Industry Committee on June 6th, 2006

[The Chair, Conservative, James Rajotte]

Mr. Fontana, I'm sorry, we're already over five minutes, and we have two more witnesses who want to address their first set of questions.

[Joe Fontana, Liberal, London North Centre, ON]

Oh, I thought I had time.

[The Chair, Conservative, James Rajotte]

Mr. Kirke, or whoever would like to go first. Ms. Grenier.

[Eve Grenier]

Thank you, sir.

I think you have a very good grasp of what is happening in our industry, and I don't think we should be so afraid of the word “protectionist”. It's become a very bad word.

One of the strengths of our industry, of all the manufacturing in Canada, has been to be able to think outside of the box. We think outside of the box. We are a small country; we have made inroads everywhere in the world. I am very proud of being a Canadian. I am asking this committee, if you want to think outside of the box, please do.

One measure would have been so simple a few weeks ago. When Mr. Harper announced a GST decrease of 1%, I was hoping that the next words would have been “on Canadian-made products”. What a wonderful marketing incentive measure it would have been to promote manufacturing in Canada. This is thinking outside of the box, and if anybody can roll with that ball, it would be wonderful.

[The Chair, Conservative, James Rajotte]

Mr. Kirke, we're way over time, so would you be brief?

[Bob Kirke]

I did want to say that if there is one thing we need, everyone would agree it is decisions. The textile and apparel industries met at the beginning of 2003. We didn't agree on everything, but between the two of us we presented a pretty clear picture to government. In point of fact, if you look at textile tariff reduction, which was announced on December 12 or 14, 2004, the first changes were actually made one year later, and some people who had previously imported goods under the duty are getting the duty relief now, this month. You make an announcement, but it takes 16 or 18 months to actually be money in the bank for manufacturers.

The world works a little more quickly than that.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Carrie for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair, and thank you to all the witnesses here today. I do actually have a lot of questions, but I'm going to try to keep them short and sweet.

The first one I'd like to address to Mr. Sharma, because I understand from the petrochemical industry that we do export our natural gas quite often, and it's not fractioned. My understanding is that if we divide it up, there are things we can take off the natural gas that you'd be able to utilize quite well.

Are there, as Mr. Fontana was saying, specific things the government could do that would allow this fractioning to occur a little bit more often?

[Atul Sharma]

You're right. That's exactly what happens. Natural gas goes out in its purest form, and we don't fraction it off and take the solids out. It's those solids that we use within the industry to produce the resin, and that resin then turns into a plastic product.

As to whether there is a specific thing that you can do, I would say it's to work with the provinces to provide an energy strategy or framework to say that a portion of our natural gas will continue to remain in Canada and will be available for the manufacturing of value-added products within Canada.

It's going to be a cooperative effort. Energy strategy and policy tends to happen at the federal-provincial level. So I don't know if there's one direction that you can take as the federal government, but certainly initiating the dialogue with the provinces to say that this is an important component of our prosperity and we need to talk about this would go a long way.

[Colin Carrie, Conservative, Oshawa, ON]

Okay, thank you very much.

I'm very interested in the whole idea of value-added products. One of the things Ms. Grenier mentioned was the “buy Canadian” marketing that you're doing. Do you have any statistics?

I come from Oshawa, and we manufacture cars. I would love it if Canadians actually had an idea that these cars are made in Canada and what effect it has on our economy. Do you have anything in your marketing that you're putting forward to the average consumer?

I'm sitting here happily in my Canadian-made suit. I'm very happy with my suit. I always go out of my way, but many Canadians don't. They're looking for the cheapest price.

Do you have any statistics or marketing strategies that you seem to be successful with in doing this “buy Canadian” thing?

[Eve Grenier]

Just to let you know, this “Wear? Canada!” thing started thanks to funding from Industry Canada in March. The first level was to use that campaign on the U.S. market during trade shows, and we now have initiatives in which many manufacturers are teamed together under a Canadian umbrella.

The next step, next year, would be to have this “Wear? Canada!” campaign going to the Canadian retailer and then to the consumer. Of course, we need funding for that. That is why one of the recommendations is to keep on with the different programs that we had under CATIP. Some have lapsed, and some will be lapsing this coming year. Bob, of course, can be more specific, but we do need funding.

Yes, there have been some initiatives in the past. One was a “made in Quebec” initiative with some retailers five or six years ago--actually, it was earlier than that. Eaton's, our retailer, had a “buy Canadian” marketing program at one point. Was it successful? I don't have figures personally. Do you, Bob?

No, we don't have figures, but I know it works. From the heart, we all know it works.

As a company, Grenier is now doing a new campaign with targeted retailers in the province of Quebec. The posters are coming in this week, so you'll have the logo. It says,

“Proudly designed and made in Quebec since 1863.”

I'm sure it's going to work dans le bas of the Quebec region.

I'm sorry, in English it means “proudly designed and manufactured in Quebec”. So we are launching that campaign. We are doing our own little bit of work. I'll tell you if it is successful. I'm sure it will be.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mrs. Grenier.

You may speak very briefly, Mr. Kirke.

[Bob Kirke]

The clerk has literature for the U.S. It is only in English because it's primarily targeted at the U.S. market.

If they weren't sent already, we have little “Wear? Canada!” pins as well. I hope people will be able to take advantage of that.

[The Chair, Conservative, James Rajotte]

We can certainly distribute that to all members through their offices, and if you have a French version, that would be very helpful.

I think Mr. Fontana also suggested that you make the pins blue. It was his suggestion, not mine. That's why he wears blue shirts.

We'll be going now to Monsieur Vincent forcinq minutes.

[Robert Vincent, Bloc, Shefford, QC]

I heard this loud and clear. Thank you for coming today.

There's a number of things I have learned. Governments say that industry must use new technology and modernize in order to be more competitive. However, you have to realize that technology is available all over the world and that other countries can also use it. Thus technology catches up with us, and we are less competitive because others use new technologies as well.

We were competitive for a few years when the value of our dollar was low. Now that we have a high dollar, we can't make it any more. We are stuck again in a ditch and we are not competitive.

You have raised the issue of the 1% on products made in Canada. This could be added to the first 1%. You have also raised the matter of the campaign promoting domestic made products. Some stores may find it difficult to affix these labels. Perhaps we will find one or two of them in each store.

However, there is something you did not talk about or that you barely mentioned. There are counterfeit goods coming into the country. Does this affect your sales? If others see your designs, copy them and then the counterfeit products are allowed into the country, you will no doubt suffer monetary losses.

[Eve Grenier]

I think Bob can answer this question.

[Bob Kirke]

Actually, next week in Montreal we're holding a seminar with Ogilvy Renault and a U.S. law firm on intellectual property. In the past, people used to write it off as, “oh, we get knocked off”. But it's the speed at which goods can be knocked off and produced and in a store before you even get your goods in the store.

In other sectors there are important safety concerns and so on, but for us, it's just incredible how the gap has shrunk in terms of finding an original idea, copying it, and having it in the store. So it is an increasing concern, and it's a worldwide phenomenon.

[Robert Vincent, Bloc, Shefford, QC]

During a meeting of the committee two weeks ago, witnesses told us that U.S. Customs seized 6,500 counterfeit products while Canadian customs only seized 6.

We're talking about research and development. I gather that when we attend fairs and trade shows to introduce our products, some of the people there only come to copy them. Shouldn't something be done at the Canadian level in order to stop importation of counterfeit products?

[Bob Kirke]

U.S. Customs have a very clearly stated goal of policing intellectual property. CBSA does not. It's as simple as that. The reason they catch them is because they look, and they have a policy to look. They do not have the same policy in Canada to anywhere near the same extent. So I don't think anyone around the table would object to reviewing that.

[Robert Vincent, Bloc, Shefford, QC]

I noticed a little while ago that you seemed to be annoyed by some of Mr. Penner's answers. I would like to know what your own answers would be.

[Eve Grenier]

I repeat that it is most important for the textile and apparel industries to work together in Canada. I fully agree on the concept of buying Canadian products. One of our greatest challenges as a manufacturer of ladies undergarments is to find suppliers on the Canadian market. We lost many of them. Indeed, the loss of a supplier hurts more than the loss of a customer.

In our field, the manufacturing of the fabrics, which are often made to our specifications, is very technical. So it is complex, difficult and costly to start over with a new supplier.

Therefore, I believe in an integrated industry although we sometimes follow different paths. As I said earlier, as a representative of the industry, I cannot support the outward processing proposal of the textile industry since this would create a new competitor for our members. It's unfortunate, but this is how we see things right now. Unless a mechanistic can be found that would-- There may be other mechanisms that could be devised in cooperation with the textile industry to avoid losing manufacturing opportunities in Canada. For instance, we could deal directly with our established customers. This is indeed what would happen with outward processing: we would be creating a new competitor and we would reduce manufacturing in Canada. Instead of selling its fabrics to a Canadian customer, it would send it over to Haiti, Bangladesh or elsewhere where the fabrics would be turned into clothing that would be purchased by Wal-Mart, Zellers or The Bay at a much lower price.

On the other hand, I fully agree with Mr. Penner when he says that the profit margins on imports are not reflected in consumer prices. You can believe me: when The Bay gets a bra for $4 through its direct import division, they still sell it for $39.99.

[The Chair, Conservative, James Rajotte]

Ms. Grenier, I'm sorry, we're over time. Also, in fairness, I think we should give Ms. Siwicki a brief time to respond.

[Elizabeth Siwicki]

Dealing with the outward processing issue, I couldn't agree more, and our industry couldn't agree more, that we need to work together with the Canadian apparel industry, because you are our customer base. But as a customer base, you're shrinking in Canada. In 2000, it was almost $8 billion of apparel shipments, and in 2005, we're down to $5.6 billion. The customer base here is eroding, and some of the customers we're targeting with outward processing are the very same companies that used to manufacture here or have moved some of their manufacturing offshore. We should try to repatriate at least the textile component of what are now imports.

The other important factor is that Canadian textiles are, generally speaking, more expensive than the textiles that apparel manufacturers in other countries are currently using. So we're not looking to have the garments come in cheaper in greater competition with what Canadians make. We don't want to destroy the Canadian apparel industry. The decrease in the duty would simply offset the higher cost of Canadian textiles.

[The Chair, Conservative, James Rajotte]

I'll go to Mr. Shipley now.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you for your presentation. I frankly find it very interesting. I think what it proves today is how important it is to have the large picture of an industry and the manufacturing.

It would appear to me that there is some difference of opinion, obviously, between the garment and the textile industries in terms of the free trade and outward processing. I don't know if those are the only issues. Are there other issues? You seem to be in agreement on most, except those two. Are there some other issues or differences it would be relevant for us to know about?