Debates of May 3rd, 1999

Questions Passed As Orders For Returns

[Peter Adams, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, if Questions Nos. 168, 191 and 192 could be made Orders for Return, these returns would be tabled immediately.

[The Acting Speaker (Mr. McClelland)]

Is that agreed?

[Some hon. members]

Agreed. .[Text]

Question No. 168—

[Jean Dubé, Progressive Conservative, Madawaska—Restigouche, NB]

Can the Department of Human Resources Development provide the following information, by region, by province and for the country as a whole, for each of the past five years, regarding the application and appeal process for disability pensions under the Canada Pension Plan: ( a ) how many people made an initial application for a disability pension and how many of these applications were accepted/rejected; ( b ) following the initial application, how long did clients have to wait for a response; ( c ) how many clients requested a review and how many of these requests were approved/rejected; ( d ) in how many cases did the Department request a review and how many of its requests were approved/rejected; ( e ) following a request for a review, how long did clients have to wait for a response; ( f ) how many clients appealed to the review tribunal, and how many of these appeals were approved/rejected; ( g ) in how many cases did the Department appeal to the review tribunal and how many of its appeals were approved/rejected; ( h ) following appeals to the review tribunal, how long did clients have to wait for a response from the tribunal; ( i ) how many clients appealed to the Pension Appeals Board and how many of these appeals were approved/rejected; ( j ) in how many cases did the Department appeal to the Pension Appeals Board and how many of its appeals were approved/rejected; and ( k ) following an appeal to the Pension Appeals Board, how long did clients have to wait for a response from the Board?

Return tabled.

Question No. 191—

[Jim Jones, Progressive Conservative, Markham, ON]

For the 1997-98 fiscal year, what were (i) the eligibility requirements, (ii) the average contribution made in the ridings of Saint-Maurice, Markham, Saint John, Calgary Southwest, Halifax, Laurier-Sainte-Marie, Ottawa South and Lasalle-Émard, (iii) the average contribution made in the Provinces of Quebec, Ontario, Alberta, Nova Scotia and New Brunswick, (iv) and the average contribution made nationwide, for the following initiatives: ( a ) the Transitional Job Fund; ( b ) the Labour Market Development partnerships; ( c ) the Youth internships; ( d ) the Targeted wage subsidy program; and ( e ) Summer career placements?

Return tabled.

Question No. 192—

[Jim Jones, Progressive Conservative, Markham, ON]

For the 1997-98 fiscal year, what were (i) the eligibility requirements, (ii) the re-payment obligations, (iii) the average contribution made in the ridings of Outremont, Laurier-Sainte-Marie, Saint-Maurice and Lasalle-Émard, and (iv) the average contribution made in the Province of Quebec for each of the following Canada Economic Development for the Quebec Regions initiatives: ( a ) innovation, research and development, design; ( b ) market development and exports; and ( c ) entrepreneurship and business development?

Return tabled.

[John Cummins, Reform, Delta—South Richmond, BC]

Mr. Speaker, I rise on a point of order.

I would like to know the whereabouts of Question No. 189. More than 45 days have elapsed since the question was asked and it is about time for an answer.

[Peter Adams, Liberal, Peterborough, ON]

Mr. Speaker, I have made note of Question No. 189. As the House knows, we are running at well over 90% in our response rate to 2,500 petitions and have similar rates for other documents we table, but I will seek the hon. member's response to Question No. 189.

I ask that the remaining questions be allowed to stand.

[The Acting Speaker (Mr. McClelland)]

Is that agreed?

[Some hon. members]

Agreed.

[The Acting Speaker (Mr. McClelland)]

I wish to inform the House that because of the ministerial statement, Government Orders will be extended by 10 minutes.

The House resumed consideration of the motion and the amendment.

Supply

[John Manley, Liberal, Minister of Industry]

Mr. Speaker, I want to begin by paying tribute to the hon. member for Saint John whose motion we are debating today. She is undoubtedly very committed to supporting an industry which is of importance to her community. I want to say to her that although I cannot accept her motion, I share her desire to see this industry, like others, flourish.

I also want to acknowledge the work of my parliamentary secretary, the hon. member for St. Catharines, who has this industry in his riding in Ontario. He has worked closely with me to gain an understanding of the challenges facing shipbuilding in Canada today.

The shipbuilding industry which is a small but important component of Canada's overall marine industry has a long, rich tradition in this country, not only in the Atlantic provinces but also in Quebec, Ontario and British Columbia. In 1997 the shipbuilding industry in Canada employed roughly 5,400 people and had total revenues around $625 million.

Canada's current strength is in building high quality relatively small vessels such as ferries, icebreakers, tugboats, fishing vessels, excursion craft and so on.

Activity on the east coast has recently centred on the construction of two container ships, two offshore vessels and tugs, the refit of one oil rig, the manufacture of oil rig components and various commercial repair work. The industry in Quebec has been involved in upgrading one oil rig, constructing tugs and doing ship overhauls and commercial repairs. The Ontario industry is currently active in the reconstruction of three bulk carriers, the conversion of two ships into one self-unloading ship and commercial repairs. The primary construction activity in British Columbia has been the three high speed ferries, but the industry is also active in the construction of smaller ferries and in commercial and government ship repairs.

In terms of the domestic market, one of the main opportunities for Canadian shipyards particularly in Ontario and Quebec has been the need to replace the Great Lakes fleet. These ships are now at an average age of 30 years or three-quarters of their estimated lifespan.

Canadian companies currently have foreign contracts to upgrade one drilling rig, refit another, manufacture oil rig components and perform commercial ship overhauls. Canadian shipbuilders are also attempting to penetrate the international supply boat market. Exporting is a sign of health.

I recognize that the international playing field has restructured recently and that in many ways it is not level. Foreign governments provide subsidies to their shipbuilding industries; Canada does not. I understand that when some of the unions met recently with my colleagues in the Liberal Atlantic caucus, they provided a table which shows that it costs less to finance a ship if subsidies are provided. I cannot argue with that, but they did not show the full picture.

Subsidies are not the only factor that gives world leaders their competitive edge. There are other contributing factors such as labour costs, aggressive pricing practices, shipbuilder national loyalty and the development of large integrated companies that build ships for their own use, to name a few such factors. They also did not accurately portray what Canada does do for the shipbuilding industry.

In the context of federal policies in support of shipbuilding, let us start with what we know. For Canada to remain in the shipbuilding industry, we must export. This is an industry for Canadians in which they must succeed in global markets because our domestic market is not big enough. International competitiveness is the key. It is a competitiveness moreover that must come at a time when there is a substantial overcapacity in shipbuilding around the world. The OECD predicts that by 2005 the overcapacity could reach 40%.

The current federal shipbuilding policy is consistent with our approach to other industrial sectors. It is also one of only a few industries to benefit from specific comprehensive government initiatives. Essentially there are three elements to this policy.

First, we have made a commitment to use Canadian shipbuilders for the renewal, repair and overhaul of government fleets. We will continue our policy of domestic procurement for all federal ships and repairs where it is possible to do so.

Second, we have a 25% tariff on all NAFTA foreign built ships over 100 tonnes entering Canadian waters, with the exception of fishing vessels over 100 feet.

Third, between 1986 and 1993 we spent $198 million on an industry led rationalization process, money given directly to the industry. The industry itself decided it was necessary to reduce its capacity so the remaining shipyards could survive and remain competitive. The structure of the Canadian shipbuilding industry has changed dramatically due to this rationalization.

In addition, the Government of Canada has several other key initiatives to support this sector. There are tax measures available to shipowners in the form of an accelerated capital cost allowance on new ships built in Canada. Purchasers can write off the entire cost of a ship 100% over four years. Bearing in mind that the average life of a ship is somewhere in the order of 40 years, this is a very accelerated rate of depreciation and it gives rise to a deferred tax item on balance sheets of companies. This exceeds the 15% declining balance rate afforded foreign built vessels.

Shipbuilders are also encouraged to keep pace with new technology through the research and development tax credit system. This system provides over $1.3 billion in annual assistance to research and development performing companies in Canada.

Through government institutions, there is financing availability to this sector, like any sector, for commercially viable projects.

For example, as I have already mentioned, the Export Development Corporation can provide financing for export sales of Canadian products, including ships. In 1998, the EDC improved its financing terms and conditions for shipbuilding. The financing term increased from eight to twelve years and the interest rate now matches the commercial rate.

I mentioned earlier today in question period, the EDC ship repair financing vehicle, a further change to the EDC offering for ships, and I quoted Peter Cairns, president of the Shipbuilding Association of Canada, who said “It is a really good initiative, beneficial to the whole industry nationwide”.

He goes on to say that it was a “significant step in the right direction in an area where Canada has a lot of expertise”. He says “The tool could be a key factor for attracting shipowners who do not necessarily repair in Canada”.

The shipbuilding industry may also apply under the enabling technologies element of the technology partnerships Canada program.

I believe that the role of the federal government is not to reinstate a tool of the past and in the process get into a subsidy war with other countries. Like many other OECD countries, Canada is out of the subsidy business. Rather, our role is to level the field by continuing our efforts to eliminate foreign subsidies and to remove market barriers.

Yet the question that comes up regularly here is whether Canada should pay the same subsidies as these countries. My response is a categorical no. I will give five reasons.

First, these subsidies would be very costly, and it is not up to Canadian taxpayers to foot this bill. Second, if we were to start subsidizing shipbuilding, there would soon be calls to subsidize other Canadian industries. Third, there is no guarantee that these subsidies would make Canadian-built ships more attractive to foreign buyers.

I remind the House that most ship buyers prefer to buy domestic. Price is only one consideration.

Fourth, such subsidies are contrary to current international trade trends. The Organization for Economic Co-operation and Development, the World Trade Organization, and several other international organizations are calling for an end to subsidies for shipbuilders. The European Union is trying to eliminate subsidies among member countries.

Fifth, Canada has strongly urged the elimination of such subsidies. We cannot call for the end of shipbuilding subsidies for our trade partners and use these subsidies to prop up our own industry.

The fact that the shipbuilding industry in Canada does not receive subsidies does not make it unique. No other industry receives support in the form of direct subsidy programs. It follows, therefore, that if the shipbuilding industry were to receive subsidies, other industries would want to receive the same types of benefits.

Topping-up would be at a considerable cost to Canadian taxpayers and would not eliminate the substantial overcapacity that currently exists in the shipbuilding industry.

Negotiating down is a complex and difficult issue that cannot be solved in the short term. However, to defend our domestic industry, we will continue to try wherever possible, such as through the OECD and the World Trade Organization negotiations. We will also continue our efforts to encourage the United States to update the 77 year old Jones Act in line with NAFTA and WTO principles.

I have described the role of the federal government to ensure that the shipbuilding industry can compete globally; its policy and its continuing efforts to reduce market distortions. However, as in other sectors, economic development in shipbuilding is a shared responsibility among various players.

There is a role to be played by the provinces. The regional development agencies provide general economic development support programs which provinces complement with targeted measures.

Provinces can set up various programs and policies to supplement the federal package and to customize solutions to their own needs. Nova Scotia and Quebec have already done this. Nova Scotia has a shipbuilding loan guarantee program similar to the U.S. title XI program, and Quebec has a subsidy program. If shipbuilding is a priority for them, other provinces can follow this example.

More importantly, the shipbuilding industry also has a role to play. For example, it can be more responsive to the market by going after new market opportunities, aggressively upgrading and retooling its technology and diversifying into related markets. It can improve productivity through training. It can also explore synergies between shipbuilders and shipbuyers.

The federal government is clearly not the only player.

In conclusion, I believe in dialogue with all industries. My parliamentary secretary, members of my staff, my officials and I have met and listened to representatives of the shipbuilding industry.

Sometimes members of the opposition like to exaggerate for effect, but I know they would never want to mislead. Contrary to press reports, I want to say categorically that I have not declined a meeting with any stakeholder in this industry.

The federal government has a shipbuilding policy and recognizes as well that Canadian taxpayers want to stop business subsidies. I have encouraged the industry to work with the Departments of International Trade and Finance within the context of that policy.

The federal government will fulfill its role by continuing its efforts to eliminate foreign subsidies and to remove market barriers. However, the provinces and the industry also have roles to play. Provinces can supplement the federal support measures with their own programs. Shipbuilders can adjust to market conditions and find the best market.

Some progress has already been made. It should be built on in order to ensure the continuing viability of this rich and historic industry.

[Elsie Wayne, Progressive Conservative, Saint John, NB]

Mr. Speaker, the minister knows that the shipbuilding industry and its representatives have been to see us as they have been to see him. One of the things they want us to ask the minister to do is to give new construction ships built in Canadian shipyards exclusion from the present Revenue Canada leasing regulations. They wanted four things, but felt that if only that one thing could take place it may put them in a position to compete. My shipyard in Saint John has bid on over 50 contracts but cannot compete in any way, shape or form as it is today. They are saying that if they got just that one thing maybe they could compete and put their people back to work.

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, in this case I am really speaking on behalf of the Secretary of State for Financial Institutions who has charge of this. The issue with respect to leasing rules really compares the leasing rate with the rate at which depreciation is permitted. Currently, Canadian built ships are entitled to be written off very rapidly over four years for 100% of the cost.

If one looks at the leasing of assets, generally speaking, the rate of write-off is much slower than that. The comparison to railway cars is often used as an example. It has a 10% declining balance. In other words, one never actually writes the whole thing off. It goes down very gradually over a long period of time.

To combine those two benefits of being able to write off everything over four years, not being willing to move from that formula, and to put on top of it the ability to lease the asset thereby essentially transferring the rapid write-off to another taxpayer, is something that would cause a precedent that other industries would be very interested in. It would be very expensive. I think to date the industry has not made a persuasive case as to why those two tax advantages should be combined uniquely for this industry.

[Antoine Dubé, Bloc, Lévis, QC]

Mr. Speaker, the Minister of Industry said he met with members of the shipbuilding association, to which the management of Canada's nine largest shipyards belong. Their brief, which dates back to 1996—and they still stand by it—mentions a number of considerations the minister or the parliamentary secretary talked about.

There are four points on which they insist, and the minister did not respond, in particular with regard to the implementation of an improved export funding program.

Yes, some assistance is available through the Export Development Corporation, but the minister said himself that Nova Scotia felt the need to implement such a program, and it is nothing new since the minister knows about Title XI in the United States.

Everyone here agrees. We do not have to talk about subsidies. Nobody is asking for that. We want tax measures and loan guarantees just like those available in the United States. We are not talking here about the Jones act. We are talking about Title XI, a program that provides guaranteed loans at lower rates, just like in the aerospace industry.

I will give the minister the opportunity to respond to that.

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, it is not true because there are no loans for domestic sales in the aerospace industry. The EDC supports export sales. That is exactly what it is there for. It is called the Export Development Corporation. There is no program that supports domestic sales in any industry in Canada.

I am sure that several industries would like to have a program that supports domestic sales, but such a program does not exist at the moment. In Nova Scotia and in Quebec, the provincial governments decided to provide that kind of support, but there is no such program at the federal level, and I think it could create a precedent that would be quite costly.

The United States have Title XI, which subsidizes domestic sales as well as export sales.

[Bill Gilmour, Reform, Nanaimo—Alberni, BC]

Mr. Speaker, I would hope that the minister would go along with the idea that Canadian jobs are at stake when we are talking about shipbuilding.

We have an opportunity in Port Alberni where a small builder, Kamma and Blake, have designed and built a 47-foot aluminum motor lifeboat that has caught on with the military around the world.

The technology has been paid for by Canadian taxpayers. The difficulty is that the Australians are now coming to Canada to basically get the design, take it back to Australia and build it. The Department of National Defence is giving away that design.

The people in my riding feel this is a Canadian designed boat. It is a good boat. Why are we not building it in Canada? Why would we export our technology and give it to somebody else when we can build it in Canada? We are exporting Canadian jobs.

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, I do not know the answer to that question. I certainly would share the member's concern if the design is Canadian, if it is a product that we could be making and exporting. I would like to get some of the details and I certainly will look into it.

I can assure the member that various agencies, including EDC and our trade representatives abroad, are very keen to support manufacturers of Canadian boats so that they have the same success in foreign markets as other manufacturers. I look forward to receiving information.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Mr. Speaker, I know the minister is concerned about not getting into the subsidy war. That is not where the world economies are actually headed. I concur with him on that particular point.

There are initiatives we can take that are clearly not from a subsidy driven perspective. I will point out a couple of them. One is that he could talk to his colleague in international trade and commission a very small team of maybe two or three persons to actually work on establishing some form of a bilateral accord with the Americans with respect to penetration into the U.S. marketplace on certain types of ships.

It could be on the Gulf of Mexico where there are some troubles in terms of drilling rig apparatus or shipshape hauls that we have developed for the Terra Nova project. There is something we could do from a very task oriented perspective and leave it there, let it work and let it hammer it out. That is one initiative I would point out.

Second, he made a comment that Revenue Canada leasing regulations combined with accelerated depreciation could be a very expensive initiative. Given that there are no ships made today whatsoever using this formula, creating some economic activity and some tax revenue is certainly better than no tax revenue. I argue that we cannot afford not to do it. If we combine that with the fact there are social costs to the individuals who will be without work and whom we may actually have to support in a different initiative.

The wording we chose today is the exact wording tabled under the Liberal Party of Canada's policy initiative. I would be very surprised if there were not members on those backbenches and even in cabinet who supported that initiative. Why would the minister not support this initiative today?

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, the member misses the point that it would be expensive in that it creates a precedent for other sectors. In other words, if there is to be both leasing and rapid write-offs provided for ships, why would it not also be provided for rail cars, for example?

Once we go down that path we effectively opt into a regime of assigning depreciation to other taxpayers on other kinds of assets. Maybe there is an argument to be made for that. Perhaps there could be. I am sure the secretary of state would be willing to hear it, but the member has to appreciate that this is not something we can necessarily isolate to ships. If we are to do that, we had better be prepared to entertain proposals in other sectors as well.

With respect to trying to find with the Americans some narrower exemptions from the Jones act, I can presume to speak on behalf of my colleague in saying that we are quite prepared to work with the industry if we can target areas where we might be able to make progress.

As a member of the PC Party the hon. member will know that the transportation section was originally covered by the FTA and then was pulled out at the last minute by the Americans, thereby ensuring that the Jones act was protected.

If I am not mistaken, there was a time when I was in opposition that I raised a question with the then minister of international trade when NAFTA was being negotiated on this very topic. Indeed it was a part of the negotiating objectives of the Government of Canada at the time that NAFTA was being negotiated. It was not successful in penetrating the Jones act then.

Maybe we could make some additional headway now perhaps in a targeted way. I think the government would be willing to pursue that possibility, if indeed it is one that would be fruitful.

[Gordon Earle, NDP, Halifax West, NS]

Mr. Speaker, I rise on a point of order. I wonder if you would seek unanimous consent of the House to extend the question period by another five minutes.

[The Acting Speaker (Mr. McClelland)]

The hon. member for Halifax West has asked for unanimous consent of the House to extend the period for questions and comments by five minutes. Is there unanimous consent?

[Some hon. members]

Agreed.

[An hon. member]

No.