Industry Committee on Dec. 5th, 2007

[Dr. Jayson Myers]

I think the fact that the industry committee has come together as a whole shows how important these issues are, how urgent they are, and how we can work together for solutions. I agree with Mr. Lazar we have to realize that at the end of the day it's up to business to make the investments and to compete to make the choices about how they're going to do business and about the market, to put in place a business environment that's not only going to respond to the short-term pressures of the dollar, but enable companies to invest more in the new technology, product innovation, and the skills development that are required to go further. If anything, the problems with the dollar just show how important and urgent it is to start these investments today and to make sure we have the right policies in place now.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

We'll go now to Mr. Carrie please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to thank you all for being here. I particularly liked your wording, Mr. Lazar, about our country needing a vision, and we need to move forward. I want you to know the government is listening to you today just as we did last year. We did that unprecedented study with 22 recommendations. I want to find out how you feel about how the government is addressing 21 out of those 22 recommendations. I want to correct for the record, because it appears a fallacy keeps getting repeated here, that we've only acted on one of the recommendations. So I would like to go over some of the things we have acted on and I want to ask your opinion on how we're doing so far.

You mentioned the CCA for manufacturing, and we did put that in for a two-year writeoff. The Minister of Finance has been very clear publicly that this is something he can look at increasing.

The improved SR and ED tax credit program. Finance announced this summer we are doing a review of the SR and ED.

As far as the energy sector is concerned, it says, “review its policies and regulatory and fiscal measures to ensure they make a greater contribution to...clean and renewable energy sources”. We talk about the ecoENERGY renewable initiative that we launched, regulating the use of renewables in fuel, incentives for producers, renewable fuels investment in Canada, ecoTRUST, ecoENERGY technology initiative, the Canada School of Sustainable Energy. We extended and expanded the CCN class 43.2 equipment.The NSERC and NRC target major investments in the clean and renewable energy sector.

In labour, we were asked to establish an agency for the assessment and recognition of foreign credentials. We did confirm our commitment through the creation of the Foreign Credentials Referral Office to be operational, and it was operational this past spring.

Improve the temporary foreign worker program. We were asked to do that. The program is to be improved as announced in budget 2007, but we're ensuring employment opportunities for Canadians are not reduced.

Again in labour, provide tax credits and other measures to companies providing employer financed training. We did that in budget 2006-07.

Increase support for post-secondary students and post-doctoral fellows conducting research in industry. We made many announcements in this regard for the youth program and NSERC; the Canada social transfer transfers to the provinces record amounts of money; improvements to the student loan program, new industrial R and D internship programs; funding for the granting--

[Some hon. members]

[Inaudible--Editor]

[The Chair, Conservative, James Rajotte]

Order.

It's Mr. Carrie's time.

[Colin Carrie, Conservative, Oshawa, ON]

It's my time. And I've heard over and over again that we have only addressed one. I'd like to continue.

In trade, disclose analysis of any free trade agreement with South Korea and the European Free Trade Association We have done extensive consultations. I would like to remind people that we hear that there is not a Korean free trade agreement yet, but there are negotiations. If you look at the speed at which we are moving, the Americans completed their free trade agreement with Korea in a record amount of time. We're not going to sign an agreement that's not good for Canada—or any free trade agreement that's not good for Canada.

Then we have “conduct an internal review of Canadian anti-dumping, countervail and safeguard”. We have looked at that and we are continuing to review these periodically.

Then it says to “amend the Copyright Act; ratify the World Intellectual Property Organization (WIPO) Copyright Treaty; ensure...enforcement resources...to combat counterfeiting”. Again, we're working with our international counterparts, and we've done studies here at INDU and Public Safety on the counterfeit issue.

On the regulatory changes, implement smart regulations. We've already worked on that. We're in negotiation with the U.S. and Mexico consistently. We're reducing the number of tax remittances, filings for more than 350,000 businesses. We're working with the provinces and territories examining and broadening the TLMA.

We were asked to conclude negotiations to implement greenhouse gas emissions in air pollution regulations. We've announced a regulatory framework, including targets and compliance mechanisms for industrial emissions of greenhouse gases.

Implement the User Fees Act: we are complying with that act.

Our infrastructure asks that this committee...22 recommendations. We asked for three.

Announce the national gateways and trade corridor policy. We agree with the INDU report and we are putting forward record amounts of money, including $2.1 billion for a new fund for gateways and border crossings and $400 million for the Windsor–Detroit.

Improve the FAST lanes and infrastructure. We're doing that.

Define financing for the Windsor–Detroit. I already said we're doing that. It was in budget 2007.

Research and development. We were asked to consider recommendations of the Expert Panel on Commercialization. Budget 2007, the S and T announcements, the venture capital, the Canada–U.S. trade treaty improvements, the BDC seed funding, funding for new centres of excellence—I could go on and on there—expanding scholarships, attracting talent from outside Canada.

Funding to bring together business, government, post-secondary institutions to focus on R and D. Businesses; the NSERC; the NRC programs, including cluster of collaborative internships—we've addressed that.

Replace the TPC. We've recognized the importance of innovation and we refer you to the SADI and the ecoENERGY initiatives.

As for reviewing the funding levels for operation of the networks of centres of excellence program, and eliminating the sunset clause, this is being evaluated right now.

Again, the last recommendation, the 22nd, was to continue to fund research infrastructure through CFI. Again, budget 2007 provided $510 million to CFI to undertake more competitions before 2010 and another $600 million expected to be leveraged from others.

Gentlemen—

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie. That's all I think you have.

[Colin Carrie, Conservative, Oshawa, ON]

Did I get it all in?

Thank you very much.

[The Chair, Conservative, James Rajotte]

Fortunately, that'll have to be his statement.

[Colin Carrie, Conservative, Oshawa, ON]

I want to know that they will consider that as prompt—

[The Chair, Conservative, James Rajotte]

No.

[Avrim Lazar]

No answer, okay

[The Chair, Conservative, James Rajotte]

No.

Order, order.

We'll go to Ms. Nash, please, for six minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Welcome to all of the witnesses.

Mr. Myers, you mentioned that manufacturing is the largest sector in Toronto. We've lost, though, in the last few years over 125,000 manufacturing jobs.

I note in your presentation that you say manufacturing jobs on average have wages about 25% higher than other sectors. Of course, we had the service sector meeting with our committee this week, and I noted that food and beverage jobs pay about $300 a week, which is well below the average. While there are government claims about there being no problem in the economy because people can transfer to other jobs, often those jobs are these very low-paying jobs.

We had a recent report from the United Way about the growing poverty in the city of Toronto, double that of many other communities. Some people write off the manufacturing sector and say, well, we're moving to a knowledge economy, let China build things; we'll do other things here. What's your take on that kind of comment? My concern is that we're neglecting a crucial sector and missing an opportunity to really help industry reposition itself in an increasingly competitive environment for manufacturing.

Can I get your comments, please?

[Dr. Jayson Myers]

I think that's right and it's certainly mistaken to think that the problems affecting manufacturing are not affecting other sectors of the economy. As the United Way report in Toronto pointed out, one of the reasons for the growing rate of impoverishment in Toronto is the disappearance of manufacturing jobs.

I think we have a false sense of security across the country, though, because we've seen significant job cuts in manufacturing, and that has been certainly a big concern of ours, but overall we've seen that manufacturing sales performance and shipments performance has been pretty stable over the past four years. That has meant that all these other sectors that have depended on manufacturing are still dependent. The jobs in the services sectors have remained because overall performance in manufacturing has not changed that much in terms of overall sales. If we do see production losses, we're going to see this knock-on effect in other sectors, and I think that would be extremely challenging. We're already seeing that in Ontario, in Toronto, because of the loss of jobs.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Can I ask you one other thing? I heard your presentation and others at the finance committee, and something that struck me there was that job losses today and the business failures today are reflecting conditions from some time back, months or even a couple of years back. So as regards the full impact of this perfect storm, the level 6 hurricane that was referred to earlier, we have not felt the full impact yet, and this will roll out in months or years to come.

What do you think we're facing in terms of the impact of the current conditions if nothing happens to change things?

[Dr. Jayson Myers]

I think that's right. The impact of this recent surge of the dollar has yet to be felt, and we'll see further job losses and closures. Moving forward, I think the next six to eight months are going to be critical. I'm unfortunately expecting probably as many as 50,000 job losses up until June in manufacturing alone. But as I say, if we're seeing production closures elsewhere, we'll begin to see those in other sectors, too, and across communities.

My concern here is not only the level of wages—again, we're seeing the shift of employment from high-wage to low-wage jobs—but we're also seeing the shift from high-productivity jobs to low-productivity jobs, and then we wonder why the overall level of productivity is falling in the economy and we wonder why the Bank of Canada says our overall capacity rate is falling and therefore we have to keep interest rates high to stave off inflation. This is all part of the same problem.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

I'm not going to have time for all my questions, but Mr. Nantais, maybe I'll just ask you. You said that as an auto-producing country we're slipping in terms of our level of importance and the amount of production we have, and that we're in seventh place. I think we were actually probably higher a few years ago, and we keep slipping. You said every other jurisdiction supports auto investment. Can you give us some examples of what other jurisdictions not only support auto but in some cases even compete for those investments?

[Mark Nantais]

It can take many forms in other jurisdictions. I gave you one example of Australia, where they take revenue from import tariffs and funnel that back into the domestic industry.

Every jurisdiction that either has an auto industry or wants an auto industry ensures that some sort of incentives are there. They recognize that the auto industry represents a solid economic hub of jobs and spinoff jobs at ratios higher than in virtually any other industry. So it's of great interest to put in place regulatory regimes, tax regimes, and so on, that improve the investment climate, and as a result, they get these investments. We've lost out in a lot of investments in Canada.

For instance, there was a time when the southern United States was very hot. Why were they hot? Because state jurisdictions, even the federal government in some cases, had put real cash on the table.

Certainly at that time, when we hired KPMG through the Canadian Automotive Partnership Council to look at that very scenario, we were very competitive on all fronts, except when somebody put cash on the table. Once they did that, we basically lost the bid. That's why it's so important to have these various supports in place as we go forward.

I've referenced the fact that outside of Canada the auto industry in many jurisdictions is taking off hugely. Why can't we position ourselves in Canada, operating plants in Canada, building world-class products, and ship them to these markets? That's why we have invested roughly $8 billion of Chrysler, Ford, and General Motors in particular, to revamp plants and make them some of the most leading-edge, flexible manufacturing plants, to continue to ship not just to the U.S. but to markets abroad. So that's why it's so important, I would suggest.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll go now to Mr. Brison, please, for five minutes.

[Scott Brison, Liberal, Kings—Hants, NS]

Thanks to all of you for appearing here today. I'm interested in what you have to tell us on some of these matters.

There's been some mention of tax competitiveness. We haven't had significant tax reform in Canada since the Carter commission in 1971, with the exception of the implementation of the GST, which was a shift towards a consumption base and away from capital and investment and personal and corporate income taxes.

Which would do more for the competitiveness of your member companies, in manufacturing particularly but also in a wider range—this is for the Chamber of Commerce, Mr. Beatty—of Canadian industry: a GST cut at $6.5 billion per 1% of GST cut, or using that money to more dramatically reduce personal and investment, capital, and corporate income taxes?

[The Chair, Conservative, James Rajotte]

Mr. Beatty.

[Perrin Beatty]

Thank you very much, Mr. Brison, for the question.

Clearly, our priority has been to look in areas other than GST reductions. We were pleased, though, when the MInister of Finance, in his economic update, announced a whole range of tax measures. They included the GST, but they went well beyond that, and we felt this was an important step forward.

One of the areas, if we're looking at tax competitiveness, where we could take an important step forward is in harmonization of provincial sales taxes with the GST. In the letter I wrote to the Prime Minister and the provincial premiers on November 20, I called upon provincial premiers to move ahead with this harmonization. This would, in Ontario alone, significantly improve the competitiveness of Ontario industry.

[Scott Brison, Liberal, Kings—Hants, NS]

How do you feel about the government's action on interest deductibility for foreign investment? It's a tax measure that effectively doesn't raise any more money for the Canadian government, but raises more money for foreign governments and puts Canadian companies at a competitive disadvantage compared with companies in other jurisdictions. How do your members feel about that?

[Perrin Beatty]

The chamber has been in touch with the government on this issue over the course of the last several months. I'll defer to Mr. Murphy, who could explain to you some of the activities he's had in this area.