Mr. Speaker, I am pleased to be able to address private member's Bill C-213, an act to promote shipbuilding, brought forward by the hon. member for Lévis-et-Chutes-de-la-Chaudière, and to hopefully shed some light on some of the innuendoes and the doom and gloom we have been hearing.
The desire to see shipbuilding in Canada contribute to the national well-being is one that the government wholeheartedly shares. This is why the government has designed a federal shipbuilding policy tailored to the industry as it exists in Canada today and is consistent with our approach to other industry sectors.
There is no doubt in my mind why the member has put forth his bill. He is hoping to assist an industry located in his riding. I refer to MIL Davie. As all members of the House, the hon. member has come to this place to defend the interest of his constituents and I commend him for that. As elected representatives we all share this sense of obligation and must meet it with vigour by telling the full story.
Accordingly, the member may wish to ask his constituents if they are aware of the federal government's contribution to MIL Davie. I suspect the member's party line dictates that he cannot discuss positive contributions offered by the Canadian government. This would be a truth that his party would rather leave to others to raise.
Let me do so with pride. Has the member informed his constituents that the Government of Canada already invested almost $1.6 billion in Davie industries between 1983 and 1996 in the form of contracts, contributions and loan guarantees? Probably not. Has the member asked his constituents if they prefer more money thrown at the problem as he is proposing in his bill? Probably not.
I would even venture to say that the hon. member's own constituents would take a common sense approach and affirm that his bill is not the magic bullet for this specific industry. Rather, his constituents would likely prefer a tax cut or increased spending on various social programs. In the wonderful world of the Bloc Quebecois everything is possible. After all, it chooses not to govern, only to oppose.
Let me now take a moment to reiterate the Government of Canada's policy. My colleague, after asking the industry committee to meet on the subject of productivity and shipbuilding, essentially ignored the evidence presented by the witnesses and concluded that there is no government support for the shipbuilding and repair industry.
I take it that this must have been nothing more than a partisan slip from my colleague who I am sure will eventually admit to his constituents that there is a federal shipbuilding policy made in Canada.
There are essentially four elements to our government's shipbuilding policy carried out by the various government departments.
First, thanks to Public Works and Government Services Canada, the acquisition of ships in Canada by the federal government is done on a competitive basis but is restricted to Canadian sources. Let me point out that at present shipyards in Atlantic Canada employ almost 2,000 Canadians and, thanks to the federal government's made in Canada shipbuilding policy, these workers are now benefiting from over $8 billion to $9 billion in federal shipbuilding and repair national contracts tendered through the competitive bidding process in the past 10 years.
Second, the finance policy allows for an accelerated capital cost allowance on new ships built in Canada. It also allows purchasers to write off 100% of the entire cost of a ship over a mere four years. If we bear in mind the fact that the average life of a ship is approximately 40 years, this is a very accelerated rate of depreciation. It gives rise to a deferred tax item on the balance sheets of companies that exceeds the 15% declining balance rate afforded to foreign built vessels.
Third, thanks to DFAIT, we have put in place a 25% tariff on all non-NAFTA foreign built ships of more than 100 tonnes that enter Canadian waters, with the exception of course of fishing vessels over 100 feet in length.
Fourth, in response to the shipbuilding and repair industry's conditions, the government has spent $198 million on an industry-led rationalization process between 1986 and 1993. This money was given directly to the industry for upgrading facilities and displaced workers adjustment programs because the industry itself, I point out, decided it was necessary to reduce its capacity so that the remaining shipyards could survive and continue to be competitive.
The Government of Canada is also supporting the shipbuilding and repair sector through a number of other key initiatives as well. For example, we have an attractive R and D environment driven in part by the scientific research and experimental development tax credit.
We have financial assistance through risk sharing repayable funds through the enabling technologies element found in Technology Partnerships Canada. This could likely be of help in fostering the development, application and diffusion of critical technologies with major impacts and benefits within and across industry sectors.
The federal government helps the shipbuilding and repair industry to compete internationally through the Canadian Commercial Corporation assistance and the Export Development Corporation export financing, which can support up to 80% of a purchase over a 12-year term at commercial market, and let me highlight its support, which has grown from $3.5 million in 1996 to more than $130 million in 1999. This is a perfect example of how the government is modernizing its policy to reflect changing needs. Financing terms were expanded from eight to twelve years, and interest rates now match commercial rates.
Peter Cairns, president of the Shipbuilding Association of Canada, called this “a very good initiative, beneficial to the whole industry nationwide”. He called it a “significant step in the right direction in an area where Canada has a lot of expertise”.
Now the hon. member opposite would ask the government to pile on top of these measures special treatment for the shipbuilding and repair industry in the form of more favourable loan guarantees and exemption from lease financing, measures that do not exist for any other industry in Canada and that are contrary to Canadian tax policy and our international trade obligations.
Furthermore, the kind of tax credits the hon. member is asking for amount to what is in essence a subsidy. Canada will not get into a subsidy war with its international competitors which, let me point out, it cannot possibly win.
Permit me to take a step back and provide the member with a worldwide view of this entire issue.
At present, when measured internationally, shipbuilding in Canada amounts to about four-tenths of one percent of global production. This market is dominated by Japan and Korea which account for about 35% to 33%, respectively, of the world commercial shipbuilding. When we add China to the mix, three top countries now control more than 75% of the world's production.
Moreover, the Asian and Europeans are not standing still waiting for the rest of the world to catch up. Consolidation, mergers and specialization continue with giants like HHI and Daewoo in Korea, and a Chinese industry that is rationalizing from 26 companies down to two. In the face of such extreme and unremitting pressure, brought about by predatory pricing, substantial global overcapacity and subsidies, many traditional firms, such as Norway's Kvaener, have elected to get out of the business of new construction altogether.
In the face of such evidence, one may be inclined to walk away from the table and ignore the difficulties being encountered by the men and women of the shipbuilding and repair industry. However, that would be too easy and, simply put, not the right thing to do. The Bloc, the NDP and the Tories may disagree that the answer does not lie in topping up the subsidies that other countries are providing or in simply throwing in the towel, as the Reformers would like us to do.
The government will do the right thing and continue our efforts in multilateral discussions to negotiate subsidies down. As the Minister for International Trade has stated, we are committed to doing so and we are putting shipbuilding subsidies on the priority list of the upcoming negotiations in Seattle, Washington.
Yes, we should be doing all we can, in an intelligent way, to foster shipbuilding and repair in Canada. But, surely, this is a shared responsibility not to be undertaken solely by the federal government. The provinces as well as the owners have a duty to respond to their workers. Most of the provinces with shipbuilding and repair interests have provided support.