Mr. Chair and members of the committee, it was with great pleasure that I accepted your invitation, on behalf of the Canadian Manufacturers & Exporters, to submit our recommendations to you in the context of your 2016 pre-budget consultations. I want to wish all of you an excellent first parliamentary session.
First of all, may I express our appreciation to all of the political parties and all of the members of the committee for the support they expressed for the manufacturing sector during the last electoral campaign. It was very clear, and it was appreciated by everyone.
I will take a few minutes to introduce our association and the Canadian manufacturing sector.
Our association represents more than 10,000 manufacturing and exporting companies in Canada. For those who remember, it was created in 1971 and was the first industrial association. In the 1990s we merged with the Canadian Exporters Association because manufacturing companies were responsible for the majority of exports, and that is still the case today.
What is the manufacturing sector and why is it important?
The manufacturing sector comprises a variety of subsectors, from natural resources to aeronautics, the automobile sector and food processing, and accounts for 10% of the Canadian gross national product. Canadian-manufactured products make up two-thirds of Canadian exports.
The Canadian manufacturing sector is responsible for approximately 42% of the private sector's total investment in research and development. The manufacturing sector employs 1.7 million people throughout Canada. They earn an average yearly salary of $72,500, as compared to the average for all industries, which currently stands at $57,900. The sector has a positive impact on a multitude of other sectors, including logistics, transportation, finance, services, and more.
Over the next few years, we will be facing many socioeconomic challenges. We formulated our pre-budget recommendations with those challenges in mind.
The first major challenge is the aging of the population, combined with the decline of the workforce in certain Canadian provinces, including Quebec. These factors will exacerbate the skilled labour shortage. This is already being felt in several manufacturing sectors.
The second challenge involves investment in research and development, which is decreasing, especially since the last severe global financial crisis. This decline is due, among other things, to the large cuts in the research and development tax credit program, in the wake of the Jenkins report released a few years ago.
The third challenge is poor productivity, which affects the competitiveness of our businesses, especially when it comes to exports to countries that have a better productivity rate than ours.
The fourth challenge is the slow rate of adoption of cutting-edge technology, in particular automation, robotics, additive technologies, 3D printing, and many more.
We are proposing solutions to overcome these challenges.
Implement a national advanced manufacturing network of excellence in the fields of automation robotics and additive manufacturing similar to the United States' National Network for Manufacturing Innovation.
Simplify and extend the tax credits and investment incentives to reduce risk and accelerate the adoption of new technologies. This would have a positive impact on productivity and economic growth, including the reinclusion of capital expenditures under the scientific research and experimental development tax credit.
We think it's time for Canada to look at the potential implementation of a patent box tax regime which would improve commercialization of technologies developed in Canada. As we say, Canada is very strong at turning money into knowledge, but weak at turning knowledge into money.
We strongly recommend the government task a parliamentary committee to undertake a full review of Canada's research and development framework with particular focus on the modernization of the SR and ED legislation with its scientific research and experimental development tax credit.
Finally, we urge the federal government to adopt a strategic procurement policy for all federally funded infrastructure projects, which would emphasize the need to maximize domestic economic benefits for the manufacturing sector—in particular, I'm thinking about fabricated steel products—while respecting our current international trade obligations.
I would be happy to respond to your questions. Thank you.