Finance Committee on Nov. 21st, 2013

[Martin Lavoie]

Okay.

Our last recommendation is with respect to the new upcoming infrastructure fund, the building Canada plan. This program will transfer $47 billion over the next 10 years to provinces and municipalities for their infrastructure projects.

We urge the federal government to maximize the benefits of these projects for the Canadian manufacturing sector and job creation while respecting our international trade obligations. Recently our organization sent a letter to the infrastructure minister to raise the importance of using the building Canada plan in order to provide a level playing field for Canadian manufacturers.

As you know, Canada has one of the most open procurement regimes in the world, and yet our trade partners keep imposing trade barriers that force our companies to delocalize their production in these countries in order to bid on projects, especially infrastructure projects.

We strongly suggest that the federal government adopt a reciprocity policy that would be implemented in the funding agreements under the building Canada plan which—

[The Chair, Conservative, James Rajotte]

Wrap up very quickly, please.

[Martin Lavoie]

Those are our recommendations.

Thank you for inviting me.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Ms. Kozhaya, the floor is yours.

[Norma Kozhaya, Director of Research and Chief Economist, Quebec Employers' Council]

Good morning.

The Quebec Employers Council would like to thank the Standing Committee on Finance for the opportunity to present its comments on the theme “Maximize job creation in consideration of the 2014-2015 federal budget preparations”.

The maximizing of jobs is, of course, predicated on the presence of competitive companies that have a favourable tax and regulatory environment. It also hinges on market innovation and openness. Equally important as the maximizing of job creation, matching available job skills and companies' needs is an essential element in raising productivity. And labour costs, including all of the mandatory contributions that add to salaries, have to be competitive.

I will start by talking about the last item, that is payroll contributions. Increasing the tax load on payrolls for employers puts the brakes on investments and job creation. In this area, the Employers Council has serious reservations about the various proposals to enhance public pension plans, meaning the Canada pension plan and the Quebec pension plan.

It is worth noting that, internationally, Canada ranks quite well in terms of retirement savings. This does not obscure the interest in promoting savings, but there isn't a generalized need. Cookie-cutter solutions such as the ones being proposed do not respond to the needs. On the contrary, this runs the risk of having adverse effects on economic activity, investments, jobs and salaries in particular. Moreover, such enhancements don't encourage the extending of an active life, an objective we should pursue.

In terms of employment insurance, which is another payroll program, we are proposing the introduction of an employment insurance credit for training expenses, which would also improve productivity and help in maintaining and creating jobs.

I would like to briefly turn to the proposal for the Canada job grant. The Employers Council hails the intention of the federal government to have more employer input by striving to have a better matching of skills training to their needs. However, we are wondering whether a more favourable course of action would be to negotiate a new agreement with the provinces so that each province remains in charge of their respective programs. The federal government could still set the national guidelines and objectives.

The area of regulations is also an important aspect to look at. Of course, businesses appreciate the continued implementation of measures designed to reduce the regulatory burden and applaud the government's desire to establish the one-for-one rule in terms of regulations. In this area, we feel that the new regulations the government plans to implement in transportation, financial services and telecommunications should adhere to the same one-for-one principle.

Quebec employers are elated by the signing of the Canada-European Union Comprehensive Economic and Trade Agreement. This agreement should come into effect in about two years' time. To maximize the benefits, we suggest taking advantage of this two-year interim to better prepare our businesses through training and information, so that they are able to effectively seize the new opportunities that will arise. The Quebec Employers Council offers its collaboration in this regard.

Investment in our transportation infrastructure continues to be a major concern in terms of ensuring optimal mobility of goods and people. We suggest that the government move ahead, without further delay, with its plans to replace the Champlain Bridge and that it promote the sustainable development of our natural resources in compliance with environmental and safety standards.

Finally, the Quebec Employers Council believes that only sound public finances will allow the government to maintain competitive tax rates and to encourage prosperity and job creation. We urge the government to continue its efforts to eliminate the deficit.

We therefore also encourage the government to introduce the balanced budget bill.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Next we'll go to Mr. Columbus, please.

[Jayson Columbus, Director, Finance and Administration, Northam Brands Ltd.]

Thank you, Mr. Chair, and members of the committee.

My recommendation today concerns federal excise rules that pertain to domestic production of apple ciders in Canada and their impact on employment, the cider beverage producers, and cider apple orchardists.

In B.C., orchardists supply apple wine as a key ingredient for authentic ciders. Producers buy bulk apple wine and use it for final packaging for consumer cider sale.

I'll provide some background on the industry, our company, and the issue at hand.

In Canada, the national retail cider category is valued at $140 million, according to the Association of Canadian Distillers, and has experienced explosive growth at 24% in the last year alone. Canadian-produced brands currently represent 63% of the market and are growing at 18% per year, slower than market growth. Import brands account for 37% of the market and lead growth at 36% per year, capturing increasing market share.

This trend is a concern for us as domestic cider producers. The cider market alone in B.C. is valued at $62 million and over 44% of the national market, making B.C. a very important contributor to national cider production.

Our group, Northam, is one of western Canada's fastest growing beverage makers in three business segments: cider, beer, and ready-to-drink beverages, such as coolers. We are ranked the fifth largest domestic cider producer nationally and we are 100% B.C. owned.

Here are some facts on the excise treatment for cider. Apple wine is a base ingredient for authentic apple cider and is regulated by wine excise rules. Cider is excise free if the agricultural content is 100% Canadian. Cider attracts 29.5¢ per litre of excise duty on finished product if ingredients in any amount are not in compliance with Canadian content rules.

We understand that the Canadian content rule for excise-free status is to assist Canadian orchards to develop and produce products in a cost-competitive manner and to compete domestically with foreign imports and stimulate Canadian business growth and employment.

We believe there is an industry issue for cider producers in B.C., and perhaps in all of Canada. We are losing ground to foreign imports primarily due to some flavour attributes of domestic industry products, an issue that can easily be corrected. To be competitive with imports, it is imperative that an authentic cider have a key ingredient, apple concentrate, that is required for mouth feel and olfactory attributes on the back of the palate.

The Canadian food and drug regulations list apple cider concentrate as the second ingredient allowable for cider, but as yet there are no reliable sources of Canadian apple concentrate. We therefore resort to using manufactured flavourings to compete with imports. We assert that only small amounts of apple concentrate are necessary for quality authentic cider to compete with foreign ciders and level the playing field.

Our recommendation is for a temporary relaxation of excise rules to allow cider producers to use a small percentage of imported apple concentrate while the industry works with Canadian producers to adapt and supply a reliable source of 100% Canadian content concentrate where no supply currently exists in Canada.

We request a staged approach to the relaxation of excise rules over a period of 10 years to allow small amounts of foreign concentrate into the final blend of finished ciders before final consumer packaging. For absolute clarity, foreign concentrate would not be allowed for the additional fermentation and alcohol production.

Over the first four years, we request an allowance of 5% foreign concentrate content; for the next three years, 2.5% foreign content; and for the final two years, to allow 1% of foreign concentrate content. Then afterward the 100% Canadian content rule can continue to apply.

We believe that Canadian jobs and the economy in the sector are at risk. If we do not allow the industry to adapt, there could be unfavourable consequences. There could be a loss of Canadian jobs in both the beverage and agricultural sectors, including a potential reduction in orchards. The domestic industry could produce an inferior product and continue to lose ground to foreign companies. Domestic industry producers could adapt by sourcing 100% foreign ingredients and pay excise, at the cost of Canadian agricultural jobs. There could be lower Canadian business income and tax base for Canada.

In closing, I would like to thank you, Mr. Chair, and committee members, for the opportunity to present today.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Columbus.

We'll now go to Madame Labrecque, s'il vous plaît.

[Julie Labrecque, Vice-President, Regroupement des jeunes chambres de commerce du Québec]

Good morning. My name is Julie Labrecque, and I am here on behalf of Regroupement des jeunes chambres de commerce du Québec.

Mr. Chair, distinguished committee members and MPs, I want to begin by thanking your for inviting us to appear today and allowing us to share our recommendations for the next budget.

For over 20 years, Regroupement des jeunes chambres de commerce du Québec has represented 35 junior chambers of commerce across Quebec, comprising more than 8,000 young entrepreneurs, business people and independent workers.

Today, we would like to make three recommendations to the committee.

Our first recommendation is the inclusion of measures that support intergenerational equity in the next budget. We applaud the benefits granted to previous generations, but we believe it is now time to focus on balancing the budget, thereby protecting the future of the next generations. To that end, we would welcome measures aimed at boosting long-term investor confidence among young entrepreneurs. In addition, we would support a plan designed to return to a balanced budget and eliminate the national debt; we would also be eager to take part in the consultations leading to such a plan.

As for our second recommendation, some of you may already be familiar with our access to entrepreneurship plan or RAE. We want to see a measure that facilitates the transfer of Canadian businesses, to avoid, at all costs, their being sold or shut down when the time comes for them to change hands. We don't want them to end up in foreign hands. We want Canadian companies to stay Canadian, and we support giving young entrepreneurs access to business opportunities.

RAE is a bit like the federal home buyers' plan. The measure we are proposing would introduce a third dimension. We want young entrepreneurs to have the ability to use money from their RRSP to buy a business without incurring a tax penalty. We firmly believe in this program and are open to exploring the idea with the government, to determine how the plan should be drawn up and implemented, and what its parameters should be. The main purpose of the access to entrepreneurship program is to retain Canadian businesses and jobs, giving them an injection of youth, in order to preserve Canadian innovations.

As you know, 98% of Canadian businesses are SMEs, employing 48% of Canada's workforce. It is therefore critical to ensure that Canadian businesses remain in Canada, in the hands of Canada's young entrepreneurs. That is why we want to see an access to entrepreneurship plan in the next budget.

Our third recommendation has to do with maintaining the Canada job grant. Regroupement des jeunes chambres de commerce views the continuation of the grant program as essential. To the extent possible, agreements with the provinces need to be renewed, especially with Quebec.

With respect to the grant's continuation, we commend the government's desire to work more closely with employers. However, we believe that Quebec is doing an excellent job of managing the program. It is our position that clear objectives and parameters will have to be set to ensure the program is implemented effectively. The Canada job grant is aimed at benefiting participating employers and adding value to Canada's economy.

In conclusion, Mr. Chair, we believe that intergenerational equity should be an integral part of the budget. Regroupement des jeunes chambres de commerce du Québec has taken steps to ensure that young people sit on the boards of directors of Quebec's crown corporations. In that vein, we also believe the next budget should contain a measure requiring every crown corporation to have at least one young person on its board of directors to facilitate business renewal.

[The Chair, Conservative, James Rajotte]

Thank you kindly.

Colleagues, we'll begin member's questions.

Ms. Nash, you have five minutes, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Good morning and welcome to all the witnesses.

I am going to start with Mr. Lavoie.

Some say the manufacturing sector is dying and has no place in our economic future. Can you reassure us that that is not the case and that the industry is still able to generate good jobs?

[Martin Lavoie]

Thank you for that question, Ms. Nash.

I hope I'm not part of a dying industry. I don't want to have to flip burgers in a few years.

There's no denying the fact that our sector was especially hard hit by the global economic crisis and the financial meltdown. Most sectors are now back to pre-recession levels. Ours is a sector that is undergoing transformation, but certainly not one that is dying. Instead, I would say it's in a period of technological change.

The strength of our sector's economy does not lie so much in its share of the GDP, although it does account for 14%. It isn't the sector with the largest share, however, when you compare it with the service industry. As I said in my opening remarks, the manufacturing sector produces 88% of Canada's exports and is responsible for 75% of R&D spending. So, for all of our sakes, I hope it isn't a dying sector. Nevertheless, I can reassure you that it isn't. We're actually seeing advanced manufacturing sectors emerging, particularly in western countries.

Advanced manufacturing relies much more heavily on new technologies. And these new technologies are focused on innovative manufacturing processes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Yes. In fact, there are some who say that having a healthy advanced manufacturing sector is really the key to a healthy developed economy. Would you agree with that?

[Martin Lavoie]

I would definitely. We're the sector of the economy that has the biggest multiplier effect. For every dollar spent in manufacturing, you get, on average, between $3 and $4 in multiplying effect.

Think about any big law firm or accounting firm in most of our big cities. Large manufacturers are some of their most important clients. That's why we have such a big multiplier effect beyond the supply chain effect.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Yes, and yet Canada's macroeconomy continues to be very sluggish. We have a lot of slack in our system. It's evident when you look at business capital investment.

That's why I think you have been arguing for targeted tax credits, to be able to leverage funds in the private sector to make those capital investments that you're talking about.

[Martin Lavoie]

To clarify, we're actually saying there should be direct investment to attract capital investment.

We know that most of the large multinationals have plans to increase production capacities, or build new labs for new technological developments. They're waiting to see how the world economy is going to do. If we want Canada to be on the map to attract those investments, maybe we need to put together that national fund.

Some of the provinces already have these funds. I know that Investissement Québec, for example, is a very popular program for companies looking for new investments in Canada. I think the federal level maybe should have one that could even be matched by the provincial funds that currently exist.

[Peggy Nash, NDP, Parkdale—High Park, ON]

It's a longer discussion, obviously. I am concerned that our exports are down, and the government seems to have its foot partially on the brake when it comes to federal spending. We see companies being very cautious in terms of their investment. In spite of significant corporate tax cuts, they have not really reinvested that money and are still sitting on quite a bit of cash. I'm certainly interested in how we can get the private sector really reinvesting in the economy, because I think in spite of these across-the-board tax cuts, that has not materialized.

I do have a question for you, Mr. Atkinson.

How can the government act to help with the retention of trades? In construction obviously it goes project to project, but many smaller companies don't want to invest the money, and they're afraid of losing their trades.

[The Chair, Conservative, James Rajotte]

Mr. Atkinson, this will be a big topic today, so if you could just address it briefly here, we'll come back to it.

[Michael Atkinson]

It is such a big topic. It's hard to peel back the onion on this.

I think one of the things that has to be remembered in our industry in particular is that according to StatsCan, 99% of the firms active in our industry are small businesses and 60% have fewer than five employees.

Many of them are family-owned mom-and-pop businesses. There are, I would argue, additional difficulties and challenges for small businesses in investing in capital and in their people.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Hoback, I believe.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you to the witnesses for being here this morning.

I come from Saskatchewan where the labour shortage is just huge. The unemployment rate is 3.6%. We're screaming for skilled and unskilled workers. We're doing everything we can to include our aboriginal communities. We're looking behind every door to find people just to fill the jobs there.

Mr. Ferguson, I know we've talked about temporary foreign worker programs and stuff like that, but I guess the question I have for you is this. Are the types of jobs you're seeing created in your industry temporary in nature, or are they full-time, long-term jobs that will make for good careers?

[Alex Ferguson]

The reality is it's a mix of both.

We're looking at and rely on, as do our allied friends in the construction and manufacturing sector, the temporary foreign workers to fill those short-term gaps and bumps, but really, the pathway forward when you look at the kind of investment plans that are in place across Canada for our sector, it's a long-term game that we're looking to play. Some of the skilled power engineers and those kind of trades are not six-month or one-year ventures. We're looking for long-term, permanent stability in that workforce.

[Randy Hoback, Conservative, Prince Albert, SK]

It would be fair to say that a good quantity of those jobs would turn into good careers. You're going to train that person and hope they are going to stay with you for a long time.

[Alex Ferguson]

Absolutely.

[Randy Hoback, Conservative, Prince Albert, SK]

Do you want an increase in immigration?