Subcommittee on Canadian Industrial Sectors committee  Last year, when projects were going ahead in the oil sands and investments were being made, the outlook was that in the next ten years we were going to see $150 billion in investment, generating over $1 trillion in economic opportunity. Most of that would be open for manufacturers across Canada, and around the world, to take part in.

Subcommittee on Canadian Industrial Sectors committee  When you look at sector-by-sector productivity numbers, the differences really stand out in two areas--machinery and equipment and information technology. We lag behind in those two areas as well as in some areas of pharmaceuticals. In auto, in metals, in plastics, in paper and wood products, and in our resource-processing sectors, our levels of productivity are better than America's, but it's these areas of more advanced technologies in which we tend to lag behind.

Subcommittee on Canadian Industrial Sectors committee  Right now we're seeing productivity increase in manufacturing simply because we're seeing less competitive companies disappear. So overall we're seeing an increase in productivity in the sector, but when you look at operational process measures like work in progress as a percentage of sales or inventories as a percentage of sales, the things that make sense to business--productivity numbers really don't make too much sense as a business indicator--productivity may be going up, but those numbers may be going the other way.

Subcommittee on Canadian Industrial Sectors committee  We do have some of the most lucrative tax credits for industrial research and development and business research and development, but I think one of the shortcomings of the system we have is the fact that these tax credits are not refundable. That means if you're making investments in R and D, you don't get the tax credit necessarily, or the credit is credited against profitability--and there's a good reason for that: you want to show that the R and D is being commercialized well.

Subcommittee on Canadian Industrial Sectors committee  I will give you an example. One of the great things I do in my job is I get to visit all these manufacturing companies and see what really is going on. If you go out to the Gilbey's distillery in Lethbridge--I also like to visit distilleries and breweries--this is one of the biggest integrated distilleries in North America.

Subcommittee on Canadian Industrial Sectors committee  We've been proponents of a Canadian content preferment for procurement—and it would not be possible at the federal level, but at provincial or local levels—to at least afford Canadian suppliers the type of access American suppliers have. Part of that is the transparency of the procurement process; part of it is making sure small companies are told about opportunities and can bid; a part of it would be volume issues too, because moving to higher volume to cut costs in provincial or local procurement has often excluded smaller Canadian companies.

Subcommittee on Canadian Industrial Sectors committee  I would also say that the NAFTA offers Canadian manufacturers and exporters tremendous opportunity and protection within the North American economy, but it doesn't cover everything here. From the point of view of the threat of opening up NAFTA, whether that would change our level of safeguard within North America, then that news is good.

Subcommittee on Canadian Industrial Sectors committee  I think the impact on production and employment lies ahead, and I think for the rest of this year it's going to be a very challenging period of time for manufacturing. I hope the worst is behind us in terms of the downturn in orders, but the adjustment to that, which is what affects jobs and decisions about whether to stay open, and financing, all those challenges are being felt right now, but I think they're going to be with us at least until the end of this year.

Subcommittee on Canadian Industrial Sectors committee  Maybe I could take a first crack at that. I think one very important reason is that we don't have the global companies and the ownership of the global companies that are doing the R and D. One of the benefits of our relationship with an awful lot of multinational companies is that the knowledge and the technology is transferred into Canada for product development.

Subcommittee on Canadian Industrial Sectors committee  Thank you, Mr. Chair. Maybe I've been around CME too long. I remember back in the recession of the early 1990s when I was debating with the Fraser Institute about the demise of manufacturing. This was one year before the manufacturing sector in Canada experienced its fastest growth rate ever and doubled in size, of course, in the 1990s.

Finance committee  But that itself depends on industry continuing to spend on R and D and new technology. We hear a lot about receptor capacity. If I have a business and talk about receptor capacity, it means I have something my customers don't want. It offers no solution. Maybe that's true of the research in some cases, or maybe there are other people who want it.

Finance committee  The bigger companies are certainly more capable of finding out where the research is and working with industry. I think most of the big companies do that very well, but not only from Canada, from around the world.

Finance committee  I think that's right. We've certainly been in support of value-added taxes as the way to go, rather than embedded taxes. In many cases this is a fixed cost that industry has to pay. That's not the way to run an efficient or effective tax system. Another set of fixed costs—here's the segue into what I wanted to rephrase—is the user fees charged by government departments.

Finance committee  It's the same for manufacturing.

Finance committee  I think it's extremely important. In my mind, research is transforming money into knowledge. Innovation is taking knowledge and creating something of greater value. The issue is, what solution does business need that they can apply the knowledge to? How can we build more collaborative relationships between the research going on in universities and colleges, which is extremely important, and the industrial application?