Finance committee  I think, giving full credit to the government for lowering the corporate tax rate, introducing the two-year writeoff last year in the budget, making the commitment to improve regulations to invest in infrastructure and the borders, and investing in R and D and schools and things like that--these are all extremely important things.

Finance committee  Let me go first. I think, first of all, the half percentage point cut we saw in the Bank of Canada rate yesterday was probably a good indication of looking ahead and thinking, things don't look too good. Four or five months from now, demand in the U.S. economy is expected to be very weak, and our key export markets are already in recession.

Finance committee  Thank you very much, Mr. Chair, and thank you, members of the committee, for inviting us here today to speak on such an important issue. As Avrim was saying, we're representing a sector of the economy that is really the most productive, the most innovative, the sector that is at the edge of international competition and may be today paying the price for that because of the impact of the Canadian dollar.

Industry committee  On the numbers issue itself, it's difficult to address this because I don't think anybody has seen how Finance calculates this. It would be nice to sit down with Finance and figure this out. Our calculations going forward, if we're looking at refundability from the current year forward, and taking into consideration that one-third of the credit is collected in revenue because all these credits are taxable anyway, here the numbers we're coming up with even on a five-year basis are something more like $3.5 billion.

Industry committee  If you look at the composition of the industrial base in Ontario and east and it, you will see it is very highly dependent on the automotive, forestry, and resources and forestry processing sectors. Those are the ones that are going to be hardest hit.

Industry committee  If I could refer you to this graph that shows the relationship between the appreciating dollar and employment in manufacturing, I think there's a pretty close relationship between the movement of the dollar and employment within the sector. As I was saying, we're in a situation right now where we're responding not only to the high dollar, with companies having to cut costs in order to respond to the dollar, but also to the very different circumstances of a weakening of key export markets in the United States, in the automotive and consumer products sectors—including paper—and the housing market in the United States as well.

Industry committee  Yes.

Industry committee  I would include them as some of the key areas that are going to be hit within the consumer products field. Again, many of them are often reliant on the U.S. as their major or largest market. So yes, they're under exactly the same pressures here; there's price compression on their sales side, their export side, and there are higher and higher business costs as a result of the increasing processing costs.

Industry committee  --and therefore bank lending is also under pressure. In that sense a credit facility like EDC, where they guarantee bank loans for investment on the part of exporters in new technologies, is a very positive program. It would be nice to see that expanded across the supply chain for exporters as well.

Industry committee  I think many companies have very specialized products and have been relying on the U.S. market for a long time. They are now in the position where they have to find other markets, so they're putting a lot more effort into new market development. It's more difficult for small companies, in terms of where to go to find a reliable partner/distributor in these markets.

Industry committee  I would just warn the committee members that the U.S. Fed is in a very difficult position right now. Given the credit market problems in the United States, the downturn in the U.S. economy, we likely will see the Fed funds rate fall probably by a percent over the coming year. That's going to put again renewed pressure on the Canadian dollar.

Industry committee  They're certainly feeling the downturn in the U.S. market in those three key areas of housing, automotive, and consumer products. Many companies are also saying that as a result of credit problems in the United States their customers are having more difficulty paying, and they're finding later payments as a result of that.

Industry committee  I wouldn't call it a subsidy, but clearly the falling Canadian dollar had a very beneficial effect on manufacturing in Canada. It boosted manufacturing output. It made manufacturing in Canada much more attractive for investment. Throughout the 1990s we had the most rapidly growing manufacturing sector of any developed country in the world as a result of that.

Industry committee  If I could answer first, dumping and subsidization of product coming in today from China and from other countries are very important issues that concern a number of sectors within the manufacturing sector. In Canada, a number of industries are affected. The recognition of what constitutes a market economy is critical to how we run our trade remedy system, how we make the determinations about what is fair and unfair trade, and how we enforce the trade rules that we negotiate in trade agreements.

Industry committee  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.