Industry and Technology Committee on Oct. 6th, 2025

[Hubert Rioux, Economic Advisor, Fédération des chambres de commerce du Québec]

Thank you for your question.

Several of the recommendations that we made in our pre-budget submission build on the ones we made in our publication. They are based on developments that have occurred since that time. For me, the most important was the passage of the One Big Beautiful Bill Act in the United States, as was mentioned. This bill introduces many significant tax incentives for American businesses, but they exacerbate the problems that our cumbersome tax system causes for Canadian businesses.

For example, this U.S. bill indefinitely extends the reduction of the United States' federal corporate tax rate to 21%. In Canada, our federal corporate tax rate is 15%, but the problem is that the combined federal and provincial rate is often much higher than the combined federal and state rate in the United States, because many states impose a maximum corporate tax rate of 10%. That is the case for some of Quebec's direct competitors, such as Ohio and Texas.

The U.S. bill also restored the possibility for SMEs to retroactively deduct all R and D and software expenses back to December 31, 2021. Furthermore, it makes permanent the accelerated 100% depreciation bonus for certain eligible goods in the manufacturing sector.

There is therefore considerable tax pressure coming from the United States. We must maintain the tax competitiveness of our businesses by responding, in a way, to what has been done in the United States. I would say that is the priority right now.

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

In that same vein, my colleague asked you a question about decarbonization.

Given what is being done in the United States, is decarbonization becoming secondary for Quebec's economy or is it still just as important?

[Philippe Noël]

No, it is still something that we are hearing a lot about.

We created a guide on decarbonization with the help of energy experts. The goal is to explain, not only to big corporations but also to SMEs, the approach to take, the game plan for decarbonizing their operations.

Earlier, I gave the example of Bridgestone. In our guide, we highlight this example, but also that of an SME that reinvests to improve the energy efficiency of its operations simply by caulking around windows or changing the type of light bulbs used. The guide contains all sorts of tricks that can be used by both SMEs and large corporations.

To answer your question, I would say that there still seems to be an interest in that.

As you know, in Quebec, we have several types of energy, for example, hydroelectricity, wind energy, solar energy, natural gas and even renewable natural gas, which is becoming increasingly popular. There are therefore all kinds of energy options that can be used to help meet the greenhouse gas reduction targets and, ultimately, improve the productivity of businesses and reduce their operating costs.

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

Thank you very much.

Do you have anything to add, Mr. Rioux?

[Hubert Rioux]

If I may—

[The Chair, Liberal, Ben Carr]

Nice try, Mr. Ste‑Marie. Unfortunately, your time is up for this round of questions, but I appreciate the effort.

Mr. Guglielmin, the floor is yours for five minutes.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you for your testimony.

Mr. Greer, according to the National Bank of Canada, there are now over 105,000 regulations impacting manufacturing.

We've been having some discussions about what the United States is doing. It seems that they're streamlining their regulatory framework, while here in Canada we're burying industry under regulatory burdens. I think you have said yourself that the regulatory burdens are now even more impactful in some cases than the tariffs themselves.

I was wondering if you could describe for us what manufacturers are saying about the impact on the day-to-day environment with some of these regulatory burdens, especially when they're competing with U.S. firms.

[Ryan Greer]

Thank you very much for the question.

At CME, we regularly connect with our members on the ground in their communities. We also have bodies called peer councils, which is where small groups of small and medium-sized manufacturer owner-operators can compare notes on business challenges and help each other work through them. It's really an interesting and unique model.

I get the opportunity to join some of these calls or conversations, and it's remarkable to me how much time is spent in those conversations not talking about dealing with a workforce issue, what they're doing to capture new customers or how they're managing new technology implementation. So many of those calls are about comparing notes on how they're navigating regulatory burden compliance requirements and other challenges with all levels of government. They don't always distinguish between a provincial requirement, a federal one and a municipal one, but between all three levels of government, it adds up and it takes so much of their time.

There's a cost to their businesses, of course, in complying with these. There's the opportunity cost of all the other things they could be doing to grow their businesses. It's the one thing when we survey our members, which we do very regularly, to ask for their biggest concerns and what public policy changes would help them grow their business. Regulatory burden is almost always in one or two when we do those surveys. We consistently hear it, and the burden does continue to proliferate.

That's not to say the one-for-one rule and other initiatives at all levels of government haven't helped manage it or tend to some of the more problematic regulations, but, as I stressed in my remarks, what our members want to see is not to fix one or two problematic regulations. I know that's the easiest place to start. Tell us what's wrong and we'll try to fix it. In the time you fix one, another dozen pop up that are maybe based on a consultation process that didn't quite integrate or learn from what industry had to say. It's other requirements that pop up through ministerial guidance, legislation or elsewhere that add a new burden in the 12 or 18 months it might take us to fix one.

As I said, our members are looking for governments to indicate not only that they understand this is a problem but that they're going to do systemic reform to try to fix these challenges for the long term.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Do you believe the current regulatory framework is deterring foreign investment in the manufacturing sector?

[Ryan Greer]

Uncertainty is what drives a lot of this decision-making. Obviously, in the last six to eight months, a lot of that uncertainty has come around trade policies. Prior to that, and even in the current context, we heard regulatory uncertainty cited repeatedly as a barrier to investment in our sector.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

In “The atrophy of the Canadian manufacturing sector has gone too far”, the National Bank of Canada highlights how, from 2018 to the time of the article's publication on December 23, 2024, Canada's manufacturing sector regressed by over 5%, affecting “no fewer than 15 of 18 manufacturing industries”, and calls this “a concerning indicator of economic erosion”. However, during the same time period, U.S. manufacturing has grown by 10%. Why do you think that is?

[Ryan Greer]

It's a range of issues, but plainly we think that all government apparatus at all levels of government should be focused on this question of productivity growth and competitiveness, because that's what's going to raise low wages, create jobs and generate government revenues to fund other priorities. This is not a short-term trend; this is a long-term one. The investment in the manufacturing sector has been sluggish for all of about two decades. In fact, it's so sluggish that we're unable to compensate for the depreciation of existing plants and machinery. Put another way, we're not actually replacing existing capital as it wears out and grows obsolete because we're below that neutral rate itself.

There needs to be a real long-term think about how we can incentivize investments through all means possible, so it is tax, it is regulatory and it is programmatic reform. There is no one key to turn on this one. It's looking at the whole suite of various ways that governments help or, in some cases, hinder business investment. As I said earlier, we want to make investment in Canada undeniable, not just attractive, but something that somebody needs to do or must do. That's how we need to frame all these decisions.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you very much.

[The Chair, Liberal, Ben Carr]

Thank you, Mr. Guglielmin.

Mr. Bains, go ahead for five minutes.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

Thank you, Mr. Chair.

Thank you, Mr. Greer, for joining us and for your work in this space with your organization and for sharing very critical information with us on this topic of productivity.

Canada ships a significant amount of raw materials outside of the country for processing, and then we reimport them as finished products. In some cases, this is regulatory. For example, in my home province of British Columbia, there's a rule that if you are to process food, you have to grow 50% of it on your own farm.

How can we retain more of the value-added processing here in Canada?

[Ryan Greer]

You're absolutely correct in terms of what we export and how we export.

When we think of our north-south relationship, almost three-quarters of what we export to the U.S. are parts, ingredients and components that integrate into U.S. manufacturing processes. These are not finished consumer goods. It's also very much true of most of what the U.S. exports to Canada, which outlines how deeply integrated our manufacturing sector is. That is a net good. When we think of Canada-U.S., it really is a sector that works together to build things to compete with the rest of the world as opposed to with each other.

Recent months have illustrated that we need to take a long look at all of the rules, requirements and incentives that might have some value-add and that might have somebody looking for a domestic market. They might be looking for a way to add value within Canada.

Again, to repeat myself, I think regulatory burden rules, like the one you've cited, might have made sense in a current context or in a previous context. We need to look at all of our priors to decide whether this make sense. Are we ensuring that we can add as much value to a product as possible in Canada? The answer may be, in some cases, that we don't need to or that we don't want to, that we're extracting a lot of benefit by selling it to customers in the U.S. or abroad. It's taking a look at all of those rules, requirements and incentives that have caused investors to make the decisions not to do those value-added processes in Canada.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

Can you share your thoughts on the removal of internal trade barriers and impacts there?

[Ryan Greer]

It is one of the biggest opportunities for growth. I don't need to outline all the figures. I'm sure members of this committee have heard them many times around the potential to grow Canadian GDP and create tens of thousands of jobs.

It is important to remember that these barriers are not hard tariff barriers. These are, in most cases, small regulatory differences that have been created across provincial borders. The way you produce or sell a product in one province is subject to different rules in another. Obviously, the labour requirements are based on various certification and boards. This means that we've created a series of small markets instead of one large market.

We are encouraged by the recent movement of the last six or seven months. We've been shaken out of our complacency on internal trade, and we've seen a number of these bilateral trade agreements announced by the provinces to look at mutual recognition.

I'm a little worried that some of that momentum seems to be fading a little bit. Everybody was talking about it, all levels of government, saying that they're going to do everything to remove these barriers. Now I don't hear as much. I know that a lot of that means work is happening behind the scenes to look at what mutual recognition looks like.

We think that strong leadership at all levels of government to continue to aggressively try to remove these barriers and commit to mutual recognition is really the key. Trying to align regulations is a long, slow, painful process, for those involved, at least, whereas mutual recognition says that, if you produce a good or sell a good in a way that is legal in one province, it should be considered legal and lawful in another. We think that's the answer. We hope all provinces start to move even more aggressively in that direction in the months ahead.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

Thank you.

I have a quick question for either Monsieur Noël or Monsieur Rioux.

In August, a consortium of Ford Motor Company and South Korean companies said they would build a $1.2-billion plant to produce electric vehicle battery materials in Becancour, Quebec. Can you expand on the reasons Canada secured this investment in the middle of a very competitive environment for private capital investment?

[Hubert Rioux]

I'm sorry, but I'm not familiar with the details of that project or the reasons why it was put forward, so I'd rather not comment.

[The Chair, Liberal, Ben Carr]

Thank you, Mr. Rioux.

Thank you, Mr. Bains.

Mr. Ste‑Marie, you have two and a half minutes.

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

Thank you very much, Mr. Chair.

Mr. Rioux, this issue has already been raised in this meeting, but could you remind us of the importance of having high-quality transportation infrastructure, especially in the regions?

[Hubert Rioux]

That is indeed very important. It is an argument that the Fédération des chambres de commerce du Québec has been putting forward for some time. Some of the biggest challenges in Quebec and Canada have to do with the quality of our infrastructure and the maintenance of existing assets. For some time now, there has been a lot of talk about diversifying our exports, and rightly so given our dependence on the American market. However, in order to increase exports and diversify our export markets, we must be able to move our goods efficiently within Canada. That is why we need transportation infrastructure expansion projects, such as the port expansion project in Contrecoeur.

Roads and railways are also extremely important for transporting our goods. Right now, most of the goods we ship to the United States go by train or truck. If we now want to export some of those goods to other parts of the world instead, for example, Europe or Asia, we need to increase the shipping capacity of our ports and airports. Infrastructure must be properly maintained in all regions of Quebec. We also need to expand the transportation capacity of various regions by increasing access to infrastructure.

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

Since we are talking about exports and diversifying markets, the FCCQ is saying that we need to better support SMEs, particularly when it comes to exporting.

Could you elaborate on that?

[Hubert Rioux]

Yes, of course.

Right now, one of the problems we are facing in Canada is that our businesses are small compared to our foreign competitors. Many of our SMEs do not export or are not competitive enough on international markets. We need to increase the proportion of SMEs that export to international markets.

In order to do that, we must first support SMEs when it comes to taxes. That is why we are proposing that part of the revenue they get from exports to international markets be made tax exempt.

We also need to change the approach we have been taking to date. It is all well and good to have programs like CanExport to help SMEs shuttle goods, participate in trade shows or conduct market research, but more needs to be done. The government needs to provide our SMEs with funding for their operations and funding to set up overseas and develop new supply chains on international markets.

The government needs to step up the support it is providing to SMEs to help them access foreign markets.