Thank you, Mr. Chairman, and thank you, members of the committee. It's good to see some of you again.
I am here today to talk about the major investment and growth opportunities in Canada's chemical industry. I want to present my recommendations for the 2019 budget.
You might have read recently eye-catching headlines last month saying that left unchecked, tax reform south of the border would put about 635,000 Canadian jobs at risk and potentially reduce Canada's GDP by $85 billion, or about 5% of the economy.
The PricewaterhouseCoopers report was commissioned by the Business Council of Canada. It specified that the petrochemical sector will be particularly hard hit by these reforms, which pose a serious risk to chemistry manufacturing in Canada. These are issues that have been on our radar for quite some time, and others are finally starting to take notice.
The chemistry industry is a vital component of Canada's economy. It's the fourth largest manufacturing sector with just over $52 billion in annual shipments, and with 68% of production exported, we are the nation's second largest exporter behind the automotive industry. While few people give thought to the role of chemistry in their everyday lives, more than 95% of all manufactured goods are directly touched by the business of chemistry.
The industry is also a highly skilled sector that employs over 87,000 Canadians, 38% of whom have a university degree. In fact, the sector has the second-highest proportion of university graduates in Canada, second only to IT.
Indirectly, we support over 525,000 thousand jobs across the country. Globally, chemistry is a large, fast-growing industry, and analysts are expecting that the global demand for chemicals will triple over the next 20 years.
While much of the production and growth has taken place in Asia, chemistry manufacturing is also the fastest growing manufacturing sector in North America. In the United States, over $258 billion worth of investments have been announced since 2010, and 60% of those come from foreign investors.
Despite some of the successes and despite many key factors that we have to our advantage here in Canada, including our low-cost feedstocks, Canada has lagged far behind its traditional 10% share of North American chemistry investments. We should have realized about 20 or 30 new investments worth over $25 billion, but have seen only a handful of investments totalling a little more than 2% of that share.
Over the past several years, we have been working very closely with the federal government and have urged them to heed the investment opportunity in our sector and take notice a number of the provinces' determination to capture new investments, particularly here in Alberta.
We continue to stress the importance of ensuring Ottawa's economic priorities align with those of the provinces where Alberta, Ontario and Quebec have all prioritized chemistry investments so that all of their oars are pulling in the same direction.
To that end, last August, we submitted three recommendations to the committee to ensure a robust investment climate for the chemistry sector. As you know, enacted in 2017, the U.S. Tax Cuts and Jobs Act, TCJA, lowered the marginal effective tax rate on capital investment from approximately 35% to 19%. While Canada has historically enjoyed a marginal effective tax rate advantage to overcome construction, utility, labour and logistic disadvantages, the TCJA has eroded some of this advantage.
A key aspect of that legislation is the 100% immediate depreciation rate for capital equipment. You've heard a lot about that this morning.
In Canada, an accelerated capital cost allowance, ACCA, for manufacturing was introduced in 2015 to encourage investment in machinery and equipment. The immediate depreciation of capital investment lowers the upfront capital costs needed to finance a project by allowing a firm to deduct those expenses from existing revenue streams.
Therefore, the CIAC is recommending that the federal government adopt a temporary 100% ACCA to be applied to value-add resource manufacturing for a minimum period of seven years or a full business cycle.
As we aim to grow chemistry and plastic resin production in Canada, we must ensure that there are systems in place to recover the value of plastics as potential feedstocks once they've reached their end-of-life use.
Canada could be a global leader in the recycling and recovery of plastics by investing in chemical recycling technologies and other innovations.
CIAC is calling on the government to invest in programs that will allow Canada to become a leader in the commercialization of technology to recycle, recover and transform all plastics by 2040.
Finally, Canadian chemistry executives now identify rail service as a key factor in deciding whether to locate a new facility or expand their operations in Canada. This decider is second only to feedstock availability. As we've seen in the past few years, work stoppages and delays in our railways have had a huge impact on the stability of the chemistry sector in Canada. That's why we're recommending investments in the effective and safe transportation of goods by renewing the national trade corridor initiative, including investments in rail and ports, and the re-funding of the rail safety improvement project, and expanding it to include education and resources around the transportation of dangerous goods.
Thank you all. I look forward to your questions.