INDU Committee Report

Dissenting Opinion
Of the Conservative Party

To the Standing Committee on Industry, Science and Technology
REPORT OF THE SUBCOMMITTEE ON CANADIAN INDUSTRIAL SECTORS

Respectfully submitted by:
Mike Lake, MP

INTRODUCTION

The Conservative Party of Canada (CPC) wishes to submit a dissenting opinion concerning the report to the Standing Committee on Industry, Science and Technology from the Subcommittee on Canadian Industrial Sectors.

The CPC would like to thank those witnesses, many of whom travelled from across the country, who appeared before the committee for their on-going interest in ensuring the strength and success of Canada’s industrial sectors. Much of the report deals directly with the testimony witnesses presented and offers a thorough and balanced explanation of the challenges facing Canada’s industrial sectors.

In particular, discussions concerning the effect of the current state of the global economy on the Canadian context were fruitful. The extent of these effects in spite of Canada’s relative strength put our current economic challenges in the proper context.

The report suggests that the government is well positioned to recover from the current economic crisis faster than other countries. This affirms what is being said about Canada by experts from around the world, many of whom also recognize the role that Canada’s Economic Action Plan is playing in shielding Canada from the worst effects of the global economic crisis. For example, the IMF said the following about Canada on May 22 of this year:

“Building on the permanent tax relief measures announced in October 2007, the authorities tabled further fiscal stimulus of around 2.8 percent of GDP in January 2009. Taking into account supplementary provincial actions announced following the federal budget, the measures are among the largest across G-20 countries. The stimulus relies mainly on infrastructure spending, support to the vulnerable sectors, enhanced social safety nets and retraining programs for job reallocation, and tax reductions and incentives... The authorities have taken proactive steps to safeguard financial stability.”

Although the report contains many such positive aspects, opposition parties have unfortunately put forward and supported a few recommendations driven by partisanship rather than the stated interests of the industrial sectors who testified. It is because of this unfortunate partisanship on the part of the opposition parties, and the factual inaccuracies that their recommendations contain, that we cannot support the report in its entirety and must submit this dissenting opinion.

DISSENT ON CERTAIN RECOMMENDATIONS

Support for the Forest Economy

The CPC acknowledges the importance of supporting the forest economy across Canada, especially in BC, Alberta, Quebec, and New Brunswick where it is most important. The committee heard many witnesses from this sector. Witnesses who appeared said very clearly that the government should not try to freeze the forest economy in its present situation; rather, the government should support innovation and ensure access to financing through the EDC and the BDC while not taking action which would undermine our trading relationship with the United States.

Regrettably, opposition members on the committee supported a recommendation that was not supported or even mentioned by the expert testimony of witnesses. This recommendation states:

“That the Government of Canada adopt a policy to encourage the use of lumber in the construction and renovation of federal buildings.”

This recommendation is troubling for the following reasons:

• Canada’s steel producers, or indeed other producers of products for the construction industry, would reasonably object to a policy that favoured another industry over theirs.
• Canadians expect their government to always ensure value for money in the construction of federal buildings. Governments should always aim to pursue the best value-for-money proposition to taxpayers rather than risk higher cost to the taxpayer for purely partisan reasons.

This recommendation was simply not well thought out. If implemented, it would have a negative impact on taxpayers while pitting Canadian industry against Canadian industry at a time when all industries are facing the negative effects of the global economic crisis. The recommendations put forward by witnesses - for example, supporting innovation and ensuring BDC and EDC continue to support the forest economy - offer a better way forward.

The committee, to its credit, generally steered clear of recommendations for expansive direct subsidies to the forestry sector, which would violate Canada’s trade commitments. Instead, the committee accepted a recommendation which affirms the measures currently being taken by this government to support innovation in the forest economy and prepare it to play a vital role creating the jobs of tomorrow.

Young Graduates

Another unacceptable recommendation contained in the committee report states:

“That the Government of Canada introduce a tax credit for young graduates in resource regions to provide regional economies with a qualified workforce, a guarantee of innovation.”

The CPC must object to this recommendation on a variety of counts:

• First, this recommendation is poorly worded and unclear. It fails to define which regions would be affected, leaving the door open for regions which are already doing very well economically to enjoy the benefit of an indirect subsidy.
• Second, the recommendation fails to show how moving young graduates to resource regions would guarantee innovation in cases where there are not positions available; it makes more sense to create job opportunities for recent graduates, rather than trying to encourage them to move to regions where they may have a hard time finding employment. Essentially, the recommendation would either create an unnecessary additional incentive for young graduates to move to areas which are already very prosperous; or, it would encourage young graduates to move to areas where there is already unemployment and local residents are searching for work. In the latter case the government would be subsidising increased competition for already scarce jobs.
• Lastly, this recommendation is worded to favour exclusively younger graduates and might adversely affect older workers.

Technology Partnerships Canada and SADI

In addition to the two particularly flawed recommendations above, there are two further cases where recommendations are poorly worded and could leave the reader with an inaccurate or incomplete sense of the challenges facing Canada’s industrial sectors or of what the government is doing in response.

The first such recommendation calls on the government to identify a replacement program for Technology Partnerships Canada (TPC). In fact, this program has already been replaced by the Strategic Aerospace and Defence Initiative (SADI). SADI is a more effective and accountable vehicle for delivering funding to the primary users of TPC. It is somewhat unclear if this recommendation calls on the government to create an additional, distinct, and parallel program to support the aerospace sector (as opposed to simply putting additional money in SADI), or if it calls on the government to ‘identify’ in the formal sense of ‘pointing out’ the replacement program to TPC. In any event, the Conservative members of the committee would be happy to identify the replacement program for TPC: it’s SADI.

Since its creation, we have invested almost $400 million into the aerospace sector through SADI, which has leveraged private investments to provide a total of almost $1.2 billion in new research and development.

Incidentally, none of the witnesses suggested the creation of a parallel program to SADI; instead, they applauded the government for its investments in SADI.

Canadian Space Agency

The second such recommendation calls on the government to develop a long-term space plan. This recommendation, while theoretically of some merit, lacks any specific direction. It seems particularly out of place, given that the committee did not even hear from the Canadian Space Agency (CSA).

It must be noted that the government has already taken strong action to ensure Canada is a leader on the final frontier. Just recently the government, through Canada’s Economic Action Plan invested $110 million into the CSA’s space robotics program. In addition, on May 13^th, 2009 the Minister of Industry and the CSA were proud to announce Canada’s two newest astronauts: David St. Jacques and Jeremy Hanson.

CONCLUSION

Notwithstanding the concerns outlined above, the committee was able to find consensus on a number of very positive recommendations.

A re-occurring theme in the testimony of many witnesses was the importance of competitiveness. Canada needs a competitive workforce, a business climate conducive to research and development, and a competitive tax environment. In particular, the committee agreed to support a recommendation which specifically emphasizes the importance of keeping all taxes, including payroll taxes, low.

In general, the CPC applauds the work of committee staff, fellow committee members and witnesses who came to testify. While we feel it is unfortunate that some of the recommendations are politically-motivated or unclear, the main body of the report and other recommendations provide some helpful information to the government and to the Canadian public. This report shows that, by investing in the long-term future of Canada’s industrial sectors, Canada’s government is on the right track to ensuring that Canada’s manufacturing, forestry, high-tech, biotech, aerospace, mining, and oil and gas sectors continue to play a vital role in Canada’s economy well into the future.