Mr. Speaker, this is a motion respecting the shipbuilding industry in Canada. The shipbuilding industry has a long and rich tradition in the country. It continues to play a key role in many coastal and port communities, from major yards in Saint John, New Brunswick, to Levis, Quebec, to smaller ones dotted across the country in Ontario, Quebec, New Brunswick, Nova Scotia, P.E.I., Newfoundland and British Columbia.
As has been stated earlier, overall the major shipyards employ about 4,000 workers. They are highly skilled, well paying jobs. The smaller yards and facilities employ many other workers. All these people can take great pride in the work they do and the contribution they make.
The shipbuilding industry is a small but important component of Canada's overall marine industry, making a significant contribution to Canada's economic growth.
Shipbuilding is one of only a few industry to benefit from comprehensive government initiatives. Essentially there are three elements to the policy.
First, we made a commitment to use Canadian shipbuilders for the renewal, repair and overhaul of government fleets. We will continue our policy of domestic procurement on all federal ships and repairs where it is possible to do so.
Second, we have a 25% tariff on all non-NAFTA foreign built ships over 100 tonnes entering Canadian waters, with the exception of fishing vessels over 100 feet.
Third, between 1986 and 1993 we spent $198 million on an industry led rationalization process. The industry decided that it was necessary to reduce its capacity so that the remaining shipyards could survive and stay competitive. Therefore the structure of the Canadian shipbuilding industry has changed dramatically since 1986 due to this rationalization. Certainly in the last five years there has been no real change in the domestic international market situation to support reversing the approach of the current government.
In addition, the Government of Canada has several other key initiatives to support this sector. There are tax measures available to ship owners in the form of accelerated capital cost allowance on new ships built in Canada. Shipbuilders are also encouraged to keep pace with new technology through the research and development tax credit system. Through government institutions there is financing available to this sector like any other sector for commercially viable projects. For example, the Export Development Corporation can provide financing for export sales of Canadian products including ships.
We recognize that the international playing field is not level. First, major distortions in the marketplace result from massive subsidies from foreign governments to their shipping industries. To defend our domestic industry we will continue our efforts to eliminate foreign subsidies through the OECD. At the same time the European community is looking at eliminating its country's subsidies by the year 2000. Things are slowly changing.
Second, let me address the U.S. situation and the Jones Act. Under the legislation only vessels built in the United States and operating under the U.S. flag can engage in U.S. domestic trade. This prohibits building or rebuilding any vessels for the U.S. coasting trade in non-U.S. shipyards.
I remind the member for Fundy—Royal that he was not a member of the House at the time the previous government led by his party negotiated the free trade agreement and did not work out any details to change this awful protectionist system under the Jones Act.
However there are opportunities for Canadian yards to capture some of the U.S. ship repair markets which will become more accessible as the standard U.S. 50% tariff on repairs continues to decrease over time and will be eliminated in 1998 under NAFTA.
It is still important to continue our efforts to encourage the U.S. government to update an archaic 77 year old Jones Act in line with NAFTA and WTO principles.
While the majority of U.S. legislators are supporters, a growing number of legislators as well as other organizations such as citizen tax groups are attacking the act on the grounds that it is effectively a subsidy paid by the consumer.
In 1996 the International Trade Commission estimated the Jones Act raises the price of water borne transportation by 26%. The extra costs get passed along to consumers in higher prices. This constitutes a hidden Jones Act tax of between $3.8 billion and $10 billion a year. There is a result of subsidies.
A U.S. senator has recently introduced the legislation to allow foreign flagships to operate between two U.S. ports, if the operator or charter of the ship is a U.S. citizen or is eligible to engage in business in the U.S., and if the operator operates regularly scheduled freight service in the ocean trades including the Great Lakes. This is a very slight improvement but still not good enough.
However all parties in the U.S. are acknowledging this is a long term issue with no immediate solution. That is what they say every year.
There is little doubt the Canadian shipbuilding industry has faced some hard times in recent years. However recent developments might help to stimulate new business in Canada for shipbuilding and marine construction. They include the need to revitalize the aging Great Lakes shipping fleet and the development of high speed ferry services in offshore oil and gas developments such as Hibernia, Terra Nova and Sable Island.
Certainly new opportunities are out there. There is evidence that the international shipbuilding industry has come out its global recession. The deep sea shipping fleet is aging and needs replacement. Double hauling will soon be mandatory for ships entering U.S. ports, requiring modifications to newer ships and possibly the replacement of older ones. Each of these developments may provide some opportunities to Canadian shipyards in the future.
We must be prepared to compete in the global marketplace. To become globally competitive Canadian shipyards must aggressively continue to adopt modern technology. Acquiring the latest technology in shipbuilding will help reduce production costs, increase productivity and reduce labour. A lot of work has been done but a lot more has to be done.
Around the world Canadian shipyards have earned a sterling reputation in specialized markets such as coastal ferry systems, icebreakers and self-unloading bulk carriers. Canada enjoys a significant technological advantage and market edge because of its experience in the construction of these specialized vessels. Many new opportunities are looming on the horizon for shipbuilding and the refit and repair industries in Canada. There is much work to be done.
Although I cannot support the motion as submitted by the member for Fundy—Royal, I congratulate him on his preparedness and his desire to continue to work on behalf of the Canadian shipbuilding industry. I hope we can continue to do so in the months and years ahead.