Finance Committee on Nov. 2nd, 2010

[The Chair, Conservative, James Rajotte]

Thank you for your presentations.

We'll now hear from the Chemistry Industry Association of Canada.

[Richard Paton, President and Chief Executive Officer, Chemistry Industry Association of Canada]

Thank you very much, Mr. Chair and members of the committee.

I am Richard Paton, the president of the Chemistry Industry Association of Canada. With me is David Podruzny, the vice-president of business and economics.

Our association used to be called the Canadian Chemical Producers Association, so it's nice to know that Mr. Rajotte has made the transition to our new name. We made that change to represent the broader chemistry industry in Canada, which is a $24 billion industry, with 50 major companies across the country.

I've made pretty well the same presentation for four years now on accelerated capital cost allowance. We're very focused here. It's the same presentation that Roger Larson made.

I have to admit that over the last 10 years we have made a lot of progress on corporate tax change. I came to this committee eight or ten years ago to talk about the surtax and the capital tax and the need for corporate tax reduction. We have made a lot of progress, over two governments, in this area.

However, I have to point out that over four years we have not made any significant progress on the accelerated capital cost allowance.

I remember Mr. Rajotte chaired a great committee, the industry committee, which made a unanimous recommendation. I think the first recommendation in that report was for an accelerated capital cost allowance change. We did see some changes in subsequent budgets, but they were always for a period of time that was not useful to our industry.

You will see a chart in our submission that we started using several years ago to explain our case, which is that unless the capital cost allowance operates for a five-year period, it has no value to us. It takes five years to go from the planning stages to the implementation stage of a major investment.

That's one of the questions we have heard over the years: why does it have to be five years? This chart was designed specifically for this committee a couple of years ago to explain that.

The other question--and you've seen the handout we provided that explains it--is how does this work? Something as technical as a capital cost allowance is not easy to explain, but you can go to that presentation. I'll start with the opportunities.

We are at a stage in the recovery period where we need to get private sector investment back into the economy. We are a capital-intensive industry, along with fertilizer and many other resource-based sectors. I think Canadian corporate tax cuts that have been done over the years have enabled us to stay in business and to compete in this very difficult global climate we work in. However, we need major investment in capital facilities.

This chart we've provided is an example of how $100 million would be taxed differently under the current 30% declining balance approach, versus the 50% straight line depreciation, which is essentially the accelerated capital cost. You can see if you go through these numbers that in one case, with the normal 30% declining balance--a tax approach that takes literally forever to write off your investment--in a three-year period you're able to write off $58.3 million and the other $42 million is taxed. In the accelerated capital cost approach, over that three years you basically write off $100 million, and that leaves $10 million of cashflow for companies.

[The Chair, Conservative, James Rajotte]

One minute.

[Richard Paton]

In the age we're living in--very competitive, needing major capital investments--it's that cashflow that makes the difference between making the investment and not making the investment in Canada. Once you build an aluminum plant or a chemical plant or a fertilizer plant, you create jobs, investment, capacity, and you create market share for Canada.

Our one recommendation is that this committee strongly support accelerated capital cost allowance. If you don't support it, I know Finance won't support it, and we have not a chance. I'll be back here next year doing the same presentation.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll start with members' questions.

Mr. Szabo, you have seven minutes.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

I'd really like to spend some time congratulating Kate McInturff from the Canadian Feminist Alliance for International Action. It's refreshing to finally get the women's perspective on the table, with so many men in shirts, ties, suits, and things like that.

We've heard about poverty. We've heard about the outcomes for kids. We've heard that 70% of the jobs today require post-secondary education, and that will go to about 77% very soon. All of those things start early. Women are depended upon by our mechanisms to be the first caregivers, and we need support. The gender analysis thing is a wonderful concept, but I've never seen it work. I think we have to call a bluff, really.

I'm glad you raised it. I don't know if every bill that should have a gender analysis actually has it attached to the damn thing, but you have to remind the government that it's a commitment we made and it has to be there.

Women, as daughters, are closer to their moms and dads than sons are. That means women also seem to be the first ones who have to withdraw from the paid economy to care for families.

How important is it that we recognize that unpaid work in a variety of ways? What recommendations would you like to reiterate or add?

[Kate McInturff]

Thank you for that question.

I'm going to cede the floor to my colleague, Professor Lahey.

[Prof. Kathleen Lahey]

From a strategic policy perspective, it is not a good idea to begin by recognizing the disproportionate home-based work on the part of women. That path very quickly leads to paying women to stay out of the monetized economy, and it reinforces existing gender stereotypes that destine women for that role into the future.

The countries that have had the most success in breaking down those gender stereotypes have instead turned to men and said that gender-based analysis assumes parity in all things. All things must be shared, including the care of children, family members, community through volunteer work, and so on. When that approach has been taken to open up and recognize men's capacity for unpaid caregiving work, things tend to equalize very quickly. It's a more productive route toward righting the balance.

[Paul Szabo, Liberal, Mississauga South, ON]

I would like to shift this a little. The point is there is no meaningful compensation, in either real income or kind, to recognize the fact that one or the other of the parents has to care for kids, or whatever.

I'm trying to get at the inducements and supports that government can give through child care, family care, and caring for the aged. We talk a lot about an aging society, so I'd kind of like to shift.

I know the other problem. It's a socio-demographic problem, and all those good things, but that's history. Right now we have to move forward, so maybe you can help us a little. How are we going to help families cope with those important responsibilities that have life-long impacts?

[Kate McInturff]

Thank you for that question.

I think we're absolutely dealing with a crisis for those who are members of what's being called the sandwich generation. They are men and women--I'm a member of that generation--who have to care for aging parents and young children at the same time. Research demonstrates that the burden of care falls disproportionately to women at the rate of about 2:1, in terms of the hours women spend doing that care.

Not to harp on child care, but that is one of the reasons why child care is so important, as well as paid family leave, and so on. This isn't about an extra handout for women or a supplement to what we think are the basic responsibilities of any individual to their family. These are well-educated women who we have invested in.

To use myself as an example, the Government of Canada has invested--I hate to confess this--tens of thousands of dollars in my education. I have a Ph.D. that I earned here in Canada. You have all spent a lot of money on me. If I come out of the economy and start doing unpaid work, that's really a bad allocation of resources.

So we need to think about this in terms of a better allocation of resources to keep members of that sandwich generation doing paid work and allowing them the supports they need to also care for their parents and children.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you. I'm with you.

We have limited time, so I'd like to quickly go to the Canadian Lung Association.

You mentioned CIHR. It was created to replace the Medical Research Council, primarily because it had an old boys' club thing to it and it had pet projects. A lot of the emerging stuff and the important stuff never got their attention. In fact, Parliament missed an opportunity to have the CIHR created.... But make it accountable to Parliament, at least on a periodic basis, say every three years or whatever.

I'm concerned you have raised the spectre that maybe the CIHR has lost a strategic focus on the priorities for Canadians.

I'll give you my last little moment to respond to that suggestion.

[Christopher Wilson]

We are very encouraged by the CIHR's new focus on its strategy for patient-oriented research. We think investment in practical research that translates the knowledge gained from biomedical research into real outcomes at the bedside is definitely the way to go.

Currently, 94% of CIHR's investments are in basic research. We absolutely support basic research, because it starts the stream that leads to improvements. But we clearly need to refocus on research that impacts directly on patient care. They seem to be on that track, and we strongly support it.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Szabo.

Mr. Paillé, you have the floor.

[Daniel Paillé, Bloc, Hochelaga, QC]

Ms. McInturff, Ms. Lahey, I also thought, when I saw you among the chemists and people from the gas industry and businessmen, that it was arranged wrong, but ultimately I decided it was a good thing, that your testimony would do them good, as it would the government. If there is one field where it is a champion, both domestically and on the international scene, it's in the area of reinforcing harmful stereotypes about the status of women. In any event, I want to thank you for coming to testify before us.

You will understand that I am going to address my remarks mainly to the people from Lebel-sur-Quévillon. When a plant is closed in Sainte-Thérèse or in Boisbriand, it is torn down, they build a shopping centre, and that's the end of it. But when a plant is closed in an isolated single-industry town like yours, we see what happens.

You are here with Mr. Bouchard, who owns a convenience store. I wonder, Mr. Bouchard, whether you have been reduced to giving your customers credit. It must be difficult to be the owner of a convenience store in Lebel-sur-Quévillon. How does the situation look to the owner of an SME in a town like that?

[François Bouchard, City Councillor, Ville de Lebel-sur-Quévillon]

Clearly it isn't easy. Given all the closings, we have no choice but to rationalize and cut jobs. We are running on the spot. Just like a duck: there's nothing going on above water, but below the surface it's paddling. The situation is the same for all business owners in Lebel-sur-Quévillon. We are out of breath after five years. Nobody is replacing the ones that are leaving.

[Daniel Paillé, Bloc, Hochelaga, QC]

Mr. Mayor, you say nothing is being done. We have all seen that what was done for the auto industry was 60 times higher than the $170 million over two years given to the forest industry, of which there was $100 million over two years in Quebec. I'm sure the people on the other side will say there is the Temporary Initiative for the Strengthening of Quebec's Forest Industries, which represents $33 million a year over three years.

Have you seen these programs passing by where you are? Is it enough to guarantee recovery for Lebel-sur-Quévillon?

[Gérald Lemoyne]

Yes, we've seen them passing by, and we would liked them to stop in Lebel-sur-Quévillon. We have heard about these programs. I think we are probably, at least in Quebec, the most glaring example of what the crisis in the forest industry means. Five years after the closings, we have unfortunately not benefited from any of this aid. Obviously, some may say we are remote and maybe we didn't make the necessary efforts to get funding. Well, I can show you that this is really not the case. Over the last five years, I think not a week has gone by that I didn't leave Lebel-sur-Quévillon to try to get assistance for reopening the plants. The good news is that we are going to succeed. However, we are going to do it on our own, so with assistance, we would have been able to get there faster.

[Daniel Paillé, Bloc, Hochelaga, QC]

Would it help you to have credit facilities or loan guarantee programs for modernizing the facilities and getting better energy efficiency? You've made an offer to buy the plant, is that right?

[Gérald Lemoyne]

Yes, we have made an offer to buy the plant. We want to do things differently from what was done before. If we want to continue doing what was done in the paper industry in recent decades, we can get assistance. However, if we do things the same way, we are going to end up in the same place.

Our plan for restarting the plant, which focuses on energy production, is different. Although we are a small community, we have paid to do research to find out whether we were able to make other products, for example in pharmaceuticals, from the forest or from paper production—obviously, that can vary. We are a small community, but we paid for researchers who have found products that could be manufactured.

So we need assistance from the government. As we speak, we have a plan to reopen the pulp and paper plant that calls for an investment on the order of $200 million. Obviously we will not be able to find those funds in the Lebel-sur-Quévillon municipal budget.

Of course there is a company that is with us in this project. We can't do it by ourselves. But still, given the investment that has to be made, we need help from senior governments.

[Daniel Paillé, Bloc, Hochelaga, QC]

You mentioned that you yourself had been locked out at Lebel-sur-Quévillon. I would like you to explain something. You were locked out, the plant shut down, but you weren't entitled to employment insurance that you had paid into for 40 years. Something isn't right.

[Gérald Lemoyne]

No. In 2005, when the plant closing was announced, the people applied for employment insurance. They were told they could not receive employment insurance benefits because they were locked out. The closing occurred during collective bargaining. Even the employer said it was not a lockout, but a closing for economic reasons.

Three years later, in 2008, when Domtar announced it was closing down permanently, people applied again for employment insurance, believing they were surely no longer locked out. Unfortunately, they weren't eligible, because they had not paid into employment insurance in the previous 104 weeks. Of course we didn't contribute, because we weren't working.

There are a lot of people who, like me, paid into employment insurance all their working lives, and unfortunately were not able to receive that assistance, which would only have been a bandaid, but would have been very useful.

[Daniel Paillé, Bloc, Hochelaga, QC]

How many workers are in that situation in Lebel-sur-Quévillon?

[Gérald Lemoyne]

We are a small isolated community that has a population of about 3,300. In Lebel-sur-Quévillon and the surrounding area, 1,000 jobs were lost in the forest industry. You can see the size of the disaster.

Some people chose to stay in Lebel-sur-Quévillon, but obviously most people who had training went to work all over the place. Some of them had to leave because they knew they could not get any help. Often, they had to make choices that were quite difficult, even in terms of their families. There are also people who have no opportunities.

When someone has spent over 40 years of their life working in a pulp and paper plant, they are specialized in a very specific field. Even if a digester operator wanted to work in the mines, they wouldn't get hired, because of their age and their lack of experience. So opportunities are limited.

Yes, people can take training, but when the person is 53 or 54 years old and has spent their live working in the forest industry, they are not certain to get hired in the mining industry, even if they retrain.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you for your testimony.