Industry and Technology Committee on Oct. 6th, 2025

[The Chair, Liberal, Ben Carr]

Good morning, everybody. Welcome to the sixth meeting of the House of Commons Standing Committee on Industry and Technology.

I will quickly mention that we have a little technical glitch. It is showing that we are in camera on Zoom. We are not in camera; we are public. This is being broadcast publicly. I'm told that the witnesses may see that it shows “in camera” on their link, so I'll clarify that this is not in camera. In other words, your testimony is public, and we are streaming this meeting live to the public.

I also want to mention that all witnesses have completed the required connection tests in advance of the meeting.

I will remind colleagues and witnesses to please, if you're not using your earpiece here in the room, make sure that you have it on the sticker in front of you in order to protect the health and well-being of our interpreters.

Colleagues, we are continuing with our productivity study today. We have three witnesses, two of whom will provide opening remarks. We'll do a little transition after the first hour as we move into the next line of questions.

Witnesses, if you have any problems at any point with your technology, put your hand up in the window and let us know.

We have here with us today, from Canadian Manufacturers and Exporters, Ryan Greer, senior vice-president, public affairs and national policy.

We have, from the Fédération des chambres de commerce du Québec, Philippe Noël, vice president of public affairs, competitiveness and market access, and Hubert Rioux, economic advisor.

With that, Mr. Greer, I'm going to turn the floor over to you for the first upwards of five minutes of introductory remarks.

Once Mr. Greer is finished, you will have five minutes, Mr. Noël.

Then, we will begin the first round of questions for witnesses.

Mr. Greer, the floor is yours, sir, for five minutes.

[Ryan Greer, Senior Vice-President, Public Affairs and National Policy, Canadian Manufacturers and Exporters]

Thank you, Chair, and members of the committee.

I am pleased to be here on behalf of Canadian Manufacturers and Exporters, one of the oldest and largest trade associations in Canada, representing thousands of manufacturers from coast to coast.

Manufacturing is the backbone of Canada's economy, employing 1.8 million Canadians, generating over $200 billion in real GDP and driving two-thirds of Canada's value-added exports, yet weak productivity growth continues to hold our sector back. Canada's labour productivity lags nearly 30% behind the U.S., and business investment per worker has dropped to half of U.S. levels. This gap leaves our economy exposed.

For Canadian companies, workers and families, the best defence against tariffs, protectionism and other external shocks is a strong and productive domestic manufacturing base.

Not all productivity gains are created equal. Manufacturing matters more. Manufacturing is unique because it drives innovation, investment and skills development across the entire economy. When manufacturers invest in new equipment or processes, the benefits spill over into other sectors. When they adopt advanced technologies, those innovations diffuse outward, and because manufacturing is both capital intensive and trade exposed, productivity improvements in this sector translate directly into higher wages, stronger exports and more resilient supply chains.

Before I get into some solutions, I want to stress that productivity isn't just something we as a trade association talk about. It is what we do every day. CME works directly with manufacturers across Canada to provide practical lean training and continuous improvement programs to help them cut waste, boost efficiency and stay competitive. That shop floor commitment to productivity is also what drives the productivity reforms we're here to talk abut today.

I'd like to highlight three opportunities to improve manufacturing productivity and competitiveness. The first is tax policy. Canada's overall tax burden on business investment is too high, and the system is too complex. Manufacturers tell us that predictability and simplicity matter just as much as rates. If the system is difficult to navigate, investment flows elsewhere.

The competitiveness of Canada's corporate tax system is difficult to measure precisely, but one reality is clear. Recent U.S. tax reforms, notably through the One Big Beautiful Bill Act, have made Canada relatively less attractive for new manufacturing investment. That bill strongly incentivizes domestic investment in U.S. production through a series of tax changes. The biggest benefits are immediate expensing of short-lived assets, 100% deduction for a production plant, more favourable R and D incentives and a more favourable international tax regime. Our close attention to U.S. trade policy is obviously warranted, but we cannot ignore the effect of their tax reforms as well.

The second area I'd like to identify is around trade and transportation infrastructure investment. Canada's productivity, and frankly, our resilience, hinge on having efficient transportation networks. Investments in trade-enabling infrastructure have the virtue of making all of its users—our members, Canadian manufacturers—more productive. Canada needs more targeted public and private investments to build new trade-enabling infrastructure and to maximize the efficiency of the infrastructure that already exists.

Third, I'd like to flag regulatory burden. This is where we see some of the biggest and the lowest-cost opportunities to boost productivity. Manufacturers, especially small and medium-sized ones, consistently cite regulatory burden as a top barrier to growth. They face a system that is fragmented, duplicative and unpredictable. Every advanced economy wrestles with regulatory drag to some extent. Bold action on this front could differentiate ourselves from competitors and could attract investment that we are losing out on today.

The flaw with past federal red tape reduction efforts is that they targeted isolated irritants instead of undertaking the systemic reforms needed to improve regulatory outcomes across all decision-making. It's like pumping air into a leaky tire: It might help you in the short term, but the underlying problem goes unsolved.

CME's “Regulate Better, Grow Faster” report lays out a road map, and I would quickly highlight a few key recommendations from it before I wrap up.

The first is that we think the federal government should legislate competitiveness and growth mandates for all federal regulators. Regulators should be required to give appropriate consideration to the potential impact of their activities on economic growth, not as an afterthought, but as a statutory obligation.

Second, we believe the federal government should expand the scope of the current one-for-one rule. Despite the rule, government-imposed requirements on businesses continue to increase because the law itself has some carve-outs in it. It also excludes legislated obligations, ministerial guidance and other non-regulatory requirements that are imposed on businesses. We think these gaps must be closed to truly contain the proliferation of red tape.

Third, we think there is an opportunity to strengthen the oversight of the cost-benefit analysis process that underpins all new regulations. Regulators can and do play with the numbers as part of these analyses to present overly optimistic analyses that justify new rules. To fix this, Canada should create an independent body, modelled after the U.K.'s Regulatory Policy Committee, to publicly grade the quality of regulatory impact assessments. A similar body in Canada would ensure that all cost-benefit analyses are credible, realistic and transparent.

These and some other systemic reforms would fundamentally change and improve how we regulate, providing significant long-term benefits to our manufacturing sector and the broader economy.

Chair and members, Canada's productivity crisis is real and urgent, and we hope that your work today and over the proceeding meetings will help spark the bold action that is required. It is only through achieving higher productivity that Canada's manufacturers can compete globally, while offering their workers better jobs and rising, real wages.

Thank you. I look forward to your questions.

[The Chair, Liberal, Ben Carr]

Thanks very much, Mr. Greer.

Mr. Noël, you have five minutes.

[Philippe Noël, Vice-President, Public Affairs, Competitiveness and Market Access, Fédération des chambres de commerce du Québec]

Mr. Chair, Madam Vice-Chair, Mr. Vice-Chair and distinguished members of the committee, we thank you for giving us an opportunity to be here today.

I would remind you that we are Quebec's largest network of business people. We represent 120 chambers of commerce and more than 40,000 businesses.

We have been looking into productivity and investment issues for many years, and in March, we published a study entitled “Livre bleu de la productivité”. My colleague, Hubert Rioux, who is an economic advisor at the FCCQ and who is here with me today, worked extensively on that study.

The state of productivity in Quebec and Canada in recent years has led us to seek practical solutions for increasing our productivity.

In 2023, every hour worked in Canada generated approximately $14 less than the average for advanced OECD economies and $17 less than in the United States. This productivity gap is having a negative effect, not only on the competitiveness of our businesses and industries, but also on our collective wealth.

In 2023, Canada's GDP per capita was $4,500 less than the average GDP per capita of advanced OECD economies and nearly $21,000 less than that of the United States.

Low rates of private investment in Canada are fuelling this productivity deficit. For example, private investments in machinery and equipment per worker in Canada are 45% less than the average for advanced OECD economies and nearly 60% less than in the United States.

Furthermore, while our dependence on the U.S. market remains a major risk, it is also important to point out that this risk is exacerbated by our productivity gap, which hinders the diversification of our export markets in three ways. First, it increases the relative price of our exports because of our higher unit production costs. Second, it shrinks the profit margins of our businesses, which then have less cash flow to invest in product innovation to meet the demands of international markets. Third, it limits some of our businesses to low-value-added sectors or product categories, which are less competitive on international markets.

There are many structural causes for this, but here are the main three.

First, let's not forget that the International Tax Competitiveness Index ranked Canada 26th out of 38 OECD countries for corporate taxation.

Second, the tax burden on salaries, income and corporate profits in Canada is higher than the average for OECD countries and the United States.

The growing administrative burden on businesses is also a major obstacle. In fact, 80% of businesses surveyed by the FCCQ believe that this burden is only growing year after year. Businesses spoke against tax compliance requirements, the complexity of financial incentives, government overlap and processing delays in the public administration.

The productivity rate of SMEs is 20% to 50% less than that of large corporations. Right now, very few SMEs are able to take advantage of export opportunities. It is a vicious cycle: SMEs do not export very many of their products because they are less productive, and their productivity stagnates because they do not have much exposure to international competition. We need to support their growth and encourage them to export.

We have a number of recommendations to address these major structural issues.

First, when it comes to taxation, we propose enhancing the small business tax deduction by increasing the limit from $500,000 to $1 million of taxable income.

Second, we recommend implementing the modernized tax incentive program for scientific research and experimental development, or SR&ED, proposed in last December's economic statement.

We also suggest creating the patent box regime that was also announced.

Furthermore, we recommend that the government extend indefinitely the accelerated investment incentive, which ended in 2023, and expand eligibility for that program to the mining and defence sectors.

With regard to the administrative and regulatory burden, we commend the current efforts, but we also recommend simplifying and expanding the eligibility criteria for tax credits by eliminating the eligibility rule related to Canadian-controlled private corporation status. We also suggest that the government convert some of the financial assistance programs into tax credits. The government should also work with the Government of Quebec to come to an agreement to establish a single tax return. Right now, our businesses have to file two tax returns, which, of course, has an impact.

Lastly, it is important that the government take action in the coming years to increase the size of our businesses and help them go international.

We propose encouraging stock exchange listings and having major pension funds and fund managers invest in Canadian companies, particularly by following up on the recommendations made by the working group led by Stephen Poloz.

Next, we recommend reforming the CanExport program to provide better funding for operations so that our SMEs are able to successfully establish themselves in international markets, rather than simply break into them.

Lastly, we suggest making some of our SMEs' export revenues in new markets tax exempt.

Thank you for your attention. We welcome your questions.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Noël.

Colleagues, we'll begin our lines of questioning.

Madam Dancho, the floor is yours for six minutes.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you, Mr. Chair.

Thank you, witnesses, for your testimony thus far, and thank you for being here.

My questions are primarily for Mr. Greer.

In your opening, you spoke a lot about the challenges faced by Canadian manufacturers. I know that your organization represents well over a thousand members. Ninety per cent of them are SMEs, small and medium-sized businesses. You also mentioned that you employ almost two million Canadians and produce billions in GDP for Canada, so I think your members have a good idea of what's going on, certainly vis-à-vis the tariff situation and the changing geopolitical dynamic that Canada is experiencing.

You also mentioned that there is considerably less investment, unfortunately, in Canadian companies and individual workers and the capital in Canada versus in the United States. I think you mentioned one-third in previous testimony.

Can you describe in brief why that should matter to Canadians, the productivity increase and the like? Why should Canadians care about this issue?

[Ryan Greer]

I think that's one of the most important questions to frame up your work with this study: to translate what something as obscure sounding as productivity, where Canada rests in OECD rankings or what business investment per worker mean. It means that, for Canadian manufacturers and other Canadian workers, there is less business investment in supporting them to do their jobs, to produce more and to help generate higher real wages for them, their co-workers and, of course, the families and the communities they operate in. As I noted in my remarks, it's only by increasing productivity that we ensure that Canadian firms can better compete, which means that we can hire more, pay better and take advantage of new market opportunities, whether those be through the U.S., where most of our sector still exports, or taking advantage of new market opportunities.

In the context of the current trade crisis, there's been a lot of talk about diversification and how we better diversify. The answer is partially through, of course, market access and tools to support manufacturers, especially SMEs, to figure out how to access those markets, but really it lies in making us more competitive and productive. Ultimately, Canada is a somewhat high-cost jurisdiction to do business in. We have benefited for decades due to our proximity to and integration with the U.S., but our ability to compete and carve out new market access and our ability to withstand tariff pressures and other political tactics from south of the border really depend on our ability to invest in our facilities, to invest in the capital stock, to give Canadian manufacturers access to the technologies that are being deployed in our competitor markets, and to continue building some of the best products in the world at the best prices and in the most reliable way.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you for outlining that very well.

My understanding is that Canada has had significant challenges with productivity decline and capital outflow to the U.S., primarily over the last number of years, but that's really been cranked up in the last six to eight months. In particular, you mentioned the Trump administration's One Big Beautiful Bill Act in your opening remarks, as well as notable production tax credits or tax deferrals and things like that in that bill.

Should Canada be looking at something like that? I mean, when we talk about tax reform.... I know it's a dream of the Conservative Party and other political institutions to really do that, but it could take a long time to reformulate our entire tax structure. Are there any things that could be quite immediate—perhaps tax deferral on capital gains or something like that—that could provide immediate relief within the next year or two? Is that something we should be looking at?

[Ryan Greer]

Yes, I think it has to be an “all of the above” approach, which is that we need to be thinking of how to reverse what is a long-term, multi-decade trend that, of course, has been brought into intense focus over the last several months. That draws to simplifying the tax code, as I said, making it easier to navigate, making a straighter line between those who wish to invest and their trying to understand what that means. In the current environment, I also think we need to be looking at every short-term incentive possible to do everything we can. We can't just say that we want investment in Canada; we have to make it undeniable, to make Canada an undeniable investment opportunity.

Certainly, in the context of capital depreciation in terms of some current capital cost initiatives that are due to expire in the next couple of years and in the context of doing a competitive analysis of all the incentives under the One Big Beautiful Bill Act and trying to draw some lines to understand directly where some of the weaker points are relative to Canadian tax law, I think that's really important. It has to be, as I said, an “all of the above” approach when we're trying to think of how to defend and go on the offensive in terms of bringing that investment here.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you.

The Department of Industry, from what I've learned in meeting with businesses, many of them members of yours, has $8 billion or $9 billion of various tax incentives, programs and things like that, which are supposed to support the issues that you and other businesses have outlined to help generate some productivity, some IP and things like that.

Are there programs you've come across in the industry department that are particularly helpful or that could be helpful if they were rejigged? Can you touch on any thoughts that come to mind on that?

[Ryan Greer]

Yes. It's not directly through the Department of Industry, but one of the biggest ones that all of you will be well aware of is, of course, the SR and ED program, which is incredibly important to our members. However, it is also very difficult to navigate, and there's a lot of uncertainty. We often talk to members about access to certain programs or tax credits, and they'll say, “It was very helpful to my business. I greatly appreciate it, but if I had to make the same decision, I'm not sure I would have applied in the first place.”

A lot of our federal programming is designed, of course, to stop bad actors, but that framing is how many officials or the programs will engage with businesses directly. They engage as if everybody is trying to defraud the government, as opposed to trying to be enablers that are going to help Canadian companies succeed. It's not to say we don't need to have strong measures in place, but I think we do need to find ways to continue to simplify these programs.

When we sit down with small and medium-sized members of ours and there's a menu of dozens of different programs across the RDAs and various other departments, including the Department of Industry, we try to walk them through what is required. Then they start to think through what kind of consultant or other external support they would need just to access these. It's a lot for them, especially because these are folks who are operators themselves. They are managing the floor. They do not have a big compliance department to help them manage these things. I think that trying to simplify all the programs that are designed to support these types of investments is a good place to start.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you, Madam Dancho.

Mr. Bardeesy, you have six minutes.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Thank you.

I have a few questions for Ryan and a few questions for our friends online.

I want to start with the threats to the auto sector and the very specific statements that President Trump has made about repatriating auto assembly.

Could you speak to the importance of the auto sector in the context of the larger manufacturing sector in which it resides?

[Ryan Greer]

The automotive sector is really the engine of southern Ontario specifically and in the Great Lakes region with these integrated supply chains. When we see what the administration has expressed in terms of its goal and some of the tariff and tax policies that it is putting in place to do it, it is incredibly challenging for tens of thousands of workers who have now found themselves either unemployed or in precarious employment because of this.

It's challenging, of course, for our members, because Swedish automakers are not pining for Canadian auto parts. We have built up a deeply integrated sector over decades to everyone's benefit, including the United States, and now that is trying to be unwound in a very unproductive way.

I'm somewhat concerned that there have been opinions expressed that Canada's overall tariff level right now isn't so bad compared to the rest of the world. While that might be true in certain instances, where the damage is being impacted is in the manufacturing sector. Where the damage is being most acutely felt is by families that are supported by manufacturing jobs in southern Ontario, around Montreal and some other clusters around the country.

Obviously, the automotive sector on the parts side and on the OEM side are being most directly impacted by that. We are hopeful that some level of sectoral relief could come in the near term because our members need it.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

The other study that our committee is doing is on defence industrial policy. There's a relationship between the possible benefits of that and your sector.

Can you talk to us a bit about how the industrial and technological benefits policy may be working or not, and how could that work better as part of a reframed industrial policy?

[Ryan Greer]

It's a great question. Canada's ITB policy is really important for Canadian manufacturers to ensure that they can participate in these North American and in some cases global supply chains to help build, secure and provide the kit that Canada's military needs. There are opportunities to improve the program. The government should be considering it as it considers what a defence industrial strategy looks like.

One of the hardest parts is, again, for Canadian SMEs to feel connected to the government and its goals. Under the ITB policy, of course, it is through their supply chains and the large OEMs which have well-established relationships. They work with various contractors across the world and through the United States for various platforms that they've built in the past.

It can be hard for SMEs to one, show, offer and compete on how they could do something domestically that would be as good, if not better, within those supply chains. Two, it's hard for them to grow in terms of their relationship with the federal government, because those small and medium-sized manufacturers have no connectivity with the government. It is only through the OEM supply chain that they have an opportunity to do what they can.

I think that finding ways in a process to connect those innovative small and medium-sized manufacturers to help them grow within that framework needs to be an important consideration.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Thank you.

Any specific advice that CME might want to present in relation to the study that we're doing would be very helpful.

Mr. Noël, your “Livre bleu de la productivité” sets out 40 recommendations. One section of the document focuses on decarbonization.

Could you tell us about the companies in Quebec's economy that are involved in that? Are they companies in the clean technology sector, or are these companies not limited to a single sector in particular?

[Philippe Noël]

Companies have a strong interest in increasing their decarbonization and reducing their environmental footprint, particularly by reducing greenhouse gas emissions and by recovering what is produced within their own facilities.

I am thinking in particular about circular economy processes that prevent too much of what is being produced from being wasted and allowing it to be reused more effectively. In the end, that reduces operating costs and the company's carbon footprint. For example, the Bridgestone facility in Joliette invested heavily in decarbonizing its operations and recovering the heat produced to reduce energy consumption. These companies are more productive because these processes reduce their operating costs and their environmental footprint.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Thank you. It is important to include stories about companies like these in our report so that we can come up with a plan for this sector.

I would like you to talk about Quebec's aerospace industry. There isn't much time left, but could you tell us briefly about that?

[Philippe Noël]

My colleague, Hubert Rioux, can add to my answer if he wants.

The aerospace industry is facing several productivity challenges, some of which are a result of measures put in place by different levels of government that have an impact not only on the aerospace industry but on other sectors as well.

We are calling for an immediate moratorium on the restrictions imposed on the temporary foreign worker program. We are also asking the government to help those companies by giving priority to local businesses when awarding aerospace contracts.

You spoke earlier about a defence industrial strategy. We hope that, as much as possible, our aerospace companies will be the ones to benefit from those contracts. We are talking about the major players in the industry, obviously, but also about all the subcontractors that contribute to the aerospace industry's value and supply chains.

We are also calling for the government to reduce companies' regulatory and tax burdens, which would give them some breathing room, enable them to increase their productivity and give them the means to achieve their goals.

We also expect governments to take advantage of this opportunity to showcase the aerospace industry's expertise on the international stage. There are tens of billions of dollars in defence contracts available, especially in Europe. We recently went there to see what those business opportunities entail.

In addition to the upcoming defence industrial strategy, the federal government has a responsibility to give preference to Canadian companies and to promote them so that they can get contracts.

[The Chair, Liberal, Ben Carr]

Thank you very much.

Mr. Ste‑Marie, you have six minutes.

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

Thank you, Mr. Chair.

Welcome to all the witnesses.

My questions are for Mr. Noël and Mr. Rioux, and I thank them for being here with us today.

As you mentioned, your federation represents 40,000 businesses and 120 chambers of commerce. Your “Livre bleu de la productivité”, which sets out 40 recommendations, is really well written and comprehensive. I thank you for giving the example of Bridgestone, which is the largest private sector employer in Joliette.

Mr. Noël, you mentioned the temporary foreign worker program. In my region, many SMEs in the manufacturing sector are involved in metal processing. These companies have followed two trends.

Some chose to focus on robotics, innovation and artificial intelligence. They reduced the number of welders, machinists and operators they require and thus managed to reduce the number of temporary foreign workers they need to hire. They have been successful, but it took them several years to get to where they are now.

Other companies chose to use the temporary foreign worker program, but they were taken by surprise by the about-face of both the federal and the Quebec governments. In the past, they were told that the solution was to recruit abroad, but then all of a sudden they were being told that those days were over and that they would have to figure things out for themselves.

Tell us why the federal government should reconsider its announcement and be more pragmatic and more responsive to the needs of SMEs.

[Philippe Noël]

In our opinion, the restrictions imposed on the temporary foreign worker program jeopardize the productivity and growth of businesses that, as you obviously know, are struggling with a shortage of skilled labour. This shortage undermines the competitiveness of our economy and our regions in particular. Businesses need access to these workers. We have estimated that 106,000 foreign skilled workers are needed to meet the demand.

We believe that the federal government must reconsider all of the measures it has taken in this case because they threaten critical expertise. These temporary foreign workers generate several million dollars in economic spinoffs, which ultimately support our growth. That is worth protecting through a moratorium on the program restrictions.

For several months, that is what we have been calling for from both levels of government, the federal and the Government of Quebec. Recently we have felt the Government of Quebec to be much more open about this issue. We are now waiting for action from the federal government.

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

Thank you. That is duly noted.

Your “Livre bleu de la productivité” was published in March. In your opinion, what has changed since March, particularly with regard to our relationship with our neighbour to the south, the government's announced intention to spend more on defence and the ongoing development of artificial intelligence? What updates would you make to this publication today?