Industry Committee on Nov. 28th, 2007

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Orr. Sorry, we're over our time. I want to give every member their due time.

We'll go now to Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

Thank you very much, Mr. Orr, for your presentation. I have some specific questions for you.

I represent Oshawa. Oshawa is an auto town, and there are definitely some challenges facing the auto industry. You mentioned that in your opening statement. We did a manufacturing study last year that was quite in-depth. One of the things we keep hearing repeatedly is how one job, say in auto assembly, can have a seven-job spinoff. So I'm going to ask you, why is it not a good idea to invest in value-added sectors from which it appears you get a very good spinoff from having that anchor in manufacturing?

[Dr. Dale Orr]

Well, from that spinoff, you could take that money and put it into a tax break for all companies for investment.

I think the answer I'm giving you is one you'd get from a lot of economists. We're really against targeted government funding to particular firms or sectors. You are much better off to take that money and use it to reduce corporate income taxes, or make depreciation rates lower, then let the market sort out who can best take advantage of it.

I know things are tough in the auto business, and they're tougher in Oshawa than most other places. To anybody who comes in front of you speaking about the auto industry, be sure to ask them to what extent are these problems the problems? Because, frankly, General Motors, Chrysler, and Ford have been mismanaged. They have grossly lost market share to Honda and Toyota. Ask them how Honda and Toyota are doing in Canada. They're hiring people. They've been well-managed companies. They've designed their autos and priced them to sell.

The Canadian dollar's been a problem, but now the settlements that have been made in the U.S. cause further problems for the Canadian auto industry. They've moved the health care costs off to the unions. They have set certain commitments for production in the U.S. You know, we could allocate an awful lot of the taxpayers' money trying to save auto jobs in Oshawa. It could get very expensive.

The point is to understand why these companies are having their problems and what the competitive equilibrium is. I think the competitive equilibrium for those types of production in Canada is a tough story. It's a tough story. They haven't finished adjusting to the Canadian dollar, and they haven't even begun to adjust to the new U.S. auto agreement. So it's tough.

[Colin Carrie, Conservative, Oshawa, ON]

It certainly is tough.

So far, you've had the opportunity to look at Advantage Canada and the economic update. In your opinion, are we on the right track in what we're doing here?

[Dr. Dale Orr]

Advantage Canada is absolutely on the right track. In terms of its substance, it wasn't that wildly different from a document put out in November 2005 by the Liberals. The recipes for productivity have been well known for many years. That's what I'm saying, it sounds good.

Now what happens is as we approach the budget one claim after another on the public purse takes away money. Then people say these things and Advantage Canada are all good ideas, but you don't have all that much money left to implement some of them.

I think it was a great document. I must say in the economic statement--apart from the GST--the personal income tax cuts and a couple of those other cuts were good for productivity.

[Colin Carrie, Conservative, Oshawa, ON]

You mentioned retraining and relocation. How do you think it's best for the government to do that?

[Dr. Dale Orr]

I am no expert, so I can only give some broad ideas from the way I understand it's done in a couple of other jurisdictions.

I guess we really have to recognize that it's a very wide-ranging issue. It goes from helping the worker identify a job in the west, to helping a family adjust to a move. There's a social work type of.... People have said how difficult it is for communities. That's why I'm saying it's not only a matter of identifying jobs. It involves a family moving. It's a very complex process.

I'm very disappointed that the federal government hasn't really got off the mark here. It really seems sad that one of the biggest problems of western Canada is a shortage of labour, while here we're sitting complaining about what we can do about all these people being laid off in eastern Canada. We have people who have been living in areas of eastern Canada with perpetually high unemployment and the federal government really isn't doing very much to help people with interprovincial moves to where the jobs are.

[Colin Carrie, Conservative, Oshawa, ON]

There appear to be some interprovincial barriers as well, even with trade unions. I'm a chiropractor, and I can practise in Ontario but not in any other province.

So you really don't have any good, solid suggestions for how the government could work on relocation and retraining?

[Dr. Dale Orr]

Take the budget of HRSD or the money from EI and allocate a whole bunch of it specifically to help these people if they're laid off in a manufacturing community in Ontario or in another area. Do whatever it takes in terms of identifying jobs, helping them move, and paying moving expenses. There's a small income tax break now, but include everything involved in the move so you can get them from there to there.

In some cases there should be retraining. I don't know if any of you are from Alberta, but they're saying there are job openings for a wide range of skills. Job openings are not limited to welders and pipefitters.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie.

We'll go now to Ms. Nash, please.

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

Thank you, Mr. Chair.

Welcome, Mr. Orr. Thank you for coming to our committee.

I'd like to pursue the line of questioning about your recommendation that people from Mr. Carrie's riding should just pull up stakes, leave the wonderful city of Oshawa, and move west--that's where their future lies.

I guess my question to you is about the value of the manufacturing sector to a country. Do you believe that a strong and vibrant manufacturing sector is important to a country like Canada--a middle economic power blessed with many natural resources, which has worked hard to develop this sector of the economy?

[Dr. Dale Orr]

I should be very clear that in terms of interprovincial mobility, the government should offer increased opportunities and assistance for those people to move. If they don't move, they should be cut back from employment insurance.

I can understand people not wanting to move--

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

What about people in the manufacturing sector?

[Dr. Dale Orr]

I'll get to that one in a minute.

If they don't want to move that's fine, but should people elsewhere continue to subsidize their EI?

There's no magic size for the manufacturing sector in Canada that's optimal. It depends on a lot of other things. I should point out that the manufacturing sector in Canada and in the U.S has been shrinking for quite a few years. Right now about 12% of our people are employed in manufacturing, and in the U.S. it's 10%.

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

Do you think a healthy manufacturing sector is important to an economy like ours?

[Dr. Dale Orr]

Yes, but it's not healthy if you're subsidizing an uncompetitive manufacturing sector. If it's competitive it doesn't need subsidization.

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

Do you see the spectacular rise of the Canadian currency vis-à-vis the U.S. currency as inherently uncompetitive on the part of Canadian manufacturers? Should they have been able to anticipate that rise and increase their competitiveness to deal with that?

[Dr. Dale Orr]

On your first point, our manufacturing sector should be smaller. It is smaller in the U.S. and they have a very vibrant, healthy, rich economy. So we shouldn't think that the Canadian economy would not be able to perform well if the manufacturing sector were smaller than it is today. The big problem would be trying to keep it bigger than the market wants it to be.

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

Is it your view that the role of government in the manufacturing sector, or in any sector of the economy, is to completely get out of the way, and whatever the market decides is what should happen?

[Dr. Dale Orr]

The government should set a good tax and regulatory environment. There are a lot of things they could do, not just for manufacturing but for the whole business sector, like have a good competition policy environment, and all of those sorts of things. They should not go in and pick winners and losers. They tried to do that and have a very bad record.

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

Let me ask you something. With across-the-board corporate tax cuts, are they not picking winners and losers? By that I mean sectors of the economy that some would argue are already quite overheated, such as the commodities sector, the oil and gas sector in particular, which then benefits spectacularly from tax cuts and is a winner. Then you have some parts of the manufacturing sector that are not profitable right now because of the high dollar, plus some other problems they have. They do not have taxable income and therefore do not benefit from across-the-board tax cuts. So is the government not picking winners and losers with this policy?

[Dr. Dale Orr]

No, not by changing corporate income taxes.

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

How so? The manufacturing sector loses and the commodity sector wins, so how are they not picking winners and losers?

[Dr. Dale Orr]

They're changing the tax environment and companies' tax status will vary from year to year. In any given year, some people are going to benefit more because they are in a tax position and others aren't, but the next year the picture could be reversed.

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

Right now, with the crisis in the manufacturing sector, to say that cutting corporate taxes is creating a healthy environment for the manufacturing sector is not helping manufacturers who do not have a taxable income to take advantage of that, and that point was impressed on me and others here by Jayson Myers, from the Canadian Manufacturers and Exporters. So, clearly, to my way of thinking, the policy the federal government is pursuing is saying in essence that everyone has an equal right to sleep under a bridge. Everyone has an equal right to take advantage of a corporate tax cut, but the reality is, only some can.