Finance Committee on Feb. 2nd, 2023

[The Chair, Liberal, Peter Fonseca]

I call the meeting to order.

Welcome, everybody. It's great to see that everybody is in such good spirits here at the kickoff of 2023 for our finance committee.

Welcome to meeting number 73 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 83.1 and the motion adopted on Wednesday, September 28, 2022, the committee is meeting to discuss pre-budget consultations in advance of the 2023 budget.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely by using the Zoom application.

I'd like to make a few comments for the benefit of the witnesses and the members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking.

With respect to interpretation, for those on Zoom, you have the choice at the bottom of your screen of either floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

This is a reminder that all comments should be addressed through the chair.

For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as well as we can. I appreciate your patience and understanding in this regard.

Members, before we move to our witnesses for today, you've received the subcommittee report from the clerk. It was emailed yesterday at 4:02 p.m. I'm looking around, and everybody has received it. Everyone is in approval. That's great.

Also, members, this is a friendly reminder that the first list of PBC recommendations—pre-budget consultation recommendations—is due by 12:00 noon tomorrow.

For the purposes of translation, we request that members prioritize the top 10 to 20 recommendations per party that are important to be considered for Tuesday. If you could do that, it would help the analysts as well as translation services in their work. For subsequent meetings, members, submit your second list of recommendations by 5:00 p.m. Monday, February 6, 2023, and submit your third and final list of recommendations by 5:00 p.m. on Thursday, February 9, 2023.

I would now like to welcome our witnesses who are before us. They always say that the last thing you hear is the thing you remember most, so what an opportunity for our witnesses, because this will be our last meeting with witnesses for our pre-budget consultations.

The witnesses have all been tested for today's meeting, those who appearing remotely, and those who are in the room. They've all passed the test, just for members' information.

With us today, from the Aerospace Industries Association of Canada, is Mike Mueller, who is the president and chief executive officer. From Campaign 2000, we have Leila Sarangi, who is the national director. From the Council of Canadian Innovators, we have Nicholas Schiavo, who is the director of federal affairs. From the Fisheries Council of Canada, we have Paul Lansbergen, who is the president of the organization. From the Hotel Association of Canada, we have Susie Grynol, who is the president and chief executive officer, and from Keystone Agricultural Producers, we have Jill Verwey, who is the president, and Colin Hornby, who is manager of communications and stakeholder relations.

Thank you all for being here with us today. We are now going to have opening remarks.

We'll hear first from the Aerospace Industries Association of Canada. Mr. Mueller, go ahead, please.

[Mike Mueller, President and Chief Executive Officer, Aerospace Industries Association of Canada]

Thank you, Mr. Chair and members of the committee. It's great to be here in person. We've been doing these virtually over the last few years, so this is my first time in person.

Thank you very much for the invitation to be here today to discuss AIAC's key recommendations for the upcoming budget. As you may know, our members represent over 90% of aerospace activity in Canada, covering the civil, defence and space sectors.

At the outset, I would like to state our appreciation for the committee's inclusion of most of our recommendations in your report last year.

I'll begin by speaking about our first recommendation, the development of a national aerospace strategy, which is critical for the prosperity and development of the aerospace industry in Canada. Just last spring, the Standing Committee on Industry and Technology also recommended the development of such a strategy. It's encouraging to see the agreement that aerospace is an industry that is a priority for Canada.

Today we need to position aerospace as a priority because it is a key economic driver and it requires full support from all parties. If we are to keep what we have and grow this industry with its high-skill and good-paying jobs, we need to ensure that the global aerospace supply chain recognizes that Canada has identified aerospace as a national priority.

The global challenges and technological opportunities of the coming decades demand the very best of Canadian aerospace innovation, and a corresponding strategy with government is absolutely critical. Meeting net-zero goals, reimagining air and space mobility, and safeguarding Canada's national interests are serious issues that require focused planning. That is why Canada needs such a comprehensive, forward-looking aerospace plan for civil aviation, defence and space—a plan that re-establishes a collaborative partnership between industry and government, a plan that leverages our country's competitive advantages over other nations.

We are also recommending the injection of resources to enhance Transport Canada's aeronautical certification capacity. The emergence of new technologies and the demands associated with Canada's commitment to net-zero greenhouse gas emissions by 2050 mean that it is essential that certification capacity be able to support the new innovations that industry is pursuing. Transport Canada needs to grow the expertise and resources to sustain its international reputation for excellence and to safeguard Canada's global competitiveness.

On the defence side, we're recommending that the government consult with industry on NORAD modernization, as well as the defence policy review. Let's ensure that companies based in Canada are benefiting and are contributing their unique capabilities within the North American supply chains as we take significant steps to modernize and protect our sovereignty.

We are also recommending that the government modify certain aspects of the aerospace regional recovery initiative and the strategic innovation fund to enable more companies to access these innovation programs. We have also made representations on the challenges we see with the export control permit process and the challenges we see across the country on the labour market side.

Again, the priorities would be the need for an aerospace strategy, the innovation ecosystem, Transport Canada resources, SIF and ARRI changes, export permits and labour market challenges.

I would like to close by speaking about the select luxury items tax that came into effect on September 1 of last year. Despite some changes made by the government, which we thank them for, our members have seen orders cancelled in the last months, affecting sales and workers in the sector. We're talking about not only those who build the aircraft, but also the supply chain and the post-production operations of maintenance and repair.

It's concerning that the government decided to implement this tax without any analysis of the impact on the industry or the workers. Because of the lack of financial analysis, the industry commissioned an independent study through Professor Roy of HEC Montréal. It shows that more than 2,000 jobs in the aerospace sector will be negatively affected—even more than industry had previously recognized.

According to the research, the government will lose $29.9 million in tax revenues and collect only $9 million per year with this tax. The math here just does not make sense. The impact of this tax on Canada's international reputation should not be overlooked, and also the resulting losses in foreign investment in Canada.

Aircraft should be excluded from this tax. We ask you, the committee, for your support with this request.

This position is also shared by the unions representing these workers. It is clear that in its current form, this tax is hurting aerospace workers and hurting our economy, and the government needs to exclude aircraft from this tax.

Thank you for your time and support. I welcome your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Mueller.

Now we will hear from Ms. Sarangi from Campaign 2000, via video conference.

[Leila Sarangi, National Director, Campaign 2000]

Hello. Thank you so much for the opportunity to speak to you today.

Campaign 2000 is a non-partisan, pan-Canadian coalition of over 120 organizations working to end child and family poverty. We've been tracking and reporting on federal progress towards ending poverty for over 30 years.

In our submission to this committee, we have made recommendations on how to make the Canada child benefit more powerful, how to get government transfers to low-income marginalized people, including those who do not file personal income tax returns, and more. All of these things are important, but today I am going to focus my comments on the pandemic benefits, which, although not designed as poverty reduction programs, have had exactly that effect.

Temporary emergency and recovery benefits and one-time top-ups to existing income supports significantly reduced poverty and inequality in every jurisdiction across the country. Statistics Canada data shows that those who were more likely to receive temporary emergency benefits were low-income women, indigenous peoples, racialized people and youth, who, for a brief moment, were lifted out of poverty. What that meant was that families could pay rent and put food on the table without stress.

Those benefits are over. Long ago they were spent on basic needs, and families are now struggling with inflation and a pandemic that has not ended. The government is now pursuing these individuals and families for repayments and calling their approach compassionate, but from everything we've been hearing about this process, it's causing real hardship.

We're on a tour of the country right now, meeting with people living in poverty in every province and territory, and we're hearing a lot of these stories.

In Whitehorse, I met a man who has a letter from the CRA. He's first nation and on disability assistance. He can’t find paid work but is a peer leader in his community. He can barely afford his medication right now, but he's being asked to pay $14,000 to the CRA.

In Winnipeg, I met with a young woman who was in the child welfare system. She’s working in a small peer-led organization and told me how she's being asked to repay the CERB. All of her money goes to her rent. She doesn’t have family to turn to and is now really worried about losing her apartment.

In Ontario, I spoke with a woman on the disability support program, which provides $1,228 a month to her. She was told by her caseworker to apply for the CERB. She’s squeezed $200 out of her budget to repay the CRA but simply cannot afford anything more.

Another gentleman, also on that disability program, called the CRA to get more information about his letter and was told on the phone that his disability tax credit would be garnisheed if he didn't enter into a repayment plan right then and there. He was so scared that he did, even though he can't afford it.

There was a public case that went through the federal courts, which I recently read about. It demonstrates some of the unfairness that's inherent in the design of some of these benefits. A woman had applied in good faith for emergency benefits. It turned out that her workers compensation did not count towards the threshold. She ended up being $7.26 short of the $5,000 threshold, which the judge called “achingly close” to being eligible. That's about a half-hour’s worth of additional work at the minimum wage, and she's being asked to repay the CRB in full.

That there are federal expenditures in the form of the government paying CRA staff to pursue hundreds of thousands of people like this who just do not have the money to repay is needless. It's damaging, and it is not a compassionate approach.

Families are still having their Canada child benefit clawed back as a result of receiving pandemic benefits. Over three years, this government will claw back $1.45 billion in child benefits. Our petition on this issue was presented in the House this morning. In it, and in our submission to committee, we outline recommendations for a CERB repayment amnesty—that is, to stop pursuing the repayment of pandemic benefits by low-income people. We include recommendations to repay families for clawed-back CCB amounts in the same way that the guaranteed income supplement was repaid to seniors. We include a recommendation to invest more in the Canada social transfer, with conditions, so that income assistance programs across the country start to advance poverty reduction and human rights commitments.

The pandemic has taught us that government transfers can help to end poverty, and they can do that quickly. There's an opportunity to make a decision that will materially change the lives of people through the implementation of a CERB amnesty. We do hope that this committee will put the recommendations forward.

Thank you for your time. I look forward to answering any questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Sarangi.

Now we'll hear from the Council of Canadian Innovators and Mr. Schiavo.

[Nicholas Schiavo, Director, Federal Affairs, Council of Canadian Innovators]

Thank you so much.

Good morning, Chair and members of the Standing Committee on Finance. I thank you for the opportunity to present today on the pre-budget consultations in advance of the 2023 agenda.

My name is Nick Schiavo, and I am the director of federal affairs at the Council of Canadian Innovators.

CCI is a national business council representing 150 of Canada's fastest-growing technology companies. Our members are headquartered here in Canada, employ north of 52,000 employees across Canada and are market leaders in the sectors of health, clean tech, financial technologies, cybersecurity, AI and more.

Following the release of budget 2022, CCI celebrated the strong investments in Canadian innovation, but we worry that without proper follow-through, we risk seeing these investments fail to stimulate the economic growth that is so desperately needed right now.

I'll be honest: It is a tough time right now to be a Canadian tech company.

Our most promising domestic firms, those that should be scaling up and finding new markets, are up against major challenges that pose a real threat to their ability to operate. From an impenetrable procurement system to rising inflation to a talent crisis to uncertainty in global supply chains to federal innovation programs that don't meet the realities of the day, technology firms across Canada are fighting to be successful in 2023.

In my remarks today, I want to offer the committee and your colleagues across Parliament concrete recommendations to help Canadian scale-ups grow. In particular, I would draw your attention to the need to develop a procurement strategy for SMEs, update and enhance the SR and ED tax credit, address our high-skilled talent shortage, create new frameworks for IP, study the impacts of negative FDI and bolster our cybersecurity industry.

I'll expand briefly on each of these.

In 2023, federal procurement just isn't working. Facing an overly complicated system, too many Canadian companies opt to sell their products and services to other countries, resulting in less economic activity for Canadians. For Canada to better leverage the capacities within the country, we need a federal procurement strategy that shelters decision-makers from downside risk, allowing them to pursue innovative technologies with enormous upside potential.

For years, the scientific research and economic development tax credit, or SR and ED, has been a hallmark of Canada's approach to spurring innovation. CCI was pleased that in the last budget, the government committed to a comprehensive review of SR and ED to ensure it's fit for purpose.

Now we need to see that review process begin and consultations with Canadian SMEs take place. CCI has led the way in shaping the future of this nearly $4-billion program with a comprehensive report that offers clear recommendations to modernize, streamline and enhance SR and ED. We're calling on the government to reform SR and ED for Canadian scale-ups and bring more accountability to this program to ensure funds are going to domestic firms instead of foreign multinationals.

On talent, it's now estimated that by the end of 2025, employment in the digital economy will reach 2.26 million, or roughly 11% of all employment in Canada. This growth will only trigger demand for additional skilled professionals, and the need of Canadian companies to attract, generate, and retain top talent has never been greater.

Building on CCI's dedicated “Talent & Skills Strategy”, we are calling on the government to implement a high-potential tech visa to increase labour density of skilled talent and accelerate funding for Canadian businesses that develop upskilling and retraining programs to enhance the domestic workforce.

Last year, the government announced the creation of a Canadian innovation and investment agency designed to target Canada's core innovation challenges. While we're pleased to see movement towards tackling Canada's low productivity and R and D, public innovation programming must prioritize freedom-to-operate strategies that complement a company's intellectual property and data activities. The government should implement its announced innovation policies, and institutions like the agency, with an outcomes-based lens that encourages greater business expenditures in research and development, also known as BERD.

When it comes to foreign direct investment in 2023, the prevailing sentiment within many funding agencies is that luring foreign multinational firms will deliver new jobs. Unfortunately, these programs and economic plans can have major negative consequences for the labour market and IP ownership of Canadian firms. In today's intangible economy, when a large multinational opens a satellite office to hire in-demand tech talent, there's a negative impact on local technology companies.

These negative economic repercussions must be accounted for at the outset of policy development and strategic decision-making. As such, we recommend that the government study the negative spillovers of FDI in the technology sector, such as the impact multinationals have on wage inflation and the effects this can have on smaller scaling companies that are hungry for talent. Understanding these impacts will empower the government to adapt their net benefit review process for foreign investment so that it is better aligned with the needs of the intangible economy.

Finally, domestic capability in cybersecurity is a precondition for our country to remain safe and sovereign in the age of digital threats. If we are not suppliers of cybersecurity solutions, Canada is fully reliant on external actors, vendors and countries that have no public accountability to Canadian citizens to design the systems that protect us. In the next national cybersecurity action plan, we urge the government to focus on building domestic partners, developing cyber-testing streams for co-developed cyber solutions alongside industry and addressing the shortage of cyber talent.

To conclude, CCI is pleased to see the government investing in Canada's innovation ecosystem. To ensure that these investments have the maximum impact for our shared prosperity, we need to implement these policies in the most effective and strategic way possible to create prosperity for all Canadians.

Thank you. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Schiavo.

Now we'll go to the Fisheries Council of Canada and Mr. Lansbergen for opening remarks.

[Paul Lansbergen, President, Fisheries Council of Canada]

Thank you and good morning.

Thank you for the invitation to appear today. It's a pleasure to be here in person. If I may be so bold, perhaps you saved the best for the last session of your consultations.

The last time FCC appeared before this committee was in 2018, and I believe it was our inaugural appearance before FINA.

The Fisheries Council of Canada is a national association representing the wild capture processors across the country, all of whom harvest as well. My remarks today will focus on three topics. These are fisheries science, seafood innovation and indigenous reconciliation, and I'll briefly highlight why those matter to us.

Canada has a good reputation for how it manages its fish resources. In addition to our robust regulatory regime, 60% of Canada's fisheries are third party-certified to ensure that the product is sustainably sourced. This puts us second in the world among large nations for our share of landings that are certified.

Unfortunately, this is being undermined by a lack of resources to conduct the foundational fisheries science that underpins sustainable fisheries management. DFO resources for core fish stock assessment science have not kept pace with competing interests or assessment complexities.

In the east, fish surveys are not being maintained, and data gaps of multiple years exist that could result in overly precautionary decisions, despite the stocks being in good health. In the case of turbot in the eastern Arctic, this situation could potentially cost the industry tens of millions of dollars of annual revenue.

In the west, stock assessments modelling the health of the stocks have been lacking. In the case of our wild Pacific salmon fisheries, this has resulted in losing our independent eco-certification. This also means losing major investments into a sustainable program. Global markets look for the Marine Stewardship Council certification. Losing this certification can have devastating effects on the hard work done to build the market and labelling required to continue in the program, and it puts Canadian fish and seafood at a market disadvantage with consumers seeking confidence that it is sustainably sourced.

The cost of conducting fisheries science is much less than the economic consequence of not doing so. You could say that investing in fisheries science has an economic multiplier effect, which benefits coastal communities.

On this topic, we made a number of recommendations, but the most important action you can take as a committee is to recommend an increase in funding resources for fisheries science in support of management decision-making. We don't have a specific dollar recommendation, but the fisheries committee is soon to release a report that may provide more clarity on what is needed.

Moving to the next topic, the federal government continues to consider its next steps in the blue economy strategy. To support Canada's seafood sector to achieve the very best sustainable growth and production, further integrated support for innovation and technology deployment is increasingly important.

The sector—both wild capture and aquaculture—has a joint vision, which is for the sector to be one of the top three global best quality and most sustainable seafood producers by 2040.

Investment in ocean proteins is a smart investment. The High Level Panel for a Sustainable Ocean Economy has concluded that such investments carry a ten-to-one benefit ratio and connect with all priorities of this government, including environmental, health, social and economic priorities. Canada would do well to further support this foundational sector for rural, coastal and indigenous communities across Canada.

The growth envisioned for the wild capture fisheries is by increasing value rather than volume. Market-driven innovation of operations and optimizing utilization are the path to this growth. Existing innovation funding programs are due to expire in 2023 and 2024. We ask that these investments be renewed.

Lastly, on indigenous reconciliation, the government wants to see increased indigenous participation in the sector. To achieve this, it has a policy of “willing buyer, willing seller”, which confirms compensation to the incumbent licence-holder for lost access. However, we have received conflicting reports on whether DFO has the funds to actually do this. Indigenous reconciliation is a national priority and one that all Canadians should contribute toward, not just individual licence-holders. No one—not even my indigenous members—believes that involuntary relinquishment of access is the approach to follow.

Industry is advancing reconciliation on its own. Where DFO wants more, it must compensate licence-holders to respect past investments made and not hinder future investments.

Thank you. I look forward to questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Lansbergen.

We will now hear from the Hotel Association of Canada. Ms. Grynol will give her opening remarks.

[Susie Grynol, President and Chief Executive Officer, Hotel Association of Canada]

Hi and good morning, Mr. Chair and members of the committee.

Thank you for inviting me to appear today.

My name is Susie Grynol. I am the president and CEO of the Hotel Association of Canada.

The tourism and hospitality industry shut down for two years during COVID. We did our part to keep Canadians safe. We are extremely grateful for the government support that kept us alive. It is the reason we have an industry today. Thank you.

However, those two lost years scarred the tourism and hospitality sector. One million employees left our sector in the first two months of COVID. Today we are still short 200,000 workers. According to our member survey that was in the field yesterday, 50% of our members are limiting available rooms today in our off season due to labour shortages. Think about that: Half the hotels in this country are operating under capacity because we don't have enough people.

As we approach our summer high season, our worker shortfall is projected to grow to 360,000 workers. That is two to three times higher than any other sector. It's a problem that will not solve itself without government intervention.

As a result of COVID, we also lost two years of planned development and growth. We have lost major international events. We have lost new hotel capacity and new attractions. Canada fell from fifth in the world in our global competitiveness ranking to 13th. We are falling behind countries that pivoted more quickly to meet the now surging global demand for travel.

That hurts not just the tourism sector but also the Canadian economy as a whole. We are Canada's largest service export. We employ one in 10 Canadians. We operate in every region and riding in Canada. There's not a single part of Canada that does not see tourism as a source of economic strength and civic pride.

Top-of-mind interest in travel to Canada is greater than ever. Google searches are up 100% for travel to Canada. U.S. bookings are outpacing 2019 levels by 111%. However, Canada needs a strategy to turn top-of-mind interest into action. We need to eliminate the barriers created by the lost years of COVID. We need to rebuild a devastated sector and position it for growth.

The industry is waiting for the much-anticipated tourism growth strategy that was announced in budget 2022. The government has a choice to make: Will the tourism growth strategy be a significant investment in tourism attractions, infrastructure and people, or will we have to watch as Canada continues to fall behind?

To work, the tourism growth strategy must include the following.

We need to rebuild our workforce. We are doing everything we can domestically to recruit Canadians, but more is needed. The first thing we can do is around the lowest-hanging fruit. We have newcomers arriving into Canada daily, many of them from Ukraine. Previously, we partnered with the government on a bridge program to mobilize new Canadians into available hotel jobs. We are recommending a relaunch of this program, called “Destination Employment”, to help with our immediate staffing needs.

Next, tourism peaks every year in the summer. We need to be able to access a seasonal workforce. We are asking for a dedicated stream of seasonal workers, similar to what is done in the agriculture sector.

However, our needs are not just seasonal, and they are not short-term. We have permanent positions for all skill levels available year round. We recommend that we find a pathway for short-term workers who want to stay and build a life in Canada. We also need to better align our longer-term immigration criteria with in-demand positions.

On investment, the government has an opportunity to co-invest in new tourism attractions and experiences so that we can capitalize on the top-of-mind international interest in Canada. We need to keep marketing our Canadian brand to the world. We need to build back our business event segment. We need to ensure that we have enough hotel capacity to support this growth.

Committee members, please don't let two lost years turn into a lost decade for tourism and hospitality. Our industry showcases the best of Canada to the world. We are an inclusive, safe and beautiful country, a model for other nations. We are unique in welcoming newcomers across partisan lines.

Tourism is the opportunity to share with the world everything beautiful about Mississauga, Calgary, Joliette, Burnaby and Winnipeg. We can build attractions that Canadians can enjoy and share with visitors from around the globe. With the right strategy, we can seize this incredible opportunity to celebrate Canada in all 338 ridings.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Grynol. I'll have to throw Mississauga into that mix.

We'll now hear from the Keystone Agricultural Producers. We have Jill Verwey and Colin Hornby with us.

Is it Mr. Hornby who will be providing the opening remarks?

[Colin Hornby, Manager, Communications and Stakeholder Relations, Keystone Agricultural Producers]

No. It will be Ms. Verwey.

[The Chair, Liberal, Peter Fonseca]

Ms. Verwey will be providing the opening remarks.

Ms. Verwey, go ahead, please.

[Jill Verwey, President, Keystone Agricultural Producers]

Good morning, Mr. Chair and honourable members of the committee. Thank you for having me here today to present on behalf of Manitoba farmers for the 2023 federal pre-budget consultations.

My name is Jill Verwey. I'm the president of Keystone Agricultural Producers. I operate a multi-generational mixed farm with my husband and children near Portage la Prairie, including approximately 8,000 acres of grain production, a beef herd and a dairy operation. I'm joined today by our manager of communications and stakeholder relations, Colin Hornby.

Keystone Agricultural Producers is Manitoba's general farm policy organization, providing a unified voice on issues that affect agriculture. We're also members of the Canadian Federation of Agriculture, the lead national advocating organization for our sector, which presented to your committee in October of 2022.

Today I'll briefly discuss our top three recommendations for the 2023 federal budget. These three recommendations have been reiterated by other farming organizations, including the CFA, indicating their importance to farmers across Canada. These recommendations highlight the need for the federal government to address gaps in the agriculture and agri-food value chain.

Our first recommendation is to increase the technical support and funding for implementing 4R nutrient stewardship to ensure more farmers can participate in reducing their emissions from fertilizer use.

The 4R nutrient stewardship is a framework that optimizes efficient fertilizer use through best management practices and is something that we promote to our members. This recommendation relates to the government's voluntary target of reducing nitrous oxide emissions from fertilizer by 30% below 2022 levels by 2030.

Progress has been made by Manitoba, with farmers employing sustainable farm practices to reduce these emissions, such as using enhanced-efficiency fertilizers and inhibitors, cover cropping, precision agriculture, nutrient management planning and transitioning from fall- to spring-applied fertilizer. However, if the federal government is looking to farmers to further reduce their emissions to help meet national environmental goals, there must be additional resources to enhance the adoption of advanced practices and technologies. These emissions targets must be supported by ample federal funding and technical support for farmers.

Our second recommendation is to exempt from the carbon tax the use of propane and natural gas used to heat and cool livestock buildings and to dry grain.

KAP has been advocating to the federal government for an exemption from carbon pricing on this issue since it took effect in 2018. If the intent of carbon pricing is to change behaviour by discouraging the consumption of carbon-based products, its application on farmers is misguided, as the areas it's applied to are unavoidable components of our operations.

First, producers are price-takers when selling their livestock and grain: They have little influence on the prevailing market price of commodities. Second, in Manitoba, farmers operate livestock buildings in extreme temperature ranges, and the inside temperature must be maintained at a safe level to ensure the best management practices of animal welfare. Third, grain drying keeps the moisture levels down, preventing food safety issues such as the development of mycotoxins, and protecting Canada's brand. These exemptions for natural gas and propane are included in Bill C-234. We would welcome the inclusion of this legislative change in budget 2023.

Our third recommendation is for the increase and expansion of the agricultural clean technology fund's adoption stream, including funding for smaller projects, and increasing government cost-sharing for smaller operations.

This stream was doubled in the budget of 2022. While our sector is appreciative of this, the funding should be supplemented in this year's budget to include smaller-budget projects and farms that are not eligible under the current requirements. These are farms that cannot generally afford the adoption of the latest technologies, and accessibility barriers have been created due to the current program structure and funding limitations. Increased funding would capture many of these farms while enabling them to incorporate practices and technologies to reduce GHG emissions.

In conclusion, as we move into the future, we must recognize that agriculture has the answer to many challenges we face, but the government and policy-makers must be committed to working collaboratively with our industry. Farmers and others in our sector need the opportunity to provide input and to be involved in the decision-making process as we tackle these challenges that we face. Our organization, along with other farm groups, is here to work with government and industry on advancing our common interests.

Thank you again for your time. We would be happy to answer your questions. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Verwey.

Thank you, witnesses, for your opening remarks. I know that after the winter break, members are pretty eager and energized to ask many questions to the witnesses.

We are getting into our first round of questions. In this round, just so the witnesses understand, there are six minutes for each party to ask questions.

We are starting with the Conservatives.

I have MP Morantz for six minutes. Go ahead, please.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

Thank you, everyone, for being here. I particularly appreciate the shout-out for Winnipeg, my home town. Thank you very much, Ms. Grynol.

I'm going to start my questions with Mr. Mueller from the aerospace industry.

After eight years of Justin Trudeau, it just feels as though everything is broken in this country. We have high made-in-Canada inflation. We have high made-in-Canada interest rates. We have a carbon tax that is unfair and inequitable and does nothing to reduce carbon in our atmosphere. We have the luxury tax—which you pointed out—and other taxes as well.

It's the luxury tax as it pertains to your industry that I want to focus on with you today. I want to go back to your brief. To put it in context, your brief says that the aerospace sector is a major engine of the Canadian economy. In 2021, the industry contributed more than $24 billion in GDP, and 200,000 jobs. It has a massive footprint, and much of it is in my home riding in Winnipeg. We have a major aerospace footprint with companies like Magellan, StandardAero and Boeing. The airport is in my riding, and there are a number of other things. This really hits home for residents in Charleswood—St. James—Assiniboia—Headingley, I can tell you.

You said the numbers are significant, even though they are greatly reduced from prepandemic figures. Overall, between 2019 and 2021, the aerospace industry's contribution to the Canadian economy declined by $9.4 billion and 35,000 jobs. You would think that the government of the day would want to try to help with that situation. The brilliant solution of Mr. Trudeau's Liberal government to lessen the devastation within the aerospace industry is to bring in a punishing so-called luxury tax.

Let's talk about that tax. It's filled with virtue signalling about making sure that wealthy people pay their share, of course, but what is the actual effect? It doesn't really help raise a lot of revenue. In fact, it may be negative—as you pointed out—in terms of the cost to the federal treasury. What it really does is hurt everyday common workers in every industry it affects.

For example, you point out in your brief that while it's designed for taxing Canada's wealthiest citizens, the luxury tax is harming one of Canada's most important industrial sectors; it's penalizing aircraft operators. The industry estimates that the legislation will cost $1 billion in lost revenue. You said a few moments ago that you are aware of actual contracts that have been cancelled. That means jobs have been cancelled in this country because of a tax that has no valid policy reason behind it. It is filled with virtue signalling and does nothing to help the Canadian economy or jobs.

I've said a lot in my little preamble. I'm going to let you run with that.

I want you to talk a little bit more about the job losses, the supply chain issues and those kinds of things around the tax.

[Mike Mueller]

Thank you for the question.

I think you've raised the interesting point that the aerospace industry is found right across the country. It may not be in as many ridings as hotels, but right across the country, in every single region of the country, you have an aerospace sector.

You're right to point out that through the pandemic, we lost 35,000 jobs. Our GDP contribution went down $9.4 billion. We were appreciative of the government for some funding support in budget 2021, which was great, but we have a lot of very serious concerns with the luxury tax that is being placed on the industry. It came into effect on September 1. There's a 10% tax on the manufacturers of those aircraft.

You're right to point out the 35,000 jobs. These are highly skilled, highly paid jobs in every region of the country.

One of the points that I think is sometimes lost, which I really want to make clear, is that this is not just on the manufacturers; this is on the supply chain, which goes right across the country. We're seeing impacts in British Columbia, Winnipeg and Montreal, obviously, where a lot of the planes are manufactured. There are huge ripple-out effects right across the country. There are big concerns.

We were also very concerned that the government did not do its own economic analysis in bringing in this tax. That's why we went out to HEC Montréal to do an independent study. That independent study showed 2,000 jobs being lost. Of those, 750 jobs were on the manufacturing side; the rest were across the supply chain, right across the country. The report also showed a reduction of $29.9 million in income tax being paid by those workers who are no longer going to be there, while the Parliamentary Budget Officer is predicting a $9-million return in taxes. The numbers just don't make sense.

I think the bottom line is that if you're building fewer planes, which we will be because of the tax, you're employing fewer people to build those planes. That's the bottom line.

Thank you.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you very much for that answer.

How much time...?

[The Chair, Liberal, Peter Fonseca]

You have 30 seconds.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I have 30 seconds. Okay.

Mr. Mueller, the Liberal government is here. What would you like to say to them about removing the luxury tax?

[Mike Mueller]

I would say to the government that we thank them for the investments they made in budget 2021, which were very much needed coming out of the pandemic, but this luxury tax needs to be.... Aircraft need to be removed from the luxury tax, because it's hurting the industry and it's hurting workers, and the impacts are going to be felt right across the country.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we're going to the Liberals. I have MP Baker for six minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thank you all for being here.

I wish I had time to ask all of you questions. I'll try to spread them around a bit. If I may, I'll ask for your assistance in keeping your responses as concise as possible so that I can get to everybody to whom I would like to ask a question.

Mike, it's great to see you here again today. As you know, I had the privilege of working with you and your colleagues as the Liberal member on the aerospace caucus in the prior Parliament. I'm really proud of that work.

One of the things I wanted to do was ask you about the work that we're doing, that your members are doing and that the industry is doing in supporting the brave people of Ukraine. Of course, the Government of Canada has provided significant military aid to Ukraine.

I wonder if you can talk very briefly about what the impact on your sector has been with those investments that we're making.

[Mike Mueller]

Thank you, MP Baker, for your interest and for always supporting our industry. It's been greatly appreciated, especially your leadership on the Ukrainian file.

We had a lot of companies spring into action right after the illegal invasion of Ukraine, wanting to know how we could leverage the aerospace industry to help out the people of Ukraine. We had companies that sprang into action, helping to airlift material and a whole host of different items. I really thank you for your leadership and for helping us facilitate some of those pieces.

On the defence procurement side, again, whenever we can help, we are there to help. As I mentioned in my opening remarks on NORAD modernization and the defence policy review, there's a lot of very significant funding coming down the pipe, and industry needs to be a part of that. Collaboration has to be there with industry to help fulfill the needs that are out there in an increasingly dangerous world.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I really appreciate that, and my thanks go to your members for stepping up. I know that they will continue to do so, as we need to do more to not only support the Ukrainian people but also reinforce our own security. Thank you for that.

You mentioned the investments in budget 2021. Could you briefly mention, for those who aren't familiar, what those were?