Industry Committee on June 10th, 2022

[The Chair, Liberal, Joël Lightbound]

This meeting is called to order.

Hello, everyone.

Welcome to Meeting No. 27 of the Standing Committee on Industry and Technology.

We are very pleased to welcome our witnesses, who are participating in person or virtually.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Friday, April 8, 2022, the committee is meeting today to study small and medium-sized enterprises and, more broadly, competitiveness.

Today's meeting is taking place in hybrid format, pursuant to the House Order of Thursday, November 25, 2021. Members and witnesses may participate in person or using Zoom.

Those attending in person are familiar with the health rules in effect and must conduct themselves accordingly.

I am pleased to introduce the witnesses who are gracing us with their presence this Friday afternoon.

We have Ms. Diane-Gabrielle Tremblay, Professor, School of Business Administration, Université TELUQ, appearing as an individual. We have Mr. Ralph Suppa, President and General Manager of the Canadian Institute of Plumbing and Heating, and Ms. Tania Johnston, of the Mechanical Contractors Association of Canada.

Welcome, Ms. Johnston.

We also have Ms. Sara Anghel, President of the National Marine Manufacturers Association of Canada, Ms. Leslie Ewing, Executive Director of Plant-Based Foods of Canada, and Mr. Patrick Perreault, Chief Executive Officer of Table Métal Abitibi-Ouest.

If memory serves me, Mr. Perreault, we had a few technical issues the last time you were here, but we are very pleased to see you again.

Finally, we have Mr. Martin Caron, General President, and Mr. David Tougas, Coordinator, Business Economics, both from the Union des producteurs agricoles.

I wish to thank all the witnesses for taking part in this exercise and shedding light on the subject of study of the Standing Committee on Industry and Technology.

Before we begin, I wish to inform members and witnesses that we have to finish the last round of questions about 10 minutes before the end of the meeting so that we can debate Ms. Gray's motion. Her motion is related to our study.

Without further delay, Ms. Tremblay has the floor for five minutes.

[Dr. Diane-Gabrielle Tremblay, Professor, School of Business Administration, Université TÉLUQ, As an Individual]

Hello.

To begin, I want to thank the committee for inviting me to appear.

Usually when I am invited to Ottawa, most of the participants are anglophones. I hear a lot of French names today. I had decided to speak English today in order to speak more directly to those present.

I will address the issue of small and medium-sized businesses' challenges for productivity and competitiveness. I have only five minutes, so I chose to address the issue from the point of view of human resources management, which is my field of expertise and the field in which I teach. I also teach on innovation and work organization issues.

In the present context throughout Canada, the main challenge for small and medium-sized businesses, for all businesses, actually, is the labour shortage. It's clearly the main issue at the moment. To ensure creativity or innovation in businesses, a labour shortage is not ideal. Even just ensuring production and services is a huge challenge, as most of us have seen in the last few weeks and months.

I think recruiting and retaining talent are really the key challenges in the present economic context. We know it's particularly the case in retail, tourism and hospitality, but it's difficult for most firms throughout the country and throughout all sectors.

There are various solutions, and we have heard of these different solutions over the last year, at least. Immigration, obviously, is often put forward. Increasing the female labour force is often put forward. Some provinces have pretty much reached the maximum, I think, in terms of day care. Good, low-cost day care is a crucial issue, so there may be solutions there as well, but that's not the issue I'm going to address today.

I actually chose to address the issue of aging workers because I think this also is a huge challenge in Canada. Unfortunately, aging workers are a neglected part of the labour force, and it's one of my areas of expertise. I've been working on aging workers' challenges in organizations for the last 20 years or so. I have a course on human resources management and age management in organizations.

There has clearly been a huge challenge over the last couple of years particularly—but actually we could say for a good 20 years—in attracting and retaining aging workers in organizations. Governments often put this idea forward, but in businesses there's not always a follow-up on this, and I think it's actually quite challenging. A lot of the literature points to a certain number of factors that are important for this, but I would put forward the idea of work-life balance in general. This is important for all age groups, but it may be more important or at least aging workers can put this idea forward even more because in many cases—not all the cases, obviously—people have enough finances to retire. Therefore, it's even more important for them to put forward their requirements or desires in terms of work-life balance.

The wage issue is obviously not negligible, nor is the fiscal aspect, but I think those are pretty well covered by the work of different people. Unfortunately, other factors that are more related to the labour market and work organization tend to be neglected, whereas the research we've done shows that a lot of these factors are crucial to attracting and retaining workers.

First of all, it is easier to retain aging workers than to get them back into the labour force, so I think it's important to work on this idea. Firms should consider more flexible retirement options. For example, in research we've done recently, a lot of workers say they'd be interested in gradual retirement options with no obligation to leave at a given date, or possibly in contract work within organizations.

Another element that is very important and is not very developed in general in Canada—in large firms as well as smaller ones—is flexibility in working-time options. Aging workers obviously want to have more time for themselves for leisure, for travel or whatever. This is often refused in organizations. It seems easier to just keep the 35-hour or 40-hour workweek, whereas a lot of workers could be interested in a four-day workweek, flexible schedules, working part time, longer vacation time or working part of the year eventually outside of the country, which is possible in some cases, but obviously not in all.

Firms often think that they can't offer a reduction in working hours because they consider that this will reduce the overall number of hours.

In fact, if we look at it differently, we might consider the fact that reducing working hours, or offering four-day workweeks, for example, will bring a certain number of workers to stay in the labour market, or to come back into the labour market, and therefore the total number of hours would be increased.

Another option, which of course we've all seen over the last two years, is telework. I've done a lot of work on that and I've done interviews with aging workers, some of whom said they might leave their job if the telework option didn't continue. It's another crucial element in terms of keeping people in the labour market.

There are some people—some aging workers—who said to us that of course they appreciate working in a physical environment and having exchanges with colleagues. Obviously this is important for a certain number, but the data show that as people age, they tend to have a rather strong preference for a certain number of days of telework, not necessarily a full week, but a good number, for example three or four days.

Finally, one element that I also find is very much neglected in organizations is the fact that aging workers express the desire to share knowledge or mentor other workers, younger workers or other workers coming into the organization. I think in our organizations in general—small business as well as others—this tends to be neglected. A lot of research has shown that this is something that can bring workers to stay in the labour market and even return to a job.

Of course, we all know that there is ageism or discrimination in the labour market. There's work that has to be done, clearly, on this, but I think aging workers are often more productive and knowledgeable in the service sector. We still have this vision of the industrial economy, where of course it can be more difficult, physically, to do a certain number of things. In the service economy, in the knowledge economy obviously, aging workers tend to be as productive, at least, as others. This is a dimension that shouldn't be neglected.

However—

[The Chair, Liberal, Joël Lightbound]

Excuse me, Ms. Tremblay. I am going to have to ask you to wrap up quickly, please.

[Dr. Diane-Gabrielle Tremblay]

Okay.

I will conclude. I'll skip one or two paragraphs...not so much.

To conclude, as a labour economist, but also a researcher on creativity and innovation in organizations, I would call, actually, for public policy that would support the participation of all age groups in the labour market, with particular attention on what needs to be done to attract and retain aging workers, and that is flexibility options.

What's interesting here is that while, of course, I put the accent on “aging workers”, this desire or request for more flexibility in work, these options, are called for by other groups as well—that is women and youth—for different reasons, so there's no discrimination in the labour force or in your organization when you offer one or the other of these options. Clearly, though, for aging workers the difference is they can leave the job, if they have a good retirement plan of course.

I'll conclude on that. I can answer questions or offer documentation to support what I was saying. Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Professor Tremblay.

I'll now turn to Mr. Suppa for five minutes.

[Ralph Suppa, President and General Manager, Canadian Institute of Plumbing and Heating]

Actually, Ms. Tania Johnston will go first, if that's okay.

[The Chair, Liberal, Joël Lightbound]

Of course.

[Tania Johnston, Chief Executive Officer, Mechanical Contractors Association of Canada]

Good afternoon and thank you for this opportunity.

My name is Tania Johnston. I am the chief executive officer of the Mechanical Contractors Association of Canada.

MCAC is the largest trade contractor association in Canada. Our organization was established in 1895. We have grown to represent over 1,000 companies nationwide. These businesses employ over 50,000 Canadians who provide plumbing, heating, ventilation, air conditioning, control systems, medical gases, welding and fire suppression solutions. Primarily they do this work in industrial, commercial and institutional sectors, but also in large housing construction, such as condominiums and apartment buildings.

Our member companies are simultaneously very busy but also struggling. This may seem like an oxymoron, but the strain being put on our sector comes from three challenges that are not easy for single business owners to address. We face major labour shortages, and the products and supply chains that our members rely on have taken a beating. My counterpart from CIPH, Ralph Suppa, will speak more to the supply chain and regulatory challenges, while I will focus on labour.

We face both a retirement challenge and a training challenge. As you may have heard, BuildForce Canada estimates that 260,000 skilled tradespeople are expected to retire by 2030. In plumbing and mechanical trades, the average age is higher than that of most other trades, and we expect the problem to be even more acute in our sector. We estimate that one in five people in the plumbing and mechanical trades is preparing to retire in the next five years. That is especially challenging timing, given that there is an expectation that Canada will build more housing units and retrofit more buildings for better energy efficiency over the years ahead. Simply put, if we do not see increased funding for skilled trades training and promotion of the skilled trades as a career of choice, we will not have the people necessary to meet Canada's goals.

We're beginning to see the cracks. Inflationary pressure is driving costs up for consumers. When our members do not have access to enough workers for a project, they will either have to pay more, driving up the costs directly, or forgo their bids, which causes price increases due to less competition.

Billions of dollars are being invested in energy efficiency, retrofits and new construction over the years ahead at all levels of government. To help small businesses in our sector, we need a coordinated plan with the federal government. We also need provincial buy-in that helps more skilled workers in trades like ours, which are especially important to solving Canada's problems of building more housing and transitioning to a low-carbon economy.

With that, I will turn it over to Ralph Suppa.

[Ralph Suppa]

Thank you, Tania, and thank you, members of the committee.

I am Ralph Suppa, president and general manager of the Canadian Institute of Plumbing and Heating.

Our national chair organization was founded in Montreal in 1933 to provide members with the tools for success to make them more competitive in the manufacture and distribution of plumbing, heating, pipe valves and fittings, waterworks and other mechanical products. Our members provide the supplies that Tania's members install and service. Our 283 member companies operate more than 800 warehouse locations and showrooms across Canada, employ more than 20,000 Canadians and contribute over $9 billion to the economy each year.

I want to thank the committee for taking the time to understand more deeply the challenges facing small and medium-sized enterprises in Canada. In our sector, we experienced major supply chain challenges, especially during the early stages of the pandemic, as a significant portion of the work we do supports the delivery of clean, safe drinking water to places like hospitals, long-term care facilities and, of course, homes.

The problems we face now are potentially more serious. They do not result from the rapid increase in demand for products, but rather from structural problems, like regulatory fragmentation, which limits our members' ability to deliver goods to markets in an efficient and cost-effective manner.

While we are dealing with the same supply chain challenges as other manufacturers and wholesale distributors, like overtaxed ports and expensive shipping containers, we face unique challenges that put added pressure on small businesses. The most problematic is regulatory fragmentation across provinces and municipalities.

Practically, regulatory fragmentation hurts businesses, workers and consumers. For example, rapidly advanced timelines for plumbing or heating products mean that the products do not have the time to be fully tested for efficiency, durability and fit for given markets. We also see that tradespeople need to upgrade their skills and knowledge more quickly and with different focuses in provinces, territories and even municipalities.

As two national associations involved with Canada's construction industry, CIPH and MCA Canada firmly believe that net-zero buildings will not be achieved on the government's timelines without major new investments in training, incentives and promotions to attract new workers. Doing so will help small and medium-sized businesses adapt to the rapid growth in demand we expect to see over the decades ahead.

When our industry is consulted early in developing policies and incentives programs, we can achieve better results. We need departments to work closely together and to encourage alignment between provinces on adopting a national building code and model codes at the same time, not on alternating cycles.

It is concerning that different approaches are required between some provinces and territories, and even within their borders. Some municipalities are creating demand today for products that are months away from being market-ready or scalable.

We cannot afford the inefficiencies of the past while we chart a path to a more energy-efficient future. The burdens we face now will only be amplified as more housing and ICI buildings are brought online and as consumers race to upgrade their homes and businesses.

We need regulatory frameworks that balance costs and measurable benefits, using good, solid data.

We need clear, manageable timelines with appropriate commitment and advance notice from governments that are making these changes.

We need decisions to be made with a deep understanding of the full business and supply chain infrastructure that considers how each building is a contained system.

Only then will our sector be able to deliver the products needed for market transformation at the right price to encourage consumer adoption.

With that, I thank you for your time. Tania and I will be available for questions after this session.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Suppa and Madame Johnston.

We'll now move to Madame Anghel for five minutes, please.

[Sara Anghel, President, National Marine Manufacturers Association Canada]

Good afternoon, Mr. Chair, members of the committee and ladies and gentlemen.

My name is Sara Anghel. I'm the president of the National Marine Manufacturers Association of Canada. I'm appearing today to speak against the luxury tax on boats included in Bill C-19. I realize the bill received third reading yesterday, but I think it's very important the committee hear our concerns.

Our industry is made up of mostly small businesses and, in many cases, family-run businesses. These include recreational marine manufacturers, dealers, marinas and service providers. The industry has a GDP impact of $5.6 billion, $10 billion in revenue, and employs 75,000 people across Canada.

Our industry has faced many headwinds since the start of the pandemic. Supply chain disruptions, production delays and inflation have affected our members. Tourism and recreational businesses were closed for months due to pandemic restrictions and border closures. On top of that, we are now facing an impending luxury tax on boats.

Our industry understands the government's need to raise revenue in the wake of the pandemic, but the luxury tax is not the way to achieve this. The history of luxury taxes shows that consumers will simply choose to take their discretionary spending elsewhere. That is what dealers and manufacturers are hearing from customers. The result will inevitably be a dip in revenue and hundreds or even thousands of job losses across the country.

According to an economic impact study by economist Dr. Jack Mintz, the proposed tax will result in a minimum $90-million decrease in revenues for boat dealers, and potential job losses of at least 900 full-time equivalent employees. In short, the tax will hurt the very middle-class families that the government is trying to help.

The problem with this kind of tax is that it can easily be avoided by consumers by either buying goods or purchasing and keeping their boats abroad, for example, in Florida or Seattle. The expected drop in sales will significantly impact the bottom line of manufacturers and dealers, who will then be forced to scale back their operations and staffing levels.

While we saw a boom in boat sales during the pandemic, the supply chain disruption has been very difficult for our industry and, in fact, dealers are expecting a significant drop in sales due to material shortages. An Ontario-based dealer, Crate's Lake Country Boats, in Orillia, expects a drop of 70% in sales by the end of 2022, and that doesn't account for what will happen once the tax is in place.

We can also expect a ripple effect on job losses at marinas and service shops. Fewer new boats sold means less work for the marine service industry, much of which is concentrated in rural and coastal communities.

In the early 1990s, the U.S. introduced a similar luxury tax on boats, which devastated the industry and was eventually repealed following the loss of thousands of jobs and a net revenue loss for the government. New Zealand, Italy, Norway, Turkey and Spain have all previously introduced luxury taxes on boats. In each one of these cases, the tax was ultimately repealed due to the net negative economic effects. There is no reason to think the same will not happen here.

We're also troubled by the singling out of recreational boats and not other recreational products. Boating is a cherished pastime for millions of middle-class Canadian families, and in this unaffordable recreational property market, many families choose to purchase a boat as their cottage. At a time when governments are trying to attract investment and rebuild our economy, a tax that guts homegrown manufacturing and retail businesses makes no sense. Instead of supporting our industry as a vital part of Canada's recovery, this tax is picking winners and losers in outdoor recreation.

The luxury tax also has the potential to damage Canada's trade relations. Concerns have been raised by the boating industry in the United States that this tax directly attacks our Canada-U.S.-Mexico agreement. Similarly, our trading partners in the U.K. and European Union could be hurt by what many see as an indirect tariff on boats.

In conclusion, I want to draw attention to the latest report released by the PBO, stating that there will be 2.9 billion dollars' worth of lost sales from boats, aircraft and cars. However, $2.1 billion of that, which is 75% of the loss, is expected to come from boats. This is a complete assault on the boating industry.

I saw that there was an amendment passed removing the September 1, 2022, implementation date for the aerospace industry. If 75% of the loss is expected to come from the boating industry, it would be only logical to have a similar amendment for boats, to save jobs and not decimate the industry in Canada.

Thank you for the time.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Ms. Anghel.

I will now turn it over to Ms. Ewing for five minutes.

[Leslie Ewing, Executive Director, Plant-Based Foods of Canada]

Good afternoon, Mr. Chair and committee members. Thank you for the opportunity to speak with you today.

Plant-Based Foods of Canada, a division of Food, Health & Consumer Products of Canada, is the collective voice for companies that make and market plant-based foods.

One of our greatest strengths is our unique membership, farm to fork. With almost 80 members spanning from manufacturers and retailers to ingredient processors, this presents enormous opportunity for collaboration and leveraging the diverse expertise of our members to make plant-based foods more accessible.

Advocacy, insights and enabling our members to grow and scale are our primary areas of focus. Working with government to address the regulatory challenges facing the industry is a key priority.

Plant-based food products are growing faster than total food and beverage products. Now more than a $1-billion market in retail in Canada, as measured by NielsenIQ, it is forecasted to continue to grow. Consumers are prioritizing longer, healthier lives without preventable diseases, which leads to why health continues to be the number one reason consumers purchase these foods. Over two-thirds of Canadians purchase plant-based foods frequently, with 30% indicating that they plan to consume more. This all points to the potential for a thriving Canadian industry.

The Government of Canada has identified plant-based proteins as an economic driver. The development of the protein supercluster, which was originally awarded $165 million to accelerate its growth, has now been re-funded a share of the $750 million allocated in the recent federal budget. This is recognition of the role that this industry can play and the global opportunity for Canada.

In contradiction to this, the current legislative requirements impacting plant-based foods are resulting in regulatory burden for industry. They are outdated and not keeping pace with innovation and technology, consumer demands and a global marketplace. It is challenging for those who are trying to bring innovation to market, particularly for small to mid-sized companies with limited resources and finances. Over 80% of the PBFC membership falls into this group. Unique formulations are required for products in Canada. This is particularly true for products with compositional requirements, like simulated meat, which requires mandatory fortification, and dairy products, where the ability to fortify is difficult and limited.

Mandatory fortification with specific vitamins and minerals for simulated meat and simulated poultry is antiquated and not aligned with today's consumer and their consumption patterns. With current health and environmental concerns, consumers now want a variety of protein choices with clean, simple ingredients, and do not rely solely on these products to meet their protein needs. The current regulations that evaluate plant-based products against animal-based products are inconsistent with how consumers are incorporating these foods into their diets and result in a long list of ingredient statements that consumers don't recognize.

In the case of plant-based or non-dairy products, there are no formal regulations guiding fortification, and the current interim measures are restrictive for developing products with comparable versatility to milk. A framework to permit fortification is required for plant-based foods including non-dairy cheeses, non-dairy yogurts, beverages and others, to allow for innovation in the category.

Labelling of these products is a challenge across the industry. Regulatory modernization, including labelling that makes sense and is in line with where consumers already are, needs to be addressed. Consumers are not confused by terms such as plant-based burgers or oat milk. They are already part of their vernacular as descriptions of these products.

Modernization is needed to reflect innovations in the marketplace and the latest consumer demands. The use of common names like “butter”, “cheese”, “meat” or “milk” to identify plant-based foods is prohibited in Canada, although these words describe the functionality or applicability of the food. As a result, companies are forced to find creative ways to describe the products, either through variations in spelling or using words like “type”, “style” or “beverage”.

The requirements regarding the use of common names for products whose labels clearly indicate that the product is plant-based, vegan or vegetarian, by using terms like plant-milk or plant-butter, need to be re-evaluated.

Lastly, the requirement to label simulated meat and poultry products as “simulated” is redundant and unnecessary, and confuses the consumer, since these products clearly communicate that the product does not contain meat by using designations such as “plant-based”, “vegan” or “vegetarian”.

Canada is home to an incredible number of entrepreneurial start-ups in this space. They are pioneering new foods that are leveraging Canadian crops and creating jobs at home. The bottom line is that it is easier to develop products for outside of Canada than within, and that results in a burden for SMEs and the industry.

The inconsistency in the government agenda is evidenced by the fact that regulatory modernization for these products is not even on the forward regulatory agenda to 2024. This is despite the recognition of the importance of this segment of the food industry to Canada.

Regulatory modernization is necessary to support and respond to the increased market demand for plant-based foods. The current regulatory framework is both restrictive and impeding innovation.

Thank you for the time. I'd be happy to provide any research, or written materials, as a follow-up to this.

[The Chair, Liberal, Joël Lightbound]

Thank you very much for your testimony.

I will now give the floor to Mr. Perreault for five minutes.

[Patrick Perreault, Chief Executive Officer, Table Métal Abitibi-Ouest]

Thank you for inviting me, Mr. Chair and members of the committee.

Table Métal Abitibi-Ouest is a group of seven companies specializing in metal fabrication, with just over 500 workers in the Abitibi-Témiscamingue region of Quebec. Our organization wants to explain our situation and suggest quick solutions that could help us continue to grow despite the labour shortage. We also wish to stress the urgent need for action, because the labour shortage will last for several years.

Like everywhere else in the country, our growth is limited right now by the labour shortage. Every week, we have to turn down client requests because we do not have the necessary staff to respond. This labour shortage leads to a rapid increase in salaries, which also makes us less competitive.

Moreover, we are afraid that our so-called remote region could become a region where people only go to work, unless we find solutions to attract workers and to keep them in the region so they can contribute to the local economy.

We are already reaching out to youth and the unemployed by training them directly in our companies. We have prepared training programs in conjunction with skills training centres and the government departments concerned. Education level is a problem in a number of cases, however, given the low rate of literacy and numeracy.

Automation and robotics are already an essential part of our growth strategies. Yet technology often requires different, highly-skilled workers who have to adapt to change. Further, technology does not lend itself to all tasks. We are not in manufacturing or series production, as we focus primarily on custom products. Most SMEs do not have the necessary resources to deal with all this change management, in terms of both technology and human resources.

Today, we would like to focus on a few solutions that we think could be implemented quickly to attract workers.

There are two potential pools of candidates in which changes are needed if we want to attract, integrate and facilitate the arrival of workers.

The first group is temporary foreign workers and immigrant candidates.

The process for temporary foreign workers is very cumbersome and onerous for SMEs. One of the main difficulties is the length of labour market impact assessments, or LMIAs, which themselves can take several months, not to mention the time required to advertise certain jobs.

Also problematic is the shortage of federal immigration officers working in Quebec who are familiar with the specifics of the relationship between our two levels of government as regards immigration.

The increase in average salaries, not to mention trades, is an important issue that negatively impacts the financial performance of companies that cannot pay high salaries.

Having easy access to information on the status of files and having the computer resources to consult the files and their status, without having to speak to an agent, would be helpful to companies. There is significant difficulty communicating with officers. At present, companies have to be available at all times to return calls, which is not very practical.

It is essential that regional offices be created to meet immigration needs. Right now, foreign workers have to travel to major cities to obtain passports and visas and for medical and biometric tests. Further, regions should be treated in accordance with their characteristics, which can differ from those of major cities.

Similar to what is in place with France, we need more agreements with certain countries in order to accelerate immigration processes and fill the specialized job vacancies that we have.

Finally, procedures to obtain family visas must be simplified so that families can more quickly come to join the workers.

The second group of candidates I want to talk about is experienced workers.

We need more tax incentives to encourage them to remain in or return to the labour market. We have to popularize mentorship programs and better structure them so that knowledge can be shared with upcoming generations.

In all these cases, we are talking about human beings, integration, and innovative practices to address an unprecedented labour shortage. SMEs will also need better support in the area of human resources management. Many SMEs cannot afford the costs associated with immigration processes and the necessary internal staff. Subsidizing the salary of one or more employees, or even offering a tax credit, based on the companies' needs, could be another solution.

We all have to work together to find innovative, short-term solutions to enable Canada to continue to grow economically and to prevent a decline of the resource-rich regions that make up the country.

In short, here are the solutions that would provide great relief, and quickly: eliminating LMIAs for trades where there is a shortage; ready access to information on immigration files; access to regional offices that offer all the necessary immigration services; creating new financial assistance programs to cover the cost of recruitment and internal staff; accelerating the selection process of Immigration Canada officers for Quebec; and reducing source deductions for experienced workers.

Thank you for your attention.

I will be pleased to answer your questions.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Perreault.

Lastly, I will now give the floor to Mr. Caron and Mr. Tougas.

[Martin Caron, General President, Union des producteurs agricoles]

Good afternoon, everyone.

Thank you very much, Mr. Chair.

My name is Martin Caron, and I'm general president of the Union des producteurs agricoles. I'm also a dairy and grain producer in Louisville, Mauricie, Quebec.

Five minutes isn't much time to talk about such a broad subject. I will therefore focus on the inflation-related issues facing farming enterprises.

As you know, we're experiencing a historic bout of inflation caused by multiple events and circumstances. They've all come together to create a perfect storm that's bringing about a sharp rise in prices. We'd have to go back to 1991 to find a higher annual growth rate in the Consumer Price Index (CPI) than we had in 2021. Since the beginning of 2022, however, prices have continued to rise. Inflation has even accelerated, having reached 6.8% in April.

Some aspects of total CPI, such as energy, have risen faster than others. In the agricultural sector, three of the major production inputs—feed, fertilizer and fuel—experienced much higher price growth than the CPI. In horticultural production, the price of containers also rose significantly.

Since the fall of 2021, the average price of these inputs has shot up by about 50%, while the CPI went up only 4.8% over the same period, from September 2021 to April 2022. For example, last spring I was paying $1 per litre for my tractor's diesel fuel, and it now costs me $2.05 per litre. Nitrogen fertilizer cost me about $640 per tonne last year. This year I had to pay $1,200.

In the Quebec agricultural sector, these increases represent nearly $1.5 billion per year in added expenses. The Canadian sector is looking at $10 billion in added expenses. We've never seen that before.

Historic highs in input prices have led to unprecedented use of cash flow by farming enterprises, even when it comes to enterprises evolving in a more favourable market environment. For those sectors where prices have remained stable in the markets, cash flow issues will soon join up with profitability issues.

It's also important to consider that it's not just established farming enterprises feeling this. Due in part to their higher debt load, startups and emerging businesses are also being hit hard by rising production costs.

In this context, and considering that agriculture plays a crucial role in food security, the government must step in quickly to support the farming sector and limit this exceptional bout of inflation. Special assistance is needed to help thousands of farming enterprises escape financial catastrophe. I repeat that the government must step in quickly. Assistance could be modelled after the Canada emergency business account, which would combine cash flow support—the portion subject to repayment—with assistance to support business profitability, the forgivable portion.

The government must also optimize tools and programs already in place to adequately address the current situation. For supply-managed producers, price adjustment mechanisms must be reviewed to make them more flexible and creative. It's important to limit the impact of rising input prices on the cash flow of businesses in this sector.

Finally, a diesel fuel tax rebate for the agricultural sector and for private forestry would limit the rising cost of that input. It would also have a limited effect on governments' budgets, as they are receiving additional tax revenue from the higher energy prices.

We recognize that one-time assistance and the measures I've mentioned will not address all the impacts of a significant increase in input prices. However, inflation will certainly have a negative effect on productivity and profitability for our businesses. It will also affect their ability to invest in new technologies, particularly to address climate change.

Inflation has also come at a time when labour shortages are already negatively impacting farm competitiveness.

One-time assistance and the measures I've requested will help mitigate the financial impact on farm enterprises, which must simultaneously deal with historic price hikes and secure the food supply for the people.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Caron.

We will now begin question period. I'd like to inform the members that we will only have enough time for the first two rounds of questions.

Mr. Kram, you have the floor for six minutes.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair, and thank you to all the witnesses for joining us today.

Ms. Anghel, from the National Marine Manufacturers Association, you spoke about the luxury tax on boats.

At first glance, one might think that if a person can afford a quarter-million-dollar boat, then they can also easily afford the 10% luxury tax on that boat, and it might not be worth their time, effort or energy to try to avoid paying the tax. I was wondering if you could elaborate a bit on what consumers will do to avoid paying this tax.

[Sara Anghel]

You're absolutely right. The view is that they can afford it and that's discretionary money, but we're seeing that they're choosing to take their discretionary money elsewhere. They're simply not interested in paying any more than they already have to pay. That's their choice.

One dealer in British Columbia outlined to me yesterday that last year, he had eight orders for boats between $250,000 and $500,000. This year he has zero, so the impact is happening.

The other piece is that, sure, the person can afford a half-a-million-dollar boat, but they're going to pick this boat up stateside and keep it in the U.S., so we're going to lose the tourism impact that the industry has. There's the ripple effect and multi-sector economic impact that a boat has on our economy. They will simply purchase it in the U.S. Maybe they'll come up to Canada, but maybe they won't. That's how they'll avoid the tax.

Thank you.

[Michael Kram, Conservative, Regina—Wascana, SK]

Would you say that boat manufacturers and boat dealers in the U.S. are your main competitors?

[Sara Anghel]

Yes.

[Michael Kram, Conservative, Regina—Wascana, SK]

If I go down to the States to buy a new car and I drive it across the border back to Canada, I have to pay any taxes on that new car I purchased because I have to get a licence plate for whatever province I'm living in and driving the car in.

Can you elaborate? Is it not the same situation for boats?

[Sara Anghel]

If someone purchases a boat in the U.S. and chooses to import it into Canada, if it's newer than 2018, it will be subject to the luxury tax at the point of entry into Canada if they choose to register it. That's not necessarily what the case would be with boats. They can float the boat across. They can come through the Great Lakes. They can choose to enter Canada, stay up to one year and then leave again, which a lot of boaters do. They go back stateside and never pay the tax on the boat.

[Michael Kram, Conservative, Regina—Wascana, SK]

Okay, so let me see if I have my head wrapped around it.

Someone who is living in Thunder Bay, Ontario is considering buying a new boat in Thunder Bay or buying the same boat in Duluth, Minnesota. All it takes is a drive down to Duluth to save $25,000 in luxury tax. Is that accurate?