Evidence of meeting #24 for Industry, Science and Technology in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
11:45 a.m.
Liberal
The Chair Liberal Sherry Romanado
Our next round of questions goes to MP Erskine-Smith.
You have the floor for six minutes.
March 23rd, 2021 / 11:45 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Thanks, Madam Chair.
I want to start with Mr. Wudrick.
When it comes to bailouts, I read an article in The Globe and Mail from an economics professor at U of T and the Rotman school, Professor Chandra, who writes:
The point of bailouts should be to preserve or enhance competition, not to prop up already strong companies that can exploit weakened rivals or throw money at companies that are likely to fold regardless.
Do you agree with that?
11:45 a.m.
Federal Director, Canadian Taxpayers Federation
It's probably a little more nuanced in my position. The challenge with a bailout is that you tend to run into one of two problems. You're either giving money to an entity that doesn't need it, as we've seen some companies openly say; or you're giving it to companies that may not deserve it, because as I think the professor is indicating, if they can't survive but for the subsidy, then it's probably a bad idea to give it to them.
11:45 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
However, you would agree, at least from my understanding of the ethos of your organization and following you online, that the emphasis should be on preserving competition or enhancing competition.
11:45 a.m.
Federal Director, Canadian Taxpayers Federation
Yes. Competition is always the better way to determine who should succeed in the marketplace. I'd agree with that.
11:45 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
The government has committed to a bailout of the sector, so when it comes to conditions that might be imposed on such a bailout, I have seen the government publicly speak about limits on executive compensation, dividends, potentially climate disclosure conditions, conditions on maintaining regional routes, the same conditions that we see, for example, in the LEEFF program.
The professor I referenced goes on to write:
A significant government stake [that is, an equity stake] will ensure that future decisions around airlines are taken with the interests of consumers and employees in mind, rather than the returns to shareholders and top executives.
If we are to have a bailout, as a significant condition do you think an equity stake would make sense?
11:45 a.m.
Federal Director, Canadian Taxpayers Federation
The challenge there, then, is now you are essentially marrying government into the entity. I realize the purpose of joining them at the hip with a company is to ensure accountability for the taxpayer support, but the flip side is that there's a reason that most businesses are not joined at the hip with government. If you then have businesses making decisions for reasons other than profitability and what their shareholders expect, you run into a different set of problems.
I have made that argument regarding concerns about use of money for things such as the wage subsidy, but I view that as a temporary program in a unique circumstance. People support that subsidy to preserve jobs, and when they see that businesses are throwing it in the bank or giving out special dividends to shareholders, it's a problem.
One thing governments can do that's relatively simple, that doesn't give rise to the same problem I've just mentioned, is transparency. If the price of admission for support for private entities is that there must be full disclosure of the terms of the contract and repayment....
It has been endlessly frustrating. I recognize that we take a very hard line on subsidy, but if governments decide they are going to support businesses for whatever reason, the bare minimum expectation of taxpayers is that they should be able to see where the money goes, when it gets paid back and whether the contract is fulfilled.
11:50 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Don't you think, though, when we look at the auto sector bailout, the equity positions the government took were much more beneficial to the taxpayer and the public interest than the loans that ultimately were never repaid?
11:50 a.m.
Federal Director, Canadian Taxpayers Federation
We lost $3.7 billion on that transaction, so I would argue it wasn't exactly a....
I understand the political pressure. I understand the calculation. However, we put out a study on this, and if you look at the dollars and cents, taxpayers lost money on that transaction. I know there were groups agitating for a continued equity stake, but as I said, there's a reason that most businesses are not in a permanent partnership with government.
11:50 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Just to pause, I'm not suggesting permanent partnership. I don't think Germany, in taking a 20% stake in Lufthansa, is suggesting that it's going to be an unending partner with that particular company. However, in a crisis—you talked about a sort of grim necessity—how do we, as decision-makers in the public interest, ensure that the public interest is protected and that, in your case, taxpayers are protected?
Wouldn't you think that—at least as this professor is writing—the public interest is better protected by government's having a serious stake and a seat at the table?
11:50 a.m.
Federal Director, Canadian Taxpayers Federation
Yes, I think the public interest is better protected when there is a consequence or when the government has some form of stick. You're proposing an equity stake. I propose things like transparency or other looser strings that don't involve an equity stake but are definitely better than a “no strings attached” approach. I would agree with that.
11:50 a.m.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Mr. Donald, I don't know if you have a view on this. I would also be interested, with the remaining time that I have—which is only a minute or so—if you could expand a little on what Transport Canada can do in a non-monetary way to ensure that the colleges are better equipped to deliver for the labour needs of the industry. It strikes me that....
You suggest convening various partners, but maybe lay out a few concrete steps that you think Transport Canada should take to free up some unnecessary red tape that potentially stands in the way of colleges' delivering on the labour market that we need.
11:50 a.m.
Executive Director, Canadian Council for Aviation and Aerospace
The first is updating the required curricula that colleges must teach. As I said, at the moment it requires colleges to teach how to fix cloth wings. I don't think that's of much use to WestJet, Air Canada or some of the majors. It also requires them to teach how to fix components that are no longer installed on aircraft, so they need to do that.
It needs to make the commitment to online, blended learning permanent and to telecolleges now so that they can take the necessary steps to invest for the future. It told them on less than two months' notice that they could go to blended. What do you expect colleges to do? Telling them now in November that, okay, it's going to be extended again....
It needs to plan a little bit better, and it's the same thing with industry, bluntly. It needs to tell industry so that Tracy and others can prepare. The government needs to set out a plan, subject to the parameters for getting rid of quarantine on internationals, so that people can start gauging the capacity they're going to need, bringing staff back, bringing aircraft back—
11:50 a.m.
Executive Director, Canadian Council for Aviation and Aerospace
I'll stop there.
11:50 a.m.
Liberal
11:50 a.m.
Liberal
The Chair Liberal Sherry Romanado
Thanks so much.
Our next round of questions go to Mr. Savard-Tremblay.
Mr. Savard-Tremblay, you have the floor for six minutes.
11:50 a.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you, Madam Chair.
Good morning to my colleagues and to the witnesses, whom I thank for their time.
Mr. Wudrick, from the Canadian Taxpayers Federation, asked us why we should support this particular industry. For Quebec, this industry represents 40,000 direct jobs and 100,000 indirect jobs, 220 companies, 200 of which are small and medium-sized businesses (SMEs), and $18 billion in sales, 80% of which are exports. It is the largest exporter in Quebec, which is also the third largest aerospace hub in the world, after Seattle and Toulouse. Only three places in the world have suppliers capable of providing all the components needed to build an aircraft, from A to Z, and greater Montreal is one of them. For this reason alone, it is a strategic industry that deserves to be defended.
In addition, we are in the midst of the COVID-19 pandemic. We know that a number of sectors will be affected more severely and for longer than others. They will need specific assistance, and I don't think I need to list the reasons. Flights are cancelled, so the planes are grounded. There is no maintenance, no replacement parts, and thousands of jobs have been lost. The industry is even forced to lend its workers to the construction industry, risking the loss of expertise and thereby the ability to bounce back. Some small and medium-sized businesses may have to close their doors. That's how serious it is.
All over the world, people are preparing for the next generation of aircraft. We also know that we need to develop a comprehensive policy now to ensure that our industry is still at the cutting edge of innovation in 10 years. However, of course, an aerospace policy should not be limited to financial assistance. We agree on that. All players must be at the table, including workers, companies and governments. Programs must be specific and tailored to the reality of the sector. Policies can be broad, whether in terms of the green shift, recycling or maintenance, but this also means providing cash and loans to buyers, and funding for research and development.
In short, if we look at the big picture, it's a highly strategic industry, and it's as important to Quebec as the auto industry is to Ontario or oil is to western Canada.
Mr. Wudrick, if we are not supposed to support aerospace, should we stop supporting the oil and automobile sectors?
11:55 a.m.
Federal Director, Canadian Taxpayers Federation
Yes, absolutely. That's been our position all along. We take the exact same position.
I want to be clear. It's not picking on a particular region. We take the identical view on every industry, including auto and oil. I recognize that some people consider that an extreme position.
I don't want to diminish the importance to a particular region. I hear similar arguments made by other industries. My concern is whether the focus on the size is undercut by the cost of support.
You mentioned the additional jobs and the spin-off. I hear this argument all the time. The reality is that, to take Bombardier as the most obvious example, support for Bombardier has often been justified on the basis that it supports a supply chain. The supply chain, however, is also subsidized. Research and development is also subsidized. Purchases of the aircraft are also subsidized.
This is not, then, a case of subsidizing at the top and seeing it trickle down to support all these other elements. Everything along the chain is subsidized. All I am asking is that, when we do a cost-benefit analysis, we also count the cost. I'm fine with counting the benefits, but I think it's only fair that for every industry we count the cost as well when we're making a judgment about what support should or shouldn't be offered.
I agree with your point and with some of the other people on the panel. I recognize that I've been focusing on subsidies. There are many other ways to support the industry. I have no issue with many of those things, and they need to be discussed. I'm really solely focused on the issue of direct transfers of taxpayer money in the form of grants, not loans.
If loans are repaid, I think there is an argument there as well, with proper disclosure, but I'm really just focusing on the subsidy issue.
11:55 a.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
In short, you are saying no direct support for the aerospace industry or for the oil and automobile industries.
Do you think a liquidity policy would at least be an option?
11:55 a.m.
Federal Director, Canadian Taxpayers Federation
It would be better than getting nothing in return, but I'm very worried again about the auto bailout example. Taxpayers lost a lot of money on that deal. I recognize that there is an immediate benefit in terms of keeping those companies afloat, but there was a cost. We need to be honest about the fact that there was a cost. It was not an ideal scenario.
If you're asking me whether there are ways to structure things that are less bad for taxpayers, I say yes. Any way in which taxpayers are repaid or protected, in terms of the money they're forced to subsidize an entity with, is preferable to none at all.
11:55 a.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
You gave the example of the agreement with Bombardier, but wasn't the problem in that case the lack of conditions, in terms of maintaining the head office, eliminating positions or increasing the salaries of senior executives?
Is my time up, Madam Chair?