Mr. Chair, ladies and gentlemen, my name is Peter Cairns. I am the president of the Shipbuilding Association of Canada.
Shipbuilding is a hot topic right now, and I am sure there is no one in this room who hasn't heard of the national shipbuilding procurement strategy. I am not going to talk about that strategy this morning but about issues that are affecting the small commercially oriented shipyards that are unlikely to be directly involved in the national shipbuilding procurement strategy. The number of shipyards I am talking about varies between 18 and 20.
There are some impediments in this country to commercial shipbuilding, and the first one, to remind everybody, is the North American Free Trade Agreement. We do not have access to the United States market, which is a natural market for the United States, so we must compete against the Chinese, the Europeans, the Koreans, and whomever.
Subsidization is still rampant within shipbuilding on the global stage, though it is not as freewheeling as it used to be. National states do not subsidize much any more, but provinces or states within countries do subsidize, and cities subsidize in the form of tax-free buildings and those sorts of things.
One of the problems we face in these small shipyards is a lack of maritime awareness in the country. Unless they live on a coast, people are not very aware of what goes on in a shipyard and why ships are important.
Last, I would mention the arbitrary removal of tariffs by the finance department for some classes of vessels in 2010.
There are four things I would like to talk about, which we have talked about before. The first is the structured financing facility. It was implemented in 2001 under the administration of the industry department and the Minister of Industry. It provides an interest rate buy-down of the financing used in the acquisition of a vessel. It has a nominal value of 15% of the cost of that vessel, but the true value is closer to 8% after tax. It has been a very useful program to the shipbuilding industry but is somewhat moribund at the moment. We understand that it remains authorized but unfunded at the moment. We are concerned that it is going to be lost in the government's search for reductions in spending. We think this program is really quite useful to the industry. I would remind everyone that under this program, a job only costs $17,000 Canadian, which makes it a pretty efficient program.
The next is the accelerated capital cost allowance. A Canadian shipowner can get the accelerated capital cost allowance to write off his ship within four years, if he has the right balance sheet and provided he builds the ship in Canada—or he can use the SFF, but he can't do both. We are advocating that shipowners be able to use both. That would make Canada's shipbuilding industry a little bit more competitive with foreigners.
The last is long-term financing. We have advocated this before but would like to talk about it again--to get long-term financing for the shipbuilding industry. You can long-term finance a house, you can long-term finance a motor home, but you can't long-term finance a ship. We believe long-term financing would allow payments on the financing to be made when the ship is at its most productive, that is, after it has been running awhile. We think the government and industry should sit down and talk about that and see what is possible. In the United States they have the Title 11 program, which allows U.S. shipbuilders of similar size to the ones I am talking about to compete internationally.
Those are my recommendations. We are looking for the SFF to remain funded to about $20 million for the next five years and then be re-evaluated to see whether it continues to be necessary. We would like to have a serious look at combining the SFF and the ACCA. We would also like to look at long-term financing.
That is the end of my brief.