Welcome to meeting number 17 of the Standing Committee on Industry, Science and Technology.
Today we're going to have a bit of a shortened session because we have to get back to the House. We're going to try to wrap it up by five o'clock. We have 15 minutes at the end to talk about a couple of things in camera.
Our witnesses today are, from the Canadian Manufacturers & Exporters, Mathew Wilson, senior vice-president, and Martin Lavoie, director, policy, innovation and productivity; and from the Canadian Labour Congress, Chris Roberts, national director, social and economic policy.
We were supposed to have Manufacturiers et Exportateurs du Québec; however, they're not coming now.
We're going to get right into it. Let's try to keep it to about eight minutes each.
Who do we have going first?
Mr. Roberts, take it away. The show is all yours.
Thank you so much, Chair, and thank you to all the committee members. Good afternoon.
I'd like to convey my appreciation on behalf of the CLC president, Hassan Yussuff, for the opportunity to appear before you today and present the views of the Canadian Labour Congress.
The CLC is the voice on national issues for 3.3 million working men and women in Canada. The Congress brings together Canada's national and international unions, along with the provincial and territorial federations of labour and 130 district labour councils across the country. The members of CLC affiliated unions work in virtually all occupations, industries, and sectors of the Canadian economy, including over 400,000 employed in manufacturing.
I don't believe I need to spend a lot of time explaining to this committee about why the state of manufacturing is of importance to all Canadians. I'm going to quickly get to some of the challenges facing manufacturing in Canada as we see them.
Manufacturing jobs historically have been an important source of relatively well-paid jobs and decent incomes for working class Canadians, including newcomers to Canada.
Today, relatively well-paid working class jobs in manufacturing are at risk. The manufacturing sector has lost half a million jobs since the sustained appreciation of the Canadian dollar, beginning in 2002, and 25% of total manufacturing employment. Job levels have remained depressed since the recession. From its recent 1999 peak of more than 15% of total employment, manufacturing's share of all employment has fallen to below 10%. Unionization rates have also fallen in manufacturing, and the wage premium that manufacturing jobs historically enjoyed has narrowed. Until 2008, hourly employees in manufacturing were paid about 10% more per hour on average than in the economy as a whole. Since the recession, that gap has largely disappeared, and manufacturing wages risk falling below the average for the total economy. In the United States, manufacturing jobs have already fallen below the median wages for the economy as a whole.
With respect to manufacturing strategy, between 2002 and 2014, the manufacturing sector broadly suffered from the combined consequences of the over-valued dollar, associated with the commodity price boom in Canada, and intensified competition from Chinese and other exports in the U.S. market.
With the commodity boom now over, economists expect that the lower dollar and rising U.S. demand for homes and cars will revive Canadian manufacturing, but most indicators of manufacturing's performance have not yet reached pre-recession levels, or have only recently begun to do so.
In our view, manufacturing, innovation, and productivity-generating growth will not occur spontaneously, but rather require encouragement and nurturing by coordinated policy measures.
We urge the federal government to work with provincial governments, industry, labour, universities, and colleges to establish manufacturing sector development councils. These councils would identify opportunities to promote investment and employment in Canada, adopt technologies developed in educational institutions like community colleges, invest in sustainable products and practices and technologies, and expand value-added exports. The suite of measures available could include such policies as domestic procurement policies, active industrial strategies to foster high-tech industry, targeted subsidies, and even public ownership in strategic industries.
In our view, the federal government should begin by convening stakeholders to develop a national automotive strategy for attracting and retaining automotive investment and product allocation in Canada. Aerospace and telecommunications are also logical candidates for sector strategies.
Manufacturing strategy also has an important role to play in helping meet Canada's ambitious greenhouse gas reduction targets agreed to in Paris in December. The federal government should actively develop Canada's manufacturing capacity to support an expansion of low and zero emission transportation, such as a national program of public transit expansion. There are also opportunities to foster the green manufacturing necessary to supply energy efficient equipment and materials used in the construction of high efficiency homes and offices.
Shifting to trade agreements, the international rules governing trade and foreign investment in Canada are critically important for manufacturing. Trade and investment deals that remove policy space necessary to develop sector strategies will constrain the revitalization of manufacturing, in our view. International trade and investment agreements that Canada enters into must preserve the right to implement performance requirements for foreign investors, negotiate community benefit agreements, foster local procurement, and include training requirements and other so-called offsets to stimulate local manufacturing.
We urge the government to replace the Investment Canada Act and its current opaque and seemingly ineffective “net benefit” test for foreign investments in Canada and create a more transparent and clear cost-benefit test. This would require a foreign investor to make binding commitments to production and job levels, commit to new investments in fixed capital and technology, and pledge to expand Canadian content in supply contracts and other inputs.
Finally, finishing with the issue of labour adjustment, higher rates of productivity growth entail that even when manufacturing output is growing, workers will need to be protected in the process of ongoing restructuring. Companies have responsibilities when laying off workers. Reasonable advance notice must be given, adjustment committees should be required in the workplace, and minimum levels of severance pay entitlement must be increased. Employment insurance regular benefits should also be improved, in our view. Governments must find ways to guarantee the pension benefits of workers against windup in the event of solvency deficiencies in the plan, so that the sorts of tragedies we've seen all too frequently in recent years cease. More federal support is needed for labour adjustment programs, especially for older workers, and EI funds should support retraining prior to layoff.
I want to end with an example of the sort of labour adjustment initiative that the CLC believes the federal government can promote and encourage. That is a joint initiative undertaken by the CLC and the Canadian Manufacturers & Exporters. It's entitled CertWORK+, and it's a workplace training and certification program in the manufacturing sector. It's been successful in assisting displaced production workers in manufacturing with adjustment. The program has already allowed assemblers, material handlers, and machine operators to have their skills recognized and certified according to national standards in order to help with mobility and job opportunities. There have been several instances of plant closures in which CertWORK+ has already come into play as one useful tool available to displaced workers in the adjustment process.
I'd be happy to answer any questions the committee might have in that regard.
Thank you very much.
Good afternoon, members.
We are pleased to be here on behalf of Canada's 60,000 Canadian manufacturers and exporters, and our association's 2,000 direct members, to discuss Canada's manufacturing sector and its future.
My name is Mathew Wilson, and I am joined by my colleague Martin Lavoie. As mentioned, Éric Tétrault, our vice-president from our Quebec division, or MEQ, was supposed to be here as well. However, he was unable to participate. Martin and I are more than able to speak to the issues. We’re all part of the same organization, and so there should be no issues whatsoever from our perspective on that, and hopefully you can understand.
Canadian Manufacturers & Exporters is Canada's largest industry and trade association with offices in every province, and is chair of the Canadian Manufacturing Coalition, which represents roughly 55 sectoral manufacturing associations, many of which have appeared or will appear before this committee during this study. Of our members, 85% are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Before we outline our vision and priorities for action to support the growth of Canada's manufacturing sector, we would like to acknowledge and thank the committee on this critically important study, and in particular Mr. and Mr. , who have worked very closely with CME to make this study happen and get as far as it has.
Despite the negative press, manufacturing remains the single largest business sector in Canada. Canadian manufacturing sales surpassed $600 billion in 2015, representing about 11% of Canada's total economy. Manufacturers directly also employed 1.7 million Canadians in highly productive, value-added, high-paying jobs. Their contribution is critical to the wealth generation. It sustains the standard of living that each and every Canadian enjoys.
At the same time, manufacturing in Canada and around the world is going through tremendous changes including major shifts in economic and market conditions, acceleration in the creation and adoption of new technologies, and changing political and policy priorities of governments. In addition to these shifts, manufacturing itself has become much more globalized for production and customer bases, and the lines among manufacturing, services, and technologies are rapidly blurring. This is a challenge for manufacturers as the production processes they use, the goods they produce, and the skills of their workforce are undergoing constant change.
These changes are not unique to Canada. Around the world, manufacturers and governments are struggling to manage the changes that the fourth industrial revolution is bringing upon us. Germany launched Industrie 4.0 several years ago to deal with these changes. The U.S. has established the National Network for Manufacturing Innovation. China has just launched “Made in China 2025”, which aims to move their manufacturing to higher quality and higher value. All of these strategies are helping to drive major changes to their economies and manufacturing sectors.
However, Canada has no strategy at this time, and we need one. Globally we might be the best positioned to capitalize on the opportunities of the fourth industrial revolution based on the strength of our natural resource sector and our access to raw materials, our excellent education system, the expertise in our technology clusters, and the strong existing base in advanced manufacturing and its workforce.
In order to develop that strategy, CME recently launched an initiative led by the private sector to help shape the future of manufacturing in Canada called Industrie2030. Our objective through Industrie2030 is to create an actionable road map that would double manufacturing activity in Canada by 2030. We are also working with officials from ISED to align our consultations with those of the national innovation strategy. We have provided the committee members today with the background documents on 2030 for your review. I apologize in advance that they are only in English. They will be translated, and we'll submit those when available.
Over the past several weeks, we have begun those consultations on Industrie2030 with manufacturing executives from across Canada. The consultations are fairly simple. We want to understand what the barriers are to growth and how we can help companies accelerate that growth. In particular, we are focused on four core pillars: investing in plant capacity, developing and commercializing new products, adoption of new technologies, and finding new customers.
We would like to provide you with some of the initial feedback we have received during the initial stages of our consultations on these core areas.
First, on investing in plant capacity, one of the most common concerns raised is the availability and effectiveness of current investment supports. Simply put, they are out of date. They must be modernized, nationally consistent, and be more relevant to advanced manufacturing. The government should implement national policies and programs, not only for regions but also in support of support manufacturing across the country. For example, all regional economic development agencies should financially support the adoption of advanced manufacturing technologies, and regional tax credits such as the Atlantic investment tax credit should be made available across the country. Further, many of today's support programs are complicated, take months to secure funding, and involve loans, which are then taxed back by CRA, drastically reducing their positive impact for the company. Manufacturers are looking to partner with government to help de-risk investment in new technologies, not to to deal with a more complicated bank.
On product development, scale-up, and commercialization, which is a key area in whether or not we're going to grow Canada's manufacturing sector, many of the current programs for product development are limited and ineffective.
Much of the value and innovation actually occurs in turning primary research and ideas into commercial products. Programs like SR and ED are excellent at supporting primary research; however, they need to support a wider range of company programs and product development and commercialization. The government should also look at other examples around the world from countries that are excelling in product commercialization and in innovations such as the patent box tax regime, which provides direct financial support towards the commercialization of new products and services.
The adoption of new technologies is going to be critical as we enter the fourth industrial revolution. Companies understand how critical it is to have the latest technologies if they are going to be world-class. Right now, however, changes and the range of technologies, such as 3-D printing, advanced automation, and the Industrial Internet, to name a few, are overwhelming many companies, especially SMEs. Most companies don't invest in the technologies because they don't know how to use them, which I guess in some ways is better than other companies that invest in the technologies only to let them collect dust in the corner because they actually don't know what to do with them.
The government should look at the creation of national manufacturing hubs, similar to what's been created in the U.S., which can demonstrate these technologies and help companies understand effective integration. The government should also be looking at programs to help financially support the adoption and creation of those technologies in Canada so that Canadian companies can get access to the best technologies globally, which today they often can't.
As well, companies obviously need to find new customers if they're going to grow. They want new customer bases and they want new markets, but reciprocity in trade access is often very difficult to come by. Canada is a small market and Canadian companies must work beyond our borders to grow. However, we must ensure that Canadian companies actually do have access to foreign markets in a manner similar to how foreign competition has access in Canada. Restrictive government procurement policies in foreign markets and foreign companies unfairly dumping products in Canada are two of the most frequent concerns that must be addressed in moving forward.
I would like to sum up these high-level comments by raising one last critical element, which often goes overlooked in study of manufacturing in Canada, but from our perspective, it's critical for our success. We must begin to once again celebrate and promote the goods that are actually made in Canada. For too long, the sector was thought of as dying or dead, so it didn't get much attention. That's changed over the last several years, but much more needs to be done. As a result, we actually have a fairly limited knowledge about what is made in Canada. Worse yet, the rules around branding something made in Canada are based on a 1970s understanding of manufacturing. Many products that are actually made here can't be labelled as such and celebrated as such. We need to reverse these trends. We need to celebrate what we make as Canadians. We need to promote these goods to Canadians and to the world.
Thank you again for your time this morning, and thank you for taking on this important study. I look forward to the discussion.
We used to have un accent aigu
off the end of the e, but I think they sold it during the Depression; I'm not sure what happened to it, but it's gone.
At any rate, thank you very much to our witnesses.
I'll start with Mr. Roberts.
I apologize for being late. I don't know if I've missed some of this and, if I have, I apologize.
With regard to the efforts toward making a green economy, what opportunities do you think there are? I see a lot of public support when we have a national strategy—and I'll get to the automotive aspect of that later—and a national vision to move to a certain sector. For example, I don't receive complaints from citizens who, for example, are working to make cleaner engines for cars or cleaner energy in general when they believe they can participate in that.
I'll ask Mr. Roberts, Mr. Wilson, and Mr. Lavoie, about that. What opportunities are really out there to harness that? I just see that we're missing some patent developments to the manufacturing floor that are really obvious. I'll leave it at that. You can spend as much time as you need, because I'll get another round.
This is something that is very important. How do we turn the national consent of the public to go in this direction into an opportunity to create jobs here in Canada?
I'll pose a theoretical example of where we might find some low-hanging fruit—and feel free to embarrass me in front of my colleagues. I look, for example, at an auto plant in Windsor, which was CAW at the time. It was able to create half a million dollars in annual savings by lowering electricity and cooling costs. That saved the plant. Then they had the competitive advantage of not moving the plant to Mexico.
When you mention, Mr. Roberts, the issue of windows, and then you look at doors, and so forth, I think there's again broad public support for that, because there's lot of local manufacturing involved when it comes to doors, windows, and supply and the workforce. If it goes into a building, then you just can't pick up that building and move it to China very easily. So you have, actually, some investment that's also going to be beneficial for the local workforce.
To Mr. Wilson's expression with regard to lowering industrial emissions, you would have some significant cost reductions for that. I look at the home renovation program that we had before. Unfortunately, it was used for some fences and decks and things like that. But would an incentive like that for the manufacturing sector for their hard-building infrastructure, their low-hanging fruit, to get something off the ground, to increase their capital capacity, be a good way to kick start some local business development? I guarantee that the product, unless it's harvested and sent somewhere else later on, is pretty well going to stay in Canada.
First, I don't come from Sudbury, but from a little bit northeast of there, and so I'm from a mining and forestry background, and I have also spent a lot of time in Alberta in the oil and gas sector. We certainly are very cognizant of the importance of the natural resource sector. We see the two sectors maybe going hand in hand. There's always this false dichotomy in the world talking about resources versus manufacturing. Manufacturing sells into resources and buys from resources, and to us they're all the same. The challenge that I think we've had in the resource sector, to be perfectly blunt, has been that we've developed a lot of really neat technologies and then we keep them at home.
Let's talk about Sudbury and the technology supply chain that Vale has created in Sudbury, for example. They have a world-class technology innovation centre. They fostered and created a whole bunch of really neat local companies, and the companies supply Vale in Sudbury.
I see this in Alberta in the oil sands, and the oil and gas services supply sector, and the manufacturers that work there. About 40% of the value of the oil sands and the investment in oil sands is in manufacturing technologies. A whole pile of great technologies created in Alberta to support oil and gas extraction have been exported to other parts of Canada, but they have stayed primarily in northern Alberta. Those companies that are working with the Imperial Oils, Suncors, you name it, are primarily selling those technologies to one location and one project.
It's great to blame governments for stuff, and I'm a big fan of doing that myself, but in this case more of this has to be in the private sector. Why aren't these companies recognizing that if you're working with a Vale in Sudbury, you could also be working with a Vale in South America or in Eastern Europe or Asia? Why, if we're working in oil and gas in northern Alberta, aren't we working in the North Sea?
We extract resources in some of the harshest conditions in the world. We develop technologies to do that. There's no reason why those technologies can't be exported through those larger value chains that those multinationals have. To me that's the starting point. How do we get those companies to use the supply chains that they are already a part of and export, whether it's to Vale or other mining companies in the case of Sudbury? What supports do they need? What access do they need to those markets? The opportunity is there. I think that the companies often don't think they should be doing those things. They think they should only be supplying locally.
Mr. Serré was speaking just a few minutes ago about the mining industry. Our natural resource extraction industry is so important, and we do have a worldwide reputation. I think sometimes we're too concerned about saying we're sorry for everything and not recognizing the fact that we're really centres of excellence in so many different areas.
Mr. Wilson, you were speaking about a fourth industrial revolution. Again, you also spoke about how important natural resources will be to that. Coming from Alberta, one of the issues I am thinking of right now is the 100,000 job losses that we have in our resource industry. However, there are some opportunities and some things that can be done.
One of your members, PSAC—the Petroleum Services Association of Canada, not the organization we normally associate with that acronym—has been looking towards getting well decommissioning done. Opportunities exist there. It is part of their commitment to make sure that they look after the wells they have that are no longer in service. I think one of the important things is to take a look at what that reclamation looks like. All you have to do is go up to Fort McMurray and you'll see what takes place there and how you have these lush forests that used to be pits. I think people would recognize how it can be done if it is done properly. I believe they made a submission to the finance department to ask for some assistance in this regard, because there are no extra dollars for the cash flow to be able to make some of these things take place. That's one issue in terms of a way in which we could perhaps help that industry.
If we look at the other side, it has to do with pipelines. You have the steel industry that is tied in, and all of these different groups. Whether it's the iron ore that is coming out of Quebec or it's the steel industry in southern Ontario or all of the jobs that are associated with the rest of the country, it's critical that we are able to make these types of moves in the future. We have a lot of people throwing sand in the gears in order to help themselves in certain issues. We do have OPEC oil that of course is coming into eastern Canada, and we're having difficulty selling western oil in the other direction. There is a lot of frustration. How do you expect companies to be able to invest when they don't see any future in that area?
My question, basically, is to ask if you could give me just a little bit more information on what you see and what you know from the Petroleum Services Association, what their plans are, and what they would like to see.
As well, perhaps, since it looks like I'm running out of time because I talk too much—
I think I met with you with Calla Farn from McCain's talking about some of these issues a couple of months ago, and they're really top of mind for us.
There are two kinds of challenges going on at the same time. A decreasing percentage of our population is in the workforce, and that is going to accelerate substantially over the next five years. We're already seeing skilled labour shortages in a lot of key manufacturing sectors that are actually slowing down growth. I mentioned that when I was in Midland a couple of weeks ago, several companies were talking about a $1 million expansion. We're talking about a town of only about 20,000, so it's a pretty big expansion and pretty big job creation.
They can't get the people to actually do that $1 million expansion. Certainly in our studies in the past when we've looked at these issues, we've seen that companies are actually withholding investing in their operations because they can't find people to do the jobs. So, there's a real concern on our part.
The second big part of the concern is the changing types of jobs. These aren't the same jobs that they were 20 to 30 years ago. Things are changing in the manufacturing sector. While there are a lot of the traditional jobs, such as welder or electrician, and a lot of the skilled jobs are still really important, now, more than ever, companies need multi-dimensional workers who are able to do multiple jobs at the same time. Often, our education system is not set up to train people that way, so that's another challenge.
What are we doing or what should we be doing about it? I guess I'd start by going back to something that Ms. Roberts said a few minutes ago, which is that we need to start with our youth. We're not getting enough youth involved. The challenge of manufacturing is that everyone thinks that manufacturing is kind of the way it was in the sixties and seventies: dark, dangerous, and dirty. They don't think of creating airplanes or jets or cars or guitars or really neat things that are going on. They think of steel, cutting down trees, and mining.
We need to reshape what modern manufacturing is: it's high-tech; it's innovative. If we can change the perception, it would get more youth in.
We can clearly find out that the current deal is fatally flawed and not supported. That's the evidence we just received.
My understanding is that it is the parliamentary secretary's birthday today. Happy birthday, Mr. Fergus.
Some hon. members: Hear, hear!
Mr. Brian Masse: I understand, as well, that one of his birthday wishes is a national auto policy.
Some hon. members: Oh, oh!
Mr. Brian Masse: I would like to turn it over to Mr. Roberts and Mr. Wilson to expand upon that subject matter. I still think that if we had the right national auto policy in place like other countries do with manufacturing and so forth.... We had Canadian Auto Partnership Council, which was a functioning council under Mr. Rock. At the time, Minister Rock had meetings that were inclusive of Parliament, inclusive of committees, inclusive of all the sectors that worked on targets. That's a starting point. I think a greenfield or a brownfield is still possible for our auto sector. It's not worth giving up on at this moment.
I'll turn over to Mr. Roberts and Mr. Wilson this highly charged subject that we should continue to consider. I want to hear your opinions about that. If they contradict my thoughts, that's fair game.
I'll disagree with that and just say two really important things.
First, Canada is often not even on the map when it comes to foreign investment decisions of major multinationals. We just don't exist. When they are asked the reasons for investing, most of them don't even know they invested here in the first place. Changing our reputation abroad, I think, is critical to our being able to track that investment.
Second, I'd say that we rely an awful lot on FDI, which is great, and the auto sector is really important, but we also need to focus on how we grow Canadian companies to be bigger and more successful. We have some world-class Canadian manufacturers in the auto sector. Magna, Linamar, and Martinrea would be three examples, and they're huge technological leaders in the parts development side of things.
A new assembly is critical to drive the parts side of things, but we could also figure out ways to grow more Canadian companies and make them more successful to drive investment, because often we aren't on the map when it comes to global investment decisions, unfortunately.