Natural Resources Committee on March 7th, 2013

[Martin Lavoie]

The accelerated capital cost allowance is a tool to achieve another objective. It's not an objective in itself. As I said, I think the first thing you need to look at is if the current CRA rules actually reflect the life cycle of the assets they use in their sector. I know there is a lot of technology going on in the oil sands. The reason they can exploit this resource now at a certain cost is that there have been a lot of new ways of thinking in extracting it, so that's one.... Are they a victim? I've never really thought of it that way.

In our sector, I think what we want to achieve is better productivity.

[Joan Crockatt, Conservative, Calgary Centre, AB]

That's right.

[Martin Lavoie]

If there's an issue of productivity in the oil sands sector, I would say that's probably a good tool to put in place if you want to increase productivity, because it goes to the heart of the kind of machinery you're using. It's quite a capital-intensive industry, so I would say that if a productivity increase is an objective, the ACCA definitely has to be looked at.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Could you maybe draw the lines between the dots for us about how productivity is exactly connected to something like the accelerated capital cost allowance?

[Martin Lavoie]

Productivity has to do with the number of outputs and the labour and the hours worked. If you have a low dollar, you can improve your productivity by having people working more, or by having more people working.

When you are in an environment where the dollar is high and you need to control your costs, having more employees might not be the best cost-efficient way to make more outputs. You need to look at innovations or new machinery that will allow you to have the same production, maybe with fewer hours worked, or more production with the same number of hours worked. It's from this perspective....

Replacing old machinery is a way to improve productivity, but as I said before, if you look at what type of machinery you want to focus on, definitely the information and communication technology type of equipment.... All the reports I've read point to that kind of equipment, which accounts for about 50% of the productivity gap between Canada and the U.S.

Maybe there's a way even beyond the ACCA, for all types of machinery and processing, to keep the focus on these kinds of machines, because new innovation in our sector is about automation and greater use of a computerized process of manufacturing.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay.

You talked about human productivity. I'd like to go there for a little while, because a lot of times when we talk about productivity, we end up coming back to things like machinery. The productivity gap in Canada seems to be.... There was a report out from Deloitte, one of many, saying that in human labour productivity they give Canada a C grade. I'm wondering how we can improve human productivity.

[Martin Lavoie]

One of our recommendations, again going through the tax system.... That's one tool to change behaviour: to tax or not tax, or to give a tax credit. One recommendation is to maybe start looking at a specific tax credit for labour training.

We give tax credits in this country for a number of things, such as innovation and all the things that we believe are important for the future of our sector. I think labour is as important as the machines that we put in our plants. From this perspective, we're saying that we should start thinking about this as one of the tools we may want to use for companies to be more proactive in doing labour training.

Labour training in our sector is also about the way in which you put your people on your assembly line to make sure you're actually more efficient. That goes back to lean manufacturing. For example, in our case in Ontario, we manage a program with SouthDev, a southern Ontario initiative, to make our companies more productive and to use lean manufacturing as a way to become more productive. It's not a tax-based approach. It's more of a direct funding approach that can complement the tax-based approach.

[Joan Crockatt, Conservative, Calgary Centre, AB]

What kind of training? Do we need attitudinal shifts? We have a lot of jobs that are available in Canada. We have a lot of people who aren't working in those jobs. We're outsourcing to other counties or bringing in immigrants. Where do you see those all matching up?

[Martin Lavoie]

It's a good question. Sometimes I wonder how universities are—

[Joan Crockatt, Conservative, Calgary Centre, AB]

Do you see any real innovation happening in our human capital?

[Martin Lavoie]

I'm sorry?

[Joan Crockatt, Conservative, Calgary Centre, AB]

Is there innovation that we could be employing in our human capital?

[Martin Lavoie]

There's definitely innovation going on. It's what you call organizational innovation. We think of innovation as product innovation, but there are actually four types of innovation. Organizational innovation has to do with the way you deal with suppliers and the way you deal with your employees. That's something we don't really hear about because it's not really covered by SR and ED or other things, but it's a really important part of productivity improvement and innovation.

Going back to the question of why we need a tax credit for companies to provide more training, I think there's a gap between the needs of companies and what is being offered in our academic institutions. I sometimes wonder how a university or a college actually decides if they will offer one type of mechanical engineering degree or another type of degree.

They don't call me. I don't know who they call. Do they actually talk to someone in the industry who looks at their needs over the next five years and at whether they should set up a new program? As for the only ones who actually do that, if they're in Baie Comeau somewhere in northern Quebec and a big mining company comes in, says it needs a certain kind of people, asks if they can set up a program, and says it will give some money for it, they actually do it.

Is there a way for us to look at how they actually decide to offer certain types of programs or not? I actually don't know.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Ms. Crockatt.

Thanks very much to all of you for a very interesting meeting today, witnesses: Mr. Morin, representing the Association of International Automobile Manufacturers of Canada; Mr. Lavoie, representing Canadian Manufacturers and Exporters; Ms. Bak, representing the Canadian Clean Technology Coalition; Mr. Dick, representing Pelee Hydroponics; and Mr. Haughton, representing Waste to Energy Canada Inc.

Thank you so much, all of you, for your presentations and for answering questions here today. It was another very informative meeting. We appreciate your input.

The meeting is adjourned.