxes and encourage governments to spend less money?

I'll start with you, Mr. Watkins.

[Ron Watkins]

I think this was discussed a bit in the previous panel as well, that having competitive tax rates and regimes in Canada versus our competitors is very important. I think it has benefited not simply our own industry, but we always look at the impact of tax measures on our customer base, basically, on manufacturers and—

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

I guess my question should be, has what the federal government done in lowering corporate taxes, lowering GST, and all these other things been a positive thing for industry?

[Ron Watkins]

I think it has contributed to the growth in manufacturing, but we also look at some of the very specific measures like the accelerated capital cost allowance that Mr. Myers commented on earlier and the impact that's had on capital investment by manufacturing. In a sense it's not just the tax rate, but it's also the related incentive measures for investment.

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

Ms. Cobden.

[Catherine Cobden]

I'm going to echo the point that we need to be vigilant on looking at our hosting conditions. I think great steps have been taken. More steps can be taken.

On the point about spending less, obviously we have a strong partnership with the forest industry and with government on our innovation system and that kind of thing, and I don't think we should be ill-informed about what other nations are doing with their industries. We need to be careful and considerate, but we still need to look at how we work together in joint investments to compete in—

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

The two of you would agree that the two are connected.

[Catherine Cobden]

Yes.

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

If we lower taxes as a government, because we're taking in less, we have to be more cognizant about it.

Mr. Volpe, what do you feel?

[Flavio Volpe]

In our narrow band of parts manufacturers that export but compete ostensibly in NAFTA with U.S. and Mexican jurisdictions, one of the key sales points we have for investment here is the combined federal-provincial corporate tax rate. Among all the other dynamics that we fight against, that's a positive for us for a new customer base.

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

Thank you.

I'm going to go to Ms. Cobden for a second.

It's a great success story, and our illustrious chair Mr. Rajotte and I served in industry and we went through those trying times. Those were difficult times. I remember that we all struggled with what we should do.

This is going to be a segue to Mr. Watkins. One of the questions that was raised was whether there were other jurisdictions that have done other things in forestry. Interestingly enough, Sweden has. They started to recognize that boreal forests cover the whole planet and they're going to start producing the industry.

You've done some marvellous things. You've done innovative things. It's great to see. Again, it was very painful to watch some of these mills that were inefficient and couldn't survive close, but you did some marvellous things. I'm going to ask you both, is there something else that the forestry industry.... I'm going to ask the steel industry, because you're in the same position. Interestingly enough, while you had the opportunity when you had the high dollar, you didn't take that opportunity. I'm not being critical, but what I'm saying is that when the investment was made and when you had the opportunity to make the investment, we failed to make those investments. I'm just curious. Is there something that the forestry industry is doing besides just doing a great job milling and such, or are there some areas you're exploring that we, as Canadians, could be leaders in?

Mr. Watkins, I'm going to ask you the same question.

[Catherine Cobden]

First of all I have to say that it's really nice to be able to talk about some successes after the decade we've had, so that's fantastic.

Absolutely, we're exploring. We've launched Vision2020, and it was not lacking in ambition. We want to add $20 billion to our $57 billion current situation. We want to do this by ensuring that we extract as much value as we can in a sustainable way to make products to serve the world. We are on that journey. We've had some great successes with that journey thus far: the investing in forest industry transformation program, for example, and the pulp and paper green transformation program.

To your point about what Sweden, Finland, Brazil, and Russia are doing, they're gearing up already to capture the new growth that's coming, so we have to continue what we've been doing.

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

The ACCA...those are all important.

[Catherine Cobden]

Yes.