That, in the opinion of this House, the government should actively develop an innovative National Shipbuilding Policy which focuses on making ship yards internationally competitive by providing tax incentives and construction financing comparable to what is being provided elsewhere in the world and which ensures reasonable access to foreign markets, particularly the United States of America; and should recognize that such a policy would not provide direct subsidies, but create alternatives methods of support to ensure the growth of the industry.
Mr. Speaker, it is with the utmost of honour that I introduce my motion which calls on the government to review, revitalize and renew Canada's shipbuilding policy.
For the past number of months various sectors have been pleading, in fact demanding, development of a national shipbuilding policy. A focused and unified consortium of stakeholders recognize the industry is in need of governmental leadership and initiatives to ensure the future of a strong, self-sufficient and export driven industry.
These stakeholders include the Shipbuilder's Association of Canada and the Canadian Ship Owners Association. Labour is represented by the Marine Workers Federation and even all 10 provincial premiers are on side.
This motion addresses the need for policies and initiatives to ensure Canadian shipyards have reasonable access to international markets. Today's debate brings the issue to the forum where change must and can only be delivered, on the floor of this House.
My objective is for the House to recognize through constructive debate what others know to be true, that the federal government has a responsibility to respond to the needs of Canada's shipbuilding industry.
I stress the need for all members to reach a consensus so this issue will reach the desk of the Minister of Industry in an urgent fashion. Reaching a consensus would be a major step forward for the shipyards and individuals who earn their living in this high tech industry.
Before we get into detail, the support and changes that I and the industry are advocating are not about subsidies. We are calling for changes to simplify regulations to enable our shipyards to compete. These changes would do more for the industry than any subsidy ever could.
The industry recognizes the way it has been supported in the past by government contracts will not continue. It is eager to find new markets internationally where it knows it can compete. This is the key to the success of a shipbuilding industry and our ability to be competitive in a global marketplace.
Canada's marine industry employs 40,000 people nationwide and adds over $2 billion to gross domestic product. Canadian shipbuilders have rationalized 40% of their shipbuilding capacity over the last decade. They have become more efficient and are lower cost producers.
The industry has evolved and modernized. What it needs now are initiatives to use this modernization to be able to compete. Canadian shipyards are now high tech companies supporting Canada's ocean and marine shipboard technology and are part of an industry with a future, yet we continue to impede their progress with a paternalistic approach.
The federal government has no specific industrial or trade policy dealing with shipbuilding. The international trade business plan, Canada's integrated plan for trade, investment, technology and development, does not include shipbuilding.
While this motion does not call for subsidies, I think we need to recognize that all other shipbuilding nations have direct subsidies or a variety of programs that enable them to compete internationally. Canada does not. This forces us to compete on an uneven playing field.
At the same time, Canadian shipyards have become more competitive by incorporating new technologies and processes, adding new equipment and modern facilities. The fact is that Canadian shipyards could be cost competitive with other European Economic Community and United States shipyards building naval ships today and have the potential to become competitive building merchant ships if we had the opportunity to compete on a more level playing field.
Shipbuilding is a relatively labour intensive activity, thus labour costs have a major impact on the total shipbuilding cost. Over the past 10 years hourly wages in Canada have gone from being among the highest in the mid-1980s to near the lowest in 1996 when compared to European and American shipyards. This is a result of significant currency exchanges, improved Canadian efficiency and rising labour costs abroad.
Due to excess subsidies, low cost shipbuilding nations such as Korea, China, Poland, Ukraine, Brazil and Spain target low technology ships such as crude tankers and bulk carriers with high steel content and low outfitting needs. Canadian shipyards cannot, would not and have no interest in participating in this aggressive market.
While some nations are losing their market share in shipbuilding, others are finding success in specialty niche construction. Canadian shipyards would focus on product carriers, chemical carriers, offshore vessels and specialty ships requiring special paint coatings, improved steel treatment and specific instrumentation, navigation and communication systems. These ships are presently built in high wage areas, such as the EU, Japan and the United States.
Over the past decade Canadian government procurement has been the main source of work for domestic shipyards. However, because of shrinking government budgets and reduced government requirements for ships, new markets must be found.
International markets provide the only possible military and commercial shipbuilding opportunities for larger Canadian firms. In the near term the commercial market offers the best prospects for maintaining and/or expanding production.
Considering the fact that only 2% to 3% of Canadian shipyard capacity is exported today, there is a real opportunity for the government to assume a leadership role and empower the industry to grow. Canadian policies must support both international market entry and sales to Canadian operators and owners. We must agree that the future of the shipbuilding industry in Canada is tied to its ability to compete in the international commercial shipbuilding markets.
Shipbuilding construction has shown consistent increase in demand since the early 1980s. Shipyards around the world are preparing for continued growth. The longer Canadian shipyards wait, the more difficult it will be to enter these international markets.
Canadian officials continually point to the need to follow the 1979 OECD agreement, yet we are the only country to abide by these terms. Members of the EU generally provide direct subsidies to their shipyards of up to 9% of construction costs. Other assistance, such as research and development, tax benefit programs and export financing are also provided.
Providing subsidies is not a solution that I am advocating. It is not a made in Canada solution. There are alternatives which would enable Canada to compete on a more level playing field which do not involve subsidies.
The premiers, the Canadian Shipbuilding Association and other stakeholders believe that there are financial mechanisms used by the Americans which could form part of our Canadian solution.
First of all, the U.S. federal ship financing program, known as Title 11, is a good example. After a long absence from the international commercial market, U.S. shipbuilders have appeared in the world order book compliments of Title 11. This financing program recognizes the common practice of ship buyers demanding a financial package as part of the total sales package.
Title 11, established in 1936, provides for federal government guarantees of private sector financing for the construction of U.S. ships for both domestic and foreign ship owners. The success of the Title 11 export financing and loan guarantee program is an indisputable success.
In fiscal year 1996 more than $1 billion U.S. in U.S. ships were exported and delivered courtesy of Title 11 guarantees. It is worth noting that there has not been a default under this program. There has been no cost to the U.S. government since it was established in 1936.
A second initiative which the shipbuilding stakeholders support involves revisions to Revenue Canada leasing regulations. Leased financing has become a predominant method of financing significant capital items. The current regulations make the ownership of leased financing of a Canadian ship uneconomical.
Accelerated depreciation was the backbone of the shipbuilding industry only a few years ago and resulted in many ships being built. The industry is imploring the government to visit this initiative immediately. There is no reason the government cannot take that step right away. It is not precedent setting and it would make a significant difference in additional activity and reduce social costs to the government.
Major items of capital equipment are already exempt from existing Revenue Canada leasing regulations, such as computers, rail cars, trucks and others.
The industry also wants to see the one-sided aspects of NAFTA eliminated. The American 1920 Jones Act legislates that cargo carried between American ports must be carried aboard American ships that are American built, registered, owned, crewed, repaired and serviced exclusively by American firms. Otherwise they are open to free trade. This legislation was exempted from the FTA and from NAFTA.
Canadian shipbuilders do not have access to the American market which is our natural market, yet American shipbuilders have the right to sell to the Canadian market duty free. This unfair and imbalanced version of free trade puts Canadian shipbuilders at a severe disadvantage. The chances of reaching a quick resolution with the Americans are slim because protectionism has pervaded U.S. shipbuilding policy since 1920, as we found out in FTA and in NAFTA.
However it is possible for us to revisit the Jones Act using a strategic piecemeal approach. We need to push for bilateral agreements on certain types of ships and vessels. I think all members would agree that some form of market penetration is better than none.
Currently U.S. grain exporters are unhappy with the Jones Act as they perceive the legislation to be an infinite tariff that has reduced competition and driven up shipping costs. This represents an American chink in the Jones Act armour which may enable better dialogue on possible bilateral agreements later on.
When referring to the government strategy for better economic and industrial development in Atlantic Canada the Minister of Industry stated:
The emphasis has to be on working with community strengths and building on community advantages, and not on wielding a pot full of cash and dispensing it to people on the basis of who they know and who they voted for in the last election.
I agree with the Minister of Industry on this issue. If he wants to work with the community strengths and the community advantages he need not look any further than Canada's modernized state of the art shipyards.
We have highly tooled yards and highly skilled labour. What we do not have is access to markets. Subsidies, or as the minister said a pot full of money, are not needed but a national policy that faces up to the realities of the global marketplace is.
The industry has proven that it is competitive. What it needs is export financing, revisions to Revenue Canada leasing regulations, and attempts at bilateral trade discussions to ensure we have access to our natural markets. A combination of any one of these initiatives would create jobs and make the industry more viable.
The development of a national shipbuilding policy has widespread support. The member for Saint John has been a tireless supporter of the shipbuilding industry since she has become a member of Parliament and during 20 years in municipal politics as well.
At the first ministers meeting in July the premiers recognized the challenges currently faced by Canadian shipbuilders in their efforts to become internationally competitive. They recognized the need for a national shipbuilding policy. The industry and the ship owners association are calling for a national policy.
The current finance minister stated in 1988 as owner of Canada Steamship Lines why he had to have ships built in Brazil:
I fought hard to have the ships built in Canada but was unable to convince the government of the need to have an aggressive shipbuilding policy. If we are not going to do that we will never be a factor in commercial shipping.
All these folks are not wrong. Simply put, we need to develop a modern policy to give Canada access to international markets. While I am pleased that constructive debate is taking place, I believe it is a great injustice that we are not able to vote on this matter.
Therefore I would like to seek unanimous consent of the House to make Motion No. 214 a votable motion. This is a national policy that benefits shipyards in Vancouver on the western coast, inland shipyards whether in Quebec or Ontario, and in Atlantic Canada as well.
This is a national policy. All we are imploring the government to do is to begin dialogue. Everybody wants a national shipbuilding strategy: the ship owners, the workers, the premiers and I believe members of Parliament.