Mr. Speaker, I first want to say that this is a very important debate. I have listened very closely to all hon. members today talk about this very important industry. It is important that Canadians have the opportunity to hear the points of view of members of the House because, indeed, this is important and something which all Canadians should, and in fact do, take very seriously.
In her motion the hon. member for Saint John refers to Canada's coastline as being the longest in the world, and I think she is correct. I would also add that we have the largest bodies of inland water in the world and, by these measures, we are certainly a maritime nation. I do not think anyone disputes that.
However, it is fair to point out that the hon. member should not equate this geography with a high domestic demand for shipbuilding. It is simply not there. This is a reality for Canada and it is something that we must face. Therefore, for Canada to remain in the shipbuilding industry, we must export. That is the reality of the world in which we live today.
This is an industry for Canadians in which we must succeed in global markets because our domestic market is simply not big enough. International competitiveness is the key to all of this; competitiveness, moreover, that must come at a time when there is substantial overcapacity in shipbuilding around the world. The OECD, for example, predicts that by the year 2005 the overcapacity will reach 40%.
To respond to overcapacity in this country the Canadian shipbuilding sector has already gone through a voluntary industry-led rationalization process. That is important to note because it underscores its commitment to this very important rationalization.
The Government of Canada has contributed $198 million to this process. Through the reorganization and streamlining of its operations over the past decade the Canadian industry has been able to improve its productivity levels. That is something we can all be very proud of.
However, it still faces very tough competition from international markets. That is the kind of world in which we live in the late 1990s, into the year 2000 and beyond. The way to meet that competition is not to go to the government to ask for money from the taxpayers. I think those days are over, as the opposition parties are proposing. Rather, the solution lies in building competitiveness through innovation by offering generous research and development tax credits, for example, and by promoting enabling industries which give Canada-built ships the technological edge. That is where the world of tomorrow is at.
The solution, I would also submit, lies in providing support for export financing through the Export Development Corporation. As we know, the EDC has improved the financing packages available to shipbuilders. The terms of repayment, as has been noted in the House, have been increased from eight to twelve years and interest rates now match the commercial rates that we know.
Finally, I think the solution lies in convincing other countries to stop their wasteful and burdensome subsidies so that all nations can compete on a level playing field. I think that is important too as we move into the 21st century.
We should then negotiate down rather than subsidize up. That is where the world lies.
The Government of Canada is doing this. We should be continuing to do so through the OECD and the World Trade Organization negotiations on shipbuilding. That we will and must continue to do.
I also want to point out that some provincial governments in Canada have taken a different approach. For example, the province of Quebec announced four incentives for shipbuilding in its 1996-97 budget. I will elaborate on those four points. The first is the marine construction loan guarantee program which was included in that budget. The second is an income tax holiday for Quebec sailors assigned to international freighters. The third is a refundable tax credit for shipbuilders. The final incentive is a capital tax reduction for taxpayers who acquire Quebec built ships. Those are significant changes and certainly we note them in parliament.
Some members of the Bloc have argued that the federal tax system undermines some of these measures. That is simply not the case. The record needs to be set straight. The operation of the federal tax system does not cancel or eliminate the benefits of provincial programs which are designed to support particular industries. In general, the federal tax system provides for tax deductions and credits based on the actual amount of costs incurred, net of any provincial assistance. To do otherwise would provide tax deductions or tax credits for costs that a taxpayer has not incurred. We need to note that and we need to understand it fully so that all Canadians know exactly what the case is in this matter.
I would emphasize that the federal government has also supported the shipbuilding industry in Quebec. Between 1986 and 1993, for example, the federal government invested almost $1.6 billion in Davie Industries in the form of contracts, contributions and loan guarantees. As hon. members are aware, Davie Industries is now under the protection of the Bankruptcy Act following the bankruptcy of its owner, Dominion Bridge Corporation. Davie Industries will receive all of the benefits to which it is entitled under the act. Meanwhile, Davie Industries has a contract to modify the Spirit of Columbus oil platform for Brazil. The Export Development Corporation is studying a proposal to supply export financing to support this project.
The Government of Canada has a generous package of measures which, in conjunction with provincial policies and sound industrial practice, benefits shipbuilders. In addition to EDC financing, for example, this package includes an accelerated capital cost allowance and very generous R and D tax credits. It includes a duty on ship imports and domestic procurement for all government shipbuilding and ship repair needs.
I want to emphasize once again, and I know we have heard it throughout the course of this debate, that the government is now and always has been supportive of the shipbuilding industry and will continue to encourage its development. That is, after all, what Canadians want.
The federal government already provides strong support in this area to the industry. It is important to note these points. There is in the form of support an accelerated capital cost allowance of 33.3% for Canadian built ships. There is a 25% tariff on most non-NAFTA ship imports. There is domestic procurement by the federal government for all government shipbuilding and ship repair needs. There is the Export Development Corporation financing for commercially viable transactions. There is a very favourable research and development tax credit system. All of these things underscore our commitment in this very important area.
The shipbuilding industry also has access to the enabling element of technology partnerships Canada. That program supports the private sector through investments sharing both risk and reward.
Our objective as a government in this very important sector is to make sure it is competitive and therefore able to win in international markets without subsidies. That is what all Canadians want. As a result, our policies and programs are working. The Canadian shipbuilding sector is now more streamlined and viable as a result, which is something we can all be proud of.
The global shipbuilding marketplace is restructured. We see that and we know that is happening throughout the world. Labour costs, aggressive pricing practices and shipowner national loyalty are having an impact in this important area, as is the growth of large integrated companies which build ships for their own use.
Government subsidies could be one way to respond to these changes but it would not be a good way. Instead, Canada should be enabling its shipbuilding industry to focus on high productivity, research and development that provides value added components, modernization and innovative marketing. These are important things that we as a government are aggressively pursuing, and rightfully so, on behalf of this important sector.
That is the route we as the government are taking. I hope other members in the House will support that approach by voting down the hon. member's motion. This is the way we need to proceed, the way we need to move into the 21st century. This is the approach that will be in the best interests of Canada and all Canadians wherever they may live in this great country of ours.