Evidence of meeting #9 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.

On the agenda

MPs speaking

Also speaking

  • Perrin Beatty  President and Chief Executive Officer, Canadian Chamber of Commerce
  • Jayson Myers  President, Canadian Manufacturers & Exporters
  • Mark Nantais  President, Canadian Vehicle Manufacturers' Association
  • Avrim Lazar  President and Chief Executive Officer, Forest Products Association of Canada
  • Michael Murphy  Executive Vice-President, Policy, Canadian Chamber of Commerce

December 5th, 2007 / 4:35 p.m.

Liberal

Scott Brison Kings—Hants, NS

Thanks to all of you for appearing here today. I'm interested in what you have to tell us on some of these matters.

There's been some mention of tax competitiveness. We haven't had significant tax reform in Canada since the Carter commission in 1971, with the exception of the implementation of the GST, which was a shift towards a consumption base and away from capital and investment and personal and corporate income taxes.

Which would do more for the competitiveness of your member companies, in manufacturing particularly but also in a wider range—this is for the Chamber of Commerce, Mr. Beatty—of Canadian industry: a GST cut at $6.5 billion per 1% of GST cut, or using that money to more dramatically reduce personal and investment, capital, and corporate income taxes?

4:35 p.m.

Conservative

The Chair James Rajotte

Mr. Beatty.

4:35 p.m.

President and Chief Executive Officer, Canadian Chamber of Commerce

Perrin Beatty

Thank you very much, Mr. Brison, for the question.

Clearly, our priority has been to look in areas other than GST reductions. We were pleased, though, when the MInister of Finance, in his economic update, announced a whole range of tax measures. They included the GST, but they went well beyond that, and we felt this was an important step forward.

One of the areas, if we're looking at tax competitiveness, where we could take an important step forward is in harmonization of provincial sales taxes with the GST. In the letter I wrote to the Prime Minister and the provincial premiers on November 20, I called upon provincial premiers to move ahead with this harmonization. This would, in Ontario alone, significantly improve the competitiveness of Ontario industry.

4:40 p.m.

Liberal

Scott Brison Kings—Hants, NS

How do you feel about the government's action on interest deductibility for foreign investment? It's a tax measure that effectively doesn't raise any more money for the Canadian government, but raises more money for foreign governments and puts Canadian companies at a competitive disadvantage compared with companies in other jurisdictions. How do your members feel about that?

4:40 p.m.

President and Chief Executive Officer, Canadian Chamber of Commerce

Perrin Beatty

The chamber has been in touch with the government on this issue over the course of the last several months. I'll defer to Mr. Murphy, who could explain to you some of the activities he's had in this area.

4:40 p.m.

Michael Murphy Executive Vice-President, Policy, Canadian Chamber of Commerce

Sure. It's a really important issue.

When the measure was announced, we were very concerned and opposed it quite strenuously. If you look at the optics of the thing in terms of thinking about tax havens, no one is going to argue with the idea that you need to address that. I think the solution that was proposed, however, went well beyond that, and this was the concern we had. If your goal is by other policy means to encourage investment by Canadian companies either here or abroad, for the betterment or the competitiveness of our Canadian enterprises, this was one way to do exactly the opposite.

So we have deep concern.

4:40 p.m.

Liberal

Scott Brison Kings—Hants, NS

The Finance bureaucrats' goal seems to be to fill all the holes in the boat, and they're fixated on tax leakage. But at the end of the day there won't be anyone in the boat, and that's part of the problem with such a narrow focus. They don't consider long-term competitiveness.

Mr. Lazar, you mentioned the natural resource wealth we have and its benefit to the economy. I'd be interested in your feedback, or perhaps Mr. Myers' feedback from the manufacturing side, on whether or not our natural resource wealth is creating a Dutch effect in Canada, in fact pricing some of our other sectors in a negative way.

4:40 p.m.

President and Chief Executive Officer, Forest Products Association of Canada

Avrim Lazar

Certainly there's a strong argument to be made that the rapid rise of oil prices, allowing the dollar to be driven up that way, creates a huge risk to the rest of the economy. Anybody who's watched markets over the long term knows that what goes up comes down. It feels as though it's never going to stop; when the dollar was rushing up to $1.10, people thought, gee, this is a trend.

You want to diversify the basis of your wealth. To look at job numbers that are based upon a petro economy without understanding how that's undermining the diversified infrastructure of the economy is a fundamental error.

I want to reinforce what Ms. Nash said: that we haven't seen the impact yet. Investments in the forest industry are being made today for tomorrow's jobs, and people are looking south. The AbitibiBowater decisions reflect Canadian business policy—and we have a choice: we can pull the investment dollars here or we can let them go elsewhere.

But we haven't seen the impact of the high dollar on our business climate yet. People just don't shut their factory as quickly as they can; they keep it going as long as they can. But if the investment isn't coming here, we really feel the pain later on, and the time to start reversing the flow of investment back into Canada is...you know, 5:15 would be good.

4:40 p.m.

Conservative

The Chair James Rajotte

Thank you.

Thank you, Mr. Brison.

We'll go now to Mr. Van Kesteren.

4:40 p.m.

Conservative

Dave Van Kesteren Chatham-Kent—Essex, ON

Thank you, Mr. Chair.

Thank you, witnesses, for coming.

Mr. Lazar, I want to congratulate you. I think often when we have industry visiting us that honesty sometimes isn't on the table. You've been very honest, and I appreciated your saying you think you missed an opportunity when our dollar was at 65 cents, and to acknowledge that.

Governments have to take responsibility for that as well. You're absolutely right, we were selling everything at wholesale, and now all of a sudden we're selling at retail and don't know what to do.

I think your recommendation is an excellent one. We forget about it. We tend to do that; we blame the one government, blame the other: “It was the old government at the helm when that was going on; they should have possibly had...” some tax. Or “What's this government doing?”

I like your recommendation; I think it's a wonderful recommendation, that we work together. That's how we as a committee have done the best work.

I'm going to direct my next question to Mr. Nantais. I have to ask you this: have we made the same mistake in the auto industry? I know we keep talking about that too. While we had all those advantages, did we let opportunity slip by?

That's my leading question. My next question would be, what can we do? Believe me, we all want the North American auto industry to flourish and come back. But did we make the same mistake, and if we did, can we still correct it?

4:45 p.m.

President, Canadian Vehicle Manufacturers' Association

Mark Nantais

When you ask whether we made the same mistake, I'm not sure what mistake you're referring to. Investing when the dollar was down...? I guess we could be criticized for that, like any other manufacturing sector.

4:45 p.m.

Conservative

Dave Van Kesteren Chatham-Kent—Essex, ON

I'm saying that while we had all those advantages, when the big three were the big three, did we not invest in enough R and D, possibly?

4:45 p.m.

President, Canadian Vehicle Manufacturers' Association

Mark Nantais

Let me answer that, for sure, because certainly the big three are the only ones who have invested in R and D in Canada to date. We have multi-billion dollars now invested in research and development facilities right here in Canada. No other company has that.

When you look at the design and manufacturing cycles in our industry, plants really are only good for five years. This means that every five years you're reinvesting in the plant, and every time you reinvest, you do a number of things. You improve the environmental performance of that plant; in the interest of competition, you improve the productivity and competitiveness of the plant. So I would suggest that we may be somewhat criticized, but consider the nature of our business—that it's global in nature and that we must remain competitive. Many investments have been put in place.

We have gotten probably a disproportionate share of new investments in Canada relative to the United States, for instance. I would suggest that we've done actually quite well.

You ask whether it can be fixed. Right now, I think we have a number of tools at our fingertips here. We have the industry committee, and certainly I can remember standing shoulder to shoulder with many of these people at this table, promoting your report. Everything in that report needs to be acted upon and acted upon urgently.

In the auto industry specifically, you also have the tools at your fingertips. The Canadian Automotive Partnership Council developed a report called A Call to Action: A Canadian Auto Strategy. That report presents a vision. It presents a series of recommendations that are still valid now for our industry and valid for many other industries. We would like you to take it and perhaps look at it more closely in terms of an overall comprehensive automotive strategy, which would include investment supports.

I think we have the tools at our fingertips. We have to get on with the job and put in place an automotive strategy that places us here competitively for the long term, so that we from Canada can capitalize on what's going on around the globe.

4:45 p.m.

Conservative

The Chair James Rajotte

Mr. Van Kesteren, you have a minute, but Mr. Myers wanted to comment. It's up to you.

4:45 p.m.

President, Canadian Manufacturers & Exporters

Dr. Jayson Myers

I just wanted to correct the misperception that manufacturers weren't investing. There was $25 billion a year in new technology and in R and D in the late 1990s. This is the sector that was growing at that time and creating 650,000 new jobs. This was a sector that was making some adjustments.