Thank you, Madam Chair and committee members, for inviting me to comment on the trade impacts of the Inflation Reduction Act. I'm going to refer to it as the IRA today.
Canada's prosperity and living standards depend on trade, the bulk of which is with the United States. A previous version of the IRA, the Build Back Better Act, would have discriminated against Canadian-assembled automobiles and severely undermined the integrity of our integrated auto sector.
We therefore were pleased to see that the IRA created a clear carve-in for North American goods and content in the battery electric vehicle supply chain. Unfortunately, in a number of other areas, the IRA poses a clear challenge to Canadian competitiveness and, by extension, Canada's ability to attract and retain investment. Our economy is going through a once-in-a-century energy transition. If Canada does not take action soon to respond to the IRA's generous support incentives for the clean economy, we could see a significant shift in long-term trade flows across North America, combined with a loss of well-paid jobs.
In the fall economic statement, the Deputy Prime Minister announced new investment tax credits for clean technology and clean hydrogen. She said the government is committed to making it more attractive for businesses to invest in Canada to produce the energy that will power the net-zero global economy.
Unfortunately, there's a significant lack of detail about those tax credits. For example, imagine you're an investor looking to build a major wind-to-hydrogen project of the sort that the Prime Minister and the German Chancellor discussed this summer. For a project like that, you need wind turbines. The fall economic statement said there will be a 30% tax credit for the purchase of those turbines. That's a start, but investors will want to know whether the tax credit will apply to the cost of the foundation on which the turbines sit. Does it apply to the labour that will be required to build the turbine, and what about the road that must be built to the site of the turbine and so on? Until those details are available, a project of this sort is unlikely to go ahead.
I should point out that investment decisions are being made not just in the energy sector. Across our economy in sectors as diverse as agri-food, manufacturing and retail, Canadian companies have made ambitious commitments to achieve net zero. If you're a company with operations in Canada and the U.S. and you're looking to invest to reduce your carbon footprint, the incentives are better and the rules are clearer in the United States.
In the fall economic statement, the government listed a number of areas in which it plans to bring forward significant measures or additional actions to level the playing field between the U.S. and Canada. This includes the launch of the Canada growth fund, specific labour conditions that will apply to companies receiving the 30% clean technology investment tax credit, any additional technologies that will be eligible for the tax credit and further measures to incentivize clean-tech manufacturing.
To repeat what I said earlier, the details surrounding these measures need to be defined as soon as possible, and we can't afford to delay. That's why the Business Council of Canada has called on the government to bring forward its next budget in the first quarter of 2023, and ideally before the end of February, consistent with the traditional budget cycle.
Also, in budget 2023, the government must follow through on recent commitments to improve regulatory certainty and expedite approvals for natural resource projects such as LNG, critical minerals and clean electricity. The Deputy Prime Minister has spoken about the need to make progress in those areas so that Canada can help our international partners improve their economic security and achieve their climate change goals.
In closing, let me repeat that in the face of the IRA and a rapidly changing global environment, Canada must act with urgency to secure its fair share of investment and economic activity. Failure to do so will have a significant impact on future North American trade flows for the years ahead.
Thank you.