Proceedings of the Standing Senate Committee on
National Finance
Issue 42 - Evidence - June 4, 2013 (Afternoon meeting)
OTTAWA, Tuesday, June 4, 2013
The Standing Senate Committee on National Finance met this day at 2:33 p.m. to study the subject-matter of Bill C- 60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures, introduced in the House of Commons on April 29, 2013.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this afternoon, we are continuing our study of the subject-matter of Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.
[English]
This is our eighth meeting on the subject matter of Bill C-60. In our first hour this afternoon, we will look at Part 1, clauses 35 and 40, beginning at the bottom of page 21 dealing with amendments to the Income Tax Act and the Tax Court of Canada Act and related regulations, specifically with reference to manufacturing and processing machinery and equipment.
From Canadian Manufacturers & Exporters, we welcome back Mr. Martin Lavoie, Director of Policy, Manufacturing Competitiveness and Innovation; and from the Chemistry Industry Association of Canada, we welcome Ms. Fiona Cook, Director of Business and Economics. I will call on Ms. Cook first and then Mr. Lavoie to give us introductory statements and to tell us about your associations and how you feel about these initiatives in Bill C- 60.
Fiona Cook, Director, Business and Economics, Chemistry Industry Association of Canada: Thank you very much, Mr. Chair and members of the committee, for the invitation to speak to you today on behalf of the Chemistry Industry Association of Canada. Our association represents 50 member companies responsible for about 200 sites across the country that produce basic chemicals and resins for manufacturing processes and provide technology services, marketing and R&D for chemical products.
The chemical industry is an interesting industry, but it is not well known. It is positioned at the crossroads of Canada's resource base, which includes mining, forestry, agriculture, and oil and gas, and Canada's manufacturers, including food and beverage, construction products, plastics and rubbers, textiles and clothing, electrical and electronics, and transportation equipment, to name just a few industries to which we supply inputs.
My remarks on Bill C-60 today will focus on proposed amendment 40. It is the two-year extension of the Accelerated Capital Cost Allowance for manufacturing machinery and equipment. This amendment is welcome by our member companies as a strong signal that the government recognizes that it can play a key role in stimulating investment and growth in the chemistry industry and, more broadly, the manufacturing sector in Canada.
The extension of the ACCA is a key factor that contributes to improving our global competitiveness because we are a global industry. It has strengthened the business case considerably to win new investments here in Canada. This is important because as few as perhaps two or three years ago, we were looking at zero investment in the chemical industry in Canada. In fact, we were looking at just maintaining and trying to prevent erosion of the base we had.
Things have changed quickly because of things like shale gas, which provides feed stock. The ACCA has allowed us to be competitive with the U.S. As I mentioned, we are very global. Most of the companies in the industry are multinational. They can go around the world to pick sites to invest in, so Canada has to be competitive. Shale gas has put us back on the map, and the Accelerated Capital Cost Allowance helps us with the U.S.
The government has taken other steps the last few years that have helped as well, such as reduction in corporate income taxes, harmonization of sales taxes and removal of the capital tax. These have all improved our competitiveness and have complemented and leveraged the ACCA change, which is focused on large capital investments.
The coming decade, as things have changed overnight almost, looks promising for our sector. We predict that we will attract close to $10 billion in investment over the next 10 years if we continue to build on the current positive policy environment and continue to work industry and government together to develop a more competitive playing field for the next decade.
Since its introduction in 2007, the ACCA has been very effective at attracting new investments to Canada. Many of our companies that have invested credit the ACCA as a key factor in their decision. Those companies invested approximately $3 billion over the past four years. This has resulted in revitalization of the industry and creating jobs and prosperity in key regions of the country. In our sector, one job in the chemical industry generates another five jobs elsewhere in the economy.
As an example of some of these investments, in Sarnia, Ontario, two of our member companies, NOVA Chemicals and BioAmber, have made recent investments of $250 million and $120 million respectively. Sarnia, as you know, has not seen much new investment in 20 years, so this has revitalized that area. We hope it is the beginning of a new trend.
In other regions of Ontario, the ACCA has enabled companies like Cytec Canada Inc., BASF Canada Inc. and DuPont to expand and improve their facilities. In the case of DuPont, they would have closed a Canadian plant and left the U.S. plant open if it had not been for the ACCA. That is a really good-news story for the Windsor area, where that plant is located.
In Alberta, Williams, Dow, Shell and Methanex have made investments estimated at $500 million. NOVA Chemicals will host a ground-breaking ceremony on June 7 for its new $1 billion polyethylene facility in Joffre, which is expected to be up and running by the end of the 2015. They will benefit from the ACCA. That was a key factor in that investment decision as well.
In summary, the ACCA is stimulative. It grows a tax base by encouraging incremental investments. Much of the $3 billion in new investment over the past several years would likely have gone elsewhere if not for the ACCA. Our competition in the U.S, specifically the chemical sector there, benefits from a 60 per cent declining balance for depreciation. Some specific operations in the chemical value chain, like ethylene, can actually structure themselves as trusts and pay no corporate tax. We are not advocating that, and our industry does not necessarily support these kinds of measures, but we believe that ACCA, to a certain extent, levels the playing field at least over the two years it is being extended.
I caution that as we look out beyond 2015 for longer-term investments, we are still dealing with significant competition from the U.S. We will continue to work with government and policy-makers to ensure that the tax regime is competitive to attract major investments to Canada. The ACCA has proven to be a very effective tool to win investments in Canada. We certainly support this budget and its manufacturing focus, and the ACCA extension, of course.
We are part of a coalition of 40 companies and associations led by the capable folks at Canadian Manufacturers & Exporters. We supported it through the coalition all along.
Thank you very much.
Senator Day: Thank you very much.
[Translation]
Martin Lavoie, Director of Policy, Manufacturing Competitiveness and Innovation, Canadian Manufacturers & Exporters: Honourable senators, thank you for inviting me to meet with you today.
[English]
On a general note, I would like to mention that Canadian Manufacturers & Exporters represents about 10,000 manufacturing and exporting companies across the country. Our sector employs about 1.85 million Canadians. Our sector still accounts for about two thirds of exports in Canada and about 55 per cent of our R&D spending. Including the ICT sector, we are approximately 88 per cent of research and development.
We were very pleased to see in the budget the recognition of manufacturing as a strong driver of the Canadian economy, especially when it comes to innovation, R&D exports and value-added activity.
The budget partially responds to some of our priorities that we had identified in our pre-budget submission. I will talk about two more specifically, the first one being the ACCA. I will also say some words about the new announcements in the budget about direct funding for business innovation.
With regards to ACCA, I can say that that was by far the most popular measure in our pre-budget submission among our members. The ACCA has been in place since 2007. It boosted Canadian manufacturers' investments in machinery and equipment by 45 per cent between 2009 and 2012. This year, we are expecting that these investments in machinery and equipment in our sector will exceed the pre-recession level, the pre-2008 level, for the first time since 2008. Canadian manufacturing investments for all capital assets have surpassed the United States in 2010 and 2011 for the first time since 2006. There is still a lot to do, but we are happy to see that these tax incentives are working well and are meeting their objectives.
Ms. Cook mentioned the situation in the United States. We think we need to pay close attention to what is going on in the United States and how they will move with regard to the incentives they currently provide to manufacturers for the acquisition of machinery and equipment. Right now, manufacturers enjoy, as was pointed out, a 60 per cent declining balance. In certain industries for certain companies they have even provided bonus depreciation of 50 per cent. You can deduct more than 100 per cent of the value of your assets in certain sectors. This is a temporary measure. We think that the ACCA should be in place as long as these special measures are also in place in the United States.
We also need to look at how we allow companies to depreciate their machinery and equipment under the traditional CRA rules. When ACCA is over, we will go back to the traditional method of depreciation, which allows, in general, a 30 per cent declining base. How does that compare with the U.S. traditional model as well? It is really difficult to compare. The U.S. is based on industries, and we are based on classes of assets. The CME will undertake a study over the summer to try to compare on certain types of machinery and equipment how we can actually look at the depreciation rates in Canada and how we can provide a more level playing field for investment attraction between Canada and the U.S.
We also need to have a look at new stimulus measures in the future to accelerate the adoption specifically of equipment related to information communication technologies. I mention that because Canada has a productivity gap with the U.S. and some other OECD countries, and many observers will point to the lack of investment in ICT equipment to explain at least half that gap. We need to pay attention to that. What is new today is that 50 per cent of all machinery and equipment bought by manufacturers is related to the ICT sector, and 20 years ago there was none. All the equipment was not ICT-related.
The problem is that this ICT equipment, for the most part, is computers and software that allow manufacturers to keep track of their production line and be more productive. They are not in the same classes of assets. They have not benefited from the ACCA in the last couple of years. We need to pay attention to that as well from a productivity policy perspective.
I would like to say a few words about direct support measures for business innovation that were in the last budget. As you remember, last year the government told the industry that the $660 million cut under the SR&ED Program, the Scientific Research and Experimental Development Program, would be reinvested entirely in new direct funding for business R&D. Government has done it, but there are still a lot of questions with respect to equity of access to this new funding across industry sectors and across the nation.
While we support the new funding provided in the automotive, aerospace and forestry sections, as well as the new advanced manufacturing fund for southern Ontario, we must realize that going from a broad, tax-based approach like SR&ED to a direct funding mechanism is going to penalize manufacturers who do not match these geographic and industry criteria.
We hope the government will eventually ensure that these direct funds for business innovation will be accessible across all sectors and also across the country between different provinces. We will work with the governments to see if other regional economic development agencies across the country could also implement similar business R&D support mechanisms.
I would conclude by again recognizing that this budget is a great step towards a better recognition of the importance of manufacturing for economic growth and for our capacity to innovate. However, a lot of work remains to be done in the sectors of ICT equipment and also to make sure we provide a level playing field with U.S. tax rules. I look forward to your questions.
The Chair: Thank you, Mr. Lavoie.
Senator Buth: I would like to start with the chemical industry. You may have mentioned this at the beginning, but can you tell me how many members you have? You mentioned some names. Can you give me more examples of some of the companies that would be your members?
Ms. Cook: Sure. It is important to remember we do not represent the entire sector. It is a very large sector that includes pharmaceuticals, paints and coatings and plastics. We represent the companies that produce the basic chemicals that go into further products upstream.
We have, at the moment, 50 member companies. We have company names like Dow, Nova and Shell. There are a lot of upstream oil and gas too that have chemical operations, so you will have Imperial Oil in there as well. We have companies like Lanxess, which is a large German multinational. Mr. Lavoie talked about the SR&ED Program. They located a brand-new SR&ED facility with the University of Western Ontario's engineering department because of that program. They won their global mandate.
We have ERCO Worldwide and Canexus, which produces inorganic chemicals, primarily for water treatment and pulp and paper. There are so many. We have large and small companies. Blachford is a small, family-owned, specialty chemical producer.
Senator Buth: You mentioned that this decade is different from the last, essentially. You mentioned one example, shale gas. Are there other reasons why you are so optimistic about the future?
Ms. Cook: It is the shale gas. It is also the revitalization south of the border, because 80 per cent of our products are shipped to manufacturers in the U.S. There is a whole renaissance going on there as well. There is a lot of optimism that there will be demand going forward.
Shale gas has really changed. We take liquids out of gas, things like ethane, butane, propane, and do all kinds of things, crack them and manipulate them to make different derivatives that go into products. Before, when we were looking at conventional natural gas supplies in Canada, and this is probably something you are aware of, a few years back, we were looking at a decline. This shale gas actually tends to contain a lot of liquids. The number one variable when you look at investment is feed stock, which accounts for about 80 per cent of their costs. They want the stability and long-term supply of that if they are making a 20- or 30-year investment into a plant.
Senator Buth: Tell me about the types of jobs that these companies have. Would the wages be high?
Ms. Cook: After the IT sector, we employ the most university graduates, as an industry. The average is about $80,000. You will have a lot of process operators and chemical engineers. We create another five jobs. You have your indirect, which is construction. Whenever plants do turnarounds and maintenance, you need a lot of construction and skilled labour. It is an issue particularly for companies in Ontario and east, because there is a huge draw for that kind of skilled labour pool from the oil and gas sector in Alberta, which is the same type of skill set.
Senator Buth: Did you give us a number for what you think the investment has been in manufacturing equipment for the last number of years?
Ms. Cook: In the last four years it was $3 billion.
Senator Buth: You would attribute that to the ACCA?
Ms. Cook: Yes, exactly.
Senator Buth: Mr. Lavoie, I was interested in your comments just at the end in terms of the SR&ED Program. These changes came about because of the Jenkins report in terms of Canada's innovation record, and we are not doing well in terms of innovation.
Part of what was in that report — and this is me paraphrasing — is that the SR&ED credit, in terms of large companies, was going to programs where there had already been R&D dollars spent, clearly, but those were to be spent anyway. That was part of the shift toward some more direct innovation.
Can you talk about what your members would like to see in terms of the innovation dollars? You mentioned some of the industries it is going into. Perhaps can you give me a better idea?
Mr. Lavoie: You made a good point. There was a lot of criticism against the SR&ED Program, for example, are these dollars being spent anyway? Are we just rewarding normal behaviour?
We could probably have this conversation about anything tax related. That is, are you taking the bus because you have a tax credit related to public transit? Are you sending your kids to swimming lessons because you have a tax credit? Would you do it anyway? I agree with the SR&ED Program, but you need to find a way that the program is incremental.
How do the elimination of capital expenditure and the reduction of the rate from 20 per cent to 15 per cent fix that? I do not see a connection between what was implemented and the original problem.
If the original problem was that businesses do not spend enough in R&D, how does a reduction of the tax credit make them spend more? How does a reduction of the tax credit convince a multinational based outside Canada to look at Canada for investment? We lost track of the original issue, which was not enough investment from businesses.
The U.S. system, for example, has a tax credit that is more incremental because they maximize the tax credit according to your track record of investment in R&D in the last three years. The more you invest as a ratio of your revenues in R&D in the last three years, the bigger your tax credit will be that particular year. That is a way to say that we will reward those who are spending more on innovation. I have not seen anything in the Jenkins report about that.
In terms of what we would like to get from the SR&ED Program, I think there are two issues. First, we need to look again at the SR&ED Program and the actual incentive of the SR&ED Program. What are the definitions of innovation that we are using? The SR&ED Program is based on the 1964 Frascati Manual adopted by the OECD. Unlike other countries in the OECD, we have never updated our definitions of R&D. We are still stuck with old definitions of R&D that were accurate in the 1960s, but in 2012 you are talking about other forms of innovation. You see a gap between what is SR&ED eligible and what is actually spent in R&D.
The pharmaceutical sector came out with a study done by KPMG that says there is a 30 per cent gap between what they actually spend and what is accounted for in the SR&ED Program. A lot more claims are being refused by the CRA because they do not consider this as technological advancement or innovation. Maybe we should re-look at this and update the definition. That is a CRA administration issue rather than a budget issue.
In terms of the SR&ED Program, one other issue that we have with it is that, for large companies, if you are not in a preferable situation you cannot access the tax credit in a refundable manner; it is only refundable for small companies. The problem is that you have to carry them forward, and you have 20 years to claim the credits.
We estimate that in the pool of unused credit — call it sleeping money, if you want, to paraphrase Mr. Carney when he was talking about money that companies were sitting on — about $7 billion that has been accumulated under SR&ED is sitting there that has been earned by companies. They will eventually claim these credits.
We are saying is there a way we can make even a partially refundable tax credit so companies can access it? In exchange, we make these companies commit to spending all this money in R&D or to raise their R&D footprint or expenditure in the next two or three years.
That would be another solution to the original problem, which was that businesses do not spend enough in R&D. These are two things with SR&ED that CME will address with the government for the next year.
The Chair: I will have to cut you off here. It is nice for us to learn about SR&ED, but it is not part of what we are dealing with right now. Unfortunately, we have a very limited time frame.
[Translation]
Senator Chaput: Why has the federal government decided to extend the accelerated capital cost allowance by two years?
Ms. Cook: Are you asking about the period of time or the actual measure?
Senator Chaput: The reason for the extension.
Ms. Cook: We would have liked it to be for more than five years because, when you decide to invest, it takes about five years for your board to approve everything, the studies to get done and the equipment to be ordered, especially in our sector.
Senator Chaput: So that is what the industry wanted?
Ms. Cook: Yes, absolutely.
Senator Chaput: Very well. What type of company does this measure benefit? Small, medium or large?
Ms. Cook: All the companies in the manufacturing sector that buy equipment can benefit from this measure.
Senator Chaput: How many companies buy equipment?
Mr. Lavoie: I would not be able to tell you how many companies, but about $13.6 billion were invested in machinery and equipment in Canada last year.
Senator Chaput: In one year?
Mr. Lavoie: Yes, last year.
Senator Bellemare: I am all in favour of the accelerated capital cost allowance, but at the same time, the measure was just extended by two years. Could you tell me what the time period is for the measure in the U.S.? Is it a permanent measure?
Ms. Cook: When the measure was announced five years ago or so, the period was longer; it was five years.
Mr. Lavoie: There is also the 60 per cent measure. It is 60 per cent for the first year, 60 per cent of the remainder for the second year, and so on. That adds up quite quickly. Almost 100 per cent can be deducted between three and five years. In some sectors, there was even a bonus. This measure was supposed to end last year, but in the well-known agreement on the budget gap, they decided to extend it by another year.
Senator Bellemare: We often hear that it is a measure that makes it possible to accelerate investments. Since it is a temporary measure, companies that are thinking of investing are probably saying to themselves that they would be better off investing right away to be able to benefit from this temporary measure.
If the program is extended, do you feel the effect will be the same? Do you feel that it does not just cause investments to be made earlier but it also gives rise to new ones?
Ms. Cook: Yes, absolutely. I feel that it generates progressive investments, investments that we will not see. That is why the long-term tax impact is positive.
Senator Bellemare: In other countries, such as the United States, for example, how do tax measures compare in terms of an accelerated capital cost allowance?
Mr. Lavoie: I only looked at the United States. I looked at accelerated depreciation for other kinds of items, telecommunications equipment, for example. I found that, in Japan and Spain, they provide blanket tax credits of 10 per cent. A lot of European countries also provide accelerated depreciation rates for items like computers and software. In Canada, we did it for two years, 2009 and 2011.
To answer your other question, two other variables must be considered in terms of incentives for business, including the level of profitability. You cannot take full advantage of the ACCA if you do not make a profit. That is because, if profits are made, they can be applied against the tax payable. That has to be considered.
A lot of people think that the measure has been in place since 2007, but it was always put in place for a two-year period. As Ms. Cook said, these kinds of investments are not usually made over a two-year period, but rather over three to five years.
If companies have only two years, they will not necessarily move forward if a project looks like it is going to take three years and they know that the program will be ending in two.
Senator Bellemare: Would it be in our interests, as a society and as an economy, to have an accelerated depreciation program in place permanently?
Ms. Cook: I think it would, especially given what the future holds for us and our demographic challenges. As Martin mentioned, with the problem of declining productivity, investments have to be made. Our hope for improvement lies with machinery and equipment.
Senator Bellemare: Without an accelerated depreciation mechanism, how long does it take to fully depreciate a piece of equipment?
Ms. Cook: Between 11 and 12 years.
Mr. Lavoie: In this sector, we are talking about 30 per cent of the residual value. You can deduct a good part of the rest after 10 years or so, but you need between 12 and 15 years in total.
Senator Bellemare: But we know how quickly equipment gets outdated today, particularly with the new technologies which become obsolete much sooner.
Mr. Lavoie: Especially with information technology equipment.
Senator Bellemare: My next question is about your comments on fairness, a subject that seems to concern you, and about new ways to encourage companies to innovate. How would you see a subsidy program that would be fair and accessible? There is a big question for you.
Mr. Lavoie: We like tax-based programs. Everyone pays taxes. If there is a tax credit and if things are checked by the Canada Revenue Agency, everyone has access to it as long as they have research and development costs. From the moment you provide direct subsidies and directly subsidize business projects, there will be limited resources for a large number of applications. The government has to choose particular sectors, regions or projects. It is always difficult to please everyone.
Senator Bellemare: Are the new access standards for the funds known yet?
Ms. Cook: Not yet.
Mr. Lavoie: There is still a great lack of information. The National Research Council is working on a "concierge service,'' which was one of the recommendations of the Jenkins Report, and which will help to distribute information. There are a huge number of programs, not just federal, but provincial too. The Jenkins Report has only four pages on federal programs. Provincial subsidies often decrease the amount of a federal subsidy and finding money becomes complicated.
Senator Bellemare: How do you explain such a major delay in new technologies in businesses in Canada compared to the United States or elsewhere in the world? We have been aware of the delay for a long time. How do you explain it? Is it because our dollar has been so weak for several decades? Is it a matter of attitude? Is it a workforce issue? Is it because our workforce does not have the skills to work with new technologies?
Mr. Lavoie: You are asking a question that a lot of people are asking. If we go back 10 years, labour costs in the manufacturing sector were relatively weak compared to the United States. They were about half the labour costs in the United States. We also had a weak dollar, which worked to the advantage of a company whose production was in Canadian dollars and whose sales were in Canadian dollars.
In 10 years, the situation has completely reversed. In the manufacturing sector, our labour costs are a little higher than in the United States and our dollar is at parity.
The only way to go against this trend is to increase productivity. But we cannot do it with labour costs because our labour is too expensive. So we have to increase our productivity with machinery.
Senator Bellemare: Would you agree to more sector-based approaches, such as an accelerated capital cost allowance specifically for new technologies only, or would you prefer to see the accelerated capital cost allowance for all machinery and equipment?
Mr. Lavoie: At the moment, there is nothing on all machinery and equipment. Just for machinery and equipment used for manufacturing. The entire sector of information technology used for production is not included. We have lost the tax incentives for machinery and equipment used for research and development. There are no more incentives for research and development in terms of capital, meaning machinery and equipment. But most other countries have either a tax credit that allows capital expenses or they use accelerated depreciation rates.
The Chair: I would like to clarify the last reply.
[English]
You would like to see the equipment used for research included as part of the equipment to which this applies?
Mr. Lavoie: Not necessarily in the same class. However, you could use the CCA model to accelerate the adaptation of machinery and equipment used for R&D purposes, not for fabrication.
The Chair: Not necessarily the same class but the same concept.
Senator Callbeck: The ACCA, as you know, has been a two-year program since 2007-09, 2011-13 and will be for 2013-15. I take from your comments that you both feel that if this were extended with a longer time frame, rather than two years, it would mean greater investment in your area. Is that right?
Mr. Lavoie: Yes.
Senator Callbeck: I think I read somewhere that this program costs $1.4 billion every two years. In your estimation, is this the best use of that $1.4 billion to help your industry?
Ms. Cook: Let me just clarify: The government, because they do budgeting on a three-year cycle, look at this from a very short-term perspective. As I mentioned before, if you were attracting investments that would not have been made, once you have done the writeoff and you are earning profits, you are generating tax revenues, so there is no cost; it is a tax deferral. They measure it from a three-year perspective. It is classified as a cost, but it is not because it ends up increasing tax revenues further along.
Senator Callbeck: I understand, but if you were initiating a program, would this be the one you would initiate?
Ms. Cook: That is a good question. I suppose we have been pushing it because it existed in the 1980s and was successful. You can look at things like investment tax credits as well, but there would be a cost. What is nice about this measure is that it does not cost the government over the long run, whereas things like a tax credit or direct subsidies obviously do cost.
Mr. Lavoie: Between 2009 and 2012, there was an increase of $4 billion in investment in machinery and equipment for a cost of $700 million a year, given the $1.4 billion for two years. The revenues outperform the costs. Many of these investments would not have happened without that measure. From a balance sheet perspective, you may see it as a cost, but you can also see the benefit in terms of productivity, foreign investment and domestic investment in manufacturing.
Senator Callbeck: You talked about investment. I believe you said that you can attract $10 billion in investment in the next 10 years if industry and government work together. What other priorities would you like to see the government address?
Ms. Cook: We would like to see more emphasis on value-added manufacturing in Canada. As I mentioned earlier, we take natural resources like natural gas, minerals and electricity to make chemicals. We would like to see more focus on more upgrading in Canada rather than shipping the raw product offshore or to the U.S. We would like to see a more concerted effort. Of course, that is difficult because natural resources fall under provincial jurisdiction. There is a lot of talk going on right now, including about getting crude oil from west to east rather than, as we did in the past, shipping it south because we were so focused on the U.S. market. Moving it from west to east you could upgrade it. There is a large petrochemical complex in the Montreal area, and they are short of feedstock right now. Certainly, it would help that industry there. From our perspective, that would be a key area to work on.
Mr. Lavoie: From our perspective, all capital expenditures are important. When I was talking about R&D capital expenditure, it is important. We want to attract innovation. We want to attract multinationals to spend here. Yesterday there was an announcement in Montreal that the Swedish company Ericsson will spend $1.2 billion for a new R&D centre that will employ people and bring innovation. They said they came to Quebec because of the tax credits and also electricity prices. Those multinationals are mobile and can invest in many countries. It is important we keep an eye on what is going on. Capital is important; once the building is there and the equipment is there, you will bring in engineers, academics and other people. In terms of R&D and production, that is important. That is going to be one priority.
We should never forget the human side of it. It is one thing to have all this nice machinery and equipment, but if your people do not know how to operate, maintain or build them, you will not be better off. I think the labour side of it is also important.
Senator Callbeck: I agree. Thank you.
[Translation]
Senator Hervieux-Payette: I would like to clarify the amount of some investments. You told me that, for the chemical industry, the group that you represent, it is $10 billion over 10 years, whereas Mr. Lavoie told us $13.5 billion in 2012. Does your $13.5 billion include her billion?
Mr. Lavoie: Yes.
Senator Hervieux-Payette: Thank you. I know my way around that sector because I worked in an engineering firm and I know that the machinery is not often made in Canada. In a number of areas, the machinery is imported from Germany, from the United States and from elsewhere. Could we not have a greater incentive for machinery made in Canada? For example, we might consider depreciation at x per cent for foreign machinery but, 15 or 20 per cent for machinery made in Canada. We would create twice as many jobs. Not a lot of production goes on without machinery in the chemical sector. A lot of equipment comes from abroad. It is the general rule for you.
As I see it, we seem to be missing the boat a little. If allowances under the research and development tax credit have been abolished, is there perhaps some way to make up for that? I would like to know what you think about it. It is not mentioned in this bill at all, but since we do a budget every year, I think it could help to give people something to think about. If we look at that amount of $13 billion, if 50 per cent of the machinery came from Canada, we would have $6 billion in Canadian manufacturing. At the moment, my impression is that 70 per cent of the equipment comes from foreign countries. Are my figures much the same as yours?
Mr. Lavoie: We actually do make industrial machinery; it is increasing every year and we are exporting a lot of it. But you are right, we also import a lot as well. The value of the dollar has also helped to lower the prices on imported machinery. The idea of linking Canadian content to the depreciation rate is an interesting one, even more so when you consider natural resources, mining, the oil sands, or petroleum in the Maritimes.
The question is knowing how to define made-in-Canada machinery. Which criteria do we use? There has to be some agreement. Do we consider the components? The labour? It would also be really interesting to see, with companies that come here to invest and who are subject to the Investment Canada Act, whether it could not be considered one of the criteria for a net benefit to Canada.
Senator Hervieux-Payette: Corporate tax rates are encouraging foreign investors to come here. In terms of labour, I agree that we have one industry in Montreal, aerospace, where we have difficulty in training people to meet the needs of the industry. Are you seeing that in any other sectors?
Mr. Lavoie: Absolutely; we see it in a number of sectors. That is the reason why some mining companies pay CEGEPs for training programs. At the CEGEP in Baie-Comeau, for example, ArcelorMittal has made donations to support the training of workers.
I have asked myself how a university or a CEGEP decides on training. No one has called me to ask where the demand is. Is it done with professors in isolation?
Senator Hervieux-Payette: I remember old programs to train high-level welders with federal money and with cooperation from business. There was an academic component and a practical component. One of the complaints from the industry was that a participating company would find itself training employees for the companies that did not participate. There has to be a way to correct that.
Mr. Chair, I do not have to tell you that, in Germany, this has been done for a long time. Perhaps we are a bit behind. We are talking about huge sectors with thousands of employees. There has to be better linkage between the private sector and the public sector. I mean provincial and federal. There is a little gap between the two and that also plays a role in productivity.
Ms. Cook: Absolutely. If I am not mistaken, we are trying to create an alliance of industry and the provincial and federal governments. It is in the works.
Senator Hervieux-Payette: Is that new?
Ms. Cook: Yes.
Senator Hervieux-Payette: We will see the results in a few years.
Ms. Cook: It takes a few years to train people.
Senator Hervieux-Payette: It does.
Ms. Cook: Exactly.
Senator Hervieux-Payette: Mr. Chair, I have a quick question about computers. Did we drop behind when we did away with the incentives in that area?
Mr. Lavoie: The latest report from the Science, Technology and Innovation Council shows that we are not catching up at all. We have to find a way of accelerating the use of that kind of information hardware, not only in manufacturing but across the entire economy. It is 14 per cent of the GDP, after all. Other sectors must invest in hardware like that. We have been talking about depreciation rates and tax credits. Those are things that could accelerate the use of that kind of hardware.
[English]
Senator McInnis: This question perhaps should be put to ministers of natural resources, but I doubt we will have them here before the Senate rises for the summer, so I will ask the chemical industry if you could comment on this. You seemed excited when shale gas was mentioned, and the future of shale gas. Where is it being extracted? I know it takes place in Alberta.
Ms. Cook: In B.C. There are deposits, of course, and a very sizable deposit in Quebec. That government has put a moratorium on any further exploration so what you are seeing is quite unique. In Sarnia, NOVA is making these investments. They are actually pipelining shale gas from the Marcellus Formation in Pennsylvania. This is a reversal in flow. They are bringing natural gas in from the U.S. because there was nothing in the east and New Brunswick, as you know —
Senator McInnis: It is a political issue and it is a difficult one. It is the same in Nova Scotia; they put it off. Do you voice any concern? Obviously it is extremely controversial.
Ms. Cook: It is controversial, and of course the public has a right to be concerned. I think the information needs to get out there; the technology is improving all the time. Most of the companies that are operating have very strict guidelines, but that is not well known.
Whenever there is anything new, there is always that fear, right? Perhaps I should not speak for the natural gas guys, but I think the industry just needs to be a little more public perhaps in some of these areas, like Quebec. I think they are trying to; I know Enbridge is trying to educate by going on a literacy campaign in Quebec to try to get perhaps more confidence with the public about this. It is quite exciting technology.
Senator McInnis: And in Atlantic Canada. It might be the reason we are labouring under deficit governments. I am not advocating it. You were excited about it, and there is plenty of shale gas in Atlantic Canada.
Ms. Cook: There is lots of shale gas in Canada. In the U.S., they are actually going ahead with a lot of development. Their manufacturing sector is taking off again. They are seeing what they are calling "re-shoring,'' which is when industries come back.
The Chair: Perhaps for the record you could explain the Accelerated Capital Cost Allowance in terms of a $100 purchase of equipment. It is 50 per cent the first year, and then is it 50 per cent of the original cost?
Mr. Lavoie: It is 25 per cent the first year; 50 per cent and then 25 per cent.
The Chair: Fifty?
Mr. Lavoie: Five zero. Then 25.
The Chair: Is that for three years to get through the package?
Ms. Cook: It takes three years, yes.
Mr. Lavoie: And it is a straight line, so it is not a declining basis.
The Chair: It is always the original amount that you are taking a percentage of.
Mr. Lavoie: In your example, it would be $25, $50, $25.
The Chair: You talked about the U.S. being 60 per cent of a declining balance.
Ms. Cook: They call it double declining, too.
The Chair: There are a number of different ways you can play around with that?
Ms. Cook: Yes. Depreciation can be complicated.
Mr. Lavoie: You can accelerate with the number of years or the upfront. If you allow 60 per cent the first year, it is twice as much as the current 30 per cent, so you will have even a lower number of years that you can depreciate your equipment.
[Translation]
Senator L. Smith: Mr. Lavoie, you mentioned that the government should look for categories of equipment in order to increase these credits.
Mr. Lavoie: These depreciation rates. We are specifically thinking of the category that includes all kinds of telecommunication and information technology equipment. We also believe that all equipment used for research and development should be subject to special tax treatment.
Senator L. Smith: And you have already made that request?
Mr. Lavoie: Yes. It has always been part of our pre-budget submissions, in the three years I have been with CME. We are pressing forward with it again this year.
Senator L. Smith: Do you have any recommendations for us that would improve the legislation?
Mr. Lavoie: What we still have to do is to fully compare the Canadian and American systems. It is very difficult to compare them. As I have already said, the American system is based on industries, so there would be one rate for one industry in the automobile sector, whereas in Canada, it is done by the kind of asset. They are difficult to compare. What we are going to try to do is to take some of the most widely purchased types of equipment in Canada and in the United States and to see how they would be handled in the United States and in Canada. And if we realize that we are at a disadvantage in Canada, if we realize, for example, that, using traditional depreciation models, it takes five or seven years longer in Canada to depreciate 100 per cent of an item's value, then there is perhaps a reason to think that it is not a national issue. Perhaps it is instead an issue of having a level playing field between the United States and Canada, because the United States are our competitors from that point of view. They want to attract investment too. Perhaps reshoring is not just happening with China, perhaps it is happening with Canada as well.
[English]
The Chair: I am told that there may be a vote; it is a one-hour bell. I will find out the timing for us. The light just went on, so we probably have time to finish this particular portion of this.
The vote is at 4:20. We might be able to get started on the next panel, as this one is almost concluded. Thank you, Ms. Cook, for being here.
[Translation]
Mr. Lavoie, you stay here and we can move on to another subject.
[English]
For those who would like to find the section, it is at page 82 of the English version of the bill. It is Part 3, Division 9, under the Immigration and Refugee Protection Act, and foreign workers is the issue we will talk about.
[Translation]
We are continuing our study of the subject-matter of Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.
[English]
In our second hour this afternoon we will be looking at Part 3, Division 9, beginning at page 82 of the bill. It deals with amendments to the Immigration and Refugee Protection Act, specifically with reference to Canada's Temporary Foreign Worker Program.
From Canadian Manufacturers & Exporters, we welcome back Martin Lavoie, Director of Policy, Manufacturing Competitiveness and Innovation. We pushed you to the side of the table; sorry about that. From the Building Construction Trades Department, we welcome Christopher Smillie, Senior Advisor, Government Relations and Public Affairs. Welcome, Mr. Smillie. From the Canadian Labour Congress, we welcome Karl Flecker, National Director of Anti-Racism and Human Rights Department.
I would ask that each of you give us any introductory comments you may wish to make with respect to this particular initiative that appears in the bill at page 82 and following. Mr. Smillie, would you like to start?
Christopher Smillie, Senior Advisor, Government Relations and Public Affairs, Building Construction Trades Department: Sure, that sounds great. I am not sure if I am on Mr. Lavoie's right or left, or if I am to the right or left of Mr. Flecker, but we will see how things go.
Thank you, chair and honourable senators. Today I am here representing the Canadian building trades. We represent 14 building trade unions, more than half a million skilled trades members across Canada and about three million in the U.S.
We are the people who build and maintain Canada; we are the people who train 80 per cent of Canada's apprentices; and we are the people who build major natural resource projects across the country. We build infrastructure, roads and just about everything you can imagine.
Canada's labour market is at a crossroads. There is so much investment and opportunity in our country. Concurrently we are facing major demographic changes. More workers will be retiring in the period 2013 to 2018 than ever before. BuildForce Canada estimates we will be short about 157,000 workers to meet the economic demand. There is no time like the present to get the policy framework right to meet this enormous opportunity.
Today I will give you my thoughts on Bill C-60 and, more specifically, the portions of the budget that make changes to the TFW Program. It is part of the HR toolbox in addressing shortages in certain sectors of Canada's economy.
Before getting to the heart of the issue, I will preface my remarks with the following: We have been working with our contractor and construction owner partners in heavy construction to use the program to meet demands with unemployed U.S. building trades members, and it has worked reasonably well thus far. We have facilitated the temporary entry and exit of thousands of our members from the United States when no Canadians exist to complete the work.
These members work alongside our Canadian members in Alberta and everywhere else to meet the challenging labour situation. In our sector of the economy we work with our employers to find folks from coast to coast before assisting to bring in Americans. We now even have some Irish welders among our ranks in Alberta.
The program is a complementary HR tool in construction. It is not the silver bullet to skill shortages, but it is a Band-Aid program designed to fix, as my 18-month-old daughter would say, the "oh-ohs'' in the labour market.
The budget measures outlined in Bill C-60 seems sufficiently reasonable to improve the integrity of the TFW Program. Some of the measures are being made in C-60 through law and some by regulation. I will address them all today.
Measures such as user pay for labour market opinions make eminent sense and discourage employers from making applications they never use or intend to use. Oftentimes the LMO in industry is used as an insurance policy to provide comfort that a labour force will be available for a large project. Taxpayers should not pay for these kinds of things.
Enhanced employer recruitment effort here in Canada is an important measure. We need to assist Canadian employers to transition to using a Canadian workforce. This is an important part of what was announced in the budget. If this change is real and substantive, we support it.
To assist employers to transition to a Canadian workforce means focusing on training Canadians. We wish this measure said, "If you use the Temporary Foreign Worker Program, you must also hire and train apprentices.'' You should not use the program to get around training Canadians — full stop.
There is a flip side to this and an important, practical upside. If we are bringing fully certified temporary foreign workers from Michigan, California and New York State, which we do, on a short-term basis, employers can then dispatch apprentices to work with that fully ticketed person. Without journey persons, you cannot have apprentices on site.
The next measure is the removal of foreign language proficiency as a requirement of employment. This is the "you must speak Mandarin to work on this project.'' This avoids the issues in the HD Mining situation, and we support it.
We do have concerns with the changes as outlined, both in the budget document and in the legislation. You will see from the brief I circulated that we are unsure of what the cancellation of the accelerated labour market opinions will mean for folks arriving for major shutdown projects. One of the other witnesses talked about large refineries. It takes 2,000 to 3,000 people to work these shutdowns. The cancellation of the accelerated LMO has created uncertainty among our contractors and our owner communities, but we will continue to work with CIC and HRSDC on this. Our employers and owners, like Syncrude, Suncor and Imperial Oil, have been using this program in a responsible manner to meet acute demand issues in our skilled trades.
I just received 2012 numbers from CIC of entries of skilled trades workers we represent from Citizenship and Immigration. It is 6,900 mostly in the high-skill occupations that we represent. This is still lower than the 2008 number.
Construction has a workforce of roughly 1.3 million. These 6,900 people are mainly from the United States. They are mainly welders, iron workers and steamfitters. It is no surprise, as these are the people we have a critical shortage of.
I thank you for the opportunity to speak.
The Chair: Thank you very much.
Mr. Lavoie, did you wish to add something on this subject matter?
Mr. Lavoie: Yes, and I can make it brief.
Thank you for having me here. Our members fully support the government's stated goal that companies in Canada should be hiring Canadians first whenever possible and that there should be no tolerance for abuse under the Temporary Foreign Worker Program. In surveys of our members, hiring foreign workers is the last choice of companies due to the uncertainty of the processes, the time to secure appropriate individuals, the resources required and the overall associated cost. In fact, it can cost a company up to $10,000 to process one temporary foreign worker application and take up to six months to bring a worker into the country. However, we also believe that the program is crucial to support Canada's economic growth and that it can be improved to support the needs of industry, government and employees.
Hiring domestic workers is not always possible. A recent survey conducted by the Canadian Employee Relocation Council found that only two in ten Canadians would move to another province to work, even with a 10 per cent wage increase and all moving expenses paid. This is the reality that Canadian industry faces. There is limited labour mobility and supply of qualified workers within Canada. Also, many of the jobs are not in the major urban centres where people want to move or are positions that are not attractive to Canadians.
More specifically on the budget, it should not be a surprise to anyone that we are strong supporters of the Canada Jobs Grant that was introduced in the budget. In our last three budget submissions we strongly recommended that the government introduce a tax credit to support training of new hires and to increase the skills levels of existing employees.
While we are working with the government to make appropriate improvements to the program, we are concerned about the manner in which user fees will be managed for labour market opinions under Bill C-60. Division 9 of Part 3 of the bill states that the fees to be charged for LMOs will be exempt from the User Fees Act. While I have not received confirmation from officials, I presume that this means the government will not consult stakeholders on the level of the fees. They are not bound to ensure that service standards are tied to the fees. There will be no impact assessment, no tabling or publication of proposed new fee structures, et cetera. CME and industry as a whole have generally agreed that it is reasonable to pay user fees, but not under these conditions.
The User Fees Act was established specifically because of the abuse of user fees by government departments and agencies as a way to increase revenues to cover costs rather than finding more efficient ways to deliver services or working with industry to establish effective user fees.
This clause sets a bad precedent, in our view, and we strongly recommend that the fees charged for labour market opinions not be exempt from the User Fees Act.
I welcome questions.
The Chair: I am glad you mentioned that user fee exemption. We will talk more about that.
Karl Flecker, National Director of Anti-Racism and Human Rights Department, Canadian Labour Congress: The Canadian Labour Congress is an umbrella organization representing 52 affiliates over 130 labour councils and over 3 million workers across all sectors across the country. Thank you for the opportunity to give a bit of input on their behalf.
Although I am pleased to be here, I must express our disappointment with the cross-Canada consultation process that the government put in place regarding the reforms. What we have witnessed are hastily put together sessions that have ignored or limited labour's critique and policy remedies. We have seen last-minute invitations to a very select list of stakeholders that has been skewed significantly toward employers and industry associations. We have seen extremely short RSVP deadlines and limited space to address complex policy issues.
Before coming here I ran down the list of the consultations in St. John's, Calgary, Regina, Vancouver and Halifax. There were two labour voices; all the others were industry associations or employer groups.
I appreciate getting this invitation from the clerk last night at 5:30. I was glad I opened my email at 4:30 a.m. this morning and was able to redo my schedule.
We have to do better. Canada's Temporary Foreign Worker Program is broken. The program has grown to epic proportions in a very short time frame, and it has no meaningful oversight or authentic measures to hold employers, labour brokers or immigration consultants accountable for abuses. The program has the potential to act as a wage suppression tool, and it can displace members of the national workforce.
This is a binder of 33,000 employers who received a positive labour market opinion between June 1, 2010, and June 13, 2012. This is a 90-page document listing thousands of employers who were successful in securing an accelerated labour market opinion for high-skilled migrant workers. Yet, many of the employers in this document operate fast food restaurants, gas stations and convenience stores. There are 112 Tim Hortons franchises alone in here. Most people would recognize that these are generally low-skill jobs. This is unfortunate, and it speaks in part to what is broken.
Let me get to the user fees. The CLC supports measures that impose user fees on employers, brokers and immigration consultants who are seeking access to the TFWP. HRSDC spends approximately $35.5 million per year processing LMO applications, or $342 per LMO application.
Minister Kenney said at the end of April that putting in place user and privilege fees is intended to serve as a financial disincentive for some employers who have been returning to this program and in some cases addictively.
The CLC urges this government to establish fee levels that will accomplish that policy objective. However, seeking a user fee exemption would, I understand, allow the government to set whatever fee it chooses. The fee must be set at a level that it cannot be treated simply as a nominal cost of doing business.
We argue there is a human replenishment cost that must be considered. Employers benefit from the training, skills and abilities that other nation states have invested in their workers who migrate here to work temporarily in Canada. Creating financial incentives that better utilize members of our national workforce can be achieved by applying privilege fees that account for the human replenishment costs of what other nations lose.
Establishing user and privilege fees must also consider mechanisms that will ensure that they will not be downloaded on to the migrant workers. On the point of suspension of LMOs and revoking of work permits, there are some disingenuous employers out there, there are some unscrupulous labour brokers, and there are even some shoddy immigration consultants who are profiting from Canada's Temporary Foreign Worker Program. Let us go after them. That is a good policy move.
What measures are being offered to protect the migrant worker who, through no fault of her own, did not lie in her application? She is not the person who is charging illegal or excessive fees. What happens to the worker who took out the loan and agreed to travel to Halifax from her home in Thailand to work in a fish plant only to discover that her employment contract was fraudulently constructed?
Pulling LMO and work permits can hurt migrant workers unfairly. However, taking the time to verify if a labour or skills shortage is genuine, that an employer is reputable, that genuine efforts have been made to recruit from the over 1 million Canadians unemployed, or the over 3 million underemployed, takes rigor. You cannot do it in 10 days.
Kindly consider policy measures that will penalize those who are abusing the program, not those who are trying to improve their lot in life.
The Chair: Mr. Flecker, thank you very much. Colleagues, we have 12 minutes. We have agreed we will go to five minutes to four o'clock. That will give us 25 minutes to get over to the vote. Let us start with questions.
[Translation]
Senator Hervieux-Payette: Can you confirm what you just said? How could Tim Horton's hire foreign workers when Mr. Lavoie is telling us that it takes six months and costs $10,000 to get one?
I am trying to understand where the profit is in hiring a foreign worker when, at the end of the day, they work at minimum wage. I am trying to put all the pieces together.
Mr. Lavoie: In our sector, we are often talking about skilled workers. In the aerospace industry, as we were discussing earlier, we are often talking about design engineers, and things like that. Companies will often have to hire an agent to recruit in other countries, often developing countries whose culture we are not familiar with. At that stage, we are talking about families, not just one person. With less-qualified workers, the process may well be much quicker.
Senator Hervieux-Payette: My question is for all the witnesses. The amount we are talking about does not seem to be fully determined. The minister is so flexible that the amount is not the same for everyone. Do you pay different amounts, to the department, I mean, to go ahead with the application? Is the cost the same for all the workers, regardless of their skill level?
Mr. Lavoie: I was talking about all the related expenses.
Senator Hervieux-Payette: I am talking strictly about the amount it costs the department to process the application. I was told that the department charges a fee, which often far exceeds the department's expenses. It became a way of raising money for the department. It does not happen all the time, of course.
Mr. Lavoie: Not in that industry.
[English]
Senator Hervieux-Payette: Mr. Smillie, is the fee structure the same for every foreign worker?
Mr. Smillie: My understanding from the construction sector is that in our universe an employer has to provide transportation and lodging for the full duration of the contract of employment. I would not be able to comment on the retail sector or the low-skill stuff. Mr. Flecker is more experienced in that realm. Our employers that use the program put out big bucks to bring people from across the world.
In our negotiations with companies, and when we sign collective agreements, we are trying to get similar benefits for Canadians to have them travel from New Brunswick or from Newfoundland. Let us talk about travel benefits for Canadians as well.
I would not be able to speak to the other sectors.
Senator Hervieux-Payette: I know there is a cost. For me, it is a cost. A fee is what the government is charging to process the application.
Mr. Smillie: Right now they are not charging any fee to employers to go apply for an LMO. It is carte blanche open to employers to go do it. However, it is obviously taking up government resources to do it.
Mr. Lavoie and I can fight about the fee structure. We think user pay is a fair way to go.
Senator Hervieux-Payette: Do not you think that if we charge $900 for a Visa for people who want to immigrate here, we should charge maybe not $900, but at least $450 for each one? You have to have a security check and make sure the person who is coming is capable of filling the position.
Mr. Smillie: I want to make a distinction. We would not be in favour of that fee being downloaded to the worker. We think it would be fair for the employer who is actually the legal entity. I want to be clear.
Senator Hervieux-Payette: Me, too.
Mr. Smillie: Set a fee that is fair and is transparent and is the same for everyone. I do not think any of our employers or their companies that they work for would object to that.
The Chair: Mr. Smillie, are you aware that this bill — and this was not previously the situation; it was not previously exempted — brings in an exemption for the user fee?
Mr. Smillie: I will assume that they will set something different than what the User Fees Act sets out. Maybe it will be higher.
The Chair: The User Fees Act was well thought out by parliamentarians to avoid an indirect tax. Just the costs could be covered. This exempts that.
Mr. Smillie: Okay.
The Chair: We are saying trust us, we will come up with our own little plan.
Mr. Flecker: Just a couple of things. I met this morning with a delegation from the Singaporean government here to learn about our Temporary Foreign Worker Program. We have taken a close look at their fee structure for brokers. Theirs is just under $1,000 to be able to apply to the program. They specifically set a high factor so that it will actually encourage legitimate applications.
How do you make money on this particular program? The volume of low-wage workers or low-skill occupations that filled temporary work permits has skyrocketed in a short time. The way to make cash off this is like the case in Regina, Saskatchewan, where the employer, a former RCMP officer, owns the franchise and brings in workers from Mexico, pays them minimum wage, provides them with accommodation and then puts six workers in his basement at $600 a head. It is a good moneymaker.
Another file on my case is a labour broker in India who says we have a shortage of stonecutters in India, a tremendous shortage. For the measly price of $600 per head you can get your LMO processed. There are no shortages of stonecutters in Canada, but it is a good way to make money.
A company in Windsor, Ontario, that I have on tape has admitted that they bank workers under phony LMO applications in the hope they will win a contract and then they charge the worker for the fee for processing it.
There are some great opportunities here to extend your income before actually having to pay any wages. What we see through my office, before coming here, was yet another case that came before me. It is quite common.
Senator Ringuette: Mr. Flecker, you just reasserted my engagement to oversee this program. This is probably just a plaster where maybe there is a need for a major surgery.
Mr. Smillie, how do you check the credentials?
Mr. Smillie: In Canada, credentials are handled by the provinces. For example, a worker from Chicago, say, presents his or her credentials to the Government of Alberta or other receiving province. They make an assessment of that worker's competencies compared to Canadians' competencies in that jurisdiction; and a decision is made. It is a complicated system in Canada because we have two different sets of credentials. We have credentials that are licensed, as in you have to have a licence to be an electrician; and there are voluntary credentials, as a bricklayer would have.
It is not difficult in the voluntary trades because there is nothing to compare a voluntary trade to. It is difficult in the certified world because you could blow something up if you do not have the right credentials.
Senator Ringuette: Absolutely.
Mr. Smillie: We have not done a good job. Maybe we could do a better job of comparing Canadian credentials to those in other countries.
Only four or five other countries in the world have an apprenticeship or credentialing system like Canada has. I have been pitching to HRSDC for a long time our need for a comprehensive worldwide grid that can say a steamfitter from the UK is good in this province and this province but not in that province. We are still not there. When we go to the U.S., it is even more complicated. Some states do not issue licences or credentials for anything. The steamfitter from Chicago may have been a steamfitter for 32 years, but that is all he or she has. Sometimes the credentialing in the U.S. goes right down to the municipal level. It is complex.
Canada needs to get the credentialing thing right when we are looking at other countries' workers. It is arduous, long and boring, but you could blow something up.
Senator Ringuette: I am reading about the fact that there are many fake resumes, so that is why I ask the question.
The Chair: Get your question on the record if you could.
Senator Ringuette: I understand that all three of you recognize the need for temporary foreign workers. The word is exactly that: "temporary.'' I foresee in the trade industry that you would need a nine-month or ten-month temporary visa, not a four-year renewable visa. The current aggregate is anything between 800 and 900 foreign workers on temporary foreign visas in Canada. We have a major problem. I recognize that there is some new stuff in this bill, but by golly, we cannot continue this way.
The Chair: If you could think about that comment, we will be in touch with you to see if we can arrange another time. Unfortunately, we never know about these votes in the Senate chamber, and our first duty is to be there for votes; and we have one in 25 minutes.
I will have to call an end to this session. I would like to thank Mr. Smillie, Mr. Lavoie and Mr. Flecker for being here. There are important issues we would like to pursue. We will be in touch to see what can be worked out.
(The committee adjourned.)