Evidence of meeting #6 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 good.
A recording is available from Parliament.
4:40 p.m.
Conservative
The Chair Conservative James Rajotte
All right. Thank you.
Thank you, Mr. Valley.
We'll go to Monsieur Arthur.
4:40 p.m.
Independent
André Arthur Independent Portneuf—Jacques-Cartier, QC
Thank you, Mr. Rajotte.
Good afternoon, Mr. Orr.
I wish my economics professor at university had had the gift of clarity that you have. Maybe I would have been a better student.
Should we be ashamed of the strength of the Canadian dollar?
4:40 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
No, we shouldn't be ashamed. It's nothing.... In fact, I think a lot of the opposite happens. I think most Canadians sort of have a new-found pride in the strength of the Canadian dollar. You could ask if we should be proud of it, as more people are. I mean, it's fine. You can go to the U.S. and people treat you with a lot more respect than they used to, or to Europe or anywhere. So I think that's part of it.
But we have to recognize, going back to what I think Ms. Nash was saying, that the dollar is strong because China and India are demanding oil and other natural resources from us. A lot of that strength is not because of things we have done right. It's the fact that China and India are growing.
Again, another thing that escapes attention too often is that the value of the Canadian dollar is a ratio. The Canadian part is the numerator; the U.S. part is the denominator. We can go on doing exactly what we're doing. If the Americans make mistakes, then what's going to happen is that our dollar goes up. If they happen to do things way better, then our dollar goes down. So it's a ratio and it reflects a relative price.
4:40 p.m.
Independent
André Arthur Independent Portneuf—Jacques-Cartier, QC
Is this a good time to start giving some attention to the possibility of having a common dollar with the United States, now that we are not in the cellar?
4:40 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
This actually received a lot of attention about three years ago, and probably at other times in history.
Frankly, I would say it probably isn't a good time, because it's clear there's no appetite for it politically in Canada or the U.S. So if you're asking me, am I going to devote a month to writing a paper about a common currency, I don't think there's any audience for it.
I did write a little paper, though, when it was very topical about three years ago. The theme of that paper was that for most of the arguments that are being used by the Bank of Canada and the Department of Finance against it, there are very good counter-arguments that don't get the play that they should. But you throw them up and say it really is a debatable issue from an economic point of view.
4:40 p.m.
Independent
André Arthur Independent Portneuf—Jacques-Cartier, QC
We talk a lot about all the misery of the manufacturers because of the strength of the Canadian dollar. Is it a case of the squeaky wheel getting the grease? Is it because they have better hostages than the other sectors of the economy because of the huge enterprises and the huge unions that are there?
I realize, for instance, when we talk about forestry, in my riding the big companies are in trouble; the little family companies are thriving and opening night shifts.
So why are we so emotional about the manufacturers? Is it because they have better hostages than the others?
4:45 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
That's a good point.
One of the things that I hope I've contributed today is to at least have given you some tough questions that you should place to the manufacturers, saying sure they're hurting, we know that, but there are a lot more reasons than the exchange rate for a lot of them hurting. There are a lot of other people who are hurting because of a high exchange rate who aren't manufacturers, and there are a lot of people in manufacturing who are hurting for reasons beyond the high dollar.
But there seems to be this highly organized profile that manufacturers are hurting because of the high dollar. I'm saying you have all sorts of things inside and outside of manufacturing and whatever. That's only a very small part of it. And why should that receive special attention? That attention should be much more broad.
4:45 p.m.
Independent
4:45 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
I have a number of questions, and I appreciate your presentation, Mr. Orr, but I want to limit it to one question, because the committee does have some other business that we have to deal with.
I appreciate your comments with respect to the capital cost allowance, that if we do this, it should be done for the general issue of productivity rather than for one sector or another.
I did want to ask about the scientific research and experimental development tax credit, the SR and ED tax credit, because there are a number of companies from a broad range of industries that have come forward to the government and are asking for the SR and ED credit to be made refundable.
In our manufacturing report, we've recommended that the government consider this, but obviously it goes beyond manufacturing. Finance Canada's response officially seems to be that this is an $8-billion fiscal cost over five years, which many of the companies themselves are saying is actually $1 billion per year.
But what I want you to address, which I thought was quite interesting, is that you said the fiscal cost never reports back the economic benefit stimulated by that particular cut. So if I could, I know it's officially not on the dollar issue, but if you wanted to comment or provide me with something on the SR and ED issue, the finance department does say the fiscal cost is $8 billion over five years. Do you have any comments on that? And do you have any comments with respect to the benefit of amending that to make it refundable for companies?
4:45 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Yes, anything reported in the budget is the fiscal costs. The capital cost allowance extension we're talking about, and this tax credit you're mentioning, would particularly be the ones from which you'd expect productivity benefits, and the government would get some of its money back from them. So the fiscal cost would be an over-estimate of the cost to the government. I think the officials in the Department of Finance would agree with that. I've taken it up with them, frankly, and they agree that's the situation, that the revenue the government will get will be ongoing, though sometimes it takes several years before the productivity benefits arise. A lot more revenues can be expected from certain tax cuts than others, and they are not included in the budget.
I would say that in some of these broad-based tax cuts, roughly speaking, they'll get about 20% of their money back. That's the order of magnitude. Some arguments can be made that some tax cuts can pay for themselves. I would say that's what we would call a corner solution. That will only apply when companies then start reporting their profits in Canada, rather than in another country for tax purposes—a transfer pricing situation that does not apply to real movements of resources, and whatever. In those situations where you get into transfer pricing, maybe you can get your money back; but other than that, if you can get 10%, 20%, or 30% of your money back going forward five years, that's the sort of thing we're talking about. It's going to be in that range. And that would apply to that tax cut too, because it should help productivity.
4:45 p.m.
Conservative
The Chair Conservative James Rajotte
I appreciate that very much, and I appreciate your being with us here today. I know members certainly enjoyed the discussion.
The committee does have some other business we have to deal with. We have a motion and then we have some other business. The committee will turn to the motion by Ms. Nash. We will stay in public for the discussion.
Thank you very much, Mr. Orr.
4:45 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Thank you very much. It was a pleasure to serve you, and any other time--let me know. I wish you all the best in going forward.
Thank you very much. It was a pleasure.
4:50 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
Ms. Nash, could we turn to your motion? Could you read it into the record and then explain the rationale for the motion?
4:50 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
The motion reads:
The Standing Committee on Industry, Science and Technology calls on the government to adopt the recommendations put forward in the “Advisory Group Report: National Roundtables on Corporate Social Responsibility and the Canadian Extractive Industry in Developing Countries”, to announce its proposals for the implementation of these recommendations, and for the committee to immediately report on these proposals to the House.
4:50 p.m.
Conservative
4:50 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
The report referred to in the motion has been provided to the federal government. It develops a framework for corporate social responsibility as it pertains to mining activities in developing countries.
This is something that has been requested. There's been criticism of some Canadian operations abroad. Certainly there are requirements for Canadian companies here in Canada that are very different from the requirements and the practices of these companies in other countries. I'm speaking specifically of mining activities in developing countries.
This framework for corporate social responsibility would be monitoring and assessing these mining companies' practices via strict human rights, environmental and economic standards. It would hold companies with mining activities in developing countries to greater account for their activities there.
So it's really about corporate social responsibility. It's about treating other countries as we would like to be treated here, just as companies are required by law to treat people and environments here. It's about exporting those standards to other countries.
4:50 p.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
I believe this motion has also been tabled at the foreign affairs and natural resources committees.
I want to point out that many Canadian companies have integrated corporate social responsibility practices into their operations at home and abroad, with great results. We encourage the Canadian business community to continue to do so.
Last year round tables were held across the country to discuss practical approaches to help Canadian companies conduct their operations in a socially and environmentally sustainable manner. An extensive and comprehensive set of recommendations was developed, and the government is reviewing them carefully right now.
Once a response is finalized, the government will honour its commitment to report back to Parliament on a proposed course of action. In the spirit of efficiency, the committee has a limited amount of time and resources to devote to studies before Christmas.
We've worked well together to set priorities. We've set out good priorities, and we need to continue with these priorities and the studies we've set out. In that framework, I'd like to inform the NDP that we would be opposed to this motion.
4:50 p.m.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
Thank you, Mr. Chairman.
I understand the motion quite well. I think there's a good intent there, but I think the home for it is the foreign affairs committee, especially when you're dealing with witnesses, bringing in people from other countries, and various aspects of it. I think that's the place for it. I would recommend that our colleague put it there and push it forward. I don't think this is the right committee to have it. So we will be voting against it if it comes forward.
4:50 p.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I agree with that, Mr. Chair, thank you. I think it's a very important thing to study, but we have other issues that are more within our mandate. I agree with Mr. Eyking.
Unless somebody else wants to discuss the matter further, I think we should call a vote on this.
4:55 p.m.
Conservative
4:55 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Simply to correct the intent, this motion would not lead to a whole study by the industry committee. There is already a report that is in the hands of the government. What that report does is incorporate the best practice voluntary frameworks that I believe Mr. Carrie referred to earlier. It really would put them into a policy framework for the Canadian government. So this report is already in the hands of the government. This motion is simply calling for the government to adopt these recommendations.
It's not the desire of the motion to have this committee reinvent the wheel and set in motion a whole new study of the recommendations. The recommendations exist. They're in the hands of the government now, and have been for some time.