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CME Chief Economist Mike Holden's remarks at HoC Finance Commitee

Published by Stefi Proulx on October 06, 2017

Mr. Chair, members of the Committee.

Good afternoon and thank you for the invitation to appear before you today.

I am here today to speak on behalf of Canadian Manufacturers & Exporters, our 2,500 direct members, and the broader manufacturing and exporting community. Our membership network accounts for an estimated 82 per cent of manufacturing activity across the country and 90 per cent of Canada’s exports.

I want to begin by congratulating this Committee for focusing its pre-budget consultations on productivity and competitiveness. Productivity is the single most important factor underpinning our prosperity as Canadians. A productive economy attracts investment, creates jobs, supports wage growth, and improves the standard of living for all Canadians.

Unfortunately, Canada’s productivity record has not been strong. According to data from the OECD, overall labour productivity in Canada is among the worst in the G-7.  The United States is 30 per cent more productive. Germany is 38 per cent more productive.

The situation in manufacturing is largely the same. Most concerning, however, is the large gap between Canada and the United States.  American manufacturers are 154 per cent more productive today than they were in 1990. In Canada, they are just 73 per cent more productive.

Why is manufacturing productivity in Canada lagging? Compared to advanced manufacturing leaders around the world, our businesses under-invest in new capital, machinery and equipment. We are slow adopters of new technologies. Our performance in business R&D, innovation and new product commercialization is poor. And on top of all that, the business cost environment in Canada is slowly deteriorating as energy costs, minimum wages, and the overall tax burden are all on the rise.

We believe that with the right action, these trends can be reversed. New advanced manufacturing technologies offer a unique opportunity to leverage Canada’s strengths to usher in a new era of prosperity for manufacturing and, by extension, for the Canadian economy as a whole.

In our formal submission to this Committee, we have offered a number of recommendations to help achieve that goal. With the time I have remaining, I would like to highlight a few of the most important of these.

First, the Government of Canada took a strong step forward this year through the creation of its 5-year, $1.3 billion Strategic Innovation Fund designed to boost innovation and investment in new technologies. We believe this program should be expanded to $2 billion per year, made permanent, and that half of all funds should be earmarked for advanced manufacturing.

Second, the federal government should introduce a permanent accelerated capital cost allowance specifically for advanced manufacturing technologies. This new ACCA would allow manufacturers to claim an immediate first-year write-off of all qualifying capital expenditures on advanced technologies, including software.

Third, business tax and regulatory systems need to be reformed. Piecemeal efforts like changes to the taxation of private companies do not address our root concerns. We ask that the Government of Canada commit to a full review of the corporate tax system to ensure that it is globally competitive; fosters innovation, entrepreneurship and growth; and is simple, transparent and fair.

The need for such a review is all the more urgent given the apparent direction of tax reform in the United States. We cannot forget that Canada competes directly with the US for business investment. Taxation may not be the only metric that businesses consider when deciding where to invest, but it IS an important one. Large gaps between Canada and the US should not be taken lightly.

The final two recommendations I want to highlight today relate to labour and skills. Any effort to boost innovation and adopt new technologies will fall short unless we have a well-trained and adaptable workforce – creative minds and skilled hands that can make the most of these new tools.

First, improvements need to be made to the Canada Job Grant. To be clear, CME and the manufacturing community in general strongly support this program. We believe that it should be made permanent and that funding be increased. We also ask that the range of eligible training programs be expanded and that support be extended to multi-year training initiatives.

The second issue relates to the makeup of the manufacturing workforce. Manufacturing is dominated by men. Women make up 48 per cent of the labour pool, but hold less than 5 per cent of jobs in some production-related skilled trades.  Attracting more women to these jobs would go a long way towards addressing the labour and skills shortages in manufacturing. We thus recommend that the Government work with industry to introduce more women to jobs in manufacturing, beginning with finding ways to increase female enrolment in skilled trades and STEM-related education.

In closing, let me once again say that we strongly support this Committee’s focus on productivity and competitiveness. A more productive economy means a more prosperous society – more jobs, higher wages and better opportunities for all Canadians. 

Thank you all for your time and I look forward to answering any questions you may have.

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