Evidence of meeting #22 for Finance in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was federal.
A recording is available from Parliament.
3:45 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Okay, I appreciate that.
The other question I have pertains to the softwood lumber agreement specifically. In your opinion, would these measures as recommended bring a challenge forward under the softwood lumber agreement as a direct subsidy?
3:45 p.m.
Senior Advisor, Trade Remedies and General Economic Relations, International Trade Policy Division, International Trade and Finance, Department of Finance
We already have two pending challenges, so the Americans have already demonstrated that they are watching closely. I think they will look at any measure in detail and juxtapose that against the obligations under the agreement—the provision I read earlier, for instance—and they would not be loathe to take a challenge if they felt that there was one to be had.
3:45 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
So this proposal, in your opinion, could well—in fact, would—put the softwood lumber industry in Canada back into a position of uncertainty.
3:45 p.m.
Senior Advisor, Trade Remedies and General Economic Relations, International Trade Policy Division, International Trade and Finance, Department of Finance
I would prefer to say “could”, because I really don't know enough about a lot of these elements in here. For example, the reimbursable contributions element, does that include reimbursement of an amount that reflects the commercial cost of capital, or is it just the reimbursement of the original amount? That's one example.
So to the extent to which there are subsidies embedded in the program once it's fleshed out in detail, I would say that we could actually find ourselves in litigation with the U.S.
3:45 p.m.
Conservative
3:50 p.m.
Senior Advisor, Trade Remedies and General Economic Relations, International Trade Policy Division, International Trade and Finance, Department of Finance
Which could introduce an element of uncertainty, yes, absolutely.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
Have you done any analysis so far of the impact of the downturn on the forestry and manufacturing sectors in terms of revenue into the federal government?
February 4th, 2008 / 3:50 p.m.
Isabelle Amano Director, Economic Analysis and Forecasting Division, Economic and Fiscal Policy Branch, Department of Finance
As to revenue impact, I can essentially just repeat for you what is in the economic statement that was tabled last fall in terms of our forecast for revenues and expenditures going forward. The minister will provide an update of our fiscal forecast when he tables the budget shortly.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
Do you have any of those numbers here with you today, for both forestry and manufacturing?
3:50 p.m.
Director, Economic Analysis and Forecasting Division, Economic and Fiscal Policy Branch, Department of Finance
Not specifically. This is just federal finances overall, not specifically for the sectors.
3:50 p.m.
NDP
3:50 p.m.
Director, Economic Analysis and Forecasting Division, Economic and Fiscal Policy Branch, Department of Finance
No.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
Can you take a guess at what the impact might be in billions of dollars?
3:50 p.m.
Director, Business Income Tax Divison, Tax Policy Branch, Department of Finance
I can only speak to business income tax revenues, but those take a long time to come in. Right now, the fiscal year we have that we're satisfied is complete data is 2005. So any data we'd be providing you on that kind of question would be a forecast, which, as Isabelle said, is provided in the actual budget documents themselves.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
I know, from having been in provincial politics, that back in the early 1990s, when we had the recession of those days, both levels of government came to the table in northern Ontario in a very proactive, generous way to try to restructure a number of major industries across that area. In Sault Ste. Marie alone there were three: Algoma Steel, St. Marys Paper, and the ACR. In Kapuskasing there was Spruce Falls. In Thunder Bay there were a couple as well. Were any of you around then, and do you remember the contribution the federal government made at that time?
I know there was an older-workers program to facilitate some of those workers moving into retirement, so the impact of this wouldn't be so great on them. Also, the restructuring of those businesses and industries gave some relief in terms of employment levels, plus it helped bring in some new people, young people, into the industry. Can you talk to me a bit about the role of the federal government at that time in that particular restructuring?
3:50 p.m.
General Director, Economic Development and Corporate Finance, Department of Finance
Mr. Chairman, I was working in the industry department during that period myself. Each of those deals was quite different, separate, and distinct. I'm not able to recall the different provisions of each and how they were structured.
As you said, the federal government was involved, and the provincial government to one extent or another, in each of those you mentioned. I'd be lying to say my memory was so good that I could go through the details of each.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
There was an involvement of the federal government at that time to try and turn that industry around. It's not dissimilar to what's happening at the moment across northern Ontario and northern New Brunswick, for example. The federal government was there, was active, and did make a concrete contribution.
3:50 p.m.
General Director, Economic Development and Corporate Finance, Department of Finance
The government of the day chose to become involved in those particular restructures, that is correct.
3:50 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
I know we live in a different trade regime at the moment because of the softwood lumber agreement, but were there any recriminations at that time?
3:50 p.m.
General Director, Economic Development and Corporate Finance, Department of Finance
I'd be guessing if I gave an answer. I wouldn't want to answer that.
Pat.
3:50 p.m.
Senior Advisor, Trade Remedies and General Economic Relations, International Trade Policy Division, International Trade and Finance, Department of Finance
In the steel sector we found the dynamics have changed tremendously, largely as a result of business-led consolidations. It's really not the same industry now as it was back in those days. A lot of that was industry-driven internationally.
We did have quite a few anti-dumping actions, in the steel sector in particular, and it's been very cyclical. It tends to go with the economy. It's hard to say what drives the applications for anti-dumping actions, but usually it goes counter-cycle. If we're in a down cycle you tend to have more applications on anti-dumping.
That being said, the dynamics of the industry have changed because of industry consolidations. For instance, you mentioned Algoma Steel. That has been international and we have fewer companies now, but bigger companies, with consolidations worldwide.
3:55 p.m.
NDP
Tony Martin NDP Sault Ste. Marie, ON
One of the things I'm told by the industry as I sit down and talk with them and try to work our way through this is that it's very difficult to attract investment. It's considered to be patient capital that's required in that industry. The money isn't there because the financial institutions that are there now want a quick return on that investment. I think that was one of the reasons the restructuring at that time was successful. Many of those industries are still there today, except that they are now being hit again. This time around the senior levels of government aren't coming to the table in the same way.
I have one other question in terms of looking for a vehicle to deliver some of this. There was some suggestion that the provincial government would have to do that. A vehicle like FedNor, a regional economic development agency, has delivered programs before, above and beyond its already existing budget. Are they vehicles that could be used to deliver some of these programs or this money to those regions that have been hit?
3:55 p.m.
Conservative
3:55 p.m.
General Director, Economic Development and Corporate Finance, Department of Finance
Thank you, Mr. Chairman.
Certainly FedNor has terms and conditions that would allow it to do those kinds of activities. The question of whether it could be done as a year-end measure was put to us earlier, and year-end measures can't be delivered through government organizations or programs. So FedNor could do these kinds of activities, but they couldn't be funded with the 2006-07 projected surplus.
