Thank you.
My name is Dave Podruzny. I'm with the association as vice-president of business and economics. With me is Fiona Cook.
I'd like to thank you for this opportunity to present in this round of budget hearings. I'd also like to begin by setting the context. This recession has hit our sector and a lot of other sectors very hard—and it hit very quickly. But our members are used to dealing with competitiveness challenges and global challenges. Every member in our association exports and is familiar with facing the competition. We live in an increasingly competitive world.
Manufacturing in Canada has seen its share of GDP drop, from 18% of GDP to 14% over the last five years. In the U.K, it's down to 10%. In the meantime, the U.S. share of global manufacturing has stayed steady at 22% for the last 30 years. People hear other stories, but these are what the numbers show. Today it comes in at an impressive $1.6 trillion, and the U.S. is still the largest manufacturing economy in the world. It's a very important market next door to us.
To pose a couple of questions, should the Canadian manufacturing sector slide further, and should we go below 14%? Or should we develop a strategy that will maintain or rebuild the core role of manufacturing in the economy?
I'll offer that there are three ways a country creates wealth: you can grow it, you can dig it, or you can manufacture it. Everything else just moves around. These are the ways you create wealth.
We think there is an opportunity to develop a manufacturing strategy, and that's the area I want to focus on. The chemical sector is a good example of why we focus on interdependency and synergy among sectors to create the right policy levers to build a strong, diversified economy that includes resource development, manufacturing, and services. Our sector won't prosper in isolation without a strong and vibrant resource development sector, or without other manufacturers using our products in the value chain. We in turn are dependent on a wide range of services, such as banking, computer support, transportation—again within the value chain.
I'd like to use that as a backdrop to raise the two points that I want to bring before you today. First of all, the good news is that on the tax front, Canada is getting more competitive. Significant steps have been taken. We commend this committee and the government for announcing the corporate tax reductions that took place, for encouraging the provinces to match them, and for extending incentives to provinces like B.C. and Ontario to harmonize their sales taxes and to get rid of fixed taxes, like the capital taxes and retail sales taxes that applied along the value chain. Alignment and cooperation between the federal and provincial governments is essential to branding Canada as a good place to invest.
We bring two recommendations before you, as I mentioned. The first one is to stay the course with the planned corporate tax rates. Just do it. That's a good thing to do. Just finish that job. The second one is to extend the accelerated capital cost allowance on machinery and equipment. My colleague has mentioned this, and it's no surprise that you're going to hear this from capital-intensive sectors. We've had this message before. If you extend the capital cost allowance for a year or two, it's good for whatever is going to happen anyway. If you extend it for five years, you'll allow us to go to the boardrooms and to win new investments we wouldn't otherwise get, and to bring them here. We can book that value in winning new investments. That's going to mean jobs. But it takes time to get that through the boardroom. It takes almost three years to get it through the environmental approvals process here, and so on. That's why we're asking for the longer timeframe.
We're capital-intensive. We generate value in the value chain. There are only two places that our industry is going today: it's either going to countries with advantage in energy and feedstocks, or it's going to rapidly expanding markets. We're not a big market, but we do have the feedstock. We have the raw material.
One concern we have right now is that U.S. refineries are retrofitting to handle Alberta bitumen, taking advantage of a five-year U.S. accelerated capital cost allowance of 50%, put in place in 2007 and allowing the refineries to convert specifically to handle Alberta bitumen.
The question I have is what are we doing to generate wealth for Canadians here. Let's at least match the competition in using our own resources. This committee can equip the Canadian value-added manufacturing sector so it can emerge from the current downturn and be part of a very integrated global supply chain. We need to be better than the competition.
In conclusion, it's all about moving along the value chain from primary energy to finished value-added manufacturing. I would offer the illustration that bitumen is the energy log with the branches still on it. Let's move it down the chain.