It's good to start in the forest and work our way into the industrial heartland as we head across the table.
First of all, thank you for inviting us. We know how busy you are, and your interest in this is very important to us.
As you know, the Canadian forest industry is the largest, most successful forest product exporting industry in the world; and we're Canada's largest industrial employer, the largest employer of aboriginal people, and the lifeblood of 300 communities. Even though we've lost 12,000 positions over the last year, we still have 300,000 people directly employed. So we're not quite gone. In fact, we are the largest industrial employer.
You all know we're suffering under very difficult circumstance—the U.S. housing decline, the huge rise in the dollar, the softwood export quotas and tariffs—and I suppose that's why you wanted to chat with us.
The question, no doubt, that is in the front of everyone's mind is, can anything be done about this? The answer is yes, and it requires action from three quarters.
We have to depend most upon markets; the markets have to come back, and the indication is that they will. The demand for forest products globally is increasing very quickly. The U.S. will get through what Warren Buffett calls a recession, though I don't think the Fed has called it a recession yet. But the markets will eventually come back; there will be markets, and we will be in a very privileged position to respond to demand from those markets. Our competitors are having land use conflicts. There will be huge demand for what we make in Canada, so the future, in terms of markets, is very positive.
The second thing we need is to be competitive, and that's industry's job. We have to be top-of-the-world competitive. Our softwood industry in the interior of British Columbia is the most efficient in the world; it is Canada's productivity champion. We've improved our productivity twice as much as the U.S. has each year. And now our pulp and paper facilities are catching up. The number of newsprint facilities in the top global quartile in competitiveness has doubled over the last couple of years. So there've been huge improvements, and the industry is working really hard to get itself to a place where it is competitive.
I can't say it's been a pretty process. It's involved rationalization, it's involved dislocation, it's involved layoffs and people having very, very painful times; but it's worth remembering that it is resulting in much better cost competitiveness and much more sustainable jobs as we go forward.
So the first bit is that markets will come back. And we're working hard at competitiveness, if not in a pretty way. The third piece is a competitive business climate, and there is where your role as government comes in. You can't fix this for us, but you certainly can play your part.
We don't want subsidies; we don't want bailouts. You don't have enough money to fix it this way, and long experience will tell everybody that it simply doesn't work that way. We don't want you to choose one company that's faltering, save them, and have another company that's doing well falter as a result. So no bailouts, no subsidies.
But there is stuff you can do that's positive and constructive. You can attract investment into Canadian mills, and that's why we've been favouring a five-year straight-line extension of the CCA two-year writedown. That costs nothing unless people invest in Canadian mills. Any other tax measures benefit people regardless of whether they invest in Canada. But that measure only—only—takes effect if people do exactly what we need, which is to invest in Canadian mills. That's why we've been hoping that eventually the extension to three years will be made into an extension for five years.
The other thing you can do is to make the tax credits for R and D refundable, so that when companies are in trouble they have access to those tax credits. Right now, you only have access when you're profitable. When you really need access to those credits is when you're not profitable. We don't want people to try to get out of trouble by asking for government handouts, but we want them to innovate their way out trouble. Refundable tax credits for R and D do exactly that. Again, they don't cost anyone a penny unless Canadian enterprises invest in research and technology. It's a very, very highly leveraged measure. I know it can be expensive, but it could easily be capped.
The other things government can do are to invest more in research and our research institutes—right now in Canada we invest less than our competitors do—and to invest more in market diversification and in telling Canada's story outside of the country.
The last budget pointed in some of these directions. The CCA was extended by one year. In the next two years a phase-out will basically take that back, so it will be an eight-year writeoff instead of a two-year writeoff. So in effect, it's been a one-year extension. We recognize that and appreciate it, but frankly, the capital planning cycles are such that people would have to move at a speed that is just not practical to take big advantage of that.
There was $10 million for market outreach; that's a pretty small number for Canada's largest industrial employer. We're very grateful for it, but we don't think it went as far as the government could do; it was quite a bit less than what was given to the Olympic torch relay. Quite a few of my members called and said, come on, Avrim. So it was a good gesture, but we also know this is not the end of the government's actions; the government has done many, many positive things in the past, and we're looking forward to many, many positive things in the future.
I'll leave it at that. Thank you.
