International Trade Committee on Feb. 12th, 2009

[Patrick Halley]

As we were explaining earlier, broader measures such as taxation initiatives that apply to a wide range of industries were announced. Tax breaks are being provided to help certain manufacturers modernize their operations. These relief measures target all types of machinery and equipment. The fact remains that as far as the shipbuilding industry is concerned, as Dean was saying, these are the figures announced in Budget 2009.

[The Chair, Conservative, Lee Richardson]

Thank you.

Now we're going to Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much.

I don't have a shipbuilding background, although the Holders from the New Brunswick part of my family were shipbuilders several generations ago, Mr. Risser, so I can't claim anything of your history. But I appreciate all the witnesses coming today.

As I've gone through all the materials, in terms of EFTA, and particularly in the issue of shipbuilding, I've heard the comparison between Canada's shipbuilding industry and that of Norway, and there's been a lot of that dialogue today. Both country's industries are similar, it seems, in that they specialize in smaller and medium-sized vessels, in terms of production.

The Government of Norway, again, from the information I have, indicated that it's eliminating its shipbuilding subsidy programs, or at least it has done that in 2005. Norway reiterated it a couple of times since then, and now we're at the point where.... I was struck by a comment that one of the officials made, and I think their reference was to Davie Shipyard, that Canada is as productive as any Norwegian shipbuilder. I think that's compelling, but here's my question.

With the comments Mr. Keddy made, and we reference the fact that there's going to be a number of maritime projects that are going to total some $43 billion over the next three decades, my question is, if we've got a capacity of about 50%, or our utilization is roughy 50% in our shipbuilding yards, to what extent has it been determined that this procurement policy will increase that capacity? Or will it remain at 50%? Do you have any sense of that, from a projection standpoint?

[Gary McGee]

The shorter answer to that question is that the $43 billion is stretched over a 30-year period to basically take into account the kinds of ebbs and flows in the cycle of shipbuilding. There's been a boom and bust for a prolonged period of time. The intent of having the fleet renewals, both for the coast guard and the navy, and having it identified over a period of time, is to help ensure that the level of capacity in specific yards is raised. Twinning this with this federal procurement will open up opportunities and kind of a trickle down from one yard, which may have commercial work, into another yard.

Certainly, the increased level of investment in this fleet renewal, the government's procurement approach, will have an increase in the capacity of Canadian shipyards.

[Ed Holder, Conservative, London West, ON]

Any indication or projection of what that would be if we're at, let's say, 50% now?

[Gary McGee]

I do not have a number for that, no.

[Ed Holder, Conservative, London West, ON]

Would there be an argument, though, that in addition to that, the whole spirit of being free traders, which is our history as a country...if those are procurements that we're talking about that are, I'll say, government sponsored, doesn't that lend to an argument that we need to go out there and market Canada's shipbuilders, not just in terms of government projects but in terms of what we can do outside of Canada? Is that not the reason it makes a whole lot more sense to have this as part of the whole EFTA arrangement?

[Gary McGee]

Under the structured financing facility, I think we certainly market Canadian capacity and capability internationally. As we know, both foreign firms and domestic firms can apply for this particular program. So in that sense, we do undertake efforts to promote the capability of Canada in specific areas, and certainly, over time, we are developing niche areas. We're developing acknowledged expertise. I look at the area of tugs. I look at East Isle on P.E.I., where they've utilized the SFF to ascertain work with the building of tugboats.

Certainly there are efforts under way. As I say, SFF is an example of the Canadian government's or Canada's efforts, writ large, to promote the capabilities of Canadian shipbuilding.

[Ed Holder, Conservative, London West, ON]

I have time for another question, Mr. Chairman.

This is all about competitiveness and ensuring that we have an opportunity to be competitive and effective. I would appreciate an opinion from the officials. Do you think the 15-year tariff phase-out on Canada's shipbuilding products is sufficient for shipbuilders to adjust to a duty-free environment?

[Karl Risser Jr.]

I'll grab that one. I just think the tariff isn't working today. I think it's obvious. You could make it 15 years or 20 years, but that's not the issue. I think that--

[Ed Holder, Conservative, London West, ON]

Are you saying you can never compete, Mr. Risser?

[Karl Risser Jr.]

No, that's not what I'm saying at all. If you go back to what I said when I came in, I said that we need the policies in place, not tariff protection. Do you know what I mean? We have to build our industry and make it healthy. We have to build it up so that it competes, and then compete on a level playing field, but we can't do that today because they've been playing the game without us for a long time. Okay?

We have to get in there and put the policies in place and build our industries through the procurement that's happening. I think it's great, the amount of procurement that's out there, but it's been a 10-year lull. We haven't had any procurement for 10 years, so these yards have been left with no work for 10 years. We've had minor repairs, but....

So yes, with the proper policies in place to back up our yards, I think we can compete. The tariff, for me, is a secondary issue.

[Ed Holder, Conservative, London West, ON]

So you'd be positively excited, though, about the $43 billion over the next 30 years in terms of--

[Karl Risser Jr.]

If it hits the ground, I'll be dancing in the streets, but it's a long process. It's very hard to get that money to the ground. You have major companies competing for it.

We need a different procurement policy, and I think the government is moving towards that, towards centres of excellence and procurement strategies that recognize what yards do what best, and then allocate work over long periods of time, not ask for seven ships tomorrow; let's lay them out over the next 35 years.

With all that stuff, included with some financing changes and some policies that support our industry, we can make it work.

[Ed Holder, Conservative, London West, ON]

Well, Mr. Risser, from the standpoint of the government, perhaps you've found a new dancing partner.

[Voices]

Oh, oh!

[Ed Holder, Conservative, London West, ON]

Thank you.

[The Chair, Conservative, Lee Richardson]

Mr. Silva.

[Mario Silva, Liberal, Davenport, ON]

Thank you, Mr. Chair.

I'll have to be very brief with my statements because my colleague, the Honourable Scott Brison, wants a question as well. I also want to pose the question in such a way that maybe you could also be brief as well.

Thank you very much for being here. I really appreciate your remarks as we go through this particular situation.

First of all, if you take shipbuilding out of the EFTA equation, are you supportive of EFTA or not?

[Karl Risser Jr.]

If you were to remove shipbuilding? I can't speak for all industries or the agriculture industries. I don't know enough about their industries to know if this is going to be positive for them or not. I think they have to come here and tell you themselves what it affects.

But as far as shipbuilding goes, I think we--

[Mario Silva, Liberal, Davenport, ON]

So you're not saying yes or no to it?

[Karl Risser Jr.]

No, I can't say that--

[Mario Silva, Liberal, Davenport, ON]

Okay.

If you were to combine both programs we discussed earlier, the SFF and the ACCA, and sort of entice more people to build in Canada and also to buy Canadian, would that then resolve your issue so you'd be supportive of EFTA?

[Karl Risser Jr.]

No. Again, I go back to my point that it's a comprehensive, broad-based thing. It can't be focused on just ACCA and SFF. It has to be broader than that. It has to be based in tax policies, in government procurement, and in financing that is over the life of the ship.

I think it's a whole bunch of things. It can't be put on just one thing, be it a tariff or be it ACCA and SFF. It has to be a broad-based approach.

[Mario Silva, Liberal, Davenport, ON]

If you look at the new economy, there will be a great emphasis in the future, I think, on green procurement, on how we will be measuring these things and so forth. There are those who are now arguing for, and some industries are going toward, green procurement--for example, where you buy, how far it goes, what types of products are used. It all makes a big difference, how certain businesses in fact purchase things.

Just speaking hypothetically, if that policy were introduced, would Canada be at a disadvantage, or would we still be in a position of advantage vis-à-vis the shipping industry, as compared with the Norwegians, for example?