Finance Committee on March 5th, 2008

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

Thank you for being here today. I'm sorry I've been slipping in and out. There have been issues in my riding I've had to deal with.

I have a question for you, Mr. Myers, but first I have a question out of this report, which I found interesting.

One of the recommendations you have here is to encourage the Competition Bureau to take a non-competitive approach to merger review that takes into consideration the global nature of the market. You need to explain what that means to you in the short term and the long term and what the Competition Bureau is doing that has caused you to put this down as a recommendation.

[Avrim Lazar]

Sure, and I can probably do it relatively quickly.

The Competition Bureau reviews applications for companies to merge. Their job is to make certain that merging will not lessen competition in Canada and lead to a rise in prices. Because most of what we do is exported, most of the time they're dealing with a very small part of our activities and, as a result, make us less competitive in global markets.

So we're saying the Competition Bureau should have as a presumption to let the marketplace happen and let the mergers happen, because you have two competing public goods: a theoretical risk that prices will rise, and a demonstrable risk that jobs will be lost. Each time we've had a merger, prices have actually gone down, because our customers are bigger than us and they just turn the screw and take a bit more out of us, so that theoretical threat is actually just theoretical. When we don't merge, when we don't become large enough to compete globally—because, remember, we're selling in foreign markets 80% of what we're making—jobs are lost.

We're thinking the Competition Bureau's mandate is 10 years behind the times, because it doesn't take into account that we are a small, open exporting economy that needs to be able to bulk up to fight all the other bulky competitors in the global marketplace.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that.

As a follow-up question, then—I'm from Burlington and I don't have forestry companies in my riding—is the industry going through mergers that are being turned down, or are the people afraid to go through the merger process because of the bureau?

[Avrim Lazar]

I have two quick answers to that.

They haven't turned us down, but they've put such a chill in it that people look elsewhere.

They've also said to companies, “That's enough; no more Canadian acquisitions.” So what that's leading to is our better mills being taken over by offshore and U.S. companies. You can't become a big Canadian company, because the Competition Bureau frowns upon you for that. So it's much easier to go and buy American assets. A lot of my most efficient competitive companies are busy buying mills elsewhere because they don't want to fight with the Competition Bureau about becoming big in Canada.

[Mike Wallace, Conservative, Burlington, ON]

That's a good point. I appreciate that, because I didn't understand what the recommendation was. I do now.

[Avrim Lazar]

I appreciate the question.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Myers, in the news lately there has been lots of discussion on a debate, I guess you'd call it, or a difference of opinion between the Premier of Ontario and the Minister of Finance for Canada. A number of economists, including Jack Mintz and Don Drummond and the gang, have been saying that the Ontario corporate tax system is way out of whack with other provinces. It's part of the problem that manufacturing is having in Ontario, where obviously my riding is. I'm next door to Ford, and there are lots of small and medium-sized manufacturers in my riding.

Has your organization taken a position, or does it have a concept? I know they're coming out with a budget soon at the Ontario level. Have you taken a position on where corporate taxes should go with the Province of Ontario?

[Dr. Jayson Myers]

We have.

First of all, we're dealing with issues in manufacturing that are far too important and urgent to have arguments between jurisdictions when we should be looking at providing solutions.

We're been on the record for some time saying there are two major tax issues that we would like the Ontario government to address. One is to reduce corporate tax rates, and the other is to harmonize the provincial sales tax with the GST. The last measure would save manufacturers $1 billion in Ontario.

[Mike Wallace, Conservative, Burlington, ON]

Have you had any feedback from the Province of Ontario on your suggestions? Do you expect that in the upcoming budget?

[Dr. Jayson Myers]

I'm meeting with the Deputy Minister of Finance on Friday.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. McKay is next, followed by Mr. Menzies.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

I had a breakfast meeting with the mill manager in Dryden a couple of weeks ago. I was so depressed at the end of the meeting, because things were sounding awfully grim, that I decided to pick up the bill.

[An hon. member]

And for John to do that--wow, it was bad.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Anybody who knows me knows that's an unusual occurrence.

I want to ask Mr. Myers and Mr. Lazar how useful it is to have a finance minister running around the countryside saying, “Don't invest in Ontario.” I can't imagine that does anything for the issues you folks are advocating for.

As far as the international markets are concerned, whether they are financial markets, forestry companies that might wish to invest in Canada, or manufacturing industries that might wish to invest in Ontario, the kind of spitting that's going on can't possibly be regarded as useful. Certainly the finance minister has the prerogative to express his views, but when he expresses his views in such a fashion, it can only put a damper on the investment climate, particularly in Ontario.

Have you had any direct consequence from the finance minister's insensitive commenting?

[The Chair, Conservative, Rob Merrifield]

Mr. Myers.

[Dr. Jayson Myers]

We have not seen any consequences as a result of the discussion that is going on.

We're under tremendous competitive pressure to attract and retain investment and keep product mandates. Companies are making these decisions all the time. I think we have to give credit to what all levels of government have done, but particularly what companies have done in working to secure these product mandates and investment. It sure isn't easy, and the ones that have been able to get them have done extraordinary things. I think it's a great example of what Canadian companies and their employees can do here.

But it's certainly not easy, and the discussion going on right now about who's at fault isn't helpful. What we need to do above all is put forward a common front and show companies around the world that there are advantages to being in Canada for both retaining and attracting investment.

[The Chair, Conservative, Rob Merrifield]

Mr. Lazar.

[Avrim Lazar]

We certainly feel just as impatient with provincial governments as we do with the federal government about improving the tax system and the competitiveness climate. We are occasionally as grouchy with them as we are sometimes with the federal government--not because we don't love them, but because we need an investment climate. Some form of competitive federalism, where provinces compete to have the best tax structure, is not a bad thing.

[John McKay, Liberal, Scarborough—Guildwood, ON]

When you see comments like that published in international newspapers, you can't think this is helpful in raising funds. You can't think that any company that wishes to invest in Canada is going to say, “Well, let's go invest in Ontario.” If it's a dispute between the province and the federal government over the best way to proceed, surely to goodness that conversation could take place other than in a public meeting where it gets international exposure.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Mr. Myers.

[Dr. Jayson Myers]

If I could say, having it publicized internationally is not helpful in making the pitch to retain or attract investment. I guess, though, at the end of the day the decision is above all a decision that makes economic sense for the company and is made, to some extent, on tax rates. It's made on other incentives for investment. It's made on the quality of workers. It's made on infrastructure. It's made on proximity to markets. It's made on all sorts of decisions. For many companies, it's made just on the idea that we want them here and we'll go out of our way and be at the table to get them here, and I think that's important.

[The Chair, Conservative, Rob Merrifield]

Mr. Menzies, for five minutes.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

I guess we've seen the similarities between the federal Liberals and the provincial Liberals, and they both seem to think that raising taxes increases the investment environment. Of course, we know that this isn't a fact.

[An hon. member]

We'll let you go on.

[Ted Menzies, Conservative, Macleod, AB]

I do have to apologize to our witnesses that they got caught in this sort of partisan question--