Thank you very much, Mr. Chairman and members of the committee. I'm very pleased to present the Canadian Manufacturers and Exporters budget recommendations for this round.
As you know, Canada’s manufacturing and exporting sector represents together around 24% directly of the Canadian economy. For every dollar of manufacturing output another $2.05 is generated somewhere else in the economy in the services sector and the primary sector. These are the industries and the businesses at the forefront of global competition that are competing every day and expanding business in global markets.
The challenges and changes that are facing manufacturing and international Canadian businesses operating on a global basis are outlined in the report we've distributed, Manufacturing 20/20. That's a report of our findings from over two years of consultation with over 3,500 manufacturers and exporters and community leaders across the country about the future of manufacturing and international business in Canada. The report focuses on what should be done to make sure we have a competitive manufacturing and exporting sector in this country. It points out that the success of these sectors really will determine Canada's place in a competitive world, the theme you're looking at this year.
Canada's place in a competitive world, our ability to sustain and increase the economic prosperity and the standard of living of all Canadians, depends on our ability to add value in the economic activities, the businesses, the jobs—all the activities in which we're engaged. Today our customers and our competitors are located around the world. The competition for investment, for market share, for knowledge and technology and skilled labour is pretty intense. Canadians have remarkable assets working in our favour: the richness of our natural resources, a highly educated and highly skilled workforce, our knowledge base, a highly productive business sector, and our well-developed logistics, services, and knowledge infrastructure.
Our future economic prosperity rests on our ability to grow these assets and to create greater value from them. That depends in turn on an investment strategy focused on four priorities: one, investing in technology; two, investing in innovation; three, investing in people; and four, investing in infrastructure. Our budget recommendations reflect those priorities.
To maintain investor confidence, the government must continue to ensure that budgets are balanced, that there are adequate contingency reserves to offset economic downturns, and that unspent reserves continue to be used to pay down the federal debt. To encourage Canadian businesses to invest in value-adding, productive technologies, the government should provide a two year CCA write-off for investments in new manufacturing, processing, and associated information and communication, energy, and environmental technologies.
The put-in-use rule for CCA should be eliminated. Over the long term, the government should not only maintain its commitment to lower the federal corporate tax rate to 19% by 2010, but undertake to reduce it by a further two percentage points, to 17%, by 2012.
To encourage investments in value-creating innovation, the government should improve the SR&ED tax credit system by making the credits refundable, excluding them from the calculation of the tax base, providing an allowance for international collaborative R&D, and extending the tax credit to cover costs for patenting, prototyping, product testing, and other pre-commercialization activities.
To encourage employers to invest more in upgrading the skills and capabilities of their workers, the government should introduce a training tax credit creditable against EI premiums.
To ensure that Canada’s infrastructure meets the competitive requirements of the future, the government should focus its investments on the provision of a reliable and cost-competitive supply of energy, further improvements to the security and efficiency of our borders, improved and expanded north-south and east-west logistics networks, more effective support for innovation activities on the part of Canadian businesses, and more effective financing mechanisms for Canadian exporters engaged in new market development around the world.
I would also say we need a much more efficient and much more rapid and responsive regulatory system in the country. We not only encourage the government to follow through with the objectives of the smart regulation initiative, but the one thing this committee could recommend that would have a direct impact on improving the efficiency of regulatory process at the federal level would be to require departments across the government to implement the User Fees Act that was passed two years ago.
Thank you very much. I would be glad to take questions.