Madam Speaker, I am pleased to speak to Bill C-4, an act to implement two international agreements, the Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment.
The purpose of the convention is to create an international legal framework to address the order in which creditors are paid and the seller's rights. The basic objective of the convention is the efficient financing of transportation equipment, which will assist in the development of expensive modes of transport using modern technologies, especially related to aeronautics.
The purpose of these agreements is to have the signatory countries standardize their legislation with respect to the security lenders take on mobile equipment such as aircraft, for example. These agreements also allow for the creation of an international aircraft registry that will make it easy for lenders to find out about the state of an aircraft or whether it has been mortgaged, by how much and by whom.
The huge outlays involved in the financing of such equipment make it essential for the creditor to be able to have confidence that if the debtor defaults in payment or other performance the relevant legal regime will respect the creditor's contractual and proprietary rights and provide the creditor with efficient and effective means to enforce those rights.
Normally in the case of conflicting legislation, that of the country where the secured property is located applies. When dealing with immovable property, it is quite simple. However, for mobile equipment constantly moving from one country to another it is more complicated and a costly source of uncertainty both for the lender and the borrower.
If these countries do not standardize their laws, especially with respect to the order in which creditors are paid, endless legal battles can ensue leading to long and expensive delays when the airline company is unable to make payments. Furthermore, contradictory legislation causes a great deal of uncertainty and increases the risk for the lender, who often compensates for this by charging much higher interest.
Hence the need for international legal rules giving the creditors the required level of security and containing measures for the debtor's protection. This would represent a competitive advantage for the airline industry. Since the risks associated with the loans or the lease agreements will be reduced, funding will be easier for the air transportation companies to obtain.
Moreover, a reduction in the costs of borrowing can be expected. All this should help the carriers who want to buy new aircraft and ultimately improve perspectives for the aerospace industry that builds them.
We all know that there is a crisis in the airline industry. The fears generated by the events of September 11, 2001, cut passenger traffic. The creation of the low cost carriers resulted in a reduction in the price of tickets. The increase in oil prices, which represent 16% of the air carriers operating costs, is resulting in higher operating costs. All that reduces the carriers profit margin.
As a result, many airlines are in a state of crisis. Air Canada has filed for protection under the Companies' Creditors Arrangement Act. Sabena and Swissair have declared bankruptcy. Alitalia and American Airlines are having a very difficult time. It is easy to understand that lenders hesitate to provide them with the funds they need to upgrade their fleet, which funds are essential if they want to stay in business. The guarantee that the lender will be able to recover the aircraft in the event of non-payment can only be beneficial.
The goal of these conventions is therefore particularly appropriate and beneficial for both carriers and equipment manufacturers, and that is the reason why the Bloc Québécois supports the principle of Bill C-4 provided, of course, that the committee finds that it is, in all of its details, in compliance with both international conventions.
Of course the bill can deal only with matters under federal jurisdiction. Issues related to loan guarantees come under civil law, which is an area of provincial jurisdiction. The implementation of the protocol and treaty will only be possible if the provinces amend their own legislation.
That is one more example of why Quebec and the provinces need to be closely involved in negotiating and reaching international accords. In addition to allowing them to defend the interests of their fellow citizens, such involvement would make implementation of international treaties much easier.
That being said, Bill C-4 is a step in the right direction. However, it does not solve the real problem in the aerospace industry, which is the lack of an aerospace policy. It is a good thing that Canada is taking the lead in signing this treaty, but it must do a lot more and put in place a real aerospace policy.
The situation is more urgent than ever as witness the events of last week, when we heard that Bombardier was being courted by three American states wanting the company to locate its facilities on their territory to build 100 and 115 seat planes. It would appear that they each are offering more than the $700 million Bombardier is seeking from the federal government.
Ottawa is procrastinating. Support for research and development is anemic. Technology Partnerships Canada is underfunded. Export contracts supported by Export Development Canada are far too few.
The federal government must act quickly, otherwise a whole sector of a flourishing industry might suffer.
Quebec's aerospace industry, which has sales of $14 billion and which employs more than 40,000 people, accounts for close to half of high-tech jobs in Canada. Of the 250 companies in this sector, 240 are SMEs, which act as suppliers to big business. Together, those 240 SMEs represent 10% of the total sales of Canada's aerospace industry.
Those SMEs could do much more. Indeed, foreign companies represent roughly two thirds of suppliers to Quebec's aerospace industry. This indicates the potential for growth of Quebec's SMEs if they succeeded in taking over part of this market. To do it, though, they need help.
To be certified as supplier in the aerospace industry, a SME must meet a series of very strict criteria set by the contactor. It must be able to be associated with the development of any new product, from the beginning of its design and through its finalization. In addition, it must meet the particularly strict demands of the contractor in terms of quality and competency of its workforce. All these demands are very costly, sometimes too costly for an SME to assume alone.
The federal government must support those companies which would be ready to move from the status of small business with precarious finances to that of a medium-sized business able to take the market head on, if given the means to do so.
We also know that two of the main employers in Quebec's aerospace industry are Bombardier and Pratt & Whitney. The latter has facilities in Longueuil in my riding. Both of these jewels of Quebec's industry have condemned the insufficient federal support for an industry which is facing strong competition. If the federal government does not act, the United States or Great Britain will move in.
Endangering these two jewels of the aerospace industry would not only threaten 40,000 jobs; it would also be a hard blow to numerous small and medium-sized enterprises serving that sector.
As the present Minister for Transport was saying, the aerospace industry is to Quebec what the automobile industry is to Ontario. I want to say to the Minister of Transport that he should stop condemning a situation that we all know only too well, and move quickly to implement a real aerospace policy. Ontario has been benefiting for decades, in terms of federal support, from special regulations, substantial grants and even special trade agreements like the Auto Pact.
Ratification of international agreements is one thing, and the Bloc Québécois supports Bill C-4 in principle. However, we also must act swiftly on the domestic scene. Besides, Canada has nothing to be proud of, since it is practically the only developed country which has no clear and consistent policy in this area.
Everywhere else in the world, it has been acknowledged that this sector must have the support of high technology research and development before it can design its final product. In other words, huge investments must precede marketing. Therefore, this industry is highly research and development intensive. Other countries have understood that, but Canada still has not.
This is why the Bloc Québécois has for years been calling for an aeronautics and aerospace policy which should include several elements.
Let us take industrial research support, for instance. Developing a high technology product, whether it is a drug or an airplane, takes a lot of time and money.This is a stage where government funding is crucial.
As Mr. Louis Chênevert, President of Pratt & Whitney Canada, so aptly put it:
Pratt & Whitney Canada is a leader internationally because it has acquired a unique technology through its investments in research and development over the last 20 years.
He added this:
Because the federal government has contributed to this effort through its Technology Partnerships Canada Program, it will reap the benefits...Indeed, it pays to invest in research and development.
Through the Technology Partnerships Canada Program, Ottawa invests in product research and development and gets its payback in royalties. As you can well understand, it is a win-win situation.
However, while spending on industrial research is increasing by approximately 8% per year, the amounts invested by the government in the program remain more or less constant. This poses a serious threat to the aerospace industry, which, as I have already noted, is one of the shining lights of Quebec industry. It exports 89% of its production and must be in a position to stand up to competitors, which get much more support. In that sense, the program, created 8 years ago, is now significantly underfunded.
In the United States, for example, the Pentagon is investing US$45 billion in research and development, of which some $6.5 billion is going directly to Boeing, Raytheon and United Technologies.
Bombardier recently announced the elimination of 2,000 jobs in Montreal, and the worst might well be yet to come, if Canada continues to drag its feet and Bombardier accepts the American offer.
It is for all these reasons that the Bloc Québécois is asking for a substantial increase in the federal investments in the Technology Partnerships Canada program.
It is also important to promote export. As the Canadian aerospace market is limited, our companies can amortize development costs only by investing in the international market. The aerospace sector exports 89% of its production. However, since Ottawa is not promoting exports nearly as much as many other countries do, our companies have a hard time remaining competitive.
In the past three years, Export Development Canada, or EDC, the federal agency financing all export contracts, has financed an average of 41% of all Bombardier regional aircraft sales. By comparison, in the same period, the Brazil Development Bank financed over 80% of Embraer sales.
Worse yet, EDC's support dropped to 37% in 2003. The majority of the funds released were for existing contracts, while Embraer received the support of the Brazilian government for almost all its financing needs.
The Bloc Québécois is thus calling on the government to increase its participation in the financing of export contracts to the levels our foreign competitors might be granted.
There are a variety of steps the federal government could take if it really wanted to help the aerospace industry. Today, the consideration of Bill C-4 is a step in the right direction, but the fact remains that the government must implement as soon as possible a real policy for the aerospace industry.
Besides, with a surplus of $9.1 billion for 2003-04, money is certainly not an issue, especially since, as I tried to demonstrate, investments in that sector generate substantial economic spinoffs. I hope that the Minister of Transport and the Minister of Industry realize that. With such a return on investment, it is profitable for the federal government and also for the public as a whole.
Investing today will ensure the viability of a critical sector of our economy in Quebec.