Good afternoon, and thank you, Mr. Chair, for allowing me to address the committee today. I want to be brief in my comments. But first let me say a few words about the members of the Association of Equipment Manufacturers.
AEM is the trade association representing manufacturers of agriculture, forestry, construction, and mining equipment. In addition to Canadian equipment manufacturers, such as MacDon Industries of Winnipeg, there are about 700 other members, including those that manufacture the tractors, tillage, harvest, and electronic equipment Canadian farmers depend upon to plant, manage, and harvest their crops.
This afternoon I wish to speak about three areas of interest to the committee as it studies the competitiveness of Canadian agriculture: the sales history of agricultural equipment and the forecast for 2009, capital cost allowance rates, and trade with Russia.
I have provided the clerk of the committee with a report showing the 20-year history of sales of combines and tractors in Canada. As you will see, by comparing the sales data over the last few years with the 20-year average, with the exception of last year it is not a rapidly growing market. Simply put, there are fewer farmers using fewer machines to cover the same amount of ground. However, this is also a good measure of how Canadian farmers are becoming more efficient and are remaining competitive on a global basis.
AEM recently published an outlook for sales of agricultural equipment in Canada and the United States for the coming year. This updated forecast suggests that tractor sales in Canada for the coming year--2009--for four-wheel drive tractors and 100-horsepower and over two-wheel drive tractors are expected to be down anywhere from 10% to 20%, if current sales data trend out for the rest of the year. Combines have maintained their growth rates over the last two years and during the first four months of 2009, but that is expected to taper off over the rest of the year.
The last time I had the privilege of appearing before this committee, I spoke about the issue of capital cost allowances. Last December, a coalition of some 14 producer, dealer, and manufacturer groups--three of us are represented at the table today--wrote to the Minister of Finance asking the government to modernize CCA rates. We were disappointed that this request was not addressed in the budget. Since then, however, the U.S. government has introduced very aggressive depreciation rates on new capital expenditures.
I've included in the package I've provided to the clerk a document that summarizes this. To help you understand its significance, for an investment of $250,000 in new equipment, farmers would benefit from a 100% writeoff in the first year. For a $500,000 investment, they would benefit from a 78% writeoff in the first year. We would urge this committee to recommend CCA rate changes, and what John spoke about earlier, to the government and that the government incorporate those in its next budget.
Allow me now to turn to a significant concern of AEM members about increasing protectionist measures coming out of the Russian Federation. I know that the information I provide to you is current, given that one of our members, Scott MacDonald, from MacDon in Winnipeg, was just in Russia last week.
The Russian government has increasingly resorted to industrial policies that limit market access of goods of non-Russian origin and that further create barriers to trade, particularly in the area of agricultural equipment. Today agricultural equipment trade with Russia is becoming progressively less transparent, and it is now affecting Canadian exports. For example, Russia recently placed temporary import duties on combine harvesters and self-propelled forage harvesters of up to 15%. This action will not be reviewed until November 2009. While limited to only two types of equipment today, there are growing concerns that these tariffs will expand to include all agricultural equipment in other sectors, such as the equipment made in Canada by AEM member companies.
Moreover, Canadian exporters are being harmed by a loan program delivered through the Russian Agricultural Bank that gives Russian farmers a 20% discount on loans if they buy domestically made machines.
Protectionism is harmful to any industry. In an effort either to raise tax revenues or protect their domestic producers, countries like Russia are stifling the growth of their agriculture sector and their own infrastructure. Russia has emerged as one of the world's largest markets for agricultural equipment, especially in combine harvesters, tractors, and air seeders. As some of you from out west know, we are pretty good makers of air seeders in this country.
As long as the agricultural economy continues to improve, the demand is a long way from being satisfied. Canadian companies exporting to Russia have already experienced a significant decrease in exports in their first quarter of 2009. It's important that the Canadian government heighten the urgency of this issue with its Russian counterparts.
AEM and the Agricultural Manufacturers of Canada, an association based in Saskatchewan, jointly wrote to the Minister of International Trade on May 12 asking that this matter be addressed in future meetings with the Russian government. We would ask that this committee urge the Minister of International Trade to add this trade concern to the agenda for discussion when he meets with his counterpart during the week of June 22.
Thank you.