Subcommittee on Canadian Industrial Sectors Committee on April 23rd, 2009

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Paton, you said that the research and development tax credit is needed and important. At the moment, in order to take advantage of non-refundable tax credits for research and development, a company has to make a profit. As many manufacturing companies are losing money, they cannot take advantage of the opportunity at the moment.

Would it be better to have refundable tax credits? A company doing research and development would be able to claim refundable tax credits even if it was losing money. That would be useful.

[Fiona Cook]

We support that idea. However, there would have to be a maximum time in which those credits could be claimed. A company that has not made a profit in ten years perhaps should not be in business. We support the position in the present situation because a lot of companies are not making money.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

[Richard Paton]

I note that this was one of the Rajotte recommendations.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Paton, since you are discussing recommendations, I gather that you see the accelerated allowance as a priority. There can be other priorities; if you had to choose another one, which priority would you support?

[Richard Paton]

In terms of the Rajotte report, that is number one for us.

Just to give you an example, I was listening on the web when Jay mentioned yesterday that there's a coalition of 43 companies and associations in the manufacturing area. You work in Parliament and you know how hard it is to get consensus among various views--

[Some hon. members]

Oh, oh!

[Richard Paton]

--so you can imagine the amount of diversity we have. There are R and D companies, service companies, and rail companies.

We agreed that the number one ask of the government was this, by far. Number two, by the way, was the refundable tax issue on that R and D credit. This is absolutely the most critical, because without investment, all of the other things don't matter very much. You have to stimulate that investment. That was the number one ask that we had for the government on the budget and we got kind of a quarter of a loaf with the two-year extension.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

For the railways, I thought I understood that you were asking for a grant program to be set up. I heard the word “grant“.

Are you just asking for a government assistance program for the railways? Do you want grants or do you have other priorities such as the accelerated allowance and refundable tax credits? I would like to hear your opinion about that.

[Jay Nordenstrom]

Merci beaucoup, monsieur Bouchard, pour votre question.

I have to apologize to my colleague, Mr. Paton, as he's been bearing the weight of the manufacturers' coalition and the issues by himself. I owe him some support here. We are a proud member of this coalition and are one of the beginners on board, as is Mr. Paton. We believe we need to speak with one voice. I came here with a proposal that's very specific to our sector, and that I thought would be of interest to this committee, to make sure we survive this economic crisis and come out in a positive way.

However, I have to say that we endorse 100% all the recommendations in the letter we've written to the Right Honourable Prime Minister, as well as the top issues that Mr. Paton has talked about. Mr. Paton has taken a forest-from-the-trees outlook on what is needed for the manufacturing community in Canada and we endorse that 100%. Those priorities are exactly in line with ours.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Lake, you may have a short round, and then we're done.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'll start by saying you needn't apologize, Jay. The approach we're taking in this committee is that it's important to hear about the big picture—and of course, we're very interested in the big picture—but that it's also very interesting to hear specific proposals that relate to industry. I think we have a good balance and I think we have had some fantastic feedback today from both of your organizations.

I think it would be appropriate, if I may, to close on opportunities. One thing we've talked about here and that we hear a lot about is the problems and challenges we're facing as Canadians--I guess because they're so much in our face right now--because of this global slowdown. One thing that is important is to look to where the opportunities are in addressing these things. As governments, rather than just throwing money at problems, we need to carefully consider where there are real opportunities, both in the short term, to address the labour issues, and in the long term, to ensure that when we come out, we come out stronger than ever.

Jay, you have mentioned some really interesting things to do with rail that I never knew about, such as products to grease the rails and things like that, specific products that I imagine have a chemical component to them.

Maybe each of you could speak to areas within your industries in which you see tremendous potential, areas in which, as we come out, there will be an environmental technology impact that's going to be in demand around the world and in which we have Canadian expertise in researching and developing and turning this into something that will drive our economy to be even stronger in the future, both in the short term and in the long term.

[Jay Nordenstrom]

Thank you for that question.

That's exactly where we want to position ourselves coming out of this, in a positive, sustainable way, whereby Canada can be very proud of its manufacturing sectors and specifically where we try to position ourselves, when domestic and international sales.... The domestic market has been hit very hard on the freight side. On the transit side, we're seeing investments. We need to make sure that these investments are happening today and are not delayed until tomorrow.

Internationally, the opportunity for Canada is to really be business diplomats in countries where we haven't been before. We have a presence in places such as Sudan, in building their infrastructure, and in Nigeria, and in the Middle East. We've had success in Iraq and now we're pursuing successes again in Iraq.

Our competitive advantage is in our turnkey solutions. We can go in and do a preliminary feasibility study, put the specs together, lay the ballast, lay the track, and get locomotives in there, and we can do it at a competitive price, with on-time delivery, excellent training capabilities to make sure you have the local workers who understand how to maintain the equipment, and after-market service. We can do the complete package. As an association, we have to do a better job of telling that story, because on these trade missions, we need to put our best foot forward.

In this case, when it comes to transportation, we're seeing these countries that have nationalized systems, such as Russia, which is looking at their 2014 Winter Olympics and asking for Canadian input into how to design their Sochi line, because they see our successes, and not only in Vancouver. With their harsh weather, they have similar needs. They don't have the technology that we have. As far as population is concerned, we don't compare, yet we've been able to build on our strengths. We can't compete with some of the other folks out there, but we know where we are successful. We need to go after that market and make sure we have a good chunk of that piece of the pie.

We'll continue to do this and we do need to make sure we have government support in staying the course and ensuring that we don't close up shop. I'm not here to use scare tactics, but that's certainly the reality I'm hearing from my members. The fact that one of our larger members is now under bankruptcy protection is a testament to that reality.

[Richard Paton]

The way we look at this, Mr. Lake, is that chemistry is part of the solution to a lot of issues. It could be food production. It could be the safety of your food. One company, for example, is developing the chemistry to take greenhouse gases out of stacks. Also, there are lighter products and rail that has less friction. The opportunity, given that these are world problems--everything from water quality and air quality to security issues and Kevlar vests or whatever--is that chemistry can provide a solution.

But the one area where perhaps Canada is really trying to focus on is an area for which one of my company leaders coined a phrase, which is that we want to be the best value-added upgraders in the world, economically and environmentally. That is our sustainability.

As part of our responsible care program, we've integrated sustainability principles. We're now working with all our plants to develop codes and ways to look at the footprint of each plant. Out of that, innovation is generated, because you start asking how we can reduce water consumption or how we can help a community with water consumption. You can actually improve the water quality in a community if you do it right. Or, how can you use less feedstock and produce better products that can reduce your emissions? How can you improve your systems, much as Jay is talking about, and design your systems for less transportation or less movement or whatever?

In there is a lot of innovation, and out of there, we hope that not only will we be leaders in selling our products, but we will be leaders in our practices. Much like your point on the banking system, Canada is a leader in these kinds of practices. It's sometimes hard to generate money out of it, but that's something we're aiming for in the future.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Paton.

That concludes our meeting.

For the record, we want to state that the report referred to as the Rajotte report.... We don't want to take anything away from James Rajotte, who is the hardest-working MP, and I would concur that James did an excellent job. The actual report, for the record, is called “Manufacturing: Moving Forward—Rising to the Challenge”.

The other note that I—

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The Rajotte and Van Kesteren report.

[Voices]

Oh, oh!

[The Chair, Conservative, Dave Van Kesteren]

I think there were actually only two left on the committee.

The other thing that's necessary to note is that the reason we are undertaking this study is that we, as an industry committee, recognize that the preface to that report was the high dollar, the energy costs, and emerging China, and I think there was one other as well. The circumstances have changed. We recognize that we are in a situation that needed to be studied, and thus we've now.... I only hope that it would be a small fraction of the lustre that was attained by the Rajotte report; however, that's what we're endeavouring to do now.

We thank you, Ms. Cook, Mr. Paton, and Mr. Nordenstrom, for your witness. We thank you for your contribution. We know that what you have told us today will certainly help us with this study.

With that, we conclude this meeting.