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Letter to PM Harper from Canadian Manufacturing Coalition

October 9, 2007 ( Ottawa, ON )

The Right Honourable Stephen Harper, P.C., M.P.
Prime Minister of Canada
Langevin Block
80 Wellington Street
Ottawa, Ontario
K1A 0A2

Dear Prime Minister,

We are writing as the representatives of Canada’s leading value-adding industries to acknowledge the initiatives that your government has taken in support of Canadian manufacturing.  We now urge you to go further by making manufacturing a priority in the upcoming Speech from the Throne, and implementing on an urgent basis the 22 recommendations unanimously agreed to by all parties in the report on manufacturing competitiveness tabled earlier this year by the House of Commons Standing Committee on Industry, Science, and Technology

Manufacturing is the business that converts our country’s natural resources, and the knowledge and skills of Canadians into higher-value products and services tradable around the world.  It is important for the future prosperity of each and every Canadian. 

However, Canada’s manufacturing industries are under risk.  Like our counterparts around the world, Canadian manufacturers must respond to the globalization of markets, the rise of newly industrialized powerhouses like China, India, and Brazil, and shortages of skilled workers.  But, our companies must do so while responding to a 60% appreciation of the Canadian dollar, escalating commodity and energy costs, and now weakening demand in our major market, the United States.  These challenges require urgent action by manufacturers and governments alike. 

How Canadian manufacturers meet these competitive challenges will have far-reaching effects on the Canadian economy.  Manufacturing is the largest single business sector in Canada.  We account for 15% of Canada’s GDP. Because our sector is such an important customer for Canada’s farmers, miners, foresters, and energy producers, for our utilities and construction sectors, and for our transportation, warehousing, communications, technical, business, and financial services industries, every dollar of manufacturing output in Canada creates over three dollars in total economic activity.

Two million Canadians are employed in manufacturing – down from a peak of 2.3 million only four years ago.  They are employed in skilled, high-paying jobs.  And, many high-paying jobs in other business sectors are also directly tied to manufacturing.

Manufacturing is at the forefront of international competition.  Approximately 60% of the goods manufactured in Canada are exported; over half of what we produce is exported into or through the United States. 

Manufacturing is at the forefront of innovation and technological change.  Our industries account for more than three-quarters of all private sector investment in research and development activity in Canada.  Our companies are the businesses that bring new products to market. 

Manufacturing is an important contributor to national security and the ability of Canada to defend our sovereign interests.  Ensuring the security of our supply capabilities is crucial to meeting both objectives.

It is also important to recognize, that through our efforts to improve both products and processes, manufacturers have cut their greenhouse gas emissions by 9.3% between 1990 and 2005, while at the same time increasing production by more than 50%.  The record clearly shows that productivity enhancement, capital replacement, and investments in new technologies go hand-in-hand with improved environmental performance. We share your government’s priority for taking action to protect Canada’s environment.

Canada’s manufacturers must be world-class to compete and grow in today’s global markets.  We must boost productivity by becoming more efficient, introducing new and improved products and processes, managing supply chains more effectively, and investing in new technologies.  We must innovate to provide customers with the products and services that meet their needs, solve our own business problems, enter new markets, and meet the requirements of public regulation and shareholder expectations.  We must ensure that the workforce is adequately equipped with the skills, experience, and expertise we require to achieve results quickly and at competitive costs.  And, we must take advantage of new business opportunities in domestic, North American, and international markets.

We recognize that the onus is on each and every business to compete and win.  But, governments also have a critical role to play in ensuring a business environment that enables Canadian industry to retain and attract investment, and make the crucial improvements they require to remain competitive and grow in global markets.

The House of Commons Industry, Science and Technology Committee, chaired by James Rajotte, tabled 22 unanimously supported recommendations aimed at improving the competitiveness of Canadian industry.  Your government responded favourably to those recommendations.

This year’s budget introduced a two-year write-off for investments in manufacturing and processing machinery and equipment, as well as accelerated depreciation rates for investments in manufacturing facilities, computer equipment, and certain energy technologies.  You renewed your commitment to more efficient regulations.  You emphasized the importance of innovation in your report on Science and Technology.  And, you made significant new investments in logistics and border infrastructure.  These provisions are valuable for Canadian industry.  They are already making a difference in helping manufacturers improve competitiveness.

We now urge your government to fully implement all of the 22 recommendations of the House of Commons Industry Committee. 

The following ten-point plan outlines the Canadian Manufacturing Coalition’s immediate priorities for action in support of Canadian manufacturing:

1.  Allow companies to take advantage of the two-year depreciation for manufacturing and processing machinery and equipment for a period of at least five years as recommended.  Many firms have investment planning processes that require several months to determine capital allocations and the most attractive or competitive investment opportunities.  They must then secure regulatory approvals.  Some companies rely on customized machinery and equipment for their operations.  Lead times from equipment suppliers are lengthy.  And, it requires additional time to install the equipment and put in operation.  In short, the 21-month timeframe that Budget 2007 allowed companies to take advantage of this accelerated write-off was too short to provide an effective incentive for investment.

2.  Make Scientific Research & Experimental Development Tax Credits refundable and improve the consistency of SR&ED administration.  The benefits of the tax credit should be extended to companies operating in Canada which, because they are either currently facing a downturn in profits, investing in R&D ahead of their earnings performance, or having to consolidate corporate earnings for foreign tax reporting purposes, are not currently able to take advantage of this important tax measure.  At the same time, consistent interpretation of eligible expenses would considerably enhance the impact of this tax incentive, particularly on the part of small and mid-sized firms whose future depends on innovation.

3.  Introduce an Employers’ Training Tax Credit to encourage businesses to increase investments in maintaining and upgrading the skills and capabilities of their workforce.

5. Ensure that Canada’s trading partners fulfill their obligations under our existing trade agreements.  Canada’s trade rules must be effectively enforced and the cost burden of enforcement should not be borne by Canadian companies.  The Industry Committee recommended that our trade laws and their application should be reviewed, including their consistency with our major trading partners.  We also urge you to adopt and implement the unanimously supported recommendations of the Eighth Report of the House of Commons Industry, Science and Technology Committee, to prohibit trade in counterfeit, pirated, and fraudulently marked goods in Canada.  In addition, Canadian companies need to have better access to the Canadian International Trade Tribunal in order to respond to unfair trading practices.  And, CITT decisions with respect to anti-dumping, countervail, and safeguard measures should be observed and effectively enforced. 

6.  Pursue and conclude multilateral, regional, and bilateral trade and investment agreements that can guarantee effective access into international markets for Canadian exporters through the elimination of both tariff and non-tariff, regulatory barriers to Canadian exports and investment, and ensure fair resolution of trade and investment disputes.

7.  Respond to the skills shortages that Canadian businesses are facing by encouraging closer collaboration between industry and our universities and colleges with respect to both research and education, speeding up entry procedures for temporary foreign skilled workers, and helping Canadian workers enter productive employment in labour markets across the country.

8.  Expedite investments in borders, security, and transportation infrastructure based on a national logistics strategy aimed at ensuring the efficient flow of goods between Canada and our largest trading partner, the United States, while making Canada the preferred logistics hub for trade between North America and the rest of the world.

9.  Use government procurement to leverage business opportunities and encourage innovation on the part of Canadian industry.  Your government would simply be following the lead of every other industrialized country in this regard.

10.  Play a leadership role in making the investments and expediting the regulatory processes required to ensure that Canadian industry has access to reliable and cost competitive energy supplies now and in the future.

With respect to longer-term priorities, the tax burden that Canada places on business investment, which is acknowledged as one of the highest in the world, must be reduced if we are to attract and retain high-value business activity and high-paying jobs in the future. 

These measures will significantly enhance the business environment for manufacturers, as well as for other industries, in Canada.  They will encourage the growth of value-adding businesses and enable companies to make the changes they require to compete and win in global markets.  All Canadians will benefit because their prosperity and employment opportunities depend on both the competitiveness and growth prospects of Canada’s manufacturing sector.

We share a vision of a world-class manufacturing sector in Canada that enables Canadians to enjoy strong economic growth and high-value, high-paying jobs.  We trust that your government shares that same vision and recognizes that a strong and competitive manufacturing base is an integral part of our economic future.

Sincerely,