Evidence of meeting #15 for Industry, Science and Technology in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was dollar.
A recording is available from Parliament.
4:30 p.m.
Liberal
4:30 p.m.
Conservative
The Chair Conservative James Rajotte
If within the next two weeks you can make yourselves available for an hour, we'd very much appreciate that. That would be preferable.
4:30 p.m.
Senior Deputy Governor, Bank of Canada
Next week could be difficult, but we will aim to do it the week after.
4:30 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, we appreciate that. Thank you for being with us here.
Members, we'll recess for a few minutes and have the mayors come forward to the table.
4:35 p.m.
Conservative
The Chair Conservative James Rajotte
We'll begin our second panel with three mayors. We want to thank all of you for coming to Ottawa today.
From Perth we have the mayor, Mr. John Fenik; from Smith Falls we have the mayor, Mr. Dennis Staples; and from Merrickville-Wolford we have the mayor, Mr. Douglas Struthers. Welcome to you all.
We'll start with Mr. Fenik and work our way down. Since we have less than an hour, please make your presentations as brief as possible. You will find the exchange during the question-and-answer session very fruitful.
Mr. Fenik.
January 30th, 2008 / 4:35 p.m.
John Fenik Mayor, Town of Perth
Mr. Chair, approximately how much time is there for each of us for an opening statement?
4:35 p.m.
Conservative
4:35 p.m.
Mayor, Town of Perth
Absolutely.
First of all, I'd like to thank everybody for having us down today. I must admit that I don't speak French. I have a town clerk who is bilingual, and she said “If you're going to Parliament Hill, Mayor Fenik, you must learn some French”. Hence I will practice what little French I have learned this week, after much practice.
Hello. Thank you for this invitation.
That took hours. I hope the delivery was great.
It is very much an honour and a privilege to be given this opportunity to address the committee and speak on behalf of the Town of Perth's industries, leaders, and citizens.
Just a snapshot of Perth: Perth is located about an hour's drive west of Parliament Hill. Perth has a population of just under 6,000 people. If you ever come and visit Perth, I promise it's a community that will captivate you with its beauty and charm. It was founded in 1860 as one of three military outposts established after the War of 1812 and it was settled by a Scottish regiment. As such, we have a wealth of Scottish stone buildings built by Scottish stonemasons. I'm proud of the fact that Perth has been the recipient of many awards, including the Heritage Canada Prince of Wales prize in 2004. We're a community that's fiercely protective of our heritage and the history we've inherited.
In addition to our strong heritage ties we have a large industrial base for a community our size. Our main industries include 3M, Albany International, Cutler Hammer, Eaton Yale, Central Wire, Grenville Castings, Omya, and Perth Soap. Our industrial base employs approximately a thousand people. The combined annual earnings of these companies is about $40 million.
As mayor, as I watched the rise of the Canadian dollar I became increasingly uncomfortable. And as all these industries are located in a very small town, I endeavoured to knock on some doors. I visited all our industries because I wanted firsthand information on how the rise of the Canadian dollar was affecting our industries. And on a very fundamental level, we all know the answers I received. The rise of the Canadian dollar was good for some and it wasn't good for others, depending on where you were with the import-export business. All the Canadian companies were wondering how long the dollar was going to be high, if there was going to be a stabilization, if this was an economic trend that would continue to go up and down. As such, they were all reacting very quickly in establishing contingency business plans.
I don't have an MBA, and I don't have a business background. I'm just a small-town mayor. But I have to tell you, when I visited these companies I was amazed at how fiercely proud they were of the products they were doing. These companies, these industry leaders said if they were given the right set of circumstances they could compete anywhere in the world and be successful. Their products are good, their people are sound, their manufacturing bases are excellent. But there were some basic issues that were current with all companies, and I'll touch on them very briefly.
The companies spoke of having a level playing field and access to federal dollars that could help tide them through difficult times. They also thought about products and they wanted to emphasize when I came here that there really had to be adopted, from a federal, provincial, and municipal level, an attitude of shopping at home. For example, Larry Smith, the owner of Central Wire, makes welding wire. He can make welding wire for anything. He makes welding wire for airplanes. He said it's very difficult to see federally subsidized contracts for airplanes, whether it be Bombardier or whatever, and these companies are buying welding wire from Brazil or eastern bloc countries when he can provide the same wire at almost the same cost. So it was heartbreaking to see those industries with federal contracts going outside the country for supportive products to make these products.
Some of our manufacturing bases were saying, at Perth Soap, for example, they were feeling the effect of rising....
Sorry?
4:40 p.m.
Mayor, Town of Perth
One minute.
Perth Soap is feeling the effect of rising costs of infrastructure, water, and services. They were saying if they had access to federal grants for a cooling tower they wouldn't rely on water resources as much and could be more profitable.
Transportation-wise, if some consideration could be given to fuel tax reduction for these companies that transport these products from Perth all over the world, it would help.
Just in wrapping up, Perth, Smiths Falls, and Merrickville-Wolford are proud communities, and we are intent on securing our economic future. We can be viable in an environmentally friendly, sustainable manner. However, we have to start thinking about relationships in a different way, because there's a different economy emerging out there. We have to think of federal, provincial, and municipal shared responsibilities, because we're no longer separated. I think we're much more joined and have to relate in a different way.
Anyway, those are my comments, Mr. Chair.
4:45 p.m.
Conservative
4:45 p.m.
Dennis Staples Mayor, Town of Smiths Falls
Thank you for the opportunity. And not to be outdone by the Mayor of Perth, bonjour, this afternoon, to everyone.
I think I can cover my comments in five minutes. I want to touch on four areas: job loss, tourism, cross-border shopping, and suggestions for consideration. I'll just proceed with my comments.
In terms of job loss, the town of Smiths Falls, not unlike many municipalities throughout Ontario and Canada, has experienced significant manufacturing job losses in the past few years. At the present time the town of Smiths Falls, with a population of just under 9,000, is faced with job loss totalling 1,500. The planned closure of the Hershey plant in Smiths Falls accounts for well over 500 of these jobs, with most of the balance attributable to the planned closure of the Rideau Regional Centre, a care facility operated by the Province of Ontario. There are some other manufacturing jobs that are part of that number as well. The 1,500 jobs in question represent good-paying jobs with good benefits that have provided reliable employment for the past 40 to 50 years in the Smiths Falls area.
There are a number of other factors that have contributed to the serious loss of manufacturing jobs in the province of Ontario, which according to many reports amounts to 175,000 jobs since 2005 that have been lost. The factors leading to the job loss include, of course, the rise in the value of the Canadian dollar, global competition, productivity in Canadian plants, the present economic slowdown in the United States, tax policies at all levels of government in Canada, and various other relevant factors.
The town of Smiths Falls, located in eastern Ontario, is faced with the most serious economic challenge in the town's history due to the loss of 1,500 jobs, and this does not include recent downsizing at some of our other local industries in Smiths Falls, which would be added to that number.
This impact is being directly experienced by the affected employees and indirectly impacting on those who supply goods and services to the organizations that are closing in our community. Furthermore, the elimination of 1,500 jobs creates a significant reduction in the spending patterns for the local economy in terms of reduced retail sales of goods and services, in addition to the laid off employees' financial ability to look after household expenses such as insurance, taxes, heating costs, etc. As a result of the local job loss situation in Smiths Falls, we are also discovering that new retail business opportunities are deciding not to locate in our town because of the current situation.
Moving on to tourism, given the recent and present value of the Canadian dollar, the local tourism activity in the Smiths Falls area, particularly from United States visitors, has declined. This is evidenced in Smiths Falls by fewer boaters and campers, reduced overnight stays, and a general decline in out-of-country visitors deciding not to visit our town. In addition, the closure of the Hershey plant in Smiths Falls will have a tremendous negative impact on tourism in our town, in that well over 400,000 visitors a year visit the Hershey plant in Smiths Falls. The visitors to the Hershey plant alone provide significant economic stimulation for the business sector in Smiths Falls.
Other factors that we believe have contributed to this decline are the high cost of gasoline; the prospect of needing a passport or different documentation to cross the border; the slowdown in the U.S. economy; as well as the high value of the Canadian dollar. This has resulted in fewer U.S. citizens travelling to Canada for tourism and other purposes.
In terms of cross-border shopping, the town of Smiths Falls is less than one hour away from three Canadian border crossings to the United States--Prescott, Ivy Lea, and Kingston. Given the recent high value of the Canadian dollar, there has been a noticeable impact on the retail economy in Smiths Falls and other areas within close proximity to the United States. It has made it attractive for many Canadian citizens to travel, in our case to northern New York State, for retail shopping and other tourism purposes. The result is reduced retail sales results in Canada, in Smiths Falls, and increased retail spending in U.S. markets.
Finally, I have some suggestions for consideration. The study data material provided by this standing committee, in particular the list of 22 recommendations, which I have read, will provide measures and strategies to address the serious and significant economic challenges that many Canadians face. In this regard I was hoping to find a recommendation that specifically addressed tax policy in the way that will enable Canadian businesses to compete more favourably with countries. The example I have is Ireland--which has been brought to my attention by local industry--and other jurisdictions that have found ways to become economically successful in the global economy. Furthermore, it is important to introduce and/or revise without delay federal measures that will improve Canada's competitiveness in world markets and hopefully mitigate the serious job losses that have occurred to date throughout Canada.
I also wish to commend the witnesses who have appeared previously before this standing committee and who have offered insightful comment and useful suggestions that will assist in creating a more effective industrial strategy for Canada.
In my view, and in the view of many other Canadians and people in my own community, this is a matter of utmost urgency and importance, based on the economic challenges and job-loss impacts that have occurred and continue to take place throughout Canada.
On January 10, 2008, the Prime Minister announced a $1-billion program to assist vulnerable communities and one-industry towns facing major downturns. In this regard, we anxiously await further details on this important program announcement, and hopefully much-needed assistance for the town of Smiths Falls and the many other communities throughout Canada facing serious economic challenge.
Finally, I wish to suggest that it is imperative that the three orders of government in Canada—federal, provincial, and municipal—work together not only on these important economic challenges and initiatives, but also on the many other important matters facing the citizens of this great country of Canada.
Thank you for this opportunity.
4:50 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mayor Staples.
We'll now go to Mr. Struthers, please.
4:50 p.m.
Douglas Struthers Mayor, Village of Merrickville-Wolford
Thank you very much. Thank you, indeed, to all the members of the committee for this opportunity.
I'd like to thank the clerk, Michelle Tittley, for her assistance as I prepared to speak today.
It might be a challenge to explain what the Canadian economy is in 30 words. Perhaps understanding what is happening in communities is a better way to appreciate the Canadian economy. This is indeed a unique opportunity for you to understand that and the impact of the appreciating Canadian dollar. So again, we appreciate the opportunity.
My community and its region might not be typical of all communities and regions in Canada, but it certainly can provide an understanding and provide actions that the federal government can take.
There are three core sectors of my community's economy: manufacturing, agriculture, and tourism, which is our top economic sector.
Grenville Castings is a manufacturing plant, which, as indicated earlier by the mayor of Perth, is in Merrickville, Smiths Falls, and Perth. It used to employ some 300 to 350 people. It's a world-class leader in technology in low-pressure castings. Grenville Castings almost disappeared last year. Fortunately, the company was purchased. The challenge to their sustainability, in part, was the increased value of the Canadian dollar over an extremely short period of time. As the previous presenter said, programs usually take two years. We need to be ready to go with programs that can assist in access to capital for new technologies.
But also keep in mind that bigger is not always better. It seems to escape the notice of political decision-makers that the companies most likely to unbolt the equipment and ship it to Mexico or the Far East are large multinationals. They drive the hardest bargain for us to get them here--I note the Ontario incentive program for the auto sector. Yet they can and do leave for more hospitable climes with increasing rapidity. I understand the global competitiveness issue. They have to count their pennies, and the shareholders demand it.
Those in the economic development world should be paying as much attention to the little guys who create 10 to 15 jobs, 50 to 100 jobs each, and have no intention of leaving, because they started the business in a place where they feel comfortable. They don't want to leave, but we do very little to help them connect to larger markets, resolve their labour force issues, and perhaps, access high-speed Internet. It is those companies that want to stay in Canada.
The eastern Ontario development program is an exceptional regional program for investing in youth retention and attraction, business planning, skills development, local initiatives, and access to capital. It is not a program that asks for a dollar to spend a dollar. Within the last three to four years, some $30 million has leveraged in excess of $100 million. That is an excellent program that can be used as a tool, perhaps, in other regions of Canada.
Beef and dairy are the significant components of my agricultural community. Many beef farmers have never fully recovered from the financial losses incurred as a result of the BSE crisis. Dairy farmers, on the other hand, have supply management. They are able to weather the storm, if you will. Is the solution supply management? It's a strong consideration--a possible future consideration, though.
We also need to think outside the proverbial box to use policy and program tools to move agriculture further up the value chain, to move away from purely commodity-based thinking towards higher-value products and services. The federal government can assist in removing unnecessary regulatory barriers to new value products. This may sound like a provincial responsibility, but the federal government does have a role to play.
Emerging challenges are seen as greater challenges than the value of the Canadian dollar. World markets are affecting fertilizer costs. China, Japan, and Korea are consuming major percentages of the available fertilizer. Here are two examples: urea has gone from $410 a tonne to $620; phosphate has gone from $385 to $650 a tonne. That's a 68% increase. These are the January 11, 2008 numbers from AgriSuccess Express, which is part of Farm Credit Canada.
Tourism, our top economic sector, has perhaps been hit the hardest. To put into perspective what is happening, it is best to understand the indicators. From 1998 to 2006, there was a 50% reduction in border crossings. From 2006 to 2007, there was a 13.5% decline. This was all before the increase in the Canadian dollar. The number of November 2007 same-day shoppers from the U.S. to Canada declined 24.5% compared to the previous November.
The combination of the value of the Canadian dollar and confusion over documentation has resulted in border crossing concerns being the number one issue. The perception in the U.S. is that it costs more in Canada. Not so.
I might point out that the cancellation of the GST rebate adds to the belief that Canada does cost more. The cancellation of the rebate program is sending the wrong message.
Then there is the issue of documentation: what documentation do I need at the border, and can I get back?
We need broad education--social marketing, if you will--on the value of the Canadian dollar and what it really means to our visitors. The cost of coffee in New York State is essentially the same as the cost of coffee in Ontario.
Re-market what the level of the dollar is in context. We need to invest in border crossings. It's a friendly process. Put out the welcome mat.
Can we make it work? Yes, we can. Commercial goods are moving well as a result of improvements--the bar code program, shipping information in advance, computer profiles, etc. So that process is working well, and best in the last five years.
With regard to the Canadian Tourism Commission, Las Vegas is spending more marketing dollars than the CTC. We need to advertise and promote both at and before our border crossings. We need to have a “Buy Us” campaign: buy and shop in Canada, tour and see Canada, support our local economies.
Last year, Dr. Anne Golden, the president and CEO of the Conference Board of Canada, said that with the level of the Canadian dollar, our level of employment, and our level of education, now is a good time to invest. I do not believe Dr. Golden's comment was directed only at the private sector. The public sector has a role. There is an expression: follow the money. I note that in November of 2007, the federal surplus was in excess of $100 million. Now is a good time to invest.
I've left with the clerk today four copies of the references for my comments as well as a copy of the Eastern Ontario Wardens' Caucus prosperity plan. I invite you to review that. It has 51 policy goals with specific proposals on how to achieve them.
Thank you very much, Mr. Chair.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Struthers. We appreciate that.
We'll start with Mr. Brison, for six minutes.
4:55 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much, Mr. Chairman.
Thank you to all your worships for appearing before us today and bringing to us the very important perspective of community leaders who are facing massive challenges. Otherwise, it's all just statistics.
There's an evolution of what was called, when it happened in Holland some time ago, the “Dutch effect”, in that our economic growth in Canada is being driven by commodities and the upward pressure on commodity prices, which is driving up our currency and crowding out a lot of really important manufacturing jobs and other types of industry.
The Bank of Canada--we had them here earlier, and some of you were here to hear them--can only do one thing in terms of really the impact, and it's through interest rates, which is a blunt instrument affecting the whole country. The federal government does have some specific things we can do--in terms of regional development, in terms of tax policy, in terms of tourism policy. So I have a couple of questions in terms of things we can do.
First, which would have a greater impact on your communities, targeted business and personal income tax measures or else a national consumption tax reduction?
Second, on the visitor rebate program, should the government bring back the previous visitor rebate program in order to not add further challenges to the tourism industries in your area?
And third, we spend a lot of time in government trying to attract businesses to Canada. I'd appreciate your views on what we can do to actually help enterprises stay and grow in small-town Canada.
Thank you.
5 p.m.
Mayor, Town of Perth
Certainly.
Thank you for the questions. The third question is probably the one I feel most comfortable answering, and that's with regard to attracting and retaining business.
All of the business leaders in the town of Perth have said that what brought them to the town of Perth was quality of life--good health care facilities, safe streets, schools, infrastructure. And they've said that when that quality of life deteriorates, then their base of operations all of a sudden doesn't look as attractive.
I have a good-news story about Albany International. They closed a plant in Arkansas and are expanding in Perth, a 42,000-square-foot expansion. When I spoke to the plant manager there, it was quality of life for their employees that was important in that community, but it was also retention, the cost of doing business, fuel. If the federal government could have some influence around the taxes with rising fuel prices, that would certainly help in maintaining businesses.
5 p.m.
Mayor, Town of Smiths Falls
I'd like to go next.
We have about 20 industries in Smiths Falls, the largest being Hershey, which is leaving. The next two are parts of U.S. branch plants, Stanley Tools and Shorewood Packaging, and both of those organizations have indicated to me, on several occasions when I've met with them in the past several years, that a decision would be made in the United States, in a boardroom, to close those operations in Canada because it's cheaper to do it in places like Mexico. So it's the value of wages. It's the issue of the exchange rate. It's the issue of capacity within their organization.
Now, just through way of example, one of the major factors of why Hershey is leaving Canada--all three plants, and they shared this with us last April--is the fact that when they look at the productivity, their plants are operating at about 40%. So they have too much capacity, which they can't fill up with product. We're seeing that contraction in terms of in favour of either going back to the U.S. or to other countries such as Mexico.
However, to answer your question, what I'm hearing from the industry leaders in Smiths Falls is that if we can find ways to—and I stress this in my point—look at the taxation policies at the three levels of government in terms of making it universally attractive for people to stay or to come to this country to do business, I think that's where the solution would take us and needs to take us. That sounds like a very general answer, but I keep hearing that other countries have been successful in that realm.
One of the comments you will probably counter with is, well, if we reduce our tax rates then we're going to lose revenue. It's been brought to my attention. I agree with this, that if we reduce the tax rates we might find more joining the party to do business in this country. I think that's vitally important.
5 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
But they reduce corporate taxes and personal income taxes, not consumption taxes.
5 p.m.
Conservative
5 p.m.
Mayor, Village of Merrickville-Wolford
Yes, thank you.
I would speak to the visitor rebate program, the GST. That in and of itself is a part of what the problem has been out there in terms of what is the image. I'm not sure what the dollar value is to the Canadian economy to not rebate the GST. I would suggest rather to look at other opportunities to get the right message out there. As I indicated, the number one issue is crossing the border--what documentation do I need and what do I need to get back home again?--and remarketing: what does the value of the dollar mean? Today a dollar gets you a dollar here and a dollar gets you a dollar there. The cost of doing business in terms of I'm a tourist, I'm a guest in your country, is virtually the same. Get rid of the barriers that are saying to people, I don't think I'm going to get there because I don't know how I'm going to get in, and I don't know how I'm going to get home.
5:05 p.m.
Conservative
5:05 p.m.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Welcome, Gentlemen. Thank you for being here.
When I hear you talking about your communities, it reminds me very much of mine, the city of Trois-Rivières. I am the MP of Trois-Rivières, a city of 130,000 residents which has grown around big businesses, mainly paper companies.
Over the last 20 years, many discussions have been held and actions taken in order to encourage small and medium enterprises and try to diversify the economy. Trois-Rivières used to have the largest paper industry in Canada. This is no longer true.
It is very difficult for cities to maintain their economic strength. What we are seeing today, and which I regret, is that well-paying jobs in the paper companies have been replaced by service sector jobs, for example in large call centres. Since Trois-Rivières is a francophone city, this attracts sub-contractors of Bell Canada. But these jobs are at minimum wage and do not provide the same economic benefits for local businesses.
Mr. Staples, when you talk about a city of 9,000 people that looses 1,500 jobs, this looks tragic to me.
You say that the Standing Committee on Industry, Science and Technology made suggestions. Indeed, these recommendations were passed unanimously in this committee. They are valuable, but the government is very slow implementing them.
You talked about the billion dollars that was announced. In our view, in the Bloc québécois — and I know it is the same in Ontario —, this is not enough. Furthermore, this money is not properly distributed because it is pro-rated on population. But Quebec and Ontario have many more businesses and people getting hit than elsewhere in the country. The manufacturing and forestry sectors will have to share the crumbs of this assistance. Finally, it is unacceptable to us that this assistance be tied to the passage of the budget. That being said, this is a political debate and I am not asking you to take part or to comment on it.
On another subject, I would like to know how the business tax reduction measures that have been announced can assist businesses who do not make any profit to restructure.
Obviously, businesses will need to modernize. Many parts of the committee report could be implemented, but this would require political will.
What advice could you give us in order to help parliamentarians to make the government understand that more appropriate measures are required? Do you have any advice for us?