Finance Committee on March 12th, 2015

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Watkins.

[Ron Watkins]

I'll speak to both direct and indirect ways in which this plays out. First of all, while you did not see brand new steel plants go up in Canada since then, there has actually been a lot of investment in the operations that we have. Frankly, you haven't seen much in the way of brand new steel plants in North America, largely because of the pressure from overcapacity in China and elsewhere. There has been reinvestment, productivity improvement, process improvement, and technology improvement, including environmental technologies, over this period of time.

Another factor came up in the earlier question about the impact of dumped products. If we're subject to dumped imports from other countries, that's going to undermine the competitiveness and in a sense the validity of investing in Canada, so having a strong trade remedies system is actually an important investment factor for our industry.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The other thing I want to mention too is that there has been a lot of talk about green energy. I think we've done that to some degree and perhaps we haven't done enough of that. I've been to China and I've seen their mills. They are impressive, to say the least, but they're filthy dirty. They use filthy dirty coal and they don't really care about that. Interestingly enough, they're the biggest advocates of our getting into the green energy business.

Can you perhaps tell us a little bit about some of those challenges that you have with where we're going? Do you know what I'm talking about?

[Ron Watkins]

I'll just quickly start.

They are challenges for us too. I bet that some of the mills you saw in China were their newer ones and not some of the older ones that are still operating.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

They're beautiful mills, but the coal plants are—

[Ron Watkins]

We have a range of environmental requirements we have to meet, a lot of them at the provincial level. We do that. We invest in the technologies and new capital investments to do that.

In the long term as an industry, our industry is working globally to find new technologies to in a sense make steel in some fundamentally different ways to deal with some of the GHG questions. There is continuous effort in our industry to do so. We actually think that from a GHG point of view it is better to get Canadian steel than a lot of these foreign products.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Can I just clarify that when I talked about “filthy dirty” I was talking about the air; I wasn't talking about the plants, because you're right that at the plants you could eat off the floors.

[Ron Watkins]

Again, it depends on whether you have environmental regulations and also whether you enforce.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That filthy dirty coal is coming from us. We supply the vast majority of that anthracite coal that goes in.

I want to turn to Mayor Blake again for a moment. I may have missed this, Your Worship, I had to step out for a phone call, but in your presentation I think you talked about taking a breath. That was during the 2008 collapse when things got off the front burner for a moment because the pace of development in trying to keep up until that point had been breathtaking, to continue the analogy.

What is the infrastructure opportunity for communities like yours right now in the context of very low interest rates and perhaps lower pressure on the workforce supply in Canada that Ms. MacEwen and others have pointed out? Is this an opportunity for the federal government to assume some responsibilities in working with communities like yours to invest for what comes next once this particular pause is over?

[Melissa Blake]

I certainly think it's a great viewpoint. When I mentioned earlier about the vastness of the projects that we've had, the lag time that we had in 2008 actually helped us to catch up a little bit, but we're still behind the eight ball. We have any number of committed capital projects that have not actually even commenced in some cases.

When you look at the broader picture of where can a federal government actually get engaged, another project that comes to mind is that we currently have one road, Highway 63, that has been an incredible focus because it was so incapable of managing the volumes of traffic that we had seen. It's also the only road that will take you from outside the community right through to the oil sands plants, but it serves every neighbourhood in the region. It also carries all those modules of steel that will come up that road, as well as dangerous goods, both in and out of the community. One road for that purpose is a very concerning thing for me.

When I look at this industry and I look at the opportunity, we are mindful that a bypass road would be very beneficial to industry, and it is a significant cost that the municipality itself could never do. We are working to engage industry, we're working to engage the province, but it's another chance where the Government of Canada might say that this makes ultimate sense for us to be a participant in to pave the path to the future. I think it leads to economic diversification opportunities beyond the life of the oil sands as well.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Deficits have been an issue; this government has run successive ones nationally, but is now, according to the finance minister, on track to balance.... Yet we are running—I'm just looking up the numbers here—tens of billions of dollars of infrastructure deficit across Canada, with municipalities like yours unable to meet the challenges. The Toronto Region Board of Trade, and groups from Fort McMurray, to Vancouver, Halifax, and beyond, recognize infrastructure, particularly around congestion.... I look at Highway 63 and just even the danger factor for those workers travelling south to Edmonton. I wonder, with these circumstances, why the government wouldn't see this as an opportunity to build the next stage for Canada. Thank you for that.

I want to turn to Ms. MacEwen for a moment. There is a connection—and this goes to Ms. Cobden's testimony as well as Mr. Watkins'—and it's an implicit connection between an increase in productivity and efficiency within any of our industries, and a drop in labour participation. Is it an explicit connection? I come from a forestry sector in northern British Columbia. We've seen mills, almost within the same breath, announce major investments, $10 million, $20 million, $30 million, into a mill and then within a couple of weeks the layoff announcement comes, because the mill becomes more efficient. It's just that fewer people are required to turn out the same volume, or even more in most cases.

I want to go to Ms. Cobden just for a second before I go to you, Ms. MacEwen.

How many Canadians worked in the forestry industry, say, 15 years ago?

[Catherine Cobden]

There were 100,000 more. I would suggest, though, that these changes are not all from productivity improvements; the vast majority of those jobs went because of structural and significant downturn in the economy.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

When we return to a more robust U.S. housing market, for example, with those investments being made in a place like forestry, we are not expecting the uptick. We were asking this of the manufacturers. This is why we are doing this study, to understand whether, if the U.S. picks up, if the dollar is lower, if interest rates are low, we are going to see a manufacturing surge back. We've lost 400,000 manufacturing jobs across Canada since this government took over. No one seems to be presenting the case that we are going to get anywhere near replacing those good-paying middle-class jobs just because of some structural changes that have gone on in our economy. Is that a fair assessment?

[Catherine Cobden]

I'd like to say that the position I've tried to put on the table is that we do have a tremendous potential ahead of us. It's not going to be easy, and I think we are not going to be able to get there alone. We have 60,000 jobs that we want to achieve in the next six years. That isn't making up the full lost ground. You're absolutely right. However, I would also suggest that if we got busy with grabbing the opportunities that are out there, that Sweden, Finland, Brazil, and all these other places are grabbing, we'd have a lot more jobs than that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I'll go first to Ms. MacEwen and then back to you, perhaps.

Can you give us one policy initiative that we should be considering right now, given the circumstance we're in, the experience we've had over the last six or seven years, specifically about manufacturing? We've lost nearly half a million manufacturing jobs. Many are predicting an energy price about here and the Canadian dollar returning to something normal.

How, specifically, would you respond to Ms. Cobden's comment? What would the Canadian government proceed with as a policy to help restore some of those manufacturing jobs or create new ones?

[Angella MacEwen]

We are partners with the Green Economy Network and have a paper that talks about one million climate jobs. We propose a three-pronged approach that is using public procurement to increase investment in transit. We are losing the ability to have local procurement at the provincial level under CETA, but if we use public procurement, we could purchase transit vehicles, have a capital infrastructure that's built in Canada using the steel we make here, and have a green retrofit of houses that could use forestry products that we make here in Canada. We could train workers to work in both of those fields.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sorry, I'm running out of time. I am trying to think of an example. Part of the so-called NDP budget of 2005 was for green infrastructure, particularly transit in Toronto. It was used to make subway cars in Thunder Bay.

[Angella MacEwen]

Exactly. That's a fantastic example that we use a lot. The sourcing of the Toronto subway is from Bombardier. It kept 500 jobs in Thunder Bay. Those are permanent, good, well-paying jobs.

We also say that investment in renewable energy itself would create one million jobs and lower our greenhouse gas emissions over the next 10 years.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you.

[The Chair, Conservative, James Rajotte]

Very briefly, please.

[Catherine Cobden]

We should think about the existing manufacturing base and how we add in these green opportunities. FPAC has a strong position in support of these ideas. You have approximately a billion dollars, give or take, of assets in each of these communities in rural Canada. Why wouldn't you build off that? Something that links innovation, environmental performance, and building off your capital stock is the kind of idea we would like to suggest is worthy of consideration.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cullen.

A comment on that point is, I agree. I think the ACCA is an excellent example. It not only helps companies in terms of productivity, but it also helps in terms of newer equipment. New machinery is more environmentally sound as well, so it accomplishes two goals, in my view.

Mayor Blake, I want to clarify something. I'm from Edmonton; I'm an Albertan as well. Just to clarify, Highway 63 is being twinned. My understanding on Highway 63 is that it was not a lack of federal funds or federal priority. I don't want to blame another level of government, but the reality is that federal funds were ready to go quite some time ago. I think it was the province in terms of identifying its priorities. It's very high on the province's list. It is being twinned now. When will it be completed? Can you just clarify that the federal funds were available some time ago for that project?

[Melissa Blake]

Yes, I certainly can confirm that.

My understanding, of course, is that the detriment in terms of applying those funds and making it happen is that there was no completion date for that highway until probably two years ago now, when they finally said that they would invest what they needed to complete that task by 2016. I'm very optimistic that by the end of next year we should be able to have that fully opened. What we're experiencing is great improvement. I do thank the federal government for their contribution.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that clarification very much.

Mr. Volpe, I wanted to get to your presentation. I thought it was very good.

One of the things that we're doing in these hearings is we're showing the complexity of the relationship between oil prices and the Canadian dollar. Also, we can't just simply say as policy-makers that if the Canadian dollar goes down, it benefits the manufacturers and it's all good. You've explained that very well. One of the things you say in your brief is, “Plant overhead is a mix of Canadian and foreign currency-based exposure. Canadian-based costs include electricity, indirect labour and local services. However, virtually all specialized and heavy machinery and ancillary equipment are based in U.S. or euro currency costs.”

Can you speak to that in terms of identifying for the committee that companies in your sector—and others may want to comment—what is a more complex picture than simply saying that when the dollar goes down there are benefits to manufacturers and exporters?