Finance Committee on March 12th, 2008

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Does anyone want to add anything?

[Erin Weir]

Yes. People have often said that the crisis in the manufacturing sector has caused the loss of 250,000 jobs since 2002, but according to Statistics Canada's most recent figures, 350,000 jobs have been lost. The crisis is continuing and it is going from bad to worse. In addition, the people at Statistics Canada told us recently that in the last few months of 2007, our current account balance became negative for the first time since 1999. That is explained by the fact that the decline in our manufacturing exports has been much sharper than the increase in our resource exports. As you said, the crisis is going to get worse if the government does nothing.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Mr. Joe Comuzzi.

[Joe Comuzzi, Conservative, Thunder Bay—Superior North, ON]

Thank you, Mr. Chairman, and I thank the members for coming and making these submissions.

I guess we can sit back and be political. As someone at this table said, this is not the time for the forestry industry to be political, and I completely concur.

I think the two suggestions, and it's not the first time we heard them, that came from Mr. Coles and Mr. Rigato are very positive in the evidence that we've heard today. There has to be a summit or round table of the top forestry people in this country to decide how.... As Mayor Peterson stated, the forestry industry is not a sunset industry, but we have to rethink our position and decide how the forestry is going to be a viable industry for Canadians and for Canadian workers in the future.

I think Mr. Coles' suggestion about the summit and what Mr. Rigato told us last week about the biofibre industry is exactly what's going to happen tomorrow in discussion at the natural resources committee, where this motion is going to be put and discussed because of these two gentlemen. The membership of this forestry council will hopefully be struck tomorrow. I think that's a tremendously positive move. It may not be the move that satisfies people politically, but it's a move that will satisfy people who are very concerned with the forestry industry.

Let me answer one more question in order to be entirely clear. I want to talk about the community development trust. This was an announcement by the Prime Minister. It was made in New Brunswick. I think it had its genesis when the Prime Minister travelled through northern Ontario on two different occasions and he looked at what was happening in the forestry industry and in other sections of this country and decided that single-industry towns were of primary importance. We have an argument there, but that's for another issue.

He came up with the idea of the community trust. That was a very broad-stroke program--$1 billion over three years. It may not be enough, but it's a hell of a lot more than what we had before he announced it. At that point in time when I was consulted, I said that now is the time for every member of Parliament to take this community trust and see what the methodology is to access these funds and try to fit the needs of their individual communities and how that fund can be utilized. I have to say this, and I know the mayor isn't listening right now, but I have taken five programs that are presently working their way through the system using the community trust as a financing agent and they're all for northwestern Ontario. There's some role that a member of Parliament has to play when it comes to developing programs for their own particular communities. That's the onus on all of us.

I would like to hear more from Mr. Rigato and Mr. Coles about what their thoughts are. I don't want to get into arguments with people, but if they want some time they could have whatever balance of time I have, Mr. Chairman. I think they're talking a lot of sense.

[The Chair, Conservative, Rob Merrifield]

We can hear you quickly. We have about a minute and a half, if you'd like to speak to that, Mr. Rigato.

[Emilio Rigato]

The technology does exist to redo the forest industry. Every pulp mill in Canada can survive. They will make different things. It needs to leapfrog the technology and become a source of chemicals, fuels. Every cord of wood contains almost two barrels of oil. The technology to get that out is in its infancy. Germany imports half a million tonnes of pellets from B.C. to burn in their coal-fired boilers and call it green fuel. Ontario has Atikokan right in the middle of the forest, a coal-fired boiler that's going to shut down. It doesn't make sense.

We need to put in R and D programs that say we're going to get 25 years ahead. The manufacturing will follow the R and D. That should be the policy, the leadership that is required.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

The time is pretty well gone, but I'll allow you a quick answer.

[David Coles]

We should stop following each other. The government needs to take a really hard look at research and development. Have the ministers go to Europe and South America to take a look at what's going on and you'll find we're in the wrong century.

If we really want to be forward-looking on this, we need to spend money on research and development. It is not subsidy. It's not hand-outs. It's not a left-wing versus a right-wing view. It is an intelligent economic view that you need to be able to break into markets that we don't even know exist today to use the fibre that's in the bush.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I would like to pursue what Mr. Chevrette said a little earlier and what Mr. Rigato said about the economic possibilities of building a little more. Mr. Hanlon talked about the real facts in the regions, but I would like Mr. Weir to talk to us about the real possibilities of building this new forestry economy. I would also like to know how it has happened, as Mr. Coles was saying, that we have stayed in a different century.

[Erin Weir]

I am going to answer in English.

A big part of the problem is that investment in manufacturing has declined since the year 2000. In fact since then it has been insufficient to even cover the depreciation of existing assets. We're not going to make the forest industry or any other manufacturing industry viable without a lot more investment in new technology. I think the way to achieve that is through much more targeted incentives that are directly tied to new investment.

Certainly we welcomed the acceleration of the capital cost allowance, but we think it should be done on a straight-line rate rather than a declining basis. A limitation of that approach is that it's only useful to manufacturers who have profits against which to write off those capital investments.

[Thomas Mulcair, NDP, Outremont, QC]

That's Mr. Chevrette's point from before.

[Erin Weir]

Exactly.

An alternative to that would be to introduce an investment tax credit, equivalent, say, to a proportion of a manufacturer's fixed investment. This could be made wholly or partly refundable, which would be particularly good for manufacturers who don't have profits currently.

These proposals are extremely cost-effective. The capital cost allowance changes cost only a few hundred million dollars per year, yet they reduced Canada's marginal effective tax rate on investment by far more than the corporate tax cuts that cost billions of dollars per year. Fixed investment in manufacturing in 2007 was about $20 billion, so a 10% investment tax credit would cost somewhere in excess of $2 billion, depending on how much additional investment it stimulated.

That is a significant amount of money, but it pales in comparison to the $15 billion a year that is being given away to profitable industries through these no-strings-attached corporate tax cuts that both the dominant political parties in this country, the Liberals and the Conservatives, have been pushing for in recent months and years.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you very much, Mr. Weir.

Mr. Chevrette, do you want to add to that?

[Guy Chevrette]

Certainly we can have a vision for the future, but in the short term, how are we going to assist the communities and the workers in the regions, and the industry, to get through this? That is the question. Mr. Comuzzi said that speeches are not what is needed. That is exactly what I want: no more speeches; concrete programs. I was asked to come and talk about how we could help the industry, and that is what I am telling you. It is implied that we are making speeches, but they are not speeches. On the contrary, I am eager to see governments, with opposition party support, propose concrete programs in the short term, because people are at the end of their ropes.

Some forestry companies have 100 years of history and have been passed down from father to son. They are being uprooted now, to the point of losing everything they have worked for. We know that it is not always the government's fault. It is not responsible for the value of the Canadian dollar. We understand that. You can do something, but you can't do it all. We understand that you can't do anything about the collapse of the construction industry in the United States; you can't do everything. However there are some programs that would allow us to survive and make concrete preparations for the recovery so that Canada...

When it was time to support British Columbia because of the mountain pine beetle, you did not hesitate long before allocating $340 million. Could you do the same thing for Quebec, which is currently being hit by two crises? There is a major structural crisis. It is Quebec's responsibility, but you could help the province. There is also a terrible cyclical crisis that has cost us 20,000 jobs. And that's not all. We are well aware that the number is going to grow in 2008 and the banks are simply going to shut the plants down because they won't have any line of credit left. These are jobs for which there are no programs. POWA does not exist anymore. Those people will be left with a pittance, barely $5,000. That is not even the equivalent of income security.

We can tell the companies they are not looking after the workers, but in the circumstances I think you can kill two birds with one stone. When the recovery comes, we will not be able to keep our young graduates, who will be leaving the remote marginal regions. They will not be staying in Chibougamau or Chapais or the Gaspé or Abitibi if they do not have a glimmer of hope for work. An older workers assistance program would be one of the keys, and you can help us in that regard.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We're going to go into another round, but we're going to ask for two minutes. It's going to be really tight, so give it your best shot in two minutes.

We'll start with Mr. Boshcoff.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thanks again, Mr. Chair.

Mr. Coles or Mr. Newman, yesterday at the natural resources committee one of the presenters said that if the forest industry's request to extend the capital cost allowance to five years had been included in the budget, the presenter's plant would have been even more competitive. Had this happened, how many plants or mills do you think would still be in operation?

[David Coles]

I wasn't there and didn't hear the debate, but it's a mug's game. That's not what's wrong with the industry. You can't tweak it. You can't adjust the tax credit. You need to find the fundamental flaws.

Mr. Rigato is right. I don't agree with all his corrections, but generally he's right. We know what was wrong. We need to find an overall solution. Tweaking it here and there won't do it--absolutely not.

We need to talk about co-generation. Pulp mills can make secondary product pulp. First product: green energy. There are all kinds of technologies that need to be utilized.

While I would respect that comment about a single move, it is not the answer to the overall problem.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Monsieur Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

Mr. Chevrette, you mentioned POWA two or three times. There have been repeated calls for a program for older workers to be reinstated. We are told that it is an old program that had no role left to play and that people should get retraining. You said that if the program were brought back it would free up jobs so that young people could stay in the regions.

Did I understand you correctly?

[Guy Chevrette]

It would not only free up jobs, it would also preserve jobs for young people. When a paper mill has to lay off 200 people, it does it according to seniority, because of the collective agreement, and I respect that, when there are people who are 56 or 57 or 58 years old who would be prepared to retire as long as they did not suffer any actuarial penalty. That would allow us to keep our young graduates who are just entering the labour market. They will not stay in remote regions and be unemployed for years. They will leave their region, and when the time comes to hire them, they won't be there anymore, and they won't be coming back. That is a tragedy for the resource regions.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

That is the case where I come from, I can tell you.

Thank you, Mr. Chair.