Finance Committee on Dec. 7th, 2020

[Ted Falk, Conservative, Provencher, MB]

That wasn't part of your presentation. But it in your organization's response to the fall economic statement from the Liberal government your response was there wasn't enough engagement with actors within the supply chain.

[Suzanne Benoît]

In fact, I was talking more about stakeholders in the federal government than in the supply chain. An enormous amount of communication goes on in the aerospace supply chain. The problem isn't the supply chain but rather federal government stakeholders. Right now, we sense that the federal government doesn't have an aerospace strategy that would help us convey the industry's position.

The aerospace industry previously had programs dedicated to its sector, as is the case in other nations around the world. For the past three or four years, all those programs have been based on the strategic innovation fund, which includes all industries.

What we want to emphasize is that we're having trouble making the federal government understand that, if it wants the aerospace industry to remain a national champion, it has to do what other nations are doing around the world, which is to become a strategic partner and to put the necessary tools in place to support that sector.

During the…

[Ted Falk, Conservative, Provencher, MB]

Okay. Thank you. Good.

I think that answers the question and provides the clarification I was looking for.

[Suzanne Benoît]

Thank you.

[Ted Falk, Conservative, Provencher, MB]

Thank you for that.

Mr. Masterson, I heard in your presentation to the committee that your industry or organization is supporting an accelerated capital cost allowance of 100%. In your brief, you've also suggested that the investment tax credit should be bumped up to 20% from 15%.

Can you explain how those two would work in tandem with each other? Would they be parallel? What are your thoughts there?

[Bob Masterson]

I think they'd be two separate initiatives. Again, if I could just share a bit of our investment picture.... In preparing for this meeting I did look at StatsCan data, and if you cast your mind back to 2007, you will know that we had $125 billion in FDI and $68 billion invested abroad.

If you look at today, in 2019 before COVID, that situation had completely reversed: $103 billion was invested abroad, and only $60-some billion invested back into Canada. We've switched the picture, and it doesn't have to be that way.

We look at the OECD. Our investment growth in Canada is two and a half times lower than the OECD's average. It's three times lower than the United States'. In the same period when our investment growth was cut in half, the United States' was doubled. That's a factor of four.

[Ted Falk, Conservative, Provencher, MB]

Do you think the investment tax credit would help alleviate that problem?

[Bob Masterson]

Both of these will, and they are both measures that we see south of the border. Those are things that Parliament can look at as it does a fundamental tax review. You can look at why Ireland and Switzerland are performing so much better. Why is the United States performing so much better? More specifically, why is Canada performing so poorly?

Look at those different instruments and see which ones will make the most sense, but definitely the ACCA will help. It was put in as a temporary measure. COVID has definitely put a pause on that, so if you get companies that want to invest, remember that the ACCA starts to phase out in 2023, right around the corner. If you're already looking at a cycle of a seven-year investment, you're going to struggle with that, so we have to address that recognizing COVID now.

[The Chair, Liberal, Wayne Easter]

You have time for a quick, last question, Ted.

[Ted Falk, Conservative, Provencher, MB]

Thanks, Mr. Easter.

What would your association's response to a single-use plastic ban be?

[Bob Masterson]

What we have said to Mr. Wilkinson and the government is they have a multi-pronged approach to addressing the problem of plastic waste. We agree it's a serious problem. We agree that industry has to lead. Industry has to pay. We support the extended producer responsibility to take it off the backs of municipal taxpayers and let industry pay for it.

We also understand, especially from our value chain, our customers, that they want more recycled content in their products. Our industry is going to have to deliver that. We don't support the ban, but more specifically, what will harm investment is using CEPA as the tool to achieve that by declaring plastics toxic. That is just a message that tells this global industry—I've told you how great the potential to grow quickly is—that Canada is just ambivalent about whether the money comes here or not. If we're ambivalent, it won't come here.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We're turning to Ms. Koutrakis for a six-minute round, followed by Mr. Ste-Marie, if he's made it to the room.

Ms. Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

My first question is for Ms. Benoît.

In the fall economic statement, the federal government announced more than $ billion in support for air transportation and the aerospace sector, including $206 million for regional air transportation, $186 million for regional airports, $500 million for larger ports and $229 million in rent relief for airport authorities.

What percentage of those funds will support your members directly? How will those funds indirectly benefit Quebec's aerospace industry as a whole?

[Suzanne Benoît]

Thank you for your question.

The aerospace manufacturing industry is very important for Quebec. More than 43,000 people work in it. However, we've lost approximately 4,400 jobs since the crisis started. We have total revenues of approximately $18 billion. It's the manufacturing industry, the supply chain, that provides the parts that are used to build aircraft. We in Quebec are fortunate to have major aircraft manufacturers such as Bombardier and Airbus and firms like Pratt & Whitney that build engines. They aren't airlines but rather suppliers that build aircraft that will eventually be sold to airlines.

The economic statement didn't include measures for the aerospace manufacturing industry. However, if you assist the airline industry, that will have a domino effect. If the airline industry is able to obtain financing, to put aircraft in the air, and if the Canadian government opens the borders, all that will stimulate the manufacturing industry. Right now, however, the airline industry is literally on its knees. Planes aren't flying; they're on the ground, and manufacturers are suffering the effects of that situation. We've received no support as manufacturers. We're going to lose SMEs, which will eventually go bankrupt. Businesses could well become targets of foreign creditors. In Quebec, we have businesses that are real gems and that could well be absorbed by foreign interests because they've been weakened.

We told the Quebec government the following, and it clearly understood what we said: the Canadian government must above all support the creation of a consolidation fund to protect the entire Canadian supply chain, particularly the SMEs, which are at greater risk because they aren't receiving any orders right now. From a business standpoint, they're operating at 40% or 50%. Defence businesses are doing much better because they're still supplying governments and meeting their defence and security needs.

In Quebec, 22% of businesses are connected to the defence sector, which isn't a lot. We're in the commercial field, we're completely on our knees right now, and we're getting no federal government assistance.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Ms. Benoît.

Now I'll try to ask Mr. Miville another question.

Mr. Miville, can you give us some more details on the Canadian reforestation program you're proposing?

What criteria or standards should be used to determine eligibility?

How much funding would be needed to provide effective support for reforestation efforts?

[Vincent Miville]

The last economic statement refers to amounts of more than $3 billion over the next 10 years for reforestation and $2 billion for trees across Canada. We think those amounts are an ambitious way to get there. Forest producers will take part in reforestation, and they're are satisfied with the amounts that will be made available to them.

We want the program criteria to allow private forest producers to benefit from this measure. This program should be used to reforest areas that have poorly regenerated.

As you know, eastern Canada has an epidemic of spruce budworm, which is the worst defoliating insect in North America. It's devastating forests, and we're in the midst of an epidemic.

Program criteria should provide forest producers with plants so they can restore production in forests that will be devastated and where trees will emit carbon shortly after they die.

As regards more specific measures that should be introduced on the ground, I think the most effective way to deploy the program in private forests across Canada is to establish partnerships with provincial governments so we can rely on existing channels, in particular the forestry advisors and people who already know how to deploy similar provincial programs. They already exist, and this new funding is welcome. We should rely on those programs.

[The Chair, Liberal, Wayne Easter]

We will have to end it there. We are slightly over the time.

We'll go to Mr. Savard-Tremblay for a six-minute round.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

Greetings to the witnesses and thank you for being here.

My question is for Ms. Benoît from Aéro Montréal.

Thank you for your presentation, which was instructive, and even salutary, because there is this permanent confusion between air transportation and the aerospace industry. We don't know why, but that's the way it is. You're right to remind us of that because it's an essential industry. It used to be said that the aerospace industry was to Quebec what the automobile industry is to Ontario. As you said, Ottawa received assistance, and Quebec should as well.

I'd like to hear what you have to say about aerospace policy. There are several aspects to it, but what's the first action that should be taken? You mentioned defence and the fact that we could offer purchasers money or loans? We could have a climate change policy, as France has done by making its assistance to Airbus conditional on the greening of its fleet.

It would be extremely lucrative in our case because we have the A220s. We could have a maintenance policy and a recycling policy. Some of the aircraft have been sent to an aircraft cemetery in Arizona, whereas we have a specialized business in that field in Mirabel.

So there are many things we could do, but where should we start?

[Suzanne Benoît]

Thank you for your question Mr. Savard-Tremblay.

I always wonder whether the federal government is proud of Canada's aerospace industry. All other nations in the world can only dream of having what we have here in Canada: a supply chain, world-class talent, well-paid jobs and a sector that exports more than 80% of what it produces. It's incredible because an industry this lucrative for the Canadian economy is quite rare.

We built this industry in Canada more than 100 years ago. We've developed global champions. We have Bombardier, but it's way more than that because businesses from Manitoba, British Columbia, the Maritimes, Prince Edward Island, Halifax, Quebec and Ontario work together within the supply chain that's now being completely abandoned.

We have proposed that the government take very specific measures. I submitted them as attachments to the documents we sent you for today's meeting. They include revolutionary and innovative projects that are ready to launch and will once again position Canada for the long term.

When you invest in innovation and aerospace, it's not like investing in the information technology field, which develops software and video games. In aerospace, you invest over 8 or 10 years before those technologies are certified and installed aboard an aircraft. We call them technology demonstration projects: they're enormously costly and very risky.

Ten or 12 years ago, we invested in and designed the C Series, which became the Airbus A220. We developed the C Series technology demonstrators here in Quebec with other players in Canada, which enabled us to design the most technologically advanced aircraft in the world.

If I were the prime minister of Canada, I would buy one and I'd be proud to show it to the entire world. It's not for no reason that Airbus is so proud to have gotten its hands on this aircraft. The company knows it's the most optimized aircraft in existence, even during the COVID-19 pandemic. If you look at airlines right now, what few aircraft are flying are C Series planes.

What I'd like to emphasize is that the government must listen to us. We have projects that are ready to launch in motorization with shipping companies in British Columbia. We're designing the hybrid electric motor of the future, a prototype of which we intend to fly in 2023-2024. We have to be in the race. The government must support us if it wants us to lead the parade and continue innovating and developing technologies.

We sense that the federal government is losing interest in the sector. The emphasis is being put on superclusters in advanced fabrication and artificial intelligence. They're creating cross-cutting technologies that the aerospace sector is incorporating in its manufacturing , development and innovation operations. However, if there's no aerospace sector in five or seven years, we unfortunately won't be able to integrate all those beautiful technologies that are emerging from the superclusters.

You must not let this industry die. United States, France, Germany and, more recently, Singapore are in the race. Few countries on the planet can put planes in the air and have the know-how and talent to design globally competitive aeronautics programs.

I'm speaking straight from the heart now. I'm afraid this industry is in decline. We're losing ground. Canada was ranked fifth in the world, and now it's seventh. If the Canadian government fails to do what other governments around the world are doing and doesn't become a strategic industry partner, this industry will continue to lose ground and will fall out of the race in the medium term.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Benoît.

[The Chair, Liberal, Wayne Easter]

Thank you.

Sorry, but we'll have to—

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I imagine we have no more time.

Thank you.

[The Chair, Liberal, Wayne Easter]

Yes.

You've made your point very well, Ms. Benoît.

We will turn to Mr. Julian for six minutes.

Peter, the floor is yours.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

Thanks to all the witnesses for being here this evening.

I hope that you and your families are healthy and safe during this pandemic.

I have several questions, and I'll begin with Ms. Benoît. I'd appreciate brief answers, please.

Ms. Benoît, I felt frustrated when you discussed the importance of investment and the fact that the government, to date, hasn't been there, even though we're talking about a lot of jobs here. This is an extremely important industry, and many jobs are at stake. When I compare it to the banking system, Canadian banks have so far received $750 million in cash from all the federal institutions. I'm frustrated that the aerospace industry hasn't received the necessary investments.

You also said there were delays in obtaining export permits. I'd like you to tell me a little about that.

Are delays in issuing export permits the federal government's fault?

What are the consequences of this situation within the industry?