Thank you, Mr. Chair.
It's an honour to appear before this committee today on behalf of Canada's chemistry industry.
Our industry is vitally important to Canada's manufacturing landscape. Chemistry is a $53-billion a year industry in Canada. That makes us the fourth largest manufacturer and the second largest manufacturing exporter. We directly employ more than 87,000 Canadians. These are well-paid and highly skilled jobs. We also support half a million jobs in other sectors. In fact, chemistry is an essential industry—you see a package of information with some examples in front of you—that provides the building blocks for more than 95% of all the consumer products in the economy today.
I want to use my brief time with you to respond directly to the objectives of your study. I'll demonstrate that chemistry is a strategic sector for Canada's economic development. I'll provide some recommendations on how to strengthen the sector through increased foreign direct investment to help grow the economy and create highly skilled manufacturing jobs for Canadians.
Let me just start by saying chemistry is a growth industry, period. As Canada is looking to expand beyond a slow, sluggish 2% annual growth rate, it need look no further than chemistry. Year after year, chemicals production has outpaced GDP growth in both North America and globally and that growth shows no signs of slowing down. In fact, analysts predict rapid growth with a near tripling of the 20 largest volume, platform chemicals over the next 30 years. This really shouldn't come as any surprise. We know that chemical demand is closely linked with population growth, societal demand, the needs and aspirations of a modern, growing middle class. As well, our industry is a key enabler for solutions to the world's most pressing problems of clean air; clean water; clean energy; and safe, nutritious, and abundant food.
Chemistry is also a highly innovative sector. Often it is forgotten; people think of it as yesterday's industry. It's a highly innovative sector. In fact, in the United States, there are more than a quarter of a million patents issued annually. About half of those do go into the computer and IT sector, but the next quarter of them go into innovative chemistry technologies. The balance, the remaining quarter, go to all other sectors combined. Chemistry is a highly innovative sector.
I'll finish just by saying chemistry is also a highly responsible industry. More than 30 years ago, this industry in Canada did face a crisis of public confidence. Our industry, with the assistance of our toughest critics, responded by developing Responsible Care, our commitment to sustainability. That initiative is a global success story, now practised in 62 countries worldwide.
The best example I can give you of the Responsible Care commitment to innovate for a safe and sustainable future is the pride we take in being at the forefront of breakthrough chemistries that will deliver new refrigerants that will help achieve the objectives of the Kigali accord. These new chemistries will have the single largest impact on global warming to date, with the environment minister estimating about a 0.5°Celsius decrease in global warming, all through the powers of innovative chemistries.
I can't say it enough and I can't say it more clearly: our chemistry industry is modern, highly innovative, solutions-oriented, responsible, and it's poised for growth.
Let's just talk about the growth potential for a moment.
The North American chemistry industry has changed dramatically in the past five years. The availability of low-cost, low-carbon feedstocks, specifically, natural gas, liquids, and shale gas, has put North American producers amongst the lowest cost chemical producers in the world. That, combined with the anticipated growth and demand, has led to significant capital investment. Today, we are tracking more than 275 chemistry projects with an impressive book value exceeding $225 billion under development in the United States alone. Sixty percent of that represents foreign direct investment into the U.S. In turn, those anchor investments have spurred an additional 600 investments in the downstream plastic sector alone.
Those investments make chemistry the fastest-growing manufacturing sector in the United States, and according to the National Association of Manufacturers, chemistry accounted for over 50% of all manufacturing investment in the United States during the past year. In short, chemistry has become the poster child for manufacturing reshoring in the United States.
Let's look at Canada for a minute. Canada has seen some investments from that recent wave, but we're lagging far behind our historical 10% comparative share.
Our industry should have seen $25 billion in new investments in Canada in the last five years. The reality is that we're seeing less than $3 billion, or just over 1% of the North American total, when we should be seeing 10%.
There's no doubt that the Canadian competitive landscape has improved significantly in recent years. We have very favourable corporate tax rates and enhanced depreciation treatments for new investment. We also know that Canada is making it to the short list when the global chemistry companies are considering where to make their next multi-billion-dollar foreign direct investment, but unfortunately, investment is not the Olympics; there's no silver medal. The competition is fierce. It's a winner-takes-all game, and we're not winning nearly enough.
It's our view that this pattern can and must change. We think our sector and the national economy face a bleak future unless the lifeblood of capital investment is restored.
I'll conclude my brief remarks by identifying what we believe are the three highest priority actions needed to land the next wave of investments for the chemistry sector in Canada.
First, the Government of Canada must work very closely—more closely—with the provinces.
In 2015 Ontario identified chemistry as an advanced manufacturing sector. This was important, because it made the chemistry sector eligible for investment assistance under the province's $2.7-billion jobs and prosperity fund. The province has also identified chemistry as a target sector for a regulatory modernization project under its Open for Business initiative, and that will be taking place in 2017.
If we turn to Alberta, the province this year launched a $500-million petrochemical diversification program to attract global investment to add value to Alberta's resources. With funding at that level, the province will likely be in a position to support just two, or perhaps three, large projects. That program, however, has attracted significant interest. They've received more than 16 proposals with a book value of more than $20 billion.
British Columbia is also exploring how to add value to the portion of the significant natural gas volumes it anticipates will leave the province through the proposed LNG terminals.
In Quebec, the government is well aware of the benefits that will accrue in new chemistry operations to support mining and other developments in the province's Plan Nord.
Canada's chemistry sector could easily get back to the 10% historical investment share if the federal government were to partner directly with those provinces that have already identified chemistry as a priority strategic sector for their own economies.
Second, Canada introduced a long-term, 10-year accelerated capital cost allowance in Budget 2015. That measure merely matches existing and permanent treatments in the U.S. It closes an important gap, but it doesn't offer Canada any overall advantage.
To level the playing field, we believe the ACCA needs to be made more permanent, and even more is needed to provide a strategic advantage and draw the attention of foreign investors. Here we're recommending specifically a 100% depreciation for value-added resource developments, over a five- to ten-year investment cycle. We believe this will send a very strong signal that our economy is serious about attracting foreign direct investment and moving beyond our lacklustre 2% growth.
Third and finally, we believe it's vital that Canada approve the development of supporting infrastructure so that the country's natural resources can reach markets. If we can't develop our natural resources, there's nothing to add value to, and the future of the chemistry industry will be bleak indeed.
I'd like to conclude by saying that the work of this committee, along with that of the Barton advisory panel, will provide the Government of Canada with very relevant and important advice. If that advice is followed, we believe that investment in the chemistry sector can advance from being poised to deployed.
I thank you again for the opportunity to share the chemistry industry's investment and growth message with this committee today.
Thank you.
