International Trade Committee on Feb. 12th, 2009

[The Chair, Conservative, Lee Richardson]

Thank you.

We'll proceed to Monsieur Cardin. You have seven minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

I promise I won’t go over my allotted time, Mr. Chair.

Thank you for joining us today. I’ll give Mr. Risser time to put in his earphone.

All set?

[The Chair, Conservative, Lee Richardson]

We'll take this off your time, Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

I have a question for Mr. Risser about the position of Canada’s shipbuilding industry with respect to other world countries, in particular Norway. What is your take on the industry’s position in terms of technology and production capacity?

[Karl Risser Jr.]

I think, definitely, we have the capacity, and we have the technology as well. We don't have the technology the other countries have, no, but we do have the capability. We can build the vessels, but not as efficiently as they can through their production methods and continuous-build processes and through building the same repetitive.... You know, we build one-offs in Canada. They build four or five vessels the same, and they continue to get better as they go.

[Serge Cardin, Bloc, Sherbrooke, QC]

You say that subsidies have been awarded to the industry for nearly 30 years now. Norway, for example, has benefited from such subsidies to further develop and test its technologies, given the scope of production in that country.

According to your knowledge of the subsidies awarded to Norway, has the industry or has government been able, under international rules, to file any complaints with the WTO during this period of time? Have any complaints been filed?

[Karl Risser Jr.]

That's something I couldn't say about complaints, but I do know that Norway faces incredible pressure from Asia. It has maintained its ability to be among the top shipbuilding nations in the world, even though Asia brings a lot to the table that Norway can't. They kind of have a worker subsidy down there and environmental subsidies and all that stuff.

So yes, I believe Norway continues. I don't have a whole lot of fact behind this, because of the time to prepare, but it's my belief that faced with the pressure from Asia, to maintain itself as a top shipbuilding nation it's done things outside the rules we follow in Canada, for sure.

[Serge Cardin, Bloc, Sherbrooke, QC]

Perhaps some of the other witnesses may be able to answer the question. A large number of subsidies have been awarded. Here in Canada, we’re often more Catholic than the Pope. We don’t dare do anything for fear of violating an agreement of some kind, and that reluctance may stop us from trying or testing certain options.

Can anyone here tell me if the subsidies awarded to Norway met WTO rules and if any action was taken as a consequence of these subsidies?

[Dean Beyea, Senior Chief, International Trade Policy Division, International Trade and Finance, Department of Finance]

The expertise on international trade disputes lies in the Department of Foreign Affairs, but I can't recall any case involving Norway and subsidies to their shipbuilding industry, off the top of my head, at the WTO.

[Karl Risser Jr.]

I just have one point on that.

There were issues around it when they entered into the agreements. I know that Norway had told Canada that by 2000 they would get rid of their subsidies and put things on a level playing ground. Whether they ever got there I don't know, but I know there was an issue prior to 2000, because there's a definite note saying that Norway has made reassurances to Canada through the WTO that they would get in line by 2000. I don't think they did.

[Serge Cardin, Bloc, Sherbrooke, QC]

Your industry is recommending to us today that we not go forward with this agreement or that the shipbuilding industry be simply excluded for a certain period of time. I see nothing unusual really in trying to bring in policies, in not waiting until the industry is abandoned, but rather in acting before it is left to face an uncertain future.

There are a number of options that we can consider. The witnesses can confirm this or not. I’m thinking here about loan guarantees for financing arrangements. Have you and the departmental officials given any thought to refundable tax credits for technological innovation or for upgrading production capacity? Obviously, not every company makes money. Have you considered providing refundable tax credits for R & D as well as for technological upgrades?

[Kei Moray]

I'm sorry. Could you repeat the question, please?

[Serge Cardin, Bloc, Sherbrooke, QC]

I was speaking about ways of helping the shipbuilding industry, among other things, by authorizing refundable tax credits for R & D as well as for production, technology and equipment upgrades. This initiative would certainly help the industry and would surely be acceptable under WTO rules.

[Kei Moray]

There is a program, the scientific research and experimental development program, which exists now, that provides a tax credit for research and development. To the extent that shipbuilders are conducting research and development that's eligible under this program, they can receive that credit.

[Serge Cardin, Bloc, Sherbrooke, QC]

I would imagine that all industries qualify for credits under that particular program. However, what we need are incentives that specifically target the shipbuilding industry, so that it can move forward. Over the next 15 years, formal commitments from the government are needed to ensure that advances in technology and production can be made to allow our shipbuilding industry to compete on a level world playing field.

[Karl Risser Jr.]

In 2001 there was a policy framework done, and there was a technology partnership with Canada. The program was available to the marine industry sector under that 2001 framework. To date, there has been limited access to it, because it's a very complex and lengthy kind of process, and it's very hard to get through. It does exist; I think it has to be modified to be easier for companies to access.

I agree with you that there's definitely a major issue around technology and that it's a very good way to improve our production capabilities. I think the program is Technology Partnerships Canada. It's in the 2001 framework. It needs to be looked at and enhanced to make it easier to access and to cut through some of the red tape involved, so that companies can get in to access it, because they're obviously not using it a whole lot.

[Dean Beyea]

I would also add that Budget 2009 announced a number of tariff cuts on machinery and equipment to allow industry writ large to import state-of-the-art machinery and equipment free of customs duties. That is another initiative that I think would help modernize plants across Canada.

[Serge Cardin, Bloc, Sherbrooke, QC]

What exactly do you mean by “tariff cuts”? What equipment qualified for a tariff cut? Was it equipment imported for the purpose of investing in one’s own business? What exactly were these tariffs?

[Patrick Halley, Chief, Tariffs and Market Acess, Department of Finance]

In Budget 2009, tariff cuts were applied to over 200 tariff products, including various types of machinery and equipment used by Canadian manufacturers in their operations. Tariff cuts are one way to help manufacturers lower their costs and remain competitive.

[Serge Cardin, Bloc, Sherbrooke, QC]

The tariff cuts apply then to equipment or products used by the industry. The aim is not necessarily to help them increase their competitive position.

[Patrick Halley]

They apply to different industries that use machinery and equipment. The budget mentions the food processing industry, the energy industry, forestry products, and so on.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Risser...

[The Chair, Conservative, Lee Richardson]

Excuse me, Mr. Cardin. We're at nine minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

You are most generous, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Mr. Julian.