Thank you, Mr. Chair and committee members. I appreciate the opportunity to address this group. With me is my colleague Colin Heartwell, who will be here to answer any questions afterwards.
I appreciate the opportunity to speak here in B.C., because I know you've heard from our colleague Dr. Jayson Myers during your hearings in Ottawa. I want to take this opportunity to make sure that the committee understands that the manufacturing sector is alive and well out here in British Columbia. It is the second largest sector of the economy here, only after finance and real estate—which I'm not sure any sector is ever going to catch up to, the way our housing prices are going.
Dr. Myers, I think, has given you the detailed presentations. I'm not going to go into all of the detail here. My colleagues from the Vancouver Board of Trade have outlined some of the numbers behind the reasons for some of the requests we're going to make as an association.
What I did want to do was impart to this committee the issues that are facing manufacturers here in this country right now, in particular here in British Columbia as well. Manufacturers right now are facing what's considered the perfect storm. We watched the Canadian dollar rise substantially, taking almost 50% off the bottom line of most companies—who are exporters, as David Levi has pointed out. Virtually all Canadian companies these days export out of their jurisdiction. We couldn't survive; the Canadian economy simply is too small.
This huge rise in the Canadian dollar was also coupled with rises in energy, in labour, in material costs. We've seen all of these things go right through the roof. Yet over that last five-year period, while we've been looking at all these numbers, the average selling price has gone down by almost 2.5%. This is a huge margin squeeze that the companies are facing here right now. Unfortunately, in these times you cannot pass on cost increases to your customer. First of all, customers now are expecting things to become cheaper; that just seems to be the nature of things, that prices are constantly dropping.
A big factor in that is our competition from overseas. The Chinas, the Indias, the eastern Europes of the world are becoming very aggressive. China is one of the largest manufacturing centres in the world. Every time our companies try to put some sort of price increase through to protect their margins, their customers simply turn around and look for an alternative supplier. So it's not an option for everyone.
Companies are looking at making improvements. They are implementing lean manufacturing; they're doing everything humanly possible to reduce their internal operating costs. As you know, companies are outsourcing. They're looking at that as a viable alternative, taking a look at the low margin, high run parts—components, pieces, sub-assemblies—that they can get from the best possible source and for the highest level of value and put in to allow the balance of the assembly and manufacturing to take place in Canada, so that we can then sell these high-value-added goods into the United States, Europe, Japan, and other leading economies.
Those are the issues we're faced with. We're also faced with acute labour shortages right now. If you take all of those things into account, right now our manufacturers are facing a tremendous squeeze, and they need help. We're operating in a global environment. As many of the committee members are well aware, most of our companies here in Canada aren't competing against one another; they're competing in that international marketplace; they're competing against firms in other countries.
Hence, from our perspective, what we as Canadian manufacturers are asking for—and I'll cut to the chase here—is reduced corporate income taxes, to make us more competitive with the other leading economies. Most importantly, we're asking for an amended depreciation allowance to allow manufacturing processing equipment and associated information communication technologies to be fully depreciated within two years. This follows a strategy the U.S. undertook over the last couple of years, as their dollar strengthened, to allow their manufacturers to invest in new technology and equipment to aid in their productivity enhancement and competitiveness.
We're also asking that the SR and ED tax credit be refundable and extended to cover a portion of international collaborative research and development work. Most of our companies are now finding partners all over the world—they have to find that new technology, that new expertise—and they're doing a lot of their research with other partners. We need to have that included.
Equally important are our employees and our skilled labour force. We're asking for the introduction of an employers training tax credit, creditable against the employment insurance premiums.
Thank you very much, Mr. Chairman.
