Industry Committee on May 28th, 2015

[John McKay, Liberal, Scarborough—Guildwood, ON]

Good. Thank you.

[The Chair, Conservative, David Sweet]

Mr. Lake.

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

I thought I would take a quick second based on Mr. McKay's line of questioning earlier, with the statistics or whatever they were that he brought up.

I went to the Invest In Ontario website and found a link with the headline “Canada ranks second in the world for ‘Best Countries For Business’ according to Bloomberg”. Hong Kong apparently secured the top spot.

“Canada jumped from sixth place to second largely because of the receptivity of its consumers, measured by the size of its middle class, household consumption and GDP per capita,” states the report.

I thought I'd bring that up for clarification, because it was interesting, given that this is a Liberal Government of Ontario website that highlights this. I thought it might be good information for John McKay.

[The Chair, Conservative, David Sweet]

Mr. Carmichael.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Mr. Chair.

Mr. Knubley, I'll follow up on my earlier line of questioning, when I didn't get a chance to get to manufacturing in southwestern Ontario directly. At a previous meeting we talked about accelerated capital cost allowance and the extension of that program, as well as about some other initiatives. Could you speak to what this government is doing to incent manufacturers in Canada, and certainly in southwestern Ontario, to invest more heavily in their industries and meet the challenges ahead?

[John Knubley]

Over the course of the last few budgets, a number of steps have been taken by the government to support manufacturing. Again I'll look to Phil to elaborate more, but they include the technology demonstration program for aerospace, the strategic aerospace and defence initiative—we talked a bit about it earlier—and the automotive innovation fund, which complements the automotive supplier innovation program.

In addition, the regional agencies have programs that support business development and that would fall into the category of supporting manufacturing.

Phil, do you want to talk more about this issue?

[Philip Jennings]

Maybe I should start by just talking about the capital cost allowance measure that was put in place. In some ways, it's a really broad-based measure that benefits firms across all the manufacturing sectors. These include aerospace, automotive, forest products, information and communications, food processing—it's really a broad base.

Also, what's really critically important in some ways is that there is long-term certainty about how capital costs will be allowed to be written off. That makes a difference for some sectors, such as the chemical industry in Canada, whose horizon to invest in capital is much longer than the two-year extension that has been the case in previous budgets.

The last thing I'd say is that in some ways, if you look at the future of manufacturing, it's really about getting positioned for it. The deputy mentioned a number of programs that are geared toward this. It's about trying to incent innovation in R and D. The other part of it is about trying to incent capital investment by way of people investing in the latest machinery, which is important for the future.

This measure, the ACCA, is something that has been broadly asked for as something that is important to complement the actions on R and D.

I won't spend too much time talking about what John talked about concerning the programs. I can go into the details, but broadly speaking, they are geared generally towards supporting innovation and R and D. Different programs adopt different risk levels in the way they support R and D. With tech demo and the automotive supplier innovation program that I mentioned, the government is taking a larger risk but is also expecting the companies—and there will be thorough due diligence on this—to take risks in what we support.

Then you have programs that are more geared towards the front end, towards basic research. Many those programs come out of the shop that Lawrence Hanson leads at the moment. Then you have some that are more at the commercialization end. The automotive innovation fund, which is really about trying to attract the assemblers here, is an example of the way you support that goal.

[John Carmichael, Conservative, Don Valley West, ON]

For the longer-term programs, such as the capital cost allowance extension, do we have a place such as we talked about earlier concerning the supplier innovation program and the automotive innovation fund—we talked about accountability and measurement—in which we actually measure our success in terms of reinvestment and investment in new equipment, job creation, etc.? Is there a place we can go to see, as you look from the outside in, how this is actually measured on criteria of success?

[John Knubley]

All programs are constantly subject to evaluations and audits. I'll let Phil talk to that.

[Philip Jennings]

As John said, every program has its own performance measurement framework, which we have to follow. There are short-, medium-, and long-term objectives that have to be met. Essentially those are evaluated and audited in terms of how we meet them.

To speak about automotive, there was an evaluation done of the automotive innovation fund about three years after it was launched that felt it was on track in meeting its short-term objectives. Also, we have a long-term evaluation, which will be done in 2017.

But if you look at what we're seeing about how we are achieving the objectives we're expecting to achieve, every single assembler in Canada has reinvested in its capacity in the last two years. For me, if you think about the ultimate outcome of what we're trying to do in supporting the auto sector, this is a good measure, people reinvesting in the capacity that exists in Canada.

[John Carmichael, Conservative, Don Valley West, ON]

Great. Thank you very much.

[The Chair, Conservative, David Sweet]

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

By how much were the automotive innovation funds cut?

[John Knubley]

They haven't been cut.

[Philip Jennings]

The automotive innovation fund has so far supported seven projects, and the fund was fully subscribed in terms of the first tranche of $258 million. There have been two additional funding envelope enhancements that have been provided, and there are still some funds that remain in those that are available for companies to access if they wish to make further investments in Canada.

[Brian Masse, NDP, Windsor West, ON]

It appears, though, that there was money moved over to the parts fund from the innovation fund, the supplier fund.

[Philip Jennings]

Yes—

[John Knubley]

That's correct. In budget 2015 it's identified. It's $100 million.

[Philip Jennings]

That's right—well, $50 million is actually identified from the automotive innovation fund, and the other $50 million will come from the fiscal framework.

[Brian Masse, NDP, Windsor West, ON]

Right, so our automotive innovation fund has less money than it did before, and that seems like an odd strategy to try to attract new auto investment when we haven't been able to successfully get that investment.

[John Knubley]

As Phil said, every assembler operating in Canada has reinvested in Canada. We could go through the list of those investments. There have been significant investments using the automotive innovation fund for this purpose.

[Brian Masse, NDP, Windsor West, ON]

I have one last question. The EDC has decided to loan Volkswagen $500 million for investments in Mexico, and I think, Arizona. Is that not counter to your attempts to try to win investment for Ontario and other parts of Canada?

[John Knubley]

As I mentioned earlier, it's very important in every sector, but particularly in the auto sector, to ensure that our companies are part of the automotive supply chain. Indeed, this particular investment by EDC is designed precisely to ensure that Canadian suppliers are participating in the global supply chain, and that is the perspective with which this investment was made.

Phil, do you want to add anything to that?

[Philip Jennings]

In some ways the incentive is for Volkswagen to really have a deep look in terms of what Canadian capability exists in the supply chain. Essentially you're creating that incentive because you're offering some financing measures to Volkswagen, and Volkswagen, in return, commits to essentially try to look at all opportunities to bring Canadian suppliers into the supply chain.

[John Knubley]

I would just add from the perspective—