International Trade Committee on Feb. 24th, 2009

[Jean-Michel Laurin]

Thank you for your question.

You asked me what are some of the opportunities for businesses out there, and what can the government do to better help them. I'll give you a story.

One of our members is a company that manufactures automotive parts, a sector you would think must be hurting really badly right now. Yes, that sector is being affected dramatically. But on the other hand, they're making a part that's sold in the after-sales market. In other words, if you're not buying a new car, chances are you'll try to extend the life of the one you have, and chances are you'll be buying some parts if you need to change them. So their market is growing. They've actually been able to grow their sales in the U.S. and throughout the world. They're exporting heavily into Asia and other parts of the world and they're confident. They have a lot of room to grow.

This is not a major corporation; most of you have probably never heard of it. I don't want to name them, because it's not about them specifically, it's just to give an example. Yet one of the things they need to grow.... Those of you who have businesses or have worked with businesses know that you need working capital. You need an operating line of credit. You need to have some room to manoeuvre when you're growing your company at a very fast pace.

This company is not able to grow right now because they're not able to access credit. They're going to banks trying to extend their operating line of credit and the banks have been told to reduce their exposure to the automotive sector. But they happen to be in that sector. They're one of the companies that came to us and asked if we could do something. It doesn't make any sense. That's why we've been asking the government to step in and play part of the role traditional financial institutions would play.

We're very confident that what's been announced in the federal budget is going to help. I think we need to make sure the bill is passed quickly so that EDC and BDC can respond with new products, new services on the market to help companies like the one I was talking about. We're in constant discussions with both these institutions. We've extended our help in terms of how we can best structure these programs to make sure they get on the market very quickly, but we also understand these two institutions don't want to spend all that money within two weeks. They want to make sure they can respond to the needs of businesses without putting money in businesses that would fail otherwise. If I can give just one example, I think that would be the one.

I think there are a lot of opportunities for Canadian companies to grow in international markets right now. I go around the country quite a bit. For the last five years, I would say, whenever you visited a plant, or you talked to somebody running a small or medium-sized manufacturing business, they would always talk to you about.... I don't know if any of you did plant visits during the last election campaign, but if you did, they probably showed you some of the continuous improvement they were doing within their plant. That's important. But now if you talk to them and ask if they had an additional dollar to invest, where would they put it, I think they would say almost unanimously they would put it in new market development, because they realize they need new customers to keep their business afloat. Obviously, as I said, access to credit is a key part of that, because you need capital when you're trying to grow your business into other markets.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you.

[David Stewart-Patterson]

Coming back to your question, Canadian companies are exporting to the world, whether directly or indirectly.

First, it's important to recognize that in strengthening our integration with American partners, we are not just selling goods and services to Americans; we are working with Americans to produce products for sale to the rest of the world. That's why anything that gets in the way of Canada-U.S. flows can be particularly destructive. So when you look at the trade statistics and say the U.S. dominates, we have to keep in mind that's not necessarily the final destination of what we sell.

That said, we've been very active in encouraging stronger relationships with key partners around the world. We worked very hard with our European counterparts in the business community there to encourage the launch of these Canada-EU discussions. My colleague Sam Boutziouvis was instrumental in working with his counterparts in the Confederation of Indian Industry in launching a process we hope is going to lead to some serious negotiations on a bilateral basis with that country.

I think we have to recognize that it's not a matter of trying to choose whether we should focus on the U.S. or focus anywhere. The fact is, in a world of integrated supply chains, exporting is a universal activity, if I can put it that way. In that sense, what's really important is taking the kind of measure that is going to help across the board.

For instance, I would note one of the important measures in the latest budget was the unilateral decision to bring down or eliminate tariffs on imports of industrial goods. Why? Because that's recognizing that free trade is going to help Canadian companies make the investments to expand their operations, invest in new technologies to grow their export sales. I think similar measures were taken in terms of capital cost allowance.

I hope the committee is taking due note of the fact that the New Democratic Party is in favour of corporate tax cuts on that front. I'm really glad to see that. I take note of that and take great encouragement from it.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Stewart-Patterson; and thank you, Mr. Harris.

We'll turn now to Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Merci.

My question again is about the shipbuilding industry. In the briefings that I'm receiving from the shipbuilding industry I'm being told that despite the fact that there is a 15-year phase-out of the tariffs and despite the fact that there is access to either the accelerated capital cost allowance or the structured financial facility program, this will not create a level playing field for the shipbuilding industry and ultimately it will wither.

I'd like to receive for the record, Monsieur Laurin, your opinion on whether you feel that Bill C-2 as currently written offers a level playing field for the shipbuilding industry in Canada—and of course if the Canadian Council of Chief Executives cares to comment as well, although I suspect I already know your answer on that one.

[Jean-Michel Laurin]

Thank you, Mr. Garneau.

Again, I don't want to speak on behalf of the shipbuilding industry specifically. When you look at this trade agreement, it's one element. When you talk about our strategy with the shipbuilding industry, this trade agreement obviously will affect the Canadian shipbuilding industry, but we need to look at what other things we can do to make sure that our local shipbuilding industry will be competitive and will stay in business.

You mentioned the capital cost allowance, which is something that's positive. You mentioned financing mechanisms that are being provided, which is another positive. Is it enough? You seem to have indications from that specific industry that it's not enough. Maybe we should look at doing more. That's more of a question, but I'm not sure we need to do it within the free trade agreement. I think, as best as we can, we should try to do that outside the trade agreement.

I think there are a lot of things we can do to help manufacturers, whether they're in shipbuilding or in other sectors, to be more competitive, just by streamlining regulations, making sure they can reduce their cost structure and be more competitive in Canada and in international markets. Again, I can't speak on the specifics of the shipbuilding industry, but as much as we can do that outside the trade agreement specifically, the better it would be, because there is strong support overall for this trade agreement. But I wouldn't want to say just forget about shipbuilding. That's not what I'm saying. I think they're an important part of the Canadian manufacturing sector.

This has been ten years in negotiation. I think we should do our best to try to get it passed, but at the same time I think we need to address the specific concerns of the shipbuilding industry—if possible, outside the trade agreement. But this is something where I'm sure they can speak on that specifically.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

May I just pursue one more question? Would you agree that if a free trade agreement is signed, then to make changes afterwards, as you say, outside the free trade agreement, is very problematic? If a treaty has been signed, and then, in a sense, you're asking to change the rules, can you see the problem involved with that?

[Jean-Michel Laurin]

Maybe I need to explain myself more clearly. I'm saying there is a trade agreement on the one hand and there are a number of things being negotiated related to market access and other things; but when you look at our policy in general related to manufacturing, there are a lot things we can do without reopening the trade agreement. We have a trade agreement with the United States, and there are a lot of things we can do to help manufacturers be more competitive in the U.S. markets without reopening the agreement.

The accelerated capital cost allowance for manufacturers across Canada is something that has been very beneficial. Should we look at specific measures for specific industries that need additional support so that they can have a level playing field? Yes, we are certainly in favour of that. As I said, there are things we can do to improve the competitiveness of shipbuilding and other industries, but if we can look at things we could do outside this trade agreement without reopening it....

There are a lot of things we can do outside trade agreements in general. The government should sit down with this specific industry and come up with a plan that ensures that this industry can compete on a level playing field.

[David Stewart-Patterson]

If I may, I think that's the point here. The Canada-EFTA agreement as it is now structured gives Canada all the room it needs to do whatever is necessary to trade on that level playing field. We're talking about a 15-year phase-out. There's no reduction of tariffs at all for the first three years. There's provision for a three-year reversion in the event of injury during the 15-year period. There's a lot of time to figure out whether we are doing enough to ensure the viability and competitiveness of that industry--as well as any other industry, for that matter--and to take appropriate measures within the field of domestic policy. There's no need to change the agreement. The agreement gives us enough room to do whatever is necessary.

I think your colleague Mr. Brison made that point at the last meeting of this committee in talking about the structure of financing, accelerated CCA, and the importance of government procurement in this sector, which also is not restricted by the Canada-EFTA agreement as it's now structured.

I don't see any problem in going ahead. I think we need to move ahead quickly with the agreement, not only for its own inherent benefits, but for the symbolic value as we launch these broader discussions with the European Union, which I think are going to have very important benefits for Canadian companies across all sectors.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Garneau.

Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses.

Not to pursue this to the end of the world, but maybe we could have a little more discussion on the shipbuilding policy. Mr. Stewart-Patterson, could we get your comments, and Mr. Laurin's as well, on the ability to pursue this issue outside of the agreement?

You know, I've met with shipbuilding associations for the nearly 12 years that I've been a member of Parliament, and consistently they've asked for a number of things. They've asked for improvements to the accelerated capital cost allowance, as did industry and business. As a government, we made those improvements, and the former government made improvements to it.

The other issue they asked for, and it was very legitimate, was an improvement to the structured financing facility. An extra $25 million has been put into that. You reiterated that there's three years where nothing changes and then there's a 15-year phase-out. That's the greatest phase-out ever negotiated by Canada in any free trade agreement at any time.

I think somewhere along this line we have to ask ourselves the question. Certainly we recognize that other countries, Norway in particular, had a lot of assistance to their industry over the years, but that assistance stopped three or four years ago. We're protecting our industry for 15 years, and at the end of that 15 years, quite frankly the playing field should be level.

I said this at the last meeting, but Mr. Garneau wasn't here. I think it's incumbent upon us to have some faith in our shipbuilding industry. Canadian industry has adapted to changes worldwide. We're competitive in any market and any marketplace in the world. We've given them the protection they need to get to that point. Plus, there's $35 billion of procurement on the table over the next 20 years that will go to Canadian shipyards. That doesn't have to go to foreign marketplaces; it's government procurement.

After $35 billion worth of procurement, changes to the tax rules, and 15 years--

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Point of order, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Keddy should be asking a question.

[The Chair, Conservative, Lee Richardson]

Mr. Keddy has the floor, Mr. Julian. We listened to you for 13 minutes.

Mr. Keddy, carry on.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

The point I'm making is that it's always difficult to do business on the world stage. However, in the case of shipbuilding I think our government and the previous government have adapted government policy. I do think at the end of 15 years we're going to have a level playing field and the ability for shipbuilding to compete. They already are competing. The smaller yards are competing all around the world. There are a number of small yards in South Shore—St. Margaret's, the riding I have the honour to represent, that sell fishing boats up and down the eastern seaboard of the United States. They sell boats in Iceland. They sell boats in West Africa. They're competing very well right now.

I think the shipbuilding issue has been beaten to death. I quite frankly think that if there is room to pursue it outside the agreement, possibly.... But the protection is there.

I just wanted to enlarge on those points. Thank you.

[Sam Boutziouvis]

If I may say, those are great points, sir.

I just want to add that this discussion on shipbuilding has been very much a defensive discussion. There's nothing wrong with being a little more offensive in our discussion. And to Mr. Garneau's excellent question and to your comment as well, there is nothing wrong with engaging our trade commissioner service to go out there to those four countries and work on behalf of our shipbuilding industry to get more contracts. That's what they are there for. We should push them to do it. If they need more money to do it, we should support them. But we should be more offensive. We have a tremendous opportunity with the shipbuilding industry we have, and the one that's going to transition toward a better one, to actually go out there and try to get some contracts with Iceland and Norway. Let's compete with the Norwegians. Why not? Let's be more offensive with respect to our interests.

[David Stewart-Patterson]

On that point, I'm not going to presume to speak for the shipbuilding industry in terms of what specific measures are going to be most helpful in enabling them to go out and compete globally. But I will note that I know the industry has complained about the damage Canadian shipbuilders suffer from protection of shipbuilding in other countries, particularly the Jones Act in the United States. I don't want to suggest there is any hope of getting rid of the Jones Act any time soon, but the reality is that it is in Canada's interest to do whatever possible to bring walls down. This particular treaty takes an important step forward in that respect, while doing so in a manner that enables our industries too.

Canadians are resourceful. They are adaptable. My favourite example is what we've seen in the wine industry, which everybody predicted would be devastated and destroyed by the Canada-U.S. free trade agreement. Yet what are we doing now? We now produce premium wines that sell very well and for high prices around the world. I am confident in the abilities of Canadians.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Actually the wine analogy is a very good one. Of course it is driven by competition. It's a very good analogy. Fifteen years ago we looked at Canadian wine and we wouldn't look sideways at it, and today we serve it to our friends at the table and we're quite proud to do so. So there has been a dramatic change in the wine industry in Canada.

The other issue I want to touch upon is supply management, and I realize it may not be your area of expertise. Supply management has been protected in the EFTA agreement completely. Our dairy over-quota has been protected, our industry has been protected, and the EFTA countries are signed onto that; so that's not about to change.

On the other hand, we're talking about a greater deal with the European Union. The European Union seems to be slipping in the other direction, with more protectionism creeping in and a lot of concern from trading partners around the world, partners in trade with the EU, on their protectionism on wheat, pork, and now on dairy, and export subsidies. That is exactly what I'm talking about. Where do you see that headed in the long term for the EU? Because this is a step toward a greater agreement and continued closer ties to the European Union.

[David Stewart-Patterson]

The agricultural sector is a very sticky issue in just about every country around the world, and that's what stalled progress at the multilateral level for year after year after year. We have to recognize that it is a difficult issue. It's not just difficult in Canada, but ultimately it's about sitting down at the table and figuring out how to bring barriers down, bring walls down in a way that's fair to everybody and in a way that enables domestic producers in each country to be treated fairly and to have opportunities to continue growing.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you very much.

I think I'm getting the word. Am I finished, or do I have 30 seconds?

[The Chair, Conservative, Lee Richardson]

All right, you have 30 seconds just because Mr. Julian is so attentive to what you're saying.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

The other issue I see at risk here, quite frankly, is that we do have a change in global economic climate. You mentioned the $12.9 billion of trade we're doing with the EFTA nations, two-way trade between Canada and the four member states. I see this at risk at this present time, if this agreement is not passed, and I see Canada's credibility at risk worldwide. If we can't sign a free trade agreement that we negotiated for nearly ten years with four important trading partners with Canada, but relatively small trading partners on the world stage--Iceland, Lichtenstein, Switzerland, and Norway—then how do we proceed with countries like China, Korea, India, and the European Union and, quite frankly, diversify away from our dependency on the United States?

[David Stewart-Patterson]

I take your point. This is an important agreement, not only in its own right, but in terms of Canada's credibility, in terms of being able to negotiate new agreements with other partners, and in terms of being able to deliver when we reach an agreement, to ratify that. That's why I would urge the committee to approve and help this process move forward as quickly as possible.

[Sam Boutziouvis]

As well, we'd like to be able to come back in three years and argue the case for revisiting the EFTA and expanding it to include intellectual property, services, and investment provisions. We will probably have a long list to bring to this committee on making improvements and expanding upon the EFTA or building on the EFTA to make this a full-fledged economic partnership agreement in the broadest comprehensive sense.