Finance Committee on May 26th, 2022

[The Chair, Liberal, Peter Fonseca]

We'll move now to the Liberals. MP Chatel, you have five minutes, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Chair.

I want to thank all the witnesses for being with us and for their excellent presentations this morning.

My question is for Mr. Poirier from Canadian Manufacturers and Exporters.

I'm very pleased to hear you talk about our greenhouse gas emissions reduction program, our strategy and our investments in businesses. More specifically, I'd like to hear more of what you have to say about small and medium enterprises.

How can the Canada growth fund help SMEs find their own niche in the green and digital economy of tomorrow?

[Matt Poirier]

I'm happy to answer that question.

We were very pleased to see the creation of those programs. We're still awaiting a lot of the details of how they'll be structured and what they'll look like, but at first glance, it's something that we called for, so we're certainly very happy on that front.

As I said in my remarks, we caution the development of these programs on two fronts. There's adequate money in the program to incent the transition, but particularly for SMEs that struggle with, one, knowing about government programs, and two, navigating them and using them to full benefit, in the structuring of the program, how do we hold them by the hand and take them through it so that the pickup is there and the results are there as well? We really need to think about that.

As I mentioned, what we're seeing right now is that the big companies, the big manufacturers, have already begun net-zero transition, with specific government help in many instances, but we're not seeing that same thing happen with the SMEs. They're not even thinking about it in many cases, depending. That's a problem that we want to tackle and that we're alerted to, because most of our companies are SMEs. We're going to get massive reductions in greenhouse gases by tackling the big ones, but most of our companies are SMEs, so we need to bring them along for the ride too.

That was sort of a long-winded way to get at the question, but again, it's the SME component. It's very important for us to get that right.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Monsieur Poirier. I must say that this is equally what I'm seeing. I'm in a rural riding. We have a lot of SMEs. I'm worried that they are not thinking strategically about how they can be winners in tomorrow's economy. I see larger companies really making these strategic decisions. The world is moving towards a green and more technological economy.

What would be your advice on these innovation funds, including the Canada growth fund? What would be your three pieces of advice for the committee, especially targeting SMEs? If you have more, we'll be very happy to read them, and you could forward them.

[Matt Poirier]

We've done a lot of work over the past few years on this, so I would be more than happy to share that research and those policy recommendations with the committee. Perhaps we can connect offline afterward.

At a high level, what I mentioned before was the SME piece. That's important. The big companies are going to do it, but they'll also drag up all the companies that are in their supply chains already along those lines, so it's an awareness function for the SMEs to realize that this is the future and that they need to help to transition to it.

One of the problems government has is that they have excellent programs, but they're not well known and it's not a default reflex for an SME to wonder what the government is doing. I think it's leveraging trade associations like us—like CME, like my colleagues here on the panel today—to help deliver the message.

There is a bit of capacity building within that, too. If we're going to use exports, for example, some of the agencies like the trade commissioner service and EDC will embed employees and resources within the trade associations to try to access those SMEs better. It's that type of model that will really be needed, at least for our sector.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Poirier and Ms. Chatel.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Chair.

[The Chair, Liberal, Peter Fonseca]

We're moving to the Bloc, and I see MP Ste-Marie.

You have two and a half minutes, MP Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good morning to my colleagues and all the witnesses.

My question is for Mr. Lasnier and Ms. St‑Georges.

Australia filed a complaint against Canada respecting grape-based wine, as a result of which an amendment will be made to the excise tax. That affects you too because the federal government draws no distinction between wine and cider. We note that the federal government didn't conduct a study on the impact that will have on your industry before penalizing you in this manner. However, you say you've done your own study.

In the next two minutes or so, would you please give us more details on the 4,000 jobs that may be lost? For example, are they jobs in regional or urban areas? How many producers will that affect?

I'm listening.

[Marc-Antoine Lasnier]

As you can understand, that assessment is quite preliminary, since the association that conducted it is very new; it was created barely a year ago.

I'd like to talk a little about the geographic distribution of these businesses. They are highly concentrated in British Columbia, Ontario and Quebec and are definitely located in regional areas. They virtually range across the entire province of Quebec.

Basically, the reinstatement of this tax quite simply means these businesses won't be able to turn a profit. For the cider industry, which is young and flourishing, it's a major threat. We're growing at a significant pace in Canada, and Canadian products have an excellent reputation around the world. I think it would be very risky not to support our sector.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

How much time do I have left, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

You have 30 seconds, MP Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Mr. Lasnier and Ms. St‑Georges, I tip my hat to you. This is really a flourishing and expanding industry producing high-quality products.

A few weeks ago, a number of cider-themed activities were held in Joliette, and we were able to taste products from across Quebec. I discovered that there's a good cider maker called Qui sème récolte in Saint-Jean-de-Matha that sells fantastic products.

I think it's incredible that the government is penalizing an industry that's expanding this way. So we hope this will be changed under this bill.

Thank you.

[Marc-Antoine Lasnier]

Thank you. We hope so too.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Now we'll move to the NDP for two and a half minutes. Go ahead, MP McPherson.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair, and thank you again to all of our witnesses today.

I have some questions for Ms. Tomkins.

As New Democrats, we were delighted to see that the dental care plan of my colleague from the previous Parliament, Mr. Harris, is going to be going forward and that we'll be working on that together.

One of the reasons I'm so pleased is that we know the impacts of failing to have dental care for children around this country and that this lack is in fact the leading cause of children visiting emergency rooms. I wonder if she could elaborate more on the impacts on children when dental care is not available.

[Dr. Lynn Tomkins]

Certainly.

There are many, as you've alluded to. Treatment of children for early childhood cavities—or caries, as we call them—can take up a lot of time in operating rooms in hospitals. That's one thing.

Very small children, if you have an age.... I see one on our call here, and I hope she's brushed her teeth today. As soon as kids have teeth, they can get cavities, and children who are susceptible have a higher rate of decay and sometimes end up at the age of two or three in the operating rooms of hospitals having fillings done, including the baby tooth version of root canals in their molar teeth. That's a tremendous event for a small child and their parents to go through. It's very traumatic, and it also has a high cost to the health system. The other thing is it's one of the most common causes of children losing time from school. Also, they can't eat properly if they have toothaches, and infections can make them very sick.

Our goal would be to have every child seen as soon as possible in a dental office, within six months of the eruption of the first tooth, to identify children who are at higher risk for dental decay and to put preventive measures and education measures in place so that over a lifetime a child will need less dental care. That is our aim: that children will need less dental care. The earlier we can identify those types of problems in children, the better.

Unfortunately, there are higher rates of dental cavities and dental problems in new Canadian populations, where perhaps the emphasis on dental care has not been the same or they've been brought late to the dental office, so by the time they do get to the dental office, they have a lot of dental problems.

Another aspect of prevention for children is community water fluoridation, which still makes a tremendous difference in the rate of decay in children. We're fully supportive of community water fluoridation to reduce the amount of dentistry overall, which will also reduce the environmental burden of a child's treatment over their lifetime.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Wonderful. Thank you so much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Dr. Tomkins and MP McPherson.

Now we'll have the Conservatives up for five minutes of questions.

I have MP Stewart for five minutes, please.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

Can you hear me? I was having some connectivity problems here in rural New Brunswick. It's common.

My questions today are for Mr. Paszkowski with Wine Growers Canada.

Mr. Paszkowski, considering that excise taxes negatively affect both consumers and wine producers, you would think it would have been clear that government would need to find a better solution. Of course, that's my opinion, but do you agree that this excise tax has the potential to produce real income losses across wages, profits and other returns to labour and capital in this industry?

[Dan Paszkowski]

Absolutely, because it's a producer tax, and we can't pass that tax on to consumers, as I mentioned; otherwise, we'll lose the consumer to imports.

If I'm paying 52¢ a bottle in tax, that's 52¢ a bottle I can't put towards any other part of my business. One of my smaller board members is going to be paying $300,000 in tax per year effective July 1. That's his entire marketing budget for the year. That's just one example of the impact this will have on the industry. As I mentioned, the majority of wineries in smaller regions—New Brunswick, for example—will not be able to survive a tax like this. There are already low margins in this business, and this will cripple them.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you so much for that. Thank you for the example as well. That adds some light to it.

Taking into consideration the hit to the industry that it actually causes based on the examples you just shared, we must also consider the consumers. Across the industry, what additional price increases can the consumer expect?

[Dan Paszkowski]

At this point, for the tax itself, you will have some wineries attempt to pass it on. I'd say possibly some of the super-high-premium wines will be able to pass it on. It has a larger impact, obviously, on lower-priced wines than on higher-priced wines, but you also have to remember that effective July 1, every 100% Canadian wine sold in Canada will also face indexation, so on April 1 of every year, we will have legislated increases to the excise duty. Given where inflation is right now, we can anticipate that with a 5% to 7% increase in the excise duty rate, there will come a point where we'll have to pass that on to the consumer. As I said, that will double by the time it hits the consumer.

There is a risk if you do pass on that cost. The consumers who have a line in the sand—maybe it's $10 a bottle, and you go to $10.05—may switch over to a different brand, and in most cases that will be to an import, so that will impact the bottom line of every winery and cidery across the country.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Paszkowski.

We've heard now that basically the wine producers and consumers are going to be hit with this excise tax in numerous and different ways. To follow up on the obvious reduction in real income to wine producers, would you say that, coupled with the excise tax, the increased costs to producers associated with shipping as a result of the dramatic rise in fuel costs will most certainly drive prices to a point that sales will be negatively affected?

[Dan Paszkowski]

We're facing that impact right now. The supply chain disruptions have increased the cost of goods for wine producers above a 10% rate. That's impacting everybody's bottom line and everybody's level of profitability. There is that point in time when you have to make a decision: Am I going to pass this on to the consumer, and how am I going to go about doing that?

The loss of the excise exemption is but one issue among a whole range of issues facing the industry right now. It couldn't come at a worse time in the history of the Canadian wine industry. It will have severe impacts, above and beyond just when the tax comes into play, because there are a lot of other factors at play.