moved that Bill C-213, an act to promote shipbuilding, 1999, be read the second time and referred to a committee.
—He said: Mr. Speaker, it is with a great deal of emotion that I rise today in the House to give the most important speech I have ever given since I was elected in 1993 as the member for Lévis-et-Chutes-de-la-Chaudière. I will be dealing with the private member's bill that I have brought forward to promote shipbuilding.
In my riding, shipbuilding is the most important issue falling under federal jurisdiction, since the Lévis shipyard once had over 3,000 employees and provided jobs to close to 1,200 workers during the last two years to rebuild the oil platform Spirit of Columbus . At some point, the overall wages reached $150 million a year and the economic benefits often exceeded $300 million in the regions of Quebec and Chaudières-Appalaches.
This bill is the result of a process I started more than two years ago with Richard Gauvin, the president of the Davie workers union, in order to bring together all the stakeholders in the Canadian shipbuilding industry. Why? Because we both realized that we would never get the attention of the federal government that the Davie shipyards needed if we did not get the other Canadian shipyards on board.
Sometimes together, sometimes individually, we approached all of the stakeholders that could be of some help to us. I want to thank Richard Gauvin for his valuable contribution and I want to say hello. I know he is sitting in the gallery, along with two members of its union executive, Bernard Demers and Nelson Roy. I can assure the House that the Davie workers and their families were always at the centre of my main concerns when I was drafting this bill.
I also want to thank the management of all the shipyards I visited in Canada during the last two years for their co-operation. They helped me see that they were not competitors of Davie but partners fighting the same battle—to get the federal government to put together a real shipbuilding policy, a policy that would allow them to compete effectively with other shipbuilding yards in the world.
I also wish to thank all MPs in the ridings concerned who paved the way for me to meet with the directors of these shipyards, as well as the 100 MPs who have supported my bill this far.
People have talked about a merchant marine policy for Canada for more than 50 years, and nothing has really been done to promote shipbuilding per se.
Since the government did not address this in the last throne speech, today I will present three of the seven measures being called for jointly by the Shipbuilders' Association of Canada, which represents the owners of all the major shipyards in Canada; the Fédération de la métallurgie CSN; the Marine Workers Federation (CAW Canada), representing maritime workers primarily; and the Shipyard General Workers' Federation of British Columbia.
These demands are being supported by 160,000 people who have sent postcards to the Prime Minister of Canada, and to all provincial premiers who met in Quebec City on August 9.
The purpose of Bill C-213 is to promote shipbuilding in Canada and make Canadian shipyards more competitive.
First measure: A loan and guarantee program: a ) through the establishment of a program whereby a maximum of 87.5% of the money borrowed by a company from financial institutions to purchase a commercial ship that will be built in a shipyard located in Canada
(i) is guaranteed by the federal government in the event of default in the repayment of the loan,
(ii) bears a rate of interest comparable to that available for loans from financial institutions to large and financially strong corporations, and
(iii) is repayable on terms comparable to those usually granted by financial institutions to large and financially strong corporations for the repayment of their loans;
This measure already exists in the United States, and is part of a specific program to promote shipbuilding, known as Title XI. Since 1993, the American government has approved financial guarantees totalling $2.9 billion U.S. under this program.
My goal in this bill is to improve the loan guarantee program of the Export Development Corporation. Right now, this program is restricted to exportats only, and the maximum is 80%.
But a loan guarantee program is needed because of the very high cost of ships and oil rigs and the long period of time required to build them.
In the United States, the title XI program makes it possible for American shipyards to price their ships competitively on the international markets. It provides federal government guarantees for financing or refinancing requirements in the private sector for long term construction or reconstruction projects of ships under the American flag in American shipyards.
The Canadian program should extend to Canadian and foreign owned ships built in Canada, and it should include a Canadian government guarantee for private loans and set interest rates similar to those granted to big healthy corporations.
Ships eligible under the program could include commercial ships like passenger ships, bulk carriers, self unloaders, cargos, tankers, tugs, push tugs, barges, dredges, research ships, pollution abatement ships, oil and gas drilling rigs, and floating drydocks.
A similar loan guarantee program was recently launched in Nova Scotia, but it is limited to $85 million and is obviously restricted to the Halifax shipyard.
A second measure provides for changes to tax rules relating to lease financing. Another provision in clause 3 provides: b ) by amending the provisions of the Income Tax Act and the Income Tax regulations to improve the tax treatment of lease financing for the purchase of a ship built in a Canadian shipyard.
Essentially, this is aimed at exempting new ships built in a Canadian shipyard from the application of Revenue Canada regulations with regard to lease financing. Lease financing has become the preferred financing option for the purchase of capital equipment. In their current form, these regulations make ownership and lease financing not very attractive, even unprofitable.
The annual depreciation that Revenue Canada would normally allow as a deduction from taxable income in other circumstances is substantially reduced in the case of lease financing. Not only does this transfer the depreciation from the first to the last years of the useful life of the ship, but it also results in a decrease of real savings from the ownership and operation of a ship, which means an increase in the operating costs of Canadian ships.
By exempting ships built in Canadian shipyards from the application of regulations relating to lease financing, the existing depreciation rates for ships would apply without any restrictions, and the tax disadvantage which prevents ownership or lease financing of ships would be eliminated. This exemption would not eliminate any of the taxes applicable to ships and their owners.
This is not an unprecedented initiative, because many assets are already exempt from regulations governing lease financing, such as furniture, office equipment, computers, electric appliances, televisions, radios, furnaces, air conditioners, railway cars, cars, vans, trucks and trailers. But not ships.
The third measure concerns refundable tax credits: c )—by amending the provisions of the Income tax Act and the Income Tax Regulations to allow a refundable tax credit for a portion of the costs relating to the construction or refit of a commercial ship in a shipyard located in Canada or the conversion of a ship in such a shipyard
(i) to the shipowner for the construction of a Canadian ship, or
(ii) to the shipyard owner for the construction of a foreign ship.
This tax credit is drawn from a Quebec government initiative implemented in the context of 1996-97 budget measures to support Quebec's shipbuilding and marine industry.
The program could apply, without being limited thereto, to commercial ships, such as passenger ships, bulk containers, self unloaders and all those I named earlier. It would not apply to fishing boats eligible for financial assistance under other federal or provincial ocean fishing development programs.
The costs that could be taken into consideration in calculating the tax credit would include the cost of plans and specifications and the salaries of employees involved in the construction of a ship. Total construction costs ought to be in keeping with market standards in relation to the planned ship. A tax credit could be given that would be the equivalent of a maximum of 20% of construction costs of the first of a series, 15% of the second and third, and 10% for the fourth.
This credit might be considered an extension of the R and D credits in effect in Canada, so as to reflect the unique nature of shipbuilding, where the very first units in a new construction or retrofit program involve very steep development costs.
By contributing to these initial expenditures, the reimbursable credit could facilitate subsequent production, thus generating the economies of scale so essential to the prosperity of the industry.
The tax credit would be kept within the economic entity of the shipyard. It could not be transferred to other divisions of the business owned by the shipyard owner, and would be paid only once construction of the ship or oil platform was finished.
I would like to make it clear that it is not just by chance that the other four initiatives called for by the key stakeholders in Canadian shipbuilding are not part of my bill.
First of all, “elimination of the unilateral aspects of NAFTA which, while allowing the United States to sell new or used ships to Canada free of the 25% duty imposed on all other countries, totally blocks Canada's access to the American market” cannot be part of a bill. It must be part of some bilateral negotiation opened up again with the United States.
It is my personal opinion that the federal government ought never to have accepted the 1989 exclusion of shipbuilding and shipping from NAFTA. If these two areas were included from NAFTA, with the present exchange rate of our Canadian dollar, our shipyards would be overloaded with work.
The shipyard owners and the shipyard unions are also calling for “an international social clause governing working conditions for shipbuilding”. This ought to be included among the concerns of the Minister of International Trade at the World Trade Organization negotiations. Hon. members must understand that I could not include this in my bill, because it involves the WTO and must be the object of multilateral negotiations first.
The joint publication by shipyard owners and unions also asked for the “promotion of Canadian resources” and “for investments in coastal infrastructures”. These views are simply meant to remind the Liberal government that Canada has the world's longest coastline and the largest inland waterway.
Under the circumstances, it would be important to preserve the existing Canadian shipyard infrastructure. Let me digress for a moment to point out Davie's useful role following the grounding of the Norwegian cruiser Norwegian Sky . That shipyard may also be called upon soon to repair the Maltese freighter Alcor , which is grounded not far from Île d'Orléans.
Finally, shipyard managers and unions asked the federal government to hold a summit for industry stakeholders, to further discuss the issues affecting the Canadian shipbuilding industry and to develop a strategy covering all aspects of shipbuilding, so as to make that industry prosper again. I fully support that request for a summit which, incidentally, was a promise made by the Liberals in 1993.
There are also biases and myths that should be dispelled regarding the shipbuilding industry. The first myth is the high cost of manpower. Salaries paid by Canadian shipyards are lower than those paid anywhere in Europe. The hourly rate for manpower in the Canadian shipbuilding industry is 20% lower than in the United States, 50% lower than in Germany, and 40% lower than in Japan.
Only Korea and communist China pay salaries that are lower than those in Canada, but our manpower is far more qualified. The effectiveness of our manpower has increased by 25% since 1986. Not many countries can boast such an improvement. Collective agreements are more flexible than ever. This is not necessarily the way to look for improvement.
It is true that workers in the shipbuilding industry are well paid, but they also pay a lot of taxes. With the loss of 7,000 jobs in this sector, the federal and provincial governments in Canada have lost $70 million annually. If nothing is done, these losses could soon reach $100 million.
Since each shipbuilding job lost eliminates at least two other jobs elsewhere, tax losses can be estimated at close to $200 million annually.
How much have these job losses cost the EI and social assistance programs? I have not been able to obtain official figures, but I can say that costs were at least $200 million a year.
Another myth is that demand is low. Many of the shipbuilding industry's detractors claim that the industry is in decline and that demand has dried up. In fact, the opposite is true. In the spring of 1999, there were 2,542 ships on order throughout the world.
The majority of the ships in circulation in the world are over 20 years old. Some of them are in very poor condition. We saw this recently off the Île d'Orléans. Others must be refurbished very soon. As ecological concerns increase worldwide, more and more countries are requiring double hulls.
The recent increase in oil prices will further favour shipping as a means of transportation and again point up the need for new oil drilling rigs.
With globalization of markets leading to increased exports, shipping can only benefit, because trains and trucks cannot cross oceans, and transportation of weight cargo by air is too expensive.
We hear that a traditional industry is in decline. Another concept that must be challenged is the view of shipbuilding as traditional. All eyes are on the new technologies.
A recent visit to several American and other shipyards, including the largest shipyard in Taiwan, which is the fourth largest in the world, showed me that the largest Canadian shipyards have nothing to fear from any of them. Our technology is equal to, if not better than, that of our competitors.
Some of our shipyards, such as Davie, are known worldwide for the quality of their engineering services; they produce three-dimensional plans. Computer-aided manufacturing is present nearly everywhere.
Frigates manufactured in Canada are the best in the world. They are loaded with more computers than any airplane. So where is the problem? The problem is financial.
You are indicating to me that I have only two minutes left, Mr. Speaker, so I will have to go faster and improvise my conclusion. I could easily speak for two hours, but I have only 20 minutes. The problem is financial, there is a lack of financial guarantees.
The problem is also that many countries are still subsidizing shipyards to the tune of 9% in Europe, and 30% in Asia. In the meantime, the United States are hanging on to their protectionist measures.
And what is the good Liberal government doing meanwhile? It is watching the ships go by and is doing nothing. It is counting on the nature of things, on external pressures to make things happen in the area of shipbuilding. However, it is not with such a laissez-faire attitude that the situation will improve. While it has been ignoring the problem, the number of jobs has dropped from 12,000 when it came to power to 7,000, and it is still dropping.
In St. John's, Lévis, Vancouver, everywhere, the situation is increasingly precarious. I urge the Liberal government, which, I know, will not dare support a bill introduced by a mere opposition member, to vote the way its party faithful asked it to do at the last national convention through a resolution asking for substantial action: a review of the situation and concrete measures. I urge the government to wake up.
