Thank you, Mr. Chair, members of the committee, and staff, for providing the Association of Equipment Manufacturers with the opportunity to address you this morning.
Allow me first to say a few words about the Association of Equipment Manufacturers. AEM is a trade association representing manufacturers of agriculture, forestry, construction, and mining equipment. Members include larger multinational equipment makers such as Caterpillar and John Deere, as well as successful Canadian manufacturers such as MacDon Industries in Winnipeg, Manitoba, and Sellick Equipment of Harrow, Ontario, and some 800 other members in Canada and the United States.
AEM member companies develop and manufacture the machines that build roads and extract resources, as well as planting and harvesting equipment.
To set the context for today, I would like to relate a small story. Late last year, we were in discussions with officials at International Trade regarding trade barriers into the Russian market that were affecting the sales of one of our Canadian members, MacDon Industries of Winnipeg. Russia had imposed a tariff on combines and was providing farmers with highly subsidized loans to purchase Russian-made combines.
One day I received an urgent phone call from the official at International Trade because they'd gone through the trade data and determined that Canada did not export combines to Russia. I assured the official that indeed this was the case, but that combines—and I've circulated a picture—are typically shipped with the headers that were specific to the types of crops to be harvested. Importantly, the trade barriers were being applied to the headers that were manufactured here in Canada, exported to Europe to the combine manufacturer, and then shipped to Russia.
So on this piece of equipment that is shown in the photograph I have here, the header, which is the black piece of equipment at the front, is made by MacDon Industries in Winnipeg, and for the combines that were being exported to the United States or Russia, the combine was manufactured in Europe in this case.
The reason I share this story with you is to underscore several points. AEM members such as MacDon Industries compete on a global basis. To compete effectively, Canadian manufacturers must invest significantly in research and development to bring to market equipment that meets the demands of customers in Canada and around the world. The markets AEM members serve must be accessible and free of trade-distorting barriers. The dealers that sell and service the equipment must have access to a skilled workforce. Last, the currency fluctuations and a high-value Canadian dollar introduce more and greater risk.
With these factors in mind, AEM has five recommendations that we would ask the committee to consider in its report to Parliament.
Firstly, extend the two-year write-off for investments in manufacturing and processing technologies to at least the end of 2016 and consider making this accelerated capital cost allowance permanent.
Make Canada's scientific research and experimental development tax credit refundable and, importantly, improve its administration.
Introduce a refundable tax credit for workplace training in order to offset the impact of rising employment insurance premiums
Follow through on the commitments to reduce the corporate income tax rate to 15%. We acknowledge and applaud the government's action on this front to date.
Also, follow through on the recommendations of both the industry committee and the finance committee for the review and modernization of capital cost allowance for equipment. Modernizing CCA rates would have a positive economic effect. Faster replacement of older equipment increases productivity and promotes real environmental savings. Improvements to the CCA rates would also bring Canada in line with its major competitor and customer, the United States.
Importantly, we can all agree that innovation is driven by investment in productive assets: research and development, technology, and workforce skills.
Thank you for undertaking this study and for your consideration of AEM's submission.