Evidence of meeting #114 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.

On the agenda

MPs speaking

Also speaking

Shane Bishop  As an Individual
Jeremy Zhao  As an Individual
John Forgeron  As an Individual
Saqib Qureshi  As an Individual
Adam Legge  President and Chief Executive Officer, Calgary Chamber of Commerce
John Bayko  Vice-President, Communications, Canadian Association of Oilwell Drilling Contractors
Ben Brunnen  Vice-President, Oil Sands, Fiscal and Economic Policy, Canadian Association of Petroleum Producers
Martin Roy  Executive Director, Festivals and Major Events Canada
Ricardo Acuna  Chair, Oxfam Canada
Naheed Nenshi  Mayor, City of Calgary
Chris Bloomer  President and Chief Executive Officer, Canadian Energy Pipeline Association
Michael Holden  Chief Economist, Canadian Manufacturers & Exporters
David Kaiser  Member, Board of Directors, Hotel Association of Canada
Casey Vander Ploeg  Vice-President, National Cattle Feeders' Association
Ray Orb  President, Saskatchewan Association of Rural Municipalities
Alex Zahavich  Vice-President of Corporate Development and Applied Research, Education, Southern Alberta Institute of Technology
Ubaka Ogbogu  Assistant Professor, Faculties of Law and Pharmacy and Pharmaceutical Sciences, University of Alberta, Stem Cell Network
Kenneth Goodall  As an Individual
Gillian Eloh  As an Individual
Mary Keizer  As an Individual

10:25 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Mr. McLeod, you have the last question during this panel.

October 6th, 2017 / 10:25 a.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

Thank you, Mr. Chair.

From just listening to the comments about energy east, I can understand and share the disappointment, because we in the Northwest Territories went through a similar process with the Mackenzie Valley pipeline. We spent a number of years; we rolled all the regulatory bodies up into one umbrella group, and we brought in the aboriginal people as a 30% shareholder. We had all the ingredients, yet it took a long time and many thousands of questions. It was very interesting that when we went back and looked at who was asking the questions, it was the federal government of the day that was asking 75% of the questions that needed detailed responses.

The industry was flagged in pointing to the need for a road in the Mackenzie Valley. We don't have a road, so that drives the costs way up. At the end of the day, they got their permitting, and to this day, they still have their permits, but market conditions don't allow it to move ahead. Sometimes you can have all the ingredients you require, but the conditions are not right and it's not going to move forward.

That leaves us in the north with a real challenge. I wanted to talk a bit and maybe ask the Calgary Chamber of Commerce some questions, because you indicated a need to increase indigenous participation. I belong to the Dehcho First Nations, and we have a real challenge in front of us with our youth. It's been pointed out that we probably have 150,000 aboriginal indigenous people sitting unemployed in our communities. I have communities that are up to 60% unemployed. It's been predicted that we're going to see 400,000 indigenous youth entering the workforce or of working age in the next while. That's going to really increase the challenges, and we don't have a mechanism for making the transition from education to getting a job in our system. Many leaders have said maybe that should be a requirement, as an attachment to economic projects.

What also caught my ear was the suggestion of a tax credit for employers. Would that be something you might see as a solution to where we're heading, of having even greater unemployment in our communities?

Another challenge, of course, is mobility. Most aboriginal people do not go where the work is, so local employment in the areas is something we need to focus on.

10:25 a.m.

President and Chief Executive Officer, Calgary Chamber of Commerce

Adam Legge

Through the chair, thank you, Mr. McLeod, for the question.

You're absolutely right that there are opportunities for Canada to achieve positive outcomes with increased labour force participation among indigenous Canadians. We could achieve so much: economic development within communities, self-sufficiency within communities, and greater support for economic activity overall.

The proposal around something oriented toward the employer specifically is that it enables the development of skills to be tightly aligned to what the needs are within the workplace. We have a variety of different funding mechanisms that follow the individual. What this would do is make sure that if there's a need for pipefitters, welders, brewmasters, or whatever it might be, you can actually get that tied to the company, and then the company can deploy those dollars in support of the specific occupations they need. I agree that there are huge opportunities to tie that to projects that exist all across this country, enabling greater employment and skills development among indigenous Canadians.

As to the issue of travelling to where the work is, one of the other options to consider is that, in addition to being a skills development investment, it could also be an investment in some of the wraparound supports that enable people to achieve stable employment. That might be child care, elder care, transportation support, lodging support, etc., that would enable someone to maintain employment. It shouldn't always be 100% tied to just the skills development.

10:30 a.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

Thank you for that.

Many people have pointed out that if we could properly invest in education and skills training for the aboriginal population, we'd see a great return. We've seen it in the mines up north. The diamond mines are doing a very good job, to the point that they're providing on-site literacy programs. We're seeing a lot of people employed, especially the younger people from the communities.

We're starting to see the same challenges the mayor of Calgary referred to. I was a mayor in my previous life, and although the community I represented only had 800 people, the challenges were the same. In our diamond industry, the Ekati mine, for example, has 200 aboriginal people from one community working there. When they go back to their communities, though, they're back in the social housing units. They're jamming the system, because there's no market or mechanism for affordable housing in those communities. A national housing strategy is something we're counting on to make a change.

I want to ask the mayor of Calgary about putting a price tag on the infrastructure deficit. I've watched the deficit grow in our communities across the country, across the north, and I've seen it at the territorial level. It continues to grow, and playing catch-up is going to be a real challenge. What would be the price tag that would be put on it? I've also heard from the mayor of Yellowknife that there is a lot of construction, more than ever in history, going on in his city, but housing continues to be an issue there as well.

10:30 a.m.

Mayor, City of Calgary

Naheed Nenshi

I can certainly provide the committee with updated numbers for our municipal infrastructure deficit. We have not calculated it in a while, but it would be relatively easy to bring that up. I will also suggest to the big city mayors' caucus of the Federation of Canadian Municipalities which keeps updated numbers, that they make sure the committee has those numbers.

That said, when you break it down within the city alone, on public transit, in terms of infrastructure that needs to continue to be built, we're looking at, in the low, up to $10 billion. When you think about affordable housing, 15,000 units are required. I'm going to drop a zero if I try and multiply through the average cost of a unit, but we're looking at a couple billion dollars there. That's just transit and housing. The big money, of course, is in roads, water, and wastewater infrastructure. The City of Calgary, for example, has about a $3.8 billion debt. Almost all of it is for water and wastewater infrastructure. When you look at a city this size, 1.2 million people, you are easily looking at $20 billion in unfunded infrastructure, and you just multiply that through by communities across the country.

Now the good news is that the previous government of Canada and the current Government of Canada have recognized that in ways that governments before them didn't, and we've been whittling away at that as part of our economic stimulus work, but also as a real interest in the need to build infrastructure. I'll give you one very fast example.

When I was first elected, I created in Calgary our first ever permanent fund for social infrastructure. You know, the transportation infrastructure and the environment infrastructure have the gas tax and other forms of funding. We had nothing to build libraries, recreation centres, and fire halls, so we've set aside from our own tax base $42 million a year, 50% of which is for maintenance of existing facilities and upgrades, and 50% of which is for new, and that has allowed us to build new libraries and four new recreation centres, as well as buy some personal protective equipment for our firefighters and fire halls. But you know, we have to actually do it. Nobody wants to sponsor the renovation of a locker room or the fixing of a leaking roof in a hockey arena, but all of this stuff has to happen.

With that, I have to go.

10:30 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mayor. I know you have to go.

I have one last comment, really, for a number of people on the tax planning using private corporations. I know there are a lot of people saying the consultations should be continued. I would suggest that the unintended consequences are real. I think Mr. Forgeron said that. He's not the only one who said that, as I heard it from people in my own riding as well. Where I come from, it's essential that the government bring some clarity to this issue and address some of the concerns that have been raised and do it quickly, because we have to get that investor confidence back.

That's why I'm certainly in favour of extending the consultations, but I would ask the chamber and others to look at the minister's press release of October 3 where he outlines five points. Get your feedback in on those five points, and concerns that you still have on the direction that is being proposed.

With that, I want to thank each and every one of the witnesses for their presentations. I think we had a really good panel.

We will suspend until 10:45 a.m.

10:45 a.m.

Liberal

The Chair Liberal Wayne Easter

We will reconvene. I call the meeting to order.

I want to welcome the witnesses here for the consultations in advance of 2018 budget. Thank you for coming here today. I know that some of you have come long distances.

I also want to thank those who were able to send in submissions prior to mid-August. They are on people's iPads and they are part of the budget consultations as well, and the witnesses' presentations will add to those.

I will ask members to introduce themselves just to give people a bit of an idea of where representatives on the committee come from. This is not the full committee. We travel with a little less than the full committee, but we do represent across the country as a whole.

There will be some people speaking French. Channel 1 is English. Channel 2 is the one you will use for translation, if need be.

We'll start with the local member, Mr. Kelly.

10:45 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Thank you, Mr. Chair.

I'm Pat Kelly. I am the member of Parliament for Calgary Rocky Ridge. For our largely local panel here, my riding is west of Sarcee Trail, north of the river, and north of Stoney Trail, so a corner around the northwest suburbs of the city is my riding. I'm glad to be here for a meeting in Calgary. It's great, and I look forward to the presentations.

10:45 a.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

Thank you, Chair.

My name is Pierre-Luc Dusseault, and I'm the member of Parliament for Sherbrooke in the House of Commons. Sherbrooke is a riding located in southeastern Quebec, an hour and a half away from Montreal. In addition to that, I am the National Revenue critic for the NDP.

I'm very happy to be in Calgary, Alberta, to meet you and hear your concerns and expectations regarding the next budget.

10:45 a.m.

Conservative

Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC

Hi. My name is Dan Albas. I am the member of Parliament for Central Okanagan—Similkameen—Nicola in beautiful British Columbia.

It's exciting to be here in Calgary. I actually lived here during the Winter Olympics, and it's a wonderful city, so it's always a pleasure to be in Calgary.

Thank you.

10:45 a.m.

Liberal

The Chair Liberal Wayne Easter

Michael is almost a resident as he flies through the Calgary airport so much.

Mr. McLeod.

10:45 a.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

Thank you, Mr. Chair.

Welcome, everybody. I'm very happy to be here.

My name is Michael McLeod and I am the MP for the Northwest Territories, a very big riding.

As the chair has mentioned, I travel through Calgary quite a bit. Every Sunday I come through on my way to Ottawa.

We just came from the Northwest Territories, where I am from. We heard lots of very interesting comments from the people who presented there and I'm hoping we're going to hear some interesting comments, solutions, and good recommendations that we can take back to Ottawa.

Thank you.

10:45 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, Mr. Chair.

Welcome, everyone.

I am Francesco Sorbara and I have the pleasure of representing the riding of Vaughan—Woodbridge, a pretty dynamic place with a lot of manufacturers and a lot of development going on in the area where things are actually going quite well.

It's great to be here in Calgary and I look forward to hearing everyone's presentations.

Thank you.

10:50 a.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Good morning, my name is Greg Fergus. I am the Liberal MP for the riding of Hull—Aylmer, just outside Ottawa, on the Quebec side.

It's my first term as an elected official and I'm very happy to be back in Calgary, a city that I've already visited a dozen times. I'm happy to be here with you.

10:50 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, all.

I'm Wayne Easter, member of Parliament for the riding of Malpeque, in Prince Edward Island. I know that in Calgary there is even an Islanders club as so many Prince Edward Islanders have come out here to do their life's work.

In any event, as the chair of the committee, I would just say that there is nothing like being on the road and on the ground to hear people's proposals and concerns relative to the work that the federal government does, so it's a real pleasure to be in Calgary to hear from you. A great many of you are on your own turf, although I know there are some here from Saskatchewan, as well.

With that, we'll turn to the first presentation on panel two.

Mr. Bloomer, from the Canadian Energy Pipeline Association, the floor is yours. Welcome, and thank you for coming.

10:50 a.m.

Chris Bloomer President and Chief Executive Officer, Canadian Energy Pipeline Association

Thank you, Mr. Chairman.

Good morning, everyone. Thank you for the opportunity. I will keep my comments short, because I look forward to the questions.

I'm the president and CEO of the Canadian Energy Pipeline Association. We represent the 11 major transmission pipelines who transport 97% of all of Canada's natural gas and crude oil production. We do appreciate the opportunity to speak to you today about how the government can help our industry be more competitive.

To be clear, for our industry, remaining competitive requires a regulatory system that provides certainty and stability. Investors are choosing other jurisdictions because they see uncertainty in the Canadian regulatory system, which means additional risks, costs, and delays. We were encouraged by Minister Carr's remarks when he said that the government understands our need for predictability and stability. It is the responsibility of governments to create the right conditions to ensure that Canada remains competitive. If we don't act on this responsibility, we will risk losing opportunities to get our resources to markets. We hope that this is a goal shared by everyone here today.

The pipeline industry plans for the long term. Even small changes to regulatory processes have significant repercussions. Major changes take years to adapt to, and create considerable uncertainty and risk along the way. In addition, changing requirements in the regulatory processes that are already under way have led to increased ambiguity, delays, duplication of work, and growing politicization. As you can imagine, we're understandably very nervous at this time.

CEPA supports a balanced approach to the economy and the environment. We have vigorously participated in all of the government's consultations on regulatory reform in an effort to help the government strike the right balance that will provide the certainty and stability the government says it understands is so important to our industry.

Now, much of the recent debate surrounding the need for regulatory reform is focused on new major projects. What seems to be lost, though, is the potential impact the proposed regulatory changes could have on current operations and maintenance of our existing pipeline network. That is a major concern for industry.

Canada's pipeline infrastructure is world class. Our member companies have delivered oil and gas products with a 99.99% safety record for over a decade, and we are continuously trying to improve on that record. We are a global leader in pipeline technology and innovation. We understand that the energy sector is in transition to a lower-carbon economy. We've heard the narrative about why we may not need new pipelines. However, according to “International Energy Outlook 2017”, global consumption of oil and gas will still account for 77% of energy use in 2040. Clearly there will continue to be a demand for oil and gas, and pipelines will be required.

In Canada there are enormous resource development opportunities beyond the oil sands. The Montney and Duvernay fields contain significant new resources. Last month the National Energy Board concluded that Duvernay could produce 3.4 billion barrels of marketable oil, 76 trillion cubic feet of natural gas, and six billion barrels of natural gas liquids. These fields are an enormous future opportunity for Canada.

In conclusion, we have two points to emphasize. First, we encourage the Government of Canada to commit to regulatory reform that ensures certainty and stability for our industry. Second, in the next budget we hope that the government makes a bold statement about the importance of the natural resource sector to the Canadian economy, employment, government revenues, and business investment. No single federal document is more carefully scrutinized by economists and the investment community than the budget. All our industry needs to hear is the strong message that our resource sector matters.

Thank you. I look forward to your questions.

10:55 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Chris.

We will turn now to Canadian Manufacturers & Exporters.

Mr. Holden, welcome.

10:55 a.m.

Michael Holden Chief Economist, Canadian Manufacturers & Exporters

Thank you very much, Mr. Chair.

Good morning to you and the members of the committee. Thank you for the invitation to appear before you today.

I am the chief economist of Canadian Manufacturers & Exporters. I do that work here out of Calgary, and I'm here to represent the organization, our 2,500 direct members and the broader manufacturing and exporting community. Our membership network accounts for an estimated 82% of all manufacturing across the country and 90% of Canada's exports.

I want to begin by congratulating this committee for focusing its pre-budget consultations on productivity and competitiveness. Productivity is the single most important factor underpinning our prosperity as Canadians. A productive economy attracts investment, creates jobs, supports wage growth, and improves the standard of living of all Canadians. Unfortunately, our record on productivity has not been strong. According to data from the OECD, overall labour productivity in Canada is among the worst in the G7. The United States is 30% more productive, and Germany is 38% more productive. The situation in manufacturing is largely the same. Most concerning is the large gap between Canada and the United States. American manufacturers are 150% more productive today than they were in 1990. In Canada, they are just 73% more productive.

Why is productivity lagging in manufacturing? We have a number of specific challenges. Compared to advanced manufacturing leaders around the world, our businesses underinvest in new capital, machinery, and equipment. We are relatively slow adopters of new technologies. Our performance in business R and D innovation and new product commercialization is poor. On top of all of that, the business cost environment in Canada is slowly deteriorating as energy costs, minimum wages, and the overall tax burden are on the rise.

We believe that with the right action these trends can be reversed. New advanced manufacturing technologies offer a unique opportunity to leverage Canada's strengths, to usher in a new era of prosperity for manufacturing, and by extension, for the Canadian economy as a whole.

In our formal submission to this committee, we offered a number of recommendations to help achieve that goal, and with the time I have remaining, I'd like to highlight a few of the most important of these.

First, the Government of Canada took a strong step forward this year due to the creation of its five-year $1.3-billion strategic innovation fund designed to boost innovation and investment in new technologies. We believe that this program should be expanded to $2 billion per year, made permanent, and that half of all funds should be earmarked for advanced manufacturing.

Second, the federal government should introduce a permanent accelerated capital cost allowance specifically for advanced manufacturing technologies. This new ACCA would allow manufacturers to claim an immediate first year writeoff of all qualifying capital expenditures on advanced technologies, including software.

Third, business tax and regulatory systems need to be reformed. Piecemeal efforts like changes to the taxation of private companies do not address our root concerns. We ask that the Government of Canada commit to a full review of the corporate tax system to ensure that it is globally competitive, fosters innovation, entrepreneurship, and growth, and is simple, transparent, and fair.

The need for such a review is all the more urgent given the apparent direction of tax reform in the United States. We can't forget that Canada competes directly with the U.S. for business investment. Taxation may not be the only metric that businesses consider when deciding where to invest, but it is an important one. Large gaps between Canada and the U.S. should not be taken lightly.

The final two recommendations that I want to highlight today relate to labour and skills. Any effort to boost innovation and adopt new technologies will fall short unless we have a well-trained and adaptable workforce, creative minds and skilled hands that can make the most of these new tools.

First, improvements need to be made to the Canada job grant. To be clear, CME and the manufacturing community in general strongly support this program. We believe that it should be made permanent and that funding should be increased. We also ask that the range of eligible training programs be expanded and that support be extended to multi-year training initiatives.

The second issue relates to the makeup of the manufacturing workforce. Manufacturing is dominated by men. Women make up 48% of the labour pool, but hold less than 5% of jobs in some production-related skills trades. Attracting more women to these jobs would go a long way towards addressing the labour and skills shortages in manufacturing. We thus recommend that the government work with industry to introduce more women to jobs in manufacturing, beginning with finding ways to increase female enrolment in skilled trades and STEM-related education.

In closing, let me just say once again that we strongly support this committee's focus on productivity and competitiveness. A more productive economy means a more prosperous society, more jobs, higher wages, and better opportunities for all Canadians.

Thank you all for your time, and I look forward to answering any questions you may have.

11 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Michael.

We're now turning to the Hotel Association of Canada. We have Mr. Kaiser and Ms. Shaw.

Welcome.

11 a.m.

David Kaiser Member, Board of Directors, Hotel Association of Canada

Good morning, and thank you for the opportunity to be here today.

My name is Dave Kaiser, and I am here today on behalf of the Hotel Association of Canada. In my day job, I am the president and CEO of the Alberta Hotel and Lodging Association.

Joining me is Leanne Shaw, who is the vice-chair of the Alberta Hotel and Lodging Association, and also the owner of the Country Inn & Suites right here in Calgary. Leanne is very representative of the many family enterprises that operate hotels across this country.

The Hotel Association of Canada is proud to represent more than 8,000 hotels, motels, and resorts, which encompass the $18.4-billion Canadian hotel industry. Our country's hotel sector directly and indirectly employs over 304,000 people and is a significant contributor to the Canadian economy, generating revenues estimated at $8.1 billion for all three levels of government.

In response to the committee's requested questions, my remarks will centre around measures that would help Canadian businesses be more productive and competitive.

We are here today with two key messages. Number one, we need fair rules for the sharing economy, and number two, we need continued funding to support Destination Canada's important work of marketing Canada to the world.

Last week, the Hotel Association of Canada released a new study, the most comprehensive of its kind. The study examined the short-term rental market in comparison to Canada's hotel sector, with a key focus on Airbnb as the most widely used digital home-sharing platform in Canada.

The results of the study revealed that commercial operators are growing exponentially and are far outpacing actual home-sharing activity. Alarmingly, only 17% of total Airbnb revenues in Canada are generated by true home sharing. This means that approximately 80% of Airbnb's revenues nationwide, which is $462 million, come from rentals where the owner is not present. This unregulated commercial activity has given rise to unintended consequences, including loss of affordable housing, loss of tax revenue for government, disruption in communities, and a risk to guests as there are no health and safety standards in place.

The existing tax laws in Canada are not designed for the 21st century digital economy. These laws need to be updated so that all businesses operating in the accommodation space have a level playing field.

In 2016, guests of Canada's legitimate hotel properties contributed an estimated $2.2 billion in consumer taxes and fees based on room revenues alone. If the same consumer tax and fee rates were to be applied to Airbnb revenues, Canada's Airbnb sector has the potential to contribute $85 million in consumer taxes and fees to the Canadian economy.

Other countries have taken action. Airbnb is now required to collect value-added tax on its service fees in the EU, Switzerland, Norway, Iceland, South Africa, and Japan, among others. Canada should follow suit.

Today, we are calling on the federal government to amend the Excise Tax Act to create a more level playing field for hotels. Airbnb and similar online platforms should be required to charge and remit HST on the service fee charged to hosts and guests.

We also recommend that the finance committee, Finance Canada, and the Canada Revenue Agency work collaboratively with the Hotel Association of Canada on a focused review of tax policies for the short-term rental industry, with the goal of achieving fairness. To be clear, we are not against individuals sharing their home to make extra income. What we are against is commercial operators acting like hotels without the same responsibilities to tax. Competition is a good thing, but it needs to be on a level playing field.

Finally, I would like to thank the government for its commitment in the last federal budget to bolster Destination Canada's funding to $95.5 million. This brings stability to Canada's marketing strategy and will allow for continued maintenance of Canada's current market share. In order to capitalize on this momentum and build towards the fulfillment of the government's new tourism vision target of being one of the top 10 most visited countries in the world by 2025, Canada will need a more competitive investment. The Hotel Association of Canada believes that a performance-based funding mechanism would best achieve this goal.

Thank you for your time. I would be happy to answer any questions you may have.

11:05 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, David and Leanne.

We now turn to the National Cattle Feeders' Association. Mr. Vander Ploeg, go ahead.

11:05 a.m.

Casey Vander Ploeg Vice-President, National Cattle Feeders' Association

Thank you, Mr. Easter, and good morning. I'm the vice-president of the National Cattle Feeders' Association and I too would like to thank you for the opportunity to share our views on budget 2018. Before I do that, I'd like to take us back to budget 2017.

Canada's agriculture community was very pleased with budget 2017's emphasis on the importance of agriculture and agrifood to the national economy and our potential to contribute even more. We agree with the findings of the advisory council on economic growth, the Barton report, that were referenced in budget 2017. We too believe that an expanding global middle class and an increasing international demand for food creates a significant opportunity for Canada's agricultural and agrifood industry.

As I said to this committee last year, and to some extent this was reflected in the budget, Canada does indeed have all the elements to become a true agricultural superpower. When it comes to beef, which pound for pound is our most valuable agricultural product, we have all the ingredients for success: a large arable land base, rich endowment of water, ample natural grasslands, superior genetics, a good climate, a fulsome supply of feed grains, tons of industry experience and know-how, and a world-class food safety system.

Budget 2017's goal of growing Canada's agricultural exports from $56 billion to $75 billion by 2025 makes a lot of sense, but it won't be automatic and it won't come without the support of policies and programs, and that's certainly the case with the beef industry.

Canada currently exports between 40% and 45% of our beef and cattle production. In 2016, 360,000 metric tons of beef worth $2.3 billion were exported. That's up from $2.2 billion a year before and $1.9 billion in 2014. While that all seems encouraging, all is not entirely well. Our national herd is below historical levels. In 2005 we had almost 13 million head of beef cattle. In 2017, that's just under 10 million, a 22% reduction. In 2005, fed cattle production was 3.6 million head. Last year, it was 2.4 million head, a 34% decline. There is concern about the industry losing its critical mass. That being the case, the timing may well be right for new policies, programs, and even goals to reverse some of the troubling signs of decline.

Getting back to budget 2018, how can Canada get to 75 billion dollars' worth of agriculture and agrifood exports and how can beef contribute to that larger goal? We believe that competitiveness emerges as the single most important prerequisite to achieving growth and achieving that export level. With that in mind, I would make five suggestions for the committee to consider.

The first concerns labour, which I believe is the single largest challenge facing Canadian agriculture and agrifood. A critical and chronic shortage of labour is impeding competitiveness and limiting our growth in future opportunities. We are very pleased to see the recommendations of the HUMA committee report on the temporary foreign worker program and decisions in budget 2017 to eliminate the four-year cumulative duration rule and to continue the exemption of certain employers from the program cap.

We're certainly pleased with the $200-million investment in the TFW program and the budget's commitment to engage stakeholders in securing improvements to that program and to improve pathways to permanent residency. Such efforts are under way but progress is slow, red tape continues, and the labour need remains great.

In budget 2018, we urge the government to follow up on its previous commitments and ensure that agriculture and agrifood has ready access to the labour it needs to remain competitive and to grow.

The second concerns rural infrastructure. Agriculture and agrifood is certainly poised to grow as an economic driver, but a strong local rural infrastructure foundation is needed. Agriculture operations are located in small rural municipalities with a limited tax base and meeting local infrastructure needs that provide national benefits is very challenging.

We welcomed budget 2017's establishment of the new national trade corridors fund and the Canadian infrastructure bank. We welcomed the $10-billion investment for gateways and ports and the $2 billion for rural roads and bridges. However, rural infrastructure support is still meagre compared with investments in urban areas. Some $2 billion for rural infrastructure over 11 years and spread across the entire country can only go so far. Meanwhile, pressures continue to build.

In the county of Lethbridge, which has a $3.5-million annual shortfall in funding for roads and bridges, the county has imposed a business tax on all livestock producers. For cattle feeders, this amounts to a $3 head tax on every beef animal in the county. A 50,000 feedlot operation in the county saw a $150,000 increase in their local taxation last year alone. These sorts of things have the potential to cause serious harm, particularly if cattle begin migrating to the U.S., shortening the supply of cattle to Canadian beef facilities.

In budget 2018 we urge the government to increase its investment in rural infrastructure to support agriculture, and to develop an ongoing stream of meaningful funding that will keep us competitive and help us to grow our exports.

Third is with regard to taxation. Federal, provincial, and local governments are introducing tax measures that are negatively impacting competitiveness. Federally, we see proposed changes to the Income Tax Act that are expected to leave less income in farmers' pockets and constrain their ability to grow. Provincially, a new carbon tax could increase costs for producers up to $7 per head. Locally, the head tax in Lethbridge is originally set at $3 per head, but plans have called for that to rise to $4 per head.

There is a piling on here that worries producers. We figure that the combined effect of these new taxes could reach up to $14 per head. The average annual profit margin for a cattle-feeding operation in Canada across the last 10 years is $18 a head. That's a 75% hit with respect to profitability.

In budget 2018 we urge the government to ensure that any changes to the Income Tax Act do not negatively impact our nation's farmers, ranchers, and feeders, and their ability to compete, grow, and expand exports.

Fourth concerns regulatory impediments. NCFA welcomes budget 2017's commitment to advance regulatory alignment with our trading partners through the $6 million invested in the Treasury Board Secretariat and the Regulatory Cooperation Council. In budget 2018 we urge the government to follow through with these funding commitments and reiterate the trade benefits of regulatory reform.

Fifth is with respect to trade. NCFA is a strong supporter of liberalized trade and recent deals such as CETA, the South Korean free trade agreement, and the TPP process. All of these are key to reaching our export goals. However, we need to resolve our labour, infrastructure, and tax challenges. Without that, we simply will not be able to take advantage of those new market opportunities because we are just not competitive.

In budget 2018 we urge the government to ensure that our trade policies and priorities are not being undermined by action or even inaction on other policy fronts. Competing internationally requires reinforcing policies that do not work at cross-purposes.

Finally, we commend the government for completing the new $3-billion Canadian agricultural partnership. With the heavy lifting done, NCFA encourages the government to push ahead with establishing the new agrifood growth council, as recommended in the Barton report.

With that, I would be pleased to answer any of your questions.

Thank you.

11:10 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Casey.

We'll turn now to SARM, and Mr. Orb.

11:10 a.m.

Ray Orb President, Saskatchewan Association of Rural Municipalities

Thank you, and good morning. My name is Ray Orb, and I am the president of Saskatchewan Association of Rural Municipalities, or SARM.

SARM is the independent association that represents all of the 296 rural municipalities in Saskatchewan. I appreciate the opportunity to be here today to talk about rural Saskatchewan's priorities for the upcoming 2018-19 budget.

The goal of increasing productivity for all Canadians, businesses, and communities is important for ensuring the overall well-being of Canada, but SARM does have concerns with the proposed tax planning using private corporations, as the changes will have major complications for the agricultural sector, a sector that the federal government did single out as a key source of future economic growth in the last budget.

Saskatchewan has the highest proportion of incorporated farms in all of the Prairies. One-quarter of all farms were incorporated in 2016. For decades, farmers have been encouraged by provincial agricultural departments and tax officials to incorporate, because the tax system then makes it easier to transfer the farm within the family. The proposed changes would threaten the transfers of farms and would make it easier for foreign buyers and non-family members to purchase land.

Rural Saskatchewan is proud of the family farm. This past June, the Information Services Corporation honoured 182 Saskatchewan families with the ISC Century Family Farm Award, an award that recognizes families that have continuously maintained the same farm or ranch operation for 100 years or more. Saskatchewan's history has been shaped by the legacy of farms and land passed along through several generations.

Rural Saskatchewan's productivity may be improved and supported through the following priorities.

Broadband access has become so prevalent in our daily lives that if we don't have access to reliable service or we don't have any service at all, we suffer through the inability to be integrated in the economy and society. Reliable and good service has become extremely important and critical for all businesses in communities across Canada. The need for this service is no less in rural areas than in urban areas.

SARM thanks the federal government for its investments in rural broadband through the connect to innovate program. This program will help to improve broadband services in rural areas across the country. The program is focused primarily on bringing new backbone infrastructure to communities that lack a connection of one gigabit per second. Bringing service to communities that lack a connection has always been a part of SARM's advocacy efforts. Providing funding to put these connections in place is very much appreciated, and SARM recommends that an important measurement moving forward will be the reliability of a connection.

Constructing new connections to underserved rural areas should remain a focus, but upgrading the reliability of existing rural connections is also important. Minimum available download and upload speeds provide an indication of an aggregate service level, but reliability should also be taken into account. A good question to ask is if that level of service is consistently available throughout the day during peak times.

SARM also recommends that the federal government work with the provincial government when determining the threshold when defining a rural community. Often a definition of “rural” in federal programs and funding does not align with provincial realities. The reality in Saskatchewan is that there is great variation in the populations of rural municipalities, from the smallest at 73 to the largest of almost 9,000. Lowering the 100,000 population threshold for the small communities fund and other federal infrastructure programs would significantly improve the benefits that rural communities receive.

SARM's board of directors has taken Saskatchewan's demographics into consideration and, after some deliberations, SARM truly believes that the definition of “rural” for Saskatchewan should be populations of less than 4,999. In Saskatchewan there are only two cities with populations of over 100,000. As a result of this criterion, rural communities must compete with all the cities across the province for infrastructure funding. By adopting this new threshold, the federal government could immediately ensure improvement of the environment, support stronger and safer communities, and support the economic prosperity of the middle class.

Training and education is also a crucial part of increasing productivity. Since municipalities are important employers in rural areas and since these employers have training and education needs, SARM recommends that the Canada-Saskatchewan job grant be expanded to include rural municipalities.

Improving the skills and knowledge of municipal employees leads to more productivity, healthier communities, and prosperity for all. Communities and the middle class rely on municipal services, such as local fire departments. The services offered by fire departments save lives and property and enhance the overall public safety of communities. The provision of these services relies heavily on resources and a sustainable model. Local fire departments in Saskatchewan have experienced sustainability issues when providing fire services to provincial and crown infrastructure and/or first nations land.

Recouping the cost of services rendered does not always occur due to stringent crown policies or the absence of servicing agreements between municipalities and first nations, so we believe that the creation of an emergency response fund would greatly enhance the sustainability of municipal fire departments and increase public safety. The emergency response fund would have some cost criteria developed that would determine what costs are eligible and under what circumstances compensation would be received. The idea is to deal with fire incidents on crown infrastructure and first nations land. This initiative would serve to increase productivity of municipal fire departments by ensuring that they continue operating, knowing that they will receive compensation for services rendered and spend less time fundraising. SARM recommends that the federal government work with the municipal sector, the Government of Saskatchewan, and first nations to assist with initiating this conversation and the development of a response fund.

In closing, I would like again to urge the federal government to reconsider the tax proposal changes that would impact farmers. Farmers take on significant risk when they invest their time, resources, and assets into a business that makes them price takers. The prices for the goods are dictated by the market. The changing climate is a constant variable that can greatly enhance or destroy crops, and changing market conditions such as new tax systems create an uncertainty for the agriculture sector. The ability for farmers to access the capital gains exemption will be significantly harmed by these proposals. It will not increase fairness or productivity for middle-class farmers. Therefore, we are urging the federal government to exclude the agriculture sector from these proposals.

By working together we can improve productivity and fairness for all.

Thank you for the opportunity to speak today. I would be pleased to answer questions.

11:20 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Ray.

Now we'll turn to Mr. Zahavich, from the Southern Alberta Institute of Technology.