Thank you, Mr. Chairman.
Good morning, members of the committee.
My name is Ron Watkins. I'm president of the Canadian Steel Producers Association, representing Canada's primary steel and steel pipe and tube producers. Our industry employs over 25,000 Canadian men and women in highly skilled, well-paid jobs in production facilities in several provinces.
As we like to say, steel makes Canada stronger every day, everywhere, and in multiple ways. Steel has always been and will continue to be a central component of virtually every major industrial cluster. We are, in many ways, a new steel industry with new products, new processes, new ownership structures, and new technologies.
A recent independent study of our industry concludes that from an employment, value-added, knowledge-intensive, and environmental perspective, this is an industry that Canadians should want in their future. Budget 2011 can make an important contribution to that future.
Our industry faces fierce competitive conditions at home and abroad, including well-documented unfair trade from China and other countries. High exchange rates add to the challenge.
The recession had a deep impact, with annual production dropping by over 35% in 2009. Recovery remains slow and uneven.
We compete for investment capital as well as markets. This requires continuous innovation to improve productivity, operational costs, technologies, environmental performance, and workforce skills.
Our recommendations focus on those needs. To be clear at the outset, we are not seeking new spending programs or measures that benefit only our industry. We are seeking measures that would strengthen the competitive conditions for all Canadian manufacturing and resource processing sectors. These are our customers and their economic vitality is important to us. That is why we advocate a pro-manufacturing policy focus by the federal and provincial governments. We ask them to embrace policies that will re-energize Canadian manufacturing, which is essential to the employment and wealth generation on which so many Canadians and public finances depend.
This committee can recommend measures that will strengthen the entire manufacturing base--small and medium enterprises, large companies, and established and emerging industries.
Let me next speak to our specific recommendations.
On investing to improve productivity, we recommend, as did my colleague, an extension of at least five years to the accelerated capital cost allowance for new machinery and equipment. As the Canadian Manufacturers and Exporters and many other industries have pointed out, the ACCA provisions strengthen the business case for individual capital projects by improving project cashflow. This translates directly into improved rates of return on such investment.
The longer-term certainty of tax treatment is fundamentally important, especially for sectors like our own, where major capital investments take several years to plan, evaluate, acquire, receive regulatory approval, and implement commercially. This is all before it starts to return a nickel.
Moreover, it is especially timely to introduce this change now. As economies recover and companies evaluate investment options, Canada must offer strong conditions to attract those next-wave investments here versus other jurisdictions. The ACCA can make a tangible difference.
Second is to develop new technologies. The scientific research and experimental development tax credit--the SR and ED--is an important incentive to market-driven industrial research and development. The SR and ED is valuable, but can be improved by making the tax credits fully refundable. That would assist Canadian industry to sustain R and D efforts even when in a financial loss position. Administrative improvements, to improve the predictability and consistency of claims, would further strengthen industry uptake.