Evidence of meeting #28 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was steel.
A recording is available from Parliament.
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
I think we agree that we pay one-third of the VCAP going into the investment in the underlying portfolio. I think that's the model of the VCAP.
Liberal
Chandra Arya Liberal Nepean, ON
Around 10% of government funds have gone. Anyway, we can defer the matter there.
Liberal
The Chair Liberal Dan Ruimy
On that note, we're going to have to cut it short, because we have our second panel here.
I want to thank our guests for coming in today.
Liberal
Conservative
Liberal
The Chair Liberal Dan Ruimy
No. We're done.
I want to thank you for coming.
We're going to suspend for a minute while we get the next group in.
Thank you.
Liberal
The Chair Liberal Dan Ruimy
We're back.
We have only a short period of time for this in order to meet our criteria to have our half-hour later on.
Today we have from the Canadian Meat Council, Troy Warren, president and chair of the board of directors; and Ron Davidson, director, international trade. From the United Steelworkers, we have Ken Neumann, national director for Canada; and Shaker Jamal, research representative, national office; and via the magic world of video conferencing, we have Michel St-Amand, president of Confection 4e Dimension Ltée.
Because of time frames, if you can keep it to a very quick five minutes, we can have some time for questions.
We're going to start off with the Canadian Meat Council.
Troy Warren President and Chair of the Board of Directors, Canadian Meat Council
Thank you very much for the opportunity to speak today with respect to strengthening the manufacturing sector.
The Canadian Meat Council has represented Canada's federally inspected meat packers and processors since 1919. The council has 50 members who are packers and processors and 90 members who provide goods and services.
Food processing is a foundation stone of the Canadian manufacturing sector, providing more jobs than any other sector and employing more people than the auto and aerospace sectors combined. In turn, the meat industry is the largest component of the food-processing sector. The meat industry registers annual sales of $24 billion and exports of $5.7 billion, and it provides over 65,000 Canadian jobs.
Meat establishments vary from less than a hundred to over 2,000 workers. A meat-packing facility is typically one of the largest employers and taxpayers in the community—and sometimes the largest.
The meat industry is an indispensable link in the value chain that also includes feed grain farmers, cow-calf producers, feedlot operators, and goods and services providers. In the absence of meat packers and processors, farmers would not have a market for their livestock; tens of thousands of Canadian jobs would not exist; and consumers would be even more dependent upon imported foods.
The meat industry is a Canadian success story characterized by a dynamic, high-technology, and globally competitive business. Unfortunately, the very substantive employment and economic contributions of our food and meat-processing industries are not well recognized. If this country is to benefit from its natural, technological, and human-capital advantages, it is most important that this committee not only acknowledge food processing as Canada's number one manufacturing sector and the meat industry as the number one component of food manufacturing, but that it see that the sector is treated as such by policy-makers.
During my presentation today, I would like to focus on how important supportive government policy programs, regulatory frameworks, and decisions are to the maintenance of a globally competitive and growing meat industry that has the capability to provide even more value-added innovation, exports, investments, and middle-class jobs.
Global competitiveness is an absolute necessity for the sustainability of the Canadian livestock and meat sector. First, the sector is export-dependent. More than half of the income from the beef sector and two-thirds of producer income in pork are dependent on exports. Second, the Canadian market is already quota- and tariff-free for pork imports and, increasingly, for beef and veal imports. Third, for most consumers, the most important consideration with regard to meat at retail is price. Should Canadian meat production prices fail to remain competitive, not only would this country lose its 120 export markets but domestic sales would also be at risk.
A competitive challenge confronting Canada's manufacturing industry, including food and meat processing, is process innovation to drive down costs and improve productivity. Although process technology innovations, such as advanced robotics, digital process controls, AI, and machine vision systems, exist at the prototype stage in other countries, few are manufactured or supported in Canada.
The meat industry values the government's policies and programs, such as internationally competitive taxation, the accelerated capital cost allowance, an outcome-based regulatory environment, and strong support for international trade. These decisions have a positive impact on the retention and creation of meat production and processing jobs in this country.
The meat industry believes that, consistent with an innovation agenda, the government should provide grants for in-plant demonstration pilots, where manufacturers, engineers, integrators, and academic partners collaborate to prove out and cost proposed innovations.
The meat industry is the most heavily inspected segment of the food-processing sector. Meat-packing plants are prohibited from operating in the absence of the Canadian Food Inspection Agency. In the U.S., our number one competitor, food safety is a public good and the government provides funding for regular-time salaries of meat inspectors. In Canada, companies must contribute to the regular-time salaries of meat inspectors.
To provide another example, the American government funds incoming missions of foreign regulatory officials who audit the U.S. meat inspection system. Conversely, the Canadian government invoices the industry for 50% of the expenditures incurred by foreign officials who audit this country's food safety system. Moreover, our government allows free-rider companies that are not CMC members to benefit from incoming missions, as those expenditures are paid by the CMC members. This is not right.
It is anticipated that in the near future the Canadian Food Inspection Agency will publish the new “Safe Food for Canadians” regulations.
Current indications are that these regulations will likely be accompanied by a new fee regime that will further disadvantage food processors in Canada. The meat industry believes that the Canadian government should not impose these fees, which place the industry in this country at a competitive disadvantage or require some companies to fund costs that benefit competitor companies.
Health Canada is responsible for activities such as the approval of processing aids, food additives, food packing materials, and nutritional claims, as well as for harmonization of Canada-U.S. food safety-related technology approvals. Canadian competitiveness is impaired when the regulators do not keep pace with food safety, consumer convenience, and cost-reduction technologies in other countries.
The European Union permits the use of at least 83 veterinary drugs by veal producers that are prohibited by Health Canada. These include category 1 and 2 drugs of high importance to human medicine. This discrepancy not only results in more stringent regulations and higher costs for Canadian veal production, it disregards the fact that antimicrobial-resistant microbes, which could evolve in Europe, would be transmitted internationally, including to Canadians. In the EU, mandatory temperature requirements for carcass cooling, cutting, and boning are significantly more lenient than those imposed by CFIA on Canadian establishments. The CFIA allows EU meat products to enter Canada, despite their less onerous and less safe production conditions. In addition to the food-safety implications, the substantive divergence between Canadian and EU standards penalizes Canadian companies in terms of yields, operating costs, and employee welfare.
Canada and the U.S. have an equivalent meat inspection system. Nevertheless, shipments of U.S. meat to Canada may proceed directly from the border point of entry to CFIA inspection facilities. Conversely, every shipment of Canadian meat into the U.S. must incur the unwarranted time and expense associated with a post-border entry stop at a privately owned American inspection facility before proceeding to a USDA facility.
The meat industry believes that the government food-safety requirements should not disadvantage producers, industry workers, and consumers in the domestic marketplace vis-à-vis imported products.
A fundamental requirement of Canadian competitiveness and business sustainability is the assurance of access to export markets that will pay the most for every pound of meat we produce. The negotiation of foreign market access requirements is an exclusive mandate of the government and may not be undertaken by industry.
At the same time that technical market access barriers have become more complex and new international trade agreements are being negotiated, government resources allocated to overcome foreign market access constraints have been reduced. Each unresolved foreign market access barrier results in forfeited opportunity for greater Canadian production, value-added exports, jobs, and investments in economic growth.
The meat industry believes that the resources available to the market access secretariat and the Canadian Food Inspection Agency should be increased to levels that would permit these organizations to fulfill their indispensable export support mandates.
Most Canadians do not yearn to become a meat cutter or a butcher, and fewer still are willing to relocate to a rural town. Companies cannot be competitive in the absence of skilled workers. Moreover, each worker on the production line in a meat plant creates four other jobs in the economy. By preventing access to sufficient workers for jobs that most Canadians will not do, government policies are preventing the creation of many more jobs that Canadians want.
The meat industry has a strong record of engaging successfully in a type of pathway to permanency program that your colleagues in the Standing Committee for Human Resources, Skills and Social Development and the Status of Persons with Disabilities supported in the report of September 19. While the recommendations were not complete, their adoption would represent a major step forward in the right direction.
The meat industry believes that when there's a serious and chronic shortfall of Canadian workers, companies should be permitted to access foreign workers who would be strong candidates for the pathway to permanency and productive Canadian citizenship.
President and Chair of the Board of Directors, Canadian Meat Council
Cut me off.
President and Chair of the Board of Directors, Canadian Meat Council
I'm on my conclusions.
President and Chair of the Board of Directors, Canadian Meat Council
I'll just thank you.
President and Chair of the Board of Directors, Canadian Meat Council
Thank you for the opportunity to speak today.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to move to the United Steelworkers, and Mr. Ken Neumann.
Ken Neumann National Director for Canada, United Steelworkers
Thank you.
Good afternoon, everyone. My name is Ken Neumann. I'm the national director for the United Steelworkers union here in Canada. With me is Shaker Jamal, a member of our national office research team. Our union's foundation was laid in the great industrial and manufacturing surge of the mid-20th century, and first in the steel industry, which employed tens of thousands of Canadians and literally built great cities like Hamilton, Ontario.
Over time, our membership grew to include resource extraction, forestry, and value-added manufacturing of everything from tires to auto parts, furniture, appliances, forest products, and more. Our experience over the last several decades shows that government policy and inaction in the manufacturing sector have deeply eroded the middle class in this country.
It has been replaced by insecurity, inequality, and uncertainty, which we believe must be reversed for the sake of future generations. Our written submission touches on several relevant areas and key sectors, such as steel, auto, forestry, trade, and the need for sustainable industrial policy all aimed at truly benefiting Canadians with job creation and growth in manufacturing.
Let me begin with the steel industry. Supporting the steel manufacturing sector is clearly in the country's economic interest. The sector produces $14 billion worth of goods annually, with half of the industry's annual output exported to foreign markets across the world. While the number of Canadians employed in the steel industry is a far cry from what it was in the past, 22,000 Canadians are still employed directly in this industry. The Canadian steel industry is high tech and diversified, and it efficiently produces high-quality products.
As we sit here, today, two of Canada's major integrated steel makers, U.S. Steel Canada and Essar Steel, have been in bankruptcy protection for over a year. Two communities, Hamilton and Sault Ste. Marie, Ontario, hang in the balance as these two major employers seek to restructure. We've been working tirelessly for two years to try to save the jobs provided by these employers as well as the pensions and benefits that support hundreds and thousands of families in Ontario.
We've been working hard with investors, the steel industry, and the lenders. We have received significant support from an engaged Ontario provincial government, but despite our repeated requests for help, the federal government has not been anywhere in this effort. We have received no offers of assistance from the federal government for investment, for retraining, or for labour adjustment. These are all areas in which, historically, the federal government has provided assistance.
This failure of the government to assist in saving the steel industry is part of a broader problem. For decades now, we have had a real industrial strategy problem in Canada. Other countries have industrial strategies. Germany has a successful modern manufacturing strategy, but Canada has utterly failed to support its manufacturing sector, and the crisis in the steel industry is just an example of that failure.
It is unfortunate that in the 2015 federal budget, which called for billions of dollars for infrastructure spending, there was no commitment to the purchase of Canadian-made steel. The lack of government support must be reversed.
I will move now to the auto parts sector. More than 100,000 Canadians are directly employed in vehicle and parts manufacturing, and many are USW members. This accounts for 7% of all manufacturing jobs in Canada. The automotive sector anchors the manufacturing sector, but over the last decade it has seen the loss of 53,000 jobs. Meanwhile, auto parts operations based in Canada typically enjoy a labour cost advantage compared to their U.S.-based counterparts. The industry has a highly skilled labour force, as well as a strong R and D network, with one of the lowest cost structures among advanced economies.
Leveraging the sector's competitive advantage to reverse its troubling decline requires direct government policy. This includes ensuring Export Development Canada's top priority in both attracting and supporting Canadian-based factories by making investment incentives competitive and efficient with sensible tax features.
The United Steelworkers is also a leader in the Canadian forest industry sector, with 17,500 members working in forestry and mills and other production facilities. The last decade, which has included the Canada-U.S. Softwood Lumber Agreement that has now expired, has been difficult for Canadian workers. Low lumber prices, a relatively high dollar, slumping U.S. demand, growing competition from South America and Asia, and lack of capital investment in manufacturing have all led to a decrease in output and to job losses.
China and India are importing increasing amounts of Canadian raw logs. There has been a 300% increase to China alone in the last five years.
By allowing companies to export such large volumes of raw logs, with no value-added work incorporated into them at the domestic mills, governments are failing workers in those communities. The federal government has a key policy role in promoting growth in the sector. An export tax on raw logs would incorporate the difference between export price and domestic price, and the revenue from the tax could be used to help promote the value-added sector.
By taking the lead, the federal government can reverse the declines and ensure that the sector reclaims its status as a sustainable, renewable, value-added industry, providing meaningful, lasting jobs.
The steelworkers also believe that the trade and manufacturing policies should be approached as one comprehensive economic challenge. Free trade agreements alone have not satisfied the imperative to build an economy that serves Canadians' need for a stable, sustainable future. Persistent trade imbalances and declines in manufacturing speak to the lack of a coherent industrial policy. Unfettered trade and minimal government intervention have meant that Canadian exports are biased in favour of our comparative advantage in raw materials and resources.
While the steelworkers represent more workers in the mining sector than any other union in Canada does, we believe that a trade policy that relies predominantly on resource extraction neglects job-creating, value-added, and productivity-enhancing manufacturing. Recent mega-trade agreements such as the TPP and CETA only further entrench a trade regime that takes away the ability to develop sectoral strategies that encourage manufacturing growth. Details in our written submission substantiate that fact. The steelworkers strongly urge the Government of Canada to reject the TPP and CETA and focus efforts for the future on industrial policies that are not constrained by trade deals that are neither free nor trade. This is not protectionism; this is pragmatism. Foreign investment goes hand in hand with trade when it comes to globalization and the need to grow our economy for the sake of Canadian citizens.
Performance requirements for foreign investors must be built in to ensure that Canadians are not disadvantaged by investment deals. There is no greater evidence of the negative impact of secret investment deals with no performance requirements than the takeover of Stelco by U.S. Steel. The unconditional agreement made by the previous federal government with U.S. Steel has all but destroyed the confidence of the people in Hamilton. The uncertainty and insecurity are obvious. One major reason for the crisis in the steel industry is the flooding of the steel market by imported steel. Global overcapacity in steel production has risen to 700 million tonnes, and China by itself maintains over 400 million tonnes of surplus capacity, over 30 times the Canadian steel market.
We are concerned by the government's initiative toward liberalized trade with China. We believe that China is not a market economy and that freer trade with China poses a great risk to Canadian manufacturing. We also believe that the government must amend trade laws to make our trade remedies more effective, and to make the process more transparent by allowing unions to fully participate in trade complaints against countries dumping steel in Canada. Many other jurisdictions such as the U.S., EU, Australia, and New Zealand afford workers that right.
It is fundamental in a globalized economy that workers be able to defend their jobs and communities from unfairly dumped goods. Industry can only benefit. Future trade agreements must allow local procurement, training requirements, and other offsets to stimulate local manufacturing and preserve Canada's right to negotiate community benefit agreements.
I know my time is up, and I'll stop there.
Thank you.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to move to Michel St-Amand.
You have five minutes.
President, Confection 4e Dimension ltée
I will try to respond fairly directly to the various issues raised by your committee at its meeting on March 10, 2016, in order to help to draft a report. So I will discuss these issues concisely, to the best of my knowledge.
First of all, the committee wants to know the manufacturing sector's position, its role and its importance for the Canadian economy. I would like to point out that, every time an employer invests one dollar in the manufacturing sector, it pays taxes to the government. During the year, very little work is seasonal or part-time. So I think that every dollar invested in the manufacturing sector brings a good rate of return to the Canadian government. Then, this is reflected in the commercial sector and the entire economy of the regions where there are manufacturing facilities.
The second aspect concerns the causes of job losses in the manufacturing sector. I will talk mainly about my sector.
However, I realize that I forgot to introduce myself. I'm sorry, and I will do that briefly. My name is Michel St-Amand, and I own Confection 4e Dimension, an SME that manufactures clothing. It is located in northwestern New Brunswick. I have been in business for 30 years. I would like to thank the committee for giving me the privilege of appearing before you.
Let me come back to the causes of job losses. I will speak about my own sector, the clothing sector. The answer is simple. From 1995 to 2005, quotas and tariff barriers were eliminated. So we lost about 80% of people employed in garment processing in Canada.
As for the collaboration between academia and the manufacturing sector, I myself tried to establish contacts with a few universities. We saw that each one has a different structure and there is no common standard from one university to the next. In addition, we did not receive the same kind of response from some universities, and it is difficult to create contacts. However, the infrastructure is more suitable in others, and it seems that the response is much more positive to relationships with the manufacturing sector. But there is no consistency.
I will speak briefly about the improvements that might be made. I suggest that there be more co-operative systems or internships in business in the universities. If the federal government could offer incentives for business internships, it would encourage a better connection between the two sectors, and the progression of technical employees to better integration into the manufacturing system in Canada.
As for the types of funding available for innovation, I must praise the federal government. My company, and many others in the manufacturing sector, use various programs. I'm thinking in particular of a federal agency, the National Research Council, the NRC, which offers good programs, including IRAP, the Industrial Research Assistance Program. Its officers are doing excellent work in the regions and are very knowledgeable. From what I have seen, these employees demonstrate great professionalism. Another tax credit that small businesses use a lot is the SR&ED, the Scientific Research and Experimental Development Program. It's a great program that is well structured and properly applied.
There is another agency called NSERC, the Natural Sciences and Engineering Research Council. I use it for student projects, and it is another great agency that helps in innovation. I also work in the innovation sector.
The committee also asked for proposals to help the manufacturing sector, especially in innovation. As I said, there needs to be a better connection between universities and businesses to support students during their studies and when they finish them. The NRC had a good initiative called the Youth Employment Strategy—which is no longer receiving any funding—and that supported businesses in offering technical, engineering and other jobs. But it isn't available anymore. I would be delighted if it could ever continue. There are probably other programs, but I'm not aware of them. The one I just described is good, but it lacks funding.
Another aspect concerns the fact that there are no federal programs to help with the purchase of advanced technical assets. There are no capital assistance programs to help manufacturing companies that want to buy a robot or advanced technical equipment.
As for innovation in the manufacturing sector, we often forget about the technical sector, whether in cegeps in Quebec or community colleges in New Brunswick. Their members are important links to properly develop innovative projects.
I'm done. Thank you very much.
I hope I kept to the five-minute time limit.
Liberal
