International Trade Committee on April 2nd, 2008

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

And you raised a good point as well when you talked about this particular free trade agreement as an example of how other free trade agreements could be pursued. And if, as you've indicated, we've compromised supply management to a certain extent on the periphery on this particular free trade agreement, then I think there's very little confidence that you have going forward with other free trade agreements.

Is that correct?

[Terry Pugh]

Well, I think it raises this question. If the government tells farmers time and again, and it's very firm on this, that its position is—and this is a quote—“firm opposition to any tariff cuts”, and then we see tariff cuts in a trade agreement that this government signs, then what does that tell us?

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Were you consulted by the government or made aware in advance of these potential tariff cuts?

[Terry Pugh]

No, we weren't. It wouldn't surprise me if commodity organizations such as the Dairy Farmers of Canada were also not consulted. And if they were consulted, how formal were those consultations? Was it just a meeting over a phone? Were there any records kept?

In the last appearance of Agriculture Canada and the trade negotiators, in their reference to discussions with dairy farmers, they weren't able to produce any written records of those meetings. They just said, basically, that these were all oral comments. So I don't know how seriously you can take consultations like those as serious discussions.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Did you make any formal presentations or submissions to the government on this particular free trade agreement, EFTA?

[Terry Pugh]

On this one, no, we haven't. We have made several presentations on other trade agreements, particularly on NAFTA of course, over the years, and on the WTO as well. The WTO, I think, is the big trade deal that will have an impact on all these bilaterals. So we've definitely been letting our views on the WTO be known to the government.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

This question also applies to the other witnesses we have, the Shipbuilding Association of Canada and the Canadian Auto Workers' Shipbuilding, Waterways and Marine Workers Council. Were you involved in any consultation process? If so, did you make any formal submissions?

[Andrew McArthur]

I'll talk for the association.

I'm forever talking. I think we've been talking about it for six years, and we've made various presentations, quite a number. I've been at them all--I can't remember how many. I've been to at least a dozen, I would think.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

They've been presentations to the government.

[Andrew McArthur]

They have been to the bureaucrats who are dealing with it.

And you know, that's one drawback. Every couple of years the people change. You find that you're talking to new people, and you have to re-educate them.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

How about you, Mr. Risser.

[Karl Risser Jr.]

Yes, I think Andrew has said it. This is an old battle for us as a union. We've been pushing our shipbuilding policies, and it dates back to Mr. Tobin. Most recently, a brother of ours from the west coast, George MacPherson, submitted to this committee on international trade a report on how he feels about the upcoming agreements under the WTO.

[The Chair, Conservative, Lee Richardson]

Thank you.

Thank you, Mr. Bains.

I think we'll move on to the Bloc. We'll go to Monsieur André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I will be sharing my time with Mr. Cardin. I believe that we have ten minutes, Mr. Chairman. Is that correct?

[The Chair, Conservative, Lee Richardson]

You have 10 minutes.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I am delighted to have you here with us today. You have clarified a number of points regarding shipbuilding. We previously heard from Mr. Plunkett, a DFAIT director general, who is currently working on international trade policy. He told us that consultations have been underway with shipbuilders since as far back as early 1990. You can check that in the transcript of his testimony. He said that there did not appear to be too much disagreement about this Agreement, that it did not present any significant problem, and that it would not necessarily have a negative impact.

The Free Trade Agreement with the States of the European Free Trade Association provides for a 15-year phase-out period. There is also a 10-year phase-out period for certain sensitive products. This will give the sector the chance to adapt and become more competitive at an international level. We asked these witnesses whether an economic analysis had been carried out. They replied that no official analysis had been undertaken, although a number of consultative meetings had been held.

If this agreement were to be signed, the government would have to support you over a 15-year period so that you can adapt and become more competitive. What sort of programs or interventions would be needed in order to do this?

[Andrew McArthur]

There is no question that what you say is basically correct. I think I said in response to the previous question that there has been extensive discussions between the government negotiating team and the Shipbuilding Association, and I've attended every single one of them. We were quite firm in saying there should be a carve-out, and as I said earlier, the government just pounded it into our heads: “We will never agree to a carve-out.” We could never understand why not. The Americans do it.

When we reluctantly accepted that the government said there would be no carve-out, we said, okay, let's get the best deal we can, and that's where we pushed for a 15-year phase-out and a different arrangement on offshore supply boats, small ferries, and tugboats. We said, however, the association agreement on doing that is contingent on help, and 15 years is fine, but if there's no additional help, the industry is just going to go along the same way.

So we said, we have the structured financing facility, we have the accelerated capital cost allowance; it's an either/or. Combine the two, and you will go a long way to supporting the shipbuilding industry. If you do one thing, combine these two, and then you'll go a long way to supporting the shipbuilding industry.

It's not going to cost the government any more. The accelerated capital cost allowance is the time value of money. You still get the same money at the end of the day. It's the time value of money. The structured financing facility is a cost, there's no question, but combine the two, and the Great Lakes fleet and others would be booming. You'd have quite a good ongoing industry. It's not difficult to do.

But you're correct, we've had long, extensive discussions with government.

I hope I've answered your question.

[Serge Cardin, Bloc, Sherbrooke, QC]

It is now my turn to take the floor, Mr. Chairman.

Good afternoon and welcome, gentlemen.

You said earlier that you have been involved in nearly all of the discussions that have taken place since the beginning of this process. We say in French that those who fail to attend are always in the wrong, and so I apologize if I ask a question that has already been asked. Before we go any further, I would like to know whether the Shipbuilding Association of Canada represents all shipyards from all regions in Canada.

[Andrew McArthur]

No, there are a few people who are not in it. The major shipyards are in it. Port Weller was out while it was under bankruptcy and so was Davie. Port Weller is back in and Davie have told us they are coming back in.

Shipyards are distinct from small boat builders. On the major people in the association, the two biggest groups are by far Irving and Washington Marine Group on the west coast, Allied in Port Weller, and then there are a number of suppliers that are part of the association. But, for example, the shipyard in Newfoundland is not a member--Peter Kiewit. They don't believe in joining associations, they tell us.

So there are a few who are not in it, but the biggest yards in the country are certainly in it.

[Serge Cardin, Bloc, Sherbrooke, QC]

Based on what you said earlier, it would seem clear that Norway, after having subsidized shipbuilding for a long time, has managed to develop a very solid industry. People have sworn to us that Norway no longer subsidizes its shipbuilding industry. However, as you said, it was able to build infrastructure and develop a fairly solid industry. It now has an impressive supply capacity and could probably meet demand at a world-wide level.

As somebody who will be affected by this Free Trade Agreement, do you not think it would be only fair for the Canadian sector to receive some form of subsidy or support—for example, tax credits for research and development, upgrading or new technology—so that it can compete with other countries, including Norway, during this transition period?

[Andrew McArthur]

Absolutely. That's been our point all along. We said, even if we get our 15-year phase-out and nothing else happens, that's going to be...I think your colleague said death by a thousand cuts. It will be the same thing. The industry will carry on. You won't have the capability to invest, for if you're not making money, you can't invest. And you have to invest in people and infrastructure.

And Norway has done a tremendous job. I have great admiration for Norway. I have many friends there. They subsidize their engineering, they subsidize their technical capability, and that's why I said we buy their designs. They're first class.

But doing the phase-out without doing something else is not going to work. We'll just gradually die. We won't die right away. There are a number of government programs, so we'll exist for a while--and the word is “exist”--and then we'll just gradually die.

Norway's been through it. Germany's been through it. B.C. Ferries are building two over in Germany. That yard was bankrupted over there. It's terrible. That yard was built and subsidized with government money. It was bankrupt; it was a wreck. The German governments, local and federal, poured all sorts of money into it. It took them 10 years to get up to where they are--a first-class shipyard, absolutely. It's a good shipyard, all built with government money.

We're saying give us the programs that we need to give the industry a chance.

[Serge Cardin, Bloc, Sherbrooke, QC]

When Norway was heavily subsidizing its shipbuilding industry, did the WTO carry out a review to assess whether the subsidies were in compliance with its rules?

[Andrew McArthur]

Yes, that's quite correct, and I think we go through the same scrutiny by the WTO. But we're always the boy scouts in the world. We appear to take everything to heart and play everything by the rules. I'm not saying you shouldn't play by the rules, but when some other countries bend them, maybe we should do the same thing.

[Serge Cardin, Bloc, Sherbrooke, QC]

We know full well that it would be possible to set up programs which would be of great assistance to the industry, without necessarily contravening WTO rules.

As you may recall, a Norwegian company called TECO bought Davie, a Quebec company. Obviously, we are very happy that jobs have been kept—and even created—in Quebec. I wonder, however, if you nonetheless feel concerned that Norway can compete with us on Quebec and Canadian soil.

Do you think that this could lead to the two countries sharing technology, something which could be beneficial for the Canadian shipbuilding industry, or are you worried about the ramifications of foreign investment in our domestic industry?

[Andrew McArthur]

We welcome the Davie's new buyer. It's a big shipyard. If it survives, it will be the biggest shipyard in the country. We closed Saint John Shipbuilding through lack of work after the frigate program. There was no continuity. You needed about $300 million a year in that facility. It was world class, but there was no continuity for the frigate program, so the shipyards closed.

Davie was in bankruptcy. This Norwegian owner came in and he bought it, and we welcome that. I hope he survives.

My biggest concern is that I don't know how much of his own money the guy's got into it. From what I'm told, not very much. And you know the Davie has gone through ups and downs with various owners over the years. I hope this fellow makes it. The industry in Canada would like Davie to survive. There are a lot of programs coming up. We need Davie. So I hope he makes it.

We don't fear the Norwegians' coming in and building inside Canada. It's wonderful. It's creating jobs in Canada, it's building in Canada. What we don't want is building in Norway and sending them over here. So we welcome that Norwegian gentleman's buying that shipyard.