Finance Committee on Feb. 4th, 2020

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Ms. Dzerowicz will have the last five-minute round.

[Julie Dzerowicz, Liberal, Davenport, ON]

Good afternoon, everyone.

I wish I had enough time to ask all of you questions, because all of you made excellent presentations.

I will start with an issue that I am starting to hear quite a bit about in my riding. I've been hearing a lot of my colleagues talk about it as well.

I'll start with the Canadian Chamber of Commerce.

Mr. Stratton, you mentioned labour shortage, and then immigration. One of the things I've heard quite a bit about from small and medium-sized businesses is that there's a severe labour shortage. It's not a new thing, but it's something they're having a lot of trouble with. I also hear from a number of industries that are particularly prevalent in my riding—mostly hospitality and construction—that they are having a hard time filling in labour. This isn't a new problem; it has been an ongoing issue.

First, is there a labour shortage? Second, what did you mean when you were pointing to immigration as a possible solution?

[Dr. Trevin Stratton]

It's a very tight labour market right now in Canada for sure.

There are a couple of different aspects to this. There is a skills gap, at least in terms of what's being demanded in the market versus what's in the labour supply. Particularly in certain areas of the country, maybe some underserved areas when it comes to the labour market, there is a shortage of labour in those areas, too.

What we have been proposing, first of all, is a pathway to permanent residency for a number of immigrants—whether they're international students or just people who are working here on temporary foreign worker permits—to have those decisions made at the local level, as opposed to having some national overarching strategy. What's going to be key for that is having the proper local labour market information to be able to match the skills of the people who are available through permanent residency or otherwise.

[Julie Dzerowicz, Liberal, Davenport, ON]

I'd like to just interject for a second, and this might be a little unfair to you.

I was talking to someone else within the Canadian Chamber of Commerce over the last couple of days, and I did get on to the data shortage. I was told that there is some general national data, but what's lacking is local and regional data. That's become highly problematic in terms of clearly identifying labour shortages, skill shortages and even skills mismatch, which might be happening.

Can you validate that this is true?

[Dr. Trevin Stratton]

Yes, we can certainly improve on having granular data at the local level. It's very important, too, to be able to match those skills to where they're demanded. The skills that are needed in rural Newfoundland are going to be very different from what's needed in downtown Calgary, so it's important to have that information to be able to have that pipeline.

[Julie Dzerowicz, Liberal, Davenport, ON]

While employment and labour tend to be under the jurisdiction of the provinces, do you see that the federal government might have a role in terms of creating a framework for gathering that information or providing resources to get it?

[Dr. Trevin Stratton]

Yes, absolutely. There are definitely federal departments that are very much involved in data collection.

There are two ways to collect data—through surveys or through a footprint that's left. I know the federal government is experimenting with some of these new methods to be able to gather that. We'd be happy to help out through our local chambers of commerce as well.

[Julie Dzerowicz, Liberal, Davenport, ON]

I appreciate that.

I'm going to turn my attention to Fanshawe College and Mr. Wright. You talked about federal government support for more funding to promote trades. I also took a note down in terms of what I call integration support with small businesses, providing more support that will help to facilitate that.

I spent a couple of days in Berlin before Christmas. They do such a wonderful job in bringing together their educational facilities, their unions, the government and businesses to try to figure this all out.

Could you explain the role you might see for the federal government in helping to address this issue that seems to be percolating?

[Jeff Wright]

This may be more under the provincial purview, but there is a funding gap between what we receive in seat plan versus what it actually costs us to deliver. That's something that needs to be remediated for sure.

With apprenticeship, generally speaking, there's much that can be done that's of no cost or low cost with just better coordination. There's a lot of disparate information for young people and older people alike about apprenticeship, generally speaking. There's much we can do, I think. The federal government could support a strategy for better navigating and wayfinding around this information. There's much we can do to support younger people to become really engaged and excited about this as a future career, and to provide opportunities for them to actually sandbox it out with a number of the partner organizations you described.

I think the German model is illustrative of what we should be doing in terms of bringing those parties together to create a solution together.

[The Chair, Liberal, Wayne Easter]

We've run out of time, and Mr. MacDonald with Imagine Canada didn't get any questions.

Is there anything you want to add to the discussion that's been going on around you?

[Bruce MacDonald]

Oh, there's a lot.

[Voices]

Oh, oh!

[The Chair, Liberal, Wayne Easter]

You have a minute or less.

[Bruce MacDonald]

Actually, one point that I thought was interesting sort of connected a couple of the conversations. Our colleagues from the chamber mentioned the link that companies are having to corporate social responsibility.

To your comments about labour market shortages, we put out a report just before Christmas that talks about the fact that upwards of 50% of employees are now considering the corporate behaviour of companies when seeking their next place to work. They want to work for companies that are environmentally responsible, have ethical supply chains, are connected to community and have employee engagement programs.

While organizations like Imagine Canada deal with the registered charitable sector, I think what we're seeing now is a blurring of sectors. Where social conscience, social good, is actually moving into mainstream business, this conversation is no longer about altruism. It's about profit. As we think about the future of the labour market, I think we're going to see welcoming immigrants and looking at the future of business align more.

[The Chair, Liberal, Wayne Easter]

Thank you.

To the Canadian Automobile Dealers Association, I went back through the brief that was forwarded in August. I don't think there was information in it on the luxury tax, or I couldn't find it. Could you send us a note, through the clerk, on your experience with the luxury tax in B.C.? It might be helpful for our thoughts.

[Huw Williams]

Absolutely, Mr. Chairman.

I would just note that it hadn't been proposed at that point in time, so we weren't—

[Voices]

Oh, oh!

[The Chair, Liberal, Wayne Easter]

Okay. That would be helpful to us.

Jana.

[Jana Ray]

I have just one quick thing to say, since I'm surrounded by such a diverse group of witnesses here: Don't underestimate the value an older workforce can bring. Certainly that's something we hear all the time. We hear that, unfortunately, ageist practices in employment are alive and well today. A lot of our older adults are looking to upscale or change, and they would be open to a number of opportunities. Please don't underestimate that.

[The Chair, Liberal, Wayne Easter]

With that, thank you to all the witnesses.

We'll suspend for five minutes while the next witnesses come forward. Thank you.

The meeting is suspended.

[The Chair, Liberal, Wayne Easter]

We'll reconvene and call the meeting to order. We're starting just a wee bit late.

We are here to further our study on the pre-budget consultations for 2020. I want to thank the witnesses for coming, putting together presentations on very short notice and making it here. We're under a very tight deadline. We have to table our report on February 28. Also, thank you to those who did earlier briefs in August. We have those. They'll go into the record as well.

We'll start with Advanced Biofuels Canada and Mr. Roberts, president and CEO. Welcome.

[Don Roberts, President and Chief Executive Officer, Nawitka Capital Advisors Ltd., Advanced Biofuels Canada]

Thank you.

Good afternoon, ladies and gentlemen.

Thank you for the opportunity to speak to you today. As the chairman said, my name is Don Roberts, the president and CEO of Nawitka Capital Advisors. I appear before you today to speak on behalf of Advanced Biofuels Canada, also known as ABFC.

Nawitka Capital Advisors is an investment bank focusing on the renewable energy and clean-tech sector, with the specialty emphasis on clean fuels. Prior to starting Nawitka in 2013, I was vice-chair of investment banking at CIBC, where I founded the renewable energy and clean technology group.

Advanced Biofuels Canada is the national voice for producers, distributors and technology developers of advanced biofuels in Canada. Based on a November 2019 survey, the ABFC members are collectively working on projects representing just over $12 billion on new capital investment projects in Canada. I'm here today to speak to ABFC's analysis of how to stimulate private sector investment in clean fuels production capacity and support clean fuel use in Canada.

In 2019, Canada's national clean fuel industry sectors conducted a review of investment conditions to identify measures to increase investment in the domestic production of clean fuel and support electric vehicle adoption, with two key objectives. One is meeting climate action commitments, and the second is supporting successful implementation of the federal clean fuel standard.

The review concluded with several overarching recommendations for budget 2020. I'll summarize those in a moment, but just before doing that, I want to note that on any recommendations that are coming out of this, to be truly effective, it's important that government really execute TLC. While we all love tender, loving care, what I'm really talking about are transparency, longevity and certainty with regard to the government's actions, and to harness market forces instead of working against them.

The ABFC, as I said, has three key overarching objectives. The first one is that Canada start by establishing a comprehensive, long-term Canadian clean fuels strategy to address the climate emergency, support sustainable growth, and ensure competitiveness of the production and use of clean fuels in Canada. It's important to note that Canada's clean fuels strategy is not a bottom-up approach that requires us to start from scratch. A lot of work has already been done. We do need, however, to connect the various disparate parts.

ABFC is recommending that the clean fuels strategy start by establishing a clean fuel signal. That's by, first of all, setting clear emissions reduction and economic development goals for the non-fossil clean fuels through 2020. Second is setting differentiated targets for clean fuel production and use in Canada, covering a series of products, including renewable fuels and other non-fossil, low-carbon liquid fuels; renewable gases like biogas, renewable natural gas and renewable hydrogen; renewable solid fuels like wood pellets and torrefied biomass; and lastly, electric vehicles. The third issue is having a strategy that would actually enact the clean fuel standard regulations to meet the clean fuel goals and targets. This will only be achieved by actually increasing the 2030 target and setting a minimum requirement for clean fuel use. That's the first recommendation.

The second one is that Canada commit core funding through 2030 to directed initiatives to attract private capital to build clean fuel production capacity and infrastructure. Specifically, the brief on Canada's clean fuel strategy identifies a number of specific measures to support private sector investment in this space, but a key one is to establish a $2.5-billion clean liquid fuel capacity-building fund through the strategic innovation fund.

The third recommendation is that Canada commit support to expanding Canada's clean fuel technology and innovation systems through targeted measures. By this we mean things like refundable tax credits, accelerated capital cost allowance, clean growth capital grants and core applied research funding.

Advanced Biofuels Canada has taken the initiative to develop the core of a Canadian clean fuel strategy, which includes more detailed recommendations for the committee's consideration for budget 2020 measures. As translation of the full brief is still in progress, ABFC asks for your leave to submit its brief to you in the coming days.

In conclusion, capital will not flow without TLC and public policy. Private investors can mobilize capital to the clean fuel space, but they need a clear and stable signal, from government, that's meaningful. With proper implementation, Canada’s clean fuel strategy will get the job done. The good thing is that the benefits transcend the politics of climate action.

Before concluding, I would like to highlight five of these key benefits in particular.

First, the economic benefits we've identified will manifest themselves throughout Canada. Second, Canada has established commercial supplies of sustainable crops, forestry, and agricultural residues, as well as clean, renewable power for electric vehicles. We already have a robust, globally competitive platform to stand on. Third, clean fuels support farmers, foresters and rural communities, those often left behind. Fourth, advanced biofuel technologies will help remote communities, especially in the north, get off diesel power, reduce industrial pollution, and capitalize on economic opportunities from waste management. Lastly, clean fuel investments will create long-term, clean energy jobs and support sustainable growth.

Now is indeed the time for some bold action in budget 2020.

Thanks for the opportunity to appear today. I am happy to entertain your questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Roberts.

Turning to the Aluminium Association of Canada, we have Mr. Simard, president and CEO.

Welcome and thank you for coming.

[Jean Simard, President and Chief Executive Officer, Aluminium Association of Canada]

Thank you, Mr. Chair.

Thank you for this opportunity, as part of these pre-budget consultations, to talk to you about the situation in which the primary aluminum production industry in Canada finds itself. I will also be talking to you about the measures we invite you to take in order to promote our industry's competitiveness in a market that is, as you will see, ever more competitive.

With the exceptions of a few blips, our industry has been experiencing historically low prices for ten years now. Yet our costs are steadily increasing and our business environment is deteriorating because of the geopolitical risk, right here in America, from trade conflicts and tariff wars, which destabilize our traditional markets.

Meanwhile, our plants are aging and require new investments in order to reach the level needed to meet the challenges of the next 25 years and to remain at the head of the pack in an industrial world based on 4G, meaning advanced production using big data, robotics and automation. We therefore see the need for major, not to say massive, investment.

Let us be clear, however. This is not a matter of expansion phases or major projects requiring capital investment. It is a matter of once more modernizing the existing capacity in order to meet the challenges of the next 25 years.

The 2018 reform of the American tax system considerably changed the investment climate in the United States. In addition, some automotive plants moved to Mexico to take advantage of the access to cheaper metal. This sometimes became illegitimate because of the measures taken by one or both of the other signatories of the CUSMA.

Despite the renewed free-trade accord, which we continue to support, our business environment remains very unstable. It is also subject to political decisions made elsewhere, decisions that considerably affect the dynamics of the market for our goods.

I cannot emphasize strongly enough that, while we get the same price for our metal today as we did 30 years ago, we pay 2020 costs. Our profit margins are therefore 44% lower than they were 30 years ago.

Our industry also has to face increasing competition from sovereign capacity, almost 70% of the world's capacity. This is held by states or sovereign funds in countries like China, the United Arab Emirates, or India, which is technologically advanced and very competitive, even in the American market. You can see this in the figures we have included in the presentation to help with the understanding.

Chinese production is heavily subsidized, as demonstrated in a report by the OECD, the Organization for Economic Cooperation and Development. The report came out in January 2019 and contains a study on the aluminum market. The production continues to have a detrimental effect on our markets because of the export of processed products that are highly subsidized. One Chinese company alone, SPIC, has received $35 billion (US) in subsidies from the government of China.

Our industry has invested billions of dollars in plant modernization over the last 20 years, which has enabled us to increase our capacity and reduce our emissions of greenhouse gases, or GHG. We have doubled our capacity and reduced our GHG emissions by 34% in absolute terms. That is by far the greatest contribution to reduced greenhouse gas emissions in Canada's history.

Our industry must now move to 4G production, with automation, robotics and big data. That move must accelerate over time in order to maintain the global competitiveness of our plants. This at a time when our competitors enjoy a business environment that is highly supported by sovereign funds and permissive regulation, which adds capacity at a greatly reduced cost.

Against that background, we submit to you the following recommendations.

First, in order to improve our competitiveness, and in conjunction with the provinces of Quebec and British Columbia, the tax measure known as the accelerated capital cost allowance on capital expenses must be updated, in order to redress the unfair treatment and allow the aluminum industry to take advantage of it. Unlike the steel industry, our sector has no access to category 53, which was established in the budget statement of 2018.

The parameters of the Strategic Innovation Fund (SIF) program must be reviewed in order to address the need to modernize our plants and maintain our competitiveness in the future. The administrative burden in navigating existing incentive programs must be eliminated in order to lighten the load of processing files and reduce delays in payment or reimbursement.

With the goal of maintaining and protecting our access to the CUSMA market, government purchasing, in government-funded projects, must attach value to low carbon-footprint solutions using materials produced right here in Canada. That goes not only for aluminum, but also for other materials. The government was quick to fly the flag by indicating that it was going to finance major infrastructure projects from coast to coast in Canada. I repeat that, for infrastructure projects to be green, we should above all use low carbon-footprint materials produced here in Canada.

There is also a need to modernize the services supporting the Canada Border Services Agency’s oversight mechanism for imports. We congratulate the government for establishing, as of last September 1, an oversight system for aluminum imports similar to the one for steel. The computer systems and the supporting infrastructure need investment in order to operate with the new parameters that have been established. Investments must be made in order to strengthen the system.

We must also make sure that Mexico implements a domestic oversight system for aluminum imports that is as robust as the one we have in Canada. Together with the governments of the United States and Mexico, we must establish a process to harmonize the mechanisms that monitor aluminum shipments in CUSMA territory. In order for the three signatories to reach an agreement on a designated trading area, we have to give ourselves the means to jointly define the metal shipments that we want to monitor, using the same parameters.

Finally, we have to implement tracking systems for metal in Canada. Seeing what comes in is one thing, but following what we produce to make sure that it is what actually goes out, is something else. So that step must be added to the process.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Simard.

Turning to the Association of Home Appliance Manufacturers Canada, we have Ms. Hatch.