Thank you, Madam Chair and members of the committee.
I'm pleased to appear before you today on behalf of Canadian Manufacturers and Exporters.
CME represents Canada's manufacturing sector, which is critical to Canada's prosperity, security and resilience. It employs more than 1.8 million Canadians across the country, generates over $200 billion in GDP and exports almost $450 billion in goods annually.
These figures understate the sector's broader impact. Manufacturing supports activity across the economy through deep and broad supply chain linkages. It is also a strategic industry that underpins Canada's national security, economic resilience and sovereignty.
Manufacturing's strategic importance is precisely why the unjustified U.S. tariffs are so damaging. Tariffs and trade uncertainty strike at the heart of Canada's industrial base, weakening business confidence, delaying or cancelling investment, and leading to layoffs and production cuts. Even if the CUSMA review produces a positive outcome, recent experience shows that U.S. trade policy can shift quickly. For manufacturers making long-term investment decisions, market access can no longer be taken for granted.
We can already see the impact of these tariffs. Since last January, Canada has lost 57,200 factory jobs. Over the same period, manufacturing construction has fallen for 15 straight months, for a cumulative decline of 27%. Real sales are down 4.7%. As well, the sector's real output has contracted for three straight years, and a fourth straight decline in 2026 appears likely.
To make matters worse, these trade pressures are hitting a sector that's already been weakened by long-term structural challenges, especially weak investment. The investment cap is stark when we compare Canada with the United States. U.S. manufacturers invest roughly three times more per worker than Canadian manufacturers do. This means that the average U.S. worker is being equipped with more than $55,000 in new equipment, technology and structures each year, compared to closer to $20,000 for Canadian factory workers.
In Canada, investment has been so weak that manufacturers are barely replacing existing plants and equipment. The sector's capital stock is now 13.5% lower than it was in 2000, while the U.S.'s manufacturing capital stock has grown by 40% over the same period. This weak investment record is a key reason that Canada's labour productivity has lagged so far behind that of the United States.
Again, the sector is under severe pressure from tariffs and trade uncertainty, which are compounding long-standing challenges that have left Canada's industrial base less competitive and less resilient. The federal government has taken important steps, including tariff relief programs and targeted support measures for manufacturing and other affected sectors. These priorities are the right ones, but Canada must build on them. The focus should now be on timely, predictable and practical implementation.
Today I want to highlight three priorities.
First, the federal government must continue reducing red tape and regulatory burden. This is one of the biggest and lowest-cost opportunities to boost investment productivity and prosperity. This would include legislating growth and competitiveness mandates for all regulators, requiring them to consider the impacts of their decisions on economic growth as a statutory obligation. It would also include expanding the scope of the one-for-one rule. Despite this rule, government-imposed requirements on businesses continue to increase, because the law excludes legislated obligations, ministerial guidance and other non-regulatory requirements. The government should also strengthen the oversight of regulatory cost-benefit analysis. These analyses must be credible, realistic and transparent.
Second, Canada's weak business investment record means that budget 2026 should include further measures to strengthen tax competitiveness. We welcome the government's actions to date, including the productivity superdeduction and enhancements to the SR and ED program. However, as noted in the budget, Canada has the lowest marginal effective tax rate in the G7; it's also below the OECD average. We still do have high average tax rates. Those matter too. Canada's personal income tax rate and corporate tax rate are above the OECD average. They're higher than those of the U.S., and that does restrict our ability to attract capital and talent.
More broadly, Canada's tax system has not undergone a comprehensive review in decades, and the case for action is stronger.