Thank you very much, Mr. Chairman, and members of the committee, for the invitation to speak to you today on behalf of the Chemistry Industry Association of Canada.
CIAC is the voice of Canada’s chemistry industry, which a $50 billion a year industry for this country. Our member companies apply knowledge to take resources, such as natural gas, electricity, minerals, and biomass, and convert them into high value products that are used to produce other manufactured goods and consumer products. In essence, we provide the building blocks, technology, and services needed by many other Canadian industries. These range from clothing and pharmaceutical companies to natural resource developers and manufacturers of energy-efficient housing and cars. I should mention that, although fairly invisible, we are Canada's fourth largest manufacturing sector.
The business of chemistry employs 82,000 Canadians directly and supports another 400,000 jobs in the Canadian economy. So we have a fairly large multiplier. One job in our sector creates another five elsewhere in the economy.
The United States is our largest customer. The bulk of our exports, about three-quarters, moves there. For many years we enjoyed a competitive advantage when it came to natural gas feedstocks and electricity. Until recently, about two years ago, the U.S. chemical industry was actually in decline. Once that country's leading export industry, it had slipped into a negative trade balance and most global investments were gravitating to China.
That is changing. Shale gas is shifting the competitiveness equation. Canada no longer has a natural gas advantage, and the shift to cheaper natural gas-fired electricity generation in the U.S. is increasing the competitiveness of manufacturing there in general, and increasing the demand for chemical inputs as well. Our electricity rates are no longer cheaper than jurisdictions in the U.S.
Announced investments for the chemistry industry in the U.S., currently at $120 billion, will increase production by 30% to 50%, which represents at least $250 billion a year. This wave is cresting in 2017 and it has not yet washed ashore in Canada. If we want to catch that next wave and be part of the reshoring of manufacturing we need to act now. I circulated a couple of charts there which will show you what's going on. There's one that shows the investment trends, Canada versus the U.S., and you can see there that the investments are shooting up in the U.S. and have yet to show a similar trend for Canada.
The opportunity for investment is real and immediate here as well, but at this point we have not even seen a proportional number of announcements. We estimate that there is a potential for $10 billion worth of new projects in Canada by the end of the decade, but we cannot attract that when the playing field is not level. U.S. companies enjoy a depreciation allowance that allows companies to write off the cost of new projects at roughly twice the rate of Canada, and this time value of money is very important for investments that can take up to six years from initiation of project analysis to commissioning and startup. Again, I circulated a chart which just gives you an idea of how long it takes to start when you start even thinking about a chemical project to when the production actually starts.
You have our pre-budget submission and our case for why Canadian manufacturing needs a permanent or long-term greater than five years depreciation rate that at least matches the U.S. A recently released independent study calculates that a 45% declining rate would only match the current and permanent U.S. rate, and coverage for the U.S. projects is much broader. So, to match that coverage differential we urge this committee to recommend a permanent 50% depreciation rate for manufacturing machinery and equipment. It will bring new investment and jobs to Canada.
Thank you very much.