Evidence of meeting #52 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was artists.
A video is available from Parliament.
4:10 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, and sorry for the interruption.
From the Canadian Credit Union Association, we have Ms. Durdin and Mr. Martin.
October 27th, 2016 / 4:15 p.m.
Martha Durdin President and Chief Executive Officer, Canadian Credit Union Association
Thank you, Mr. Chair, and thank you, committee members.
I'm here with my colleague, Rob Martin, representing Canada's credit unions.
Credit unions, as you know, are member-owned, full-service banking institutions that serve over 5.6 million Canadians. We contribute $6.5 billion to our country's GDP and help create over 58,000 jobs. We support small and medium-sized business with 11.5% market share, and that market share is close to 50% in some markets out west. In a recent CFIB study, credit unions are far ahead of the banks when it comes to serving small and medium-sized business in Canada.
This year, for the 12th year in a row, we ranked first in customer service, well ahead of the banks. We do this from what is largely a traditional banking model: taking deposits, making loans. However, the current environment is challenging for us, with low interest rates, federal tax changes, increased regulatory burden, and new mortgage lending rules, which are all making it more difficult to serve our markets, mostly middle-class Canadians.
My remarks today will focus on two key priorities: allowing for a regulatory pause to assess the full impact of recent mortgage change rules before any new risk-sharing measures are considered, and implementation of a risk-based approach to the common reporting standard.
Our first and most pressing recommendation is that the government implement a regulatory pause to assess the impact of recent mortgage rule changes before proceeding with new risk-based measures. As you know, the government recently announced two changes to mortgage insurance parameters. The first change implements a stress test for high-ratio insured mortgages. These borrowers have less than a 20% down payment. The second change will implement, as of November 30, new qualifying requirements to obtain low-ratio mortgage insurance. This is when a borrower has 20% or more as a down payment.
In our view, and the view of others, the recent measures will dampen mortgage markets across Canada and will make it more difficult for those aspiring to the middle-class goal of home ownership. To elaborate, in the October monetary policy report, the Bank of Canada recognized the impact that these measures will have, and projected a slowdown in the housing market through 2016 and 2017. In fact, the bank projects that in 2017, rather than being a net contributor to GDP growth, the housing sector will become a drag on the Canadian economy.
The bank also projects a significant dampening of resale activity across Canada. According to Genworth Financial, a little over one-third of insured mortgages, predominantly for first-time homebuyers, will have difficulty qualifying for mortgage insurance. Genworth has also estimated that approximately 50% to 55% of its total portfolio of new insurance written would no longer be eligible for mortgage insurance under the new low-ratio mortgage insurance requirements. Preliminary credit union analysis suggests that, in some instances, up to half of low-ratio mortgages would no longer qualify for low-ratio insurance. This could have a significant impact on funding opportunities for credit unions and our ability to raise capital, and would increase prices for members and our customers.
On top of these measures, the government released a consultation paper on mortgage insurance risk sharing just last week. Two of the proposed models would require lenders to accept more losses if loans default. A third model would establish premiums that lenders would pay that would be based on loan losses in a specific period. In our view, implementation of any of these proposed models during a period before other mortgage measures have taken hold would be unwise. Mortgage activity would face a further slowdown, credit costs would rise, resale activities would decline, and mortgage credit would be harder to come by.
As the market tightens, aspiring homeowners across Canada would find it more difficult to obtain a first mortgage or get home financing in economically challenged regions. It is especially concerning, because many of these regions have not experienced the housing sector upswings, as in the Toronto and Vancouver markets. Credit unions are particularly concerned about the impact these measures would have on the 380 small communities where they are the sole bricks-and-mortar financial institution.
Once again, I'd like to emphasize the need for a regulatory pause before the government moves toward implementation of a new risk-sharing framework.
Our second recommendation is to incorporate a risk-based approach to the common reporting standard. As you know, in Bill C-29, the government included an amendment that will bring a common reporting standard into force in Canada. The standard is intended to help curb cross-border tax evasion by facilitating the automatic exchange of financial account information between tax jurisdictions, except, of course, the U.S.
Bill C-29 does not propose a risk-based approach to compliance. Instead, the standard is being implemented on a one-size-fits-all basis to require all financial institutions, even those that are at low risk for being used for this type of tax evasion, to begin reporting on all accounts held by non-residents, this despite the fact that the CCUA survey found that the median number of non-U.S. non-residents served by Canada's credit unions is three—just three. This means that every credit union will have to dedicate additional resources for account screening, review, analysis, monitoring, reporting, and record-keeping. Banking system changes will need to be made and additional staff training undertaken, all to report to CRA annually on a handful of foreign-held accounts.
In our view, regulatory compliance based on risk assessments makes more sense. To this end, CCUA urges the federal government to apply a risk-based approach wherein institutions qualifying under an annually applied test would be exempt from CRS obligations. This is similar to the approach that we applied under FATCA, the current bilateral tax agreement with the U.S., and it makes sense to apply it for the common reporting standard.
Thank you for the opportunity to speak today. We look forward to your questions.
4:20 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Martha.
For the Canadian Steel Producers Association, we have Mr. Galimberti.
4:20 p.m.
Joseph Galimberti President, Canadian Steel Producers Association
Thank you very much.
Good afternoon, honourable members of the committee. On behalf of our association, I thank you for the opportunity to present to you today as part of your study on budget 2017.
The Canadian Steel Producers Association is the national voice of Canada's $14-billion primary steel production industry. Our producers are integral to the automotive, energy, construction, and other demanding industrial supply chains here in Canada. Our mandate is to work with governments and industry partners to advance public policies that will enable a globally competitive business environment for our members and our supply chain stakeholders.
As committee members are undoubtedly aware, it's a remarkably difficult time in the global steel industry, and Canada is not immune to or sheltered from truly international challenges in the sector.
Global excess production capacity in steel has now risen to in excess of 700 million metric tons annually, with the People's Republic of China, through a variety of state supports, by itself now maintaining more than 425 million metric tons of the total global surplus. For context, that's almost 30 times the size of the total Canadian market. This is despite declining domestic demand in China. Widespread institutional ownership of and support for China's steel sector is the single largest force disrupting established trade patterns and degrading the pricing of steel products globally today.
As a result, on a worldwide scale, the steel industry has seen a significant increase in market-distorting dumping and circumvention practices, both from China directly and from a variety of other global producers whose home markets have in many cases suffered as the result of unfair Chinese competition. Once their home markets are inundated with subsidized product from China, other global producers are left with no choice but to export aggressively, dumping yet more product on the global market and further degrading global prices.
While our association would commend the Government of Canada for its work in pressing forward on the development of multinational solutions to the problem of global overcapacity in the sector, which has recently included statements from the North American leaders summit, the G7, and the G20 on the importance of reducing capacity through the elimination of state supports and other subsidies, and while we would encourage Canada's continued senior-level participation at the global forum on steel excess capacity, which was established as an outcome of the latest G20, we would also caution that international solutions on overcapacity will not be quick in coming.
For context as I make this statement, I would note that from 2003 to 2015, China has issued nine separate—
4:25 p.m.
President, Canadian Steel Producers Association
I'm sorry. It's a delicate act to try to get it in and do the five minutes.
4:25 p.m.
Liberal
4:25 p.m.
President, Canadian Steel Producers Association
Absolutely.
Nine separate policy statements address steel expansion in China, while at the same time their production capacity has increased in total by roughly a billion metric tons annually.
With this in mind, we believe the Government of Canada should move very quickly to strengthen Canada's domestic trade remedy system through legislative amendments, which we believe should be included in budget 2017.
In the more than two decades since the last substantive reform of Canada's trade remedy system, the companies and countries engaging in unfair trade have proactively, and through sophisticated means, adjusted their practices to skirt Canadian regulations and unfairly gain access to our markets. The development of sophisticated software platforms, direct electronic solicitations, offers to circumvent duties in place, falsification of documents, price engineering, and other manipulations to understate the actual costs associated with production are all commonplace and constantly evolving far beyond what is currently contemplated in Canadian legislation.
As part of budget 2017, our association recommends that the Government of Canada amend SIMA to immediately address issues where a calculation of dumping margins does not accurately reflect the real amount of dumping in the Canadian market; address the need for enhanced and more transparent processes available to the Government of Canada, in instances of circumvention and scope rulings; and provide needed clarification as regards the type and amount of evidence domestic industry is required to put forward to get cases initiated.
As I close, I would remind this committee that unfairly traded goods pose a clear and present threat to the livelihood of the over 22,000 middle-class Canadians employed directly in steel production and the additional 100,000 Canadians whose employment is indirectly supported by our sector. Steel production in Canada involves significant advance manufacturing processes, and Canada's steelworkers are well educated, highly skilled, and trained throughout their careers. As such, we would suggest that it is in the government's defined interest to ensure that steelworkers in Canada do not have their employment security compromised by market distortions created by the policy decisions of foreign governments or offshore corporations.
Moreover, given environmental realities and standards associated with foreign steel production, including the transport of raw materials and requirements for secondary inputs like electricity and transport of product to end markets, there is a significant environmental penalty associated with the use of dumped and subsidized steel in Canada. Domestic production is reliant on efficient local supply chains, operates on a modern and largely emission-free power supply, and benefits from short distances to end markets. The same cannot be said for imported products, which impose a significant GHG penalty and undermine Canada's ability to properly understand and regulate the full life-cycle environmental impacts associated with infrastructure development, energy exploitation, and manufacturing in Canada.
With this in mind, I urge this committee to recommend a quick and fulsome reform to Canada's trade remedy system that will ensure Canada's steel producers, steelworkers, and steelworks are effectively protected from well-documented and corrosive effects associated with global overcapacity and unfair trade in steel.
Thank you very much.
4:25 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Joseph.
Turning to Unifor, we have Mr. Brennan, an economist with the research department. Thank you.
4:25 p.m.
Jordan Brennan Economist, Research Department, Unifor
Good afternoon. On behalf of Unifor's 310,000 members, I would like to thank the committee for allowing us to share our views with you here today. You can find the details of our submission in the document of August 5.
The industries where Unifor's members work are essential to the success of the Canadian economy and serve as the nation's leading centres of advanced technology and innovation. They are also Canada's top exporters and a source of increasingly scarce good jobs.
Unifor's members have the highest interest in the success of their industries, and have a long track record of partnering with employers and with governments to enhance productivity and innovation.
Unifor believes in an active role, a leadership role, for government to develop strong and sophisticated policies that leverage strategic investments to secure long-term economic development.
The federal government's automotive innovation fund has served as an important tool for securing investments that anchor the wider auto industry in Canada. However, the structure of the AIF is increasingly out of step with investment attraction programs in other major North American auto-producing jurisdictions. Additionally, in the current low-interest period, the value of a non-interest loan with front-end loaded tax obligations is significantly diminished.
Reflecting the growing consensus in the industry, Unifor recommends the AIF be amended to become a non-taxable granting program with flexible rules, and procedures, and proportionally comparable funding parameters as observed by other leading auto jurisdictions. Canada should develop a one-stop system to win and attract new investment in Canadian assembly and parts plants.
Bombardier's C Series program has been hailed as a game-changer for the commercial aviation industry. Once facing questions about its long-term viability, the program had seen significant orders this year, and this summer saw the first C Series planes come into use with Swiss International Air Lines.
The aerospace industry has significant and positive impact on Canada's economy. Good jobs, superior skills development and productivity, technological innovation, and a positive trade balance are just a few reasons that governments all over the world invest heavily in their aerospace industries.
Unifor recommends the federal government invest $1 billion for a direct equity stake in Bombardier's C Series program in support of good jobs, productivity, and innovation. An equity stake in the company would solidify the long-term viability of this Canadian success story, and given prevailing trends, the government could probably expect a handsome return on its investment through capital appreciation and distributions.
Planned new infrastructure spending is welcome news, including the $20-billion new transit spending over the next decade. Public transit systems will be a key driver of delivering quality-of-life improvements to Canadians, including tackling climate change. Unifor believes these new investments in infrastructure, and especially transit, should also be tied to broader economic development objectives. Buy Canadian and local content rules affixed to new investments are proven job creation and skills development tools. They encourage the development of industrial competencies that foster global competitiveness for Canadian products.
Unifor recommends provisions for “Made in Canada” public transit equipment procurement and local hiring requirements, especially among under-represented workers, including women in the skilled trades, visible minorities, young workers, and indigenous workers.
For Canada to continue to be a leader in advanced technology and innovation, we need to ensure all Canadians have the ability to contribute to Canada's economic growth. Lack of affordable child care continues to be a significant barrier to working families, and especially working women. Government must create an affordable child care program so that all Canadians can contribute to our long-term economic development.
Unifor accepts that we must now address climate change, and as a nation we need to transition to a low-carbon economy. We support the concept of a just transition, which is the principle endorsed by the International Labour Organization when industrial transformation imposes a burden of change on workers and their livelihoods.
Unifor calls on the federal government to implement the principle of just transition, including periodic review of labour market impacts at provincial and community levels to assess affected groups, and to assess which strategies are needed to ensure that the costs associated with the transition to a low-carbon economy aren't unduly borne by working families. And investment of the EI surplus into training programs so new workers can capitalize on the green jobs being created through public investment, and expanding access to EI....
I see my time is up, so I'll thank you with that, and I look forward to your questions.
4:30 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay. On account of the delay, we are tight for questions, so we'll go with five questions, five minutes each, starting with Mr. Grewal.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair, and thank you to the witnesses for coming here today.
I just wanted to start off with the Canadian Artists Representation. I'd like to know about resale rights. Can you give an example really quickly on how an artist.... They produce it. It's bought. Then you're saying that on the next sale—correct me if I'm wrong—they should be given the money. Why is that?
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
It's a royalty. For example, I'm a playwright by vocation. Every single time a piece of my writing is reproduced after the initial production of the play, I receive royalties, as do most artists in Canada because it's our intellectual property. This is the function in order for visual artists to share in royalties.
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
Ninety-three.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Ninety-three countries had similar legislation. Is the United States one of them?
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
The United States isn't one of them. The State of California, I believe, has it, as well as the entire EU and Australia and New Zealand.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Is there an economic study on how much it will benefit artists?
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
There isn't in Canada because the public sale of art is not public information. However, the countries that recently passed it, including the U.K. and Australia, have metrics about how much it has benefited artists since that data has been collected through the artist's resale rights. It's significant.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
In your opinion, would it help our indigenous brothers and sisters who are artists?
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
Absolutely, and you don't have to ask me for it. The evidence-based research is there to prove that from other countries.
You mentioned the 93 other nations that have it. Many of these are developing nations where their art is known as indigenous art. It's highly valuable, and that's why they've chosen to pass that law, to protect their indigenous artists.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you very much for your testimony. I learned something today, so that's easy.
4:35 p.m.
Director of Advocacy, National, Canadian Artists Representation
I'm so happy.
4:35 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
To the Canadian Construction Association, with the global downturn in commodity prices and the new mortgage rules that have just been implemented by our government, do you see a slowdown in construction across the country?
4:35 p.m.
President, Canadian Construction Association
In certain geographical areas, and in certain sectors, there is a slowdown. There's no question about that, particularly on resource-based industries, the industrial sector, but there is also an uptick. We're very optimistic in the future, particularly with the amount of renewal that has to be done on Canada's public infrastructure. We're just reaching the end of its useful life, the 40 or 50 years, since it's been built. It's coming home to roost now, so we need to make that reinvestment.