Finance Committee on Oct. 17th, 2016

[The Chair, Liberal, Wayne Easter]

Do you want to add a comment, Mr. Legere?

[Mike Legere]

I think when you try to identify one unique approach or answer as to what could improve our stake in the world, especially in the resource sector, for us it's a drum we've been beating for a long time: competitiveness. There are several measures that can be taken at the federal level to help enhance our competitive position, not only here in New Brunswick but across the country. Wood supply is one of the major things. In my presentation, I alluded to investment in silviculture. It ensures wood supply, and that, in turn, will protect existing jobs. Also, it incentivizes investment to improve our productivity and help us remain competitive.

Again, on the subject of wood supply, it's a case of budworm, as I mentioned. We have a threat here that's not unique to New Brunswick. This particular pest is found throughout eastern and central Canada as well. If there's one thing we can look at, it's to make sure measures are in place, when you're considering budgetary considerations for programs, that will help improve our competitiveness in terms of wood supply and the cost of that wood supply. That's a complicated equation when you look at cost, because there are many factors that influence cost. We have to have an ability to transport our product not only from forest to facility but also from facility to markets. Anything that can help improve those cost structures is of great benefit to us.

[The Chair, Liberal, Wayne Easter]

Okay, thank you.

We will now turn to Mr. Aboultaif for seven minutes.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you all for the great presentations. I'm happy to hear them, and in the meantime, I'm just thinking, business-wise, how can we improve the situation? Anytime we hear about the Maritimes, we hear about these places. We know that forestry, fishing, and agriculture are the main resource industries.

I found common threads in your presentations, about competitiveness, investment, and government's role in helping the industries to improve their position by enhancing productivity and cost-effectiveness, and becoming more competitive on the world stage. It seems the threads come from many different places, such as intergenerational transfers. You are asking the government to facilitate the taxation issues there, and I do add my voice to you. I would like to see the budget consider that, for sure.

On the other side, there are short-term and long-term issues, but the common thread is that you are asking the government to basically invest some money on the taxation front and on the investment and innovation fronts.

How long has this problem been sitting around in your area, and where is the private sector? Where's your role as a private sector to push that? I believe that the private sector is the main element in being able to bring investment on board. If the federal government or the governments find that there is industry in a place and there is a business community in a place that can encourage such activity, I believe those combined efforts will definitely bring prosperity to the region.

So the question to all—and whoever wants to contribute, please do so—is how do you see the private sector role in this overall picture, in order to improve the overall situation once and for all, because we cannot keep going back and forth like that?

[Krista Ross]

It's challenging for business to be innovative and to grow in an environment that is not conducive to that. One of the challenges we face and that I mentioned is the overall tax burden and the complication of the tax system.

In addition to what's happening federally, we've just been told that we have a 30% plus increase in our WorkSafe costs that will be coming in November. We're having minimum wage increases. We have the highest level of personal taxation for high-income earners here in the province of New Brunswick. It's a challenge to incentivize people to want to do business here when you're facing these extreme costs. Our economy is sluggish and it is a difficult time for businesses to have the confidence to invest.

That being said, we've recently done a survey with Corporate Research Associates, CRA, and they're telling us that the business confidence here in Fredericton is doing a little better but we need to create that environment where businesses can succeed. I think businesses are willing, businesses are excited. We have people who are coming up with innovative and creative ideas, and businesses they want to launch. We have a new growth plan that the Province of New Brunswick has put forward. There are certainly areas, such as cybersecurity, that our business community wants to grow, but we need to have that environment in which they can grow and prosper, and taxation is an issue, for sure.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thanks.

Would anyone else like to comment?

[Mike Legere]

That's a very fair question and I think, speaking from my sector, since 2014 we've earmarked $750 million in investment in our facilities, based on secure wood supply. We can't raise capital without that security. We've addressed that on a provincial level, but there are factors that are affecting our industry that are beyond the province's capability to deal with, and for us to fully contribute to provincial and federal economies, those factors need to be addressed. I agree, we have cost-shared on the early intervention strategy for budworm. That was a cost-share effort there, and the subsequent request for further funding for that will be a cost-share as well.

I think it's incumbent upon us as an industry to make sure we communicate that we want to partner with the federal government on that.

So that was a good question, a fair question.

[Paul Gaunce]

We don't expect the government to throw money at business in the Maritimes. We expect it to be a shared opportunity. If a producer—a forester, fisherman, or whatever—comes with a sound business plan, and it looks like it's worth investing in, what we're asking is that the money is there. If it's going to be good for the economy everywhere, then it should be easy to finance.

Every facet of agriculture has all kinds of innovation and opportunities, but is sadly lacking the funding to get there. Approximately 20% of our producers in the Maritimes now are milking their cows with robots. It's an expensive technology, but one that has come, and it has been in Europe for quite a while. It's a huge step, and it's an innovation we're moving down the road with.

Where we're probably behind the most in this part of the country—and we're seeing it now so much with the CETA and TPP deals coming—is export opportunities, because we don't have the market expertise.

I'm all for export, but I'm not for export while losing my shirt. If we can get into good niche cheese markets in the European Union with 400 million people, then we don't need much of that market to be very successful in growth in the dairy industry in Canada.

Yes, we want you to finance, but we want you to finance the right...having the money there and not throwing it, but having it there for the people who have a good business plan.

[The Chair, Liberal, Wayne Easter]

Mr. Brun.

[Christian Brun]

What we are trying to prevent is a unique demographics crisis that could happen in the next five to 10 years. I don't think we're the only industry that will be going through this. I think this is also Canada-wide.

The reason why it might be unique for Atlantic Canada is that we don't have an enormous pool, especially in the fishing industry, of people who are ready, or would have the know-how, or want to learn how to head out with 25 knots on the water in the morning to harvest sticky herring from 4 o'clock in the morning to approximately 4 o'clock in the afternoon. There is going to be a unique crisis in this area if we don't deal with it properly.

Our industry, our sector, is ready to take full responsibility in putting the fair share of investment into getting through this. As my colleague mentioned, this might be just a little bigger because it's such a unique crisis we're heading into, and I think other industries will also be facing the wave.

[The Chair, Liberal, Wayne Easter]

Mr. Fudge.

[Paul Fudge]

To reiterate, there is always access to capital. The problem New Brunswick specifically has is that there's just not enough. For good projects, what we're seeing now is that our companies are heading outside the region. Venture capital firms in Boston, California, and Toronto are not coming very often to Atlantic Canada to find their investments.

The private sector is involved. There was an increase in the New Brunswick small business investor tax credit recently, and that has helped, but programs to attract investment from other parts of Canada to coincide with government funding would be a great help.

[The Chair, Liberal, Wayne Easter]

Mr. Walker.

[Eric Walker]

I would say we need access to capital delivered in a timely fashion. I'm currently building one of those robot barns, and I have six innovation applications currently in, which the timeliness of the application.... Maybe there is an abundance of applications in the system. My feedback was that I'm approved for all six applications, but they're not coming until April. I would like to have my animals in the barn from December 1 to December 15.

The timeliness of that application process versus how the delivery happens is...maybe if the funding could be in a pod available for the full four years. Maybe in 2017 there's going to be an abundance of people doing innovative projects, and then in 2018 and 2019 in that four-year term maybe there's not going to be an abundance of projects. You're going to get that 10% of slippage on projects either way, so maybe the way that's broken out would be a pretty good solution.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you all, but we're well over time.

Mr. Dusseault, you have seven minutes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

My first question is for you, Mr. Gaunce.

I did not hear you say anything about the diafiltered milk problem. All of my colleagues are already aware of the issue. Is this also a problem here, in New Brunswick? What solution should the federal government be looking at to resolve that problem?

[Paul Gaunce]

It's a problem we have nationally. We see it more in Quebec and Ontario because that's where most of the market is, but the issue becomes that we do not have the processing technology in this country to make diafiltered milk. Cheese processors use it because it helps their bottom line big time. Their cheese yield is about 20% greater when they use diafiltered milk.

For the people who don't understand what diafiltered milk is: they skim the cream off the milk to make butter, and then they run the skim milk through a filter to concentrate the protein, in layman's terms. We need that technology in the processing plants built in this country, so they'll use Canadian protein rather than import it. It displaces approximately 80 million litres of our milk.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So, the solution would be to...

[Paul Gaunce]

Just to add to that, we are working on an ingredient strategy with the Canadian processors. We've come up with a deal to make our protein price more competitive, so hopefully they'll get that infrastructure built and use our protein.

[The Chair, Liberal, Wayne Easter]

Mr. Guance or Mr. Dusseault, could one of you explain the impact of diafiltered milk being imported from the United States on the domestic industry? We don't produce the product in Canada, but if either one of you could explain that for the benefit of the record, it would be helpful.

Go ahead, Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

In Quebec, half of the dairy producers are seeing their income diminish because diafiltered milk is considered an ingredient at the border, and consequently it is not considered in the supply management system. It's a big problem.

As a solution, you suggest that the federal government invest more in dairy production enterprises so as to allow them to innovate and do the same thing as the United States. Did I understand that correctly?

[Paul Gaunce]

The first issue deals with dairy processing.

The other issue is the Canada Border Services Agency, as you're talking about the border. It comes in as an ingredient and that's fine, since it's tariff-free. That's not an issue. However, when it gets added to the cheese vat, it becomes a milk and that becomes an issue for us. If the thing were put in the right tariff line, it wouldn't be an issue. It would be stopped at the border because it wouldn't be economical for them to import it.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

Ms. Ross, I would like to ask you a question about small and medium businesses.

The government committed to reducing taxes for small and medium businesses. Are you disappointed that that commitment has not been kept yet? Would you recommend to the government that it keep this commitment in the next budget and reduce corporate taxes on SMEs from 11% to 9% as it promised to do?

[Krista Ross]

Certainly anything that can help businesses be more competitive is welcome and yes, we would hope that would happen in the next budget. Our businesses cannot continue to operate at a higher tax threshold than they're paying in other jurisdictions. Here in New Brunswick, we're finding it even more challenging because of our aging demographic since we have fewer people to purchase those businesses. We've talked about business transition. We need a tax situation that makes them more competitive.

We learned last week that 75% of businesses in Canada will transition. The owners of 75% of small and medium-sized enterprises will retire within the next 10 years. That's a huge challenge that our business community must face. We understand that fewer than half of those businesses have a transition plan in place, and fewer than 10% of those businesses, if they do have some type of a plan, have it in writing. This is a big challenge that we're facing across the country, but particularly here in our region, as we have a greater aging population here than elsewhere.

The Canadian Chamber of Commerce, at a recent conference in Regina, passed a resolution to support this issue of the import of diafiltered milk product. That's something that the business community across the country has supported in the agricultural field. I'm not sure if you were aware of that, but I wanted to share that with you.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

My next question is for Mr. Brun.

You did not mention the employment insurance program, and I wondered if it was still problematic.

In your opinion, is it adapted to the seasonal aspect of the work fishers do?

Would you have any recommendations to make to the government in this regard for the next budget?

Would you like to see some changes made to the employment insurance program so that it is better adapted to the seasonal work fishers do?