June 2009, the Standing Committee on Industry, Science and Technology (INDU)
tabled its report A Study of the Crisis Faced by Certain Industrial Sectors
in Canada, that examined the impact of the economic crisis on certain
Canadian industries including the aerospace, energy, forestry, high-tech and
manufacturing industries. The challenges faced by these sectors are significant
and, in many instances, the global recession has exacerbated difficult
structural adjustments already underway.
Government is concerned for the many Canadian communities, businesses and
workers that have been affected by the economic slowdown. The manufacturing
industry, for example, has been especially hard-hit during the global economic
crisis and is continuing to undergo significant restructuring. Other sectors
such as the information and communications technologies sector and
biotechnology sector have been faced with financial challenges and still others
such as the energy and aerospace industries have faced lower international
demand for their products.
all countries, including Canada, have felt the impacts of the deep and
synchronized global recession, Canada has done so from a position of relative
economic and fiscal strength. Canada’s comparative strengths include a real
estate market that avoided many of the challenges seen elsewhere and a banking
system that the World Economic Forum recognizes as the strongest in the world.
It has allowed Canada to put in place a comprehensive stimulus package, Canada’s Economic Action Plan. It is helping Canadians weather the global recession and emerge with an even stronger economy.
Action Plan delivers key initiatives that stimulate the economy, protect
Canadian jobs, support those being hit the hardest and invest for our future.
The Plan has been designed to deliver stimulus
as quickly and effectively as possible and consists of joint actions of
federal, provincial, territorial and municipal governments, helping to boost
The Government will continue to implement the Economic Action Plan as
aggressively as possible, appropriately balancing effective stewardship and
governance of taxpayer dollars with speed of delivery.
families, businesses and communities are already benefiting from the measures
introduced by the Government. Canada’s Economic Action Plan provides
approximately $14 billion to support adjustment and help create and protect
jobs in regions, communities and industries of the Canadian economy that have
been most affected by the severe downturn. This includes targeted support for
traditional industries such as forestry and agriculture, and manufacturing,
which play important roles in the economies of many communities. This support
will help these industries invest in their long-term success and create new
opportunities and jobs for Canadians in all areas of the country.
note, Canada’s manufacturers and processors are benefiting from an accelerated
capital cost allowance on machinery and equipment purchases, first introduced
in Budget 2007 and extended in the 2008 and 2009 budgets, and the permanent
elimination of tariffs on a wide range of machinery and equipment. These
measures work in tandem to lower the cost of restructuring and retooling for
long-term success. The Economic Action Plan also expands the scope and
resources for the Business Development Bank of Canada and Export Development
Canada, including measures such as the Business Credit Availability Program,
that are providing access to the financing companies need to grow and compete.
Action Plan also provides support for communities and workers, particularly
those most affected by the economic downturn. The Community Adjustment Fund,
for example, helps to mitigate the impact of short-term job losses in smaller
communities and promotes economic development and diversi-fication. The
creation of the Federal Economic Development Agency for Southern Ontario
(FedDev Ontario) will foster economic development where many communities are
adjusting to the restructuring of the manufacturing sector. The Economic Action
Plan also helps to avoid layoffs by enhancing the Employment Insurance
work-sharing program and the unemployed through enhanced Employment Insurance
and training programs. The Economic Action Plan helps to create the economy of
tomorrow by improving infrastructure at colleges and universities, supporting
research and technology development and enabling industry to innovate and
invest in world class machinery and equipment.
Action Plan also helps to keep money in the hands of businesses. In total, the
Government has introduced more than $60 billion in tax relief for Canadian
businesses over 2008-09 and the following five fiscal years, providing a
stimulus to the economy and supporting job creation.
recovery will depend on improved global economic conditions, including growing
demand in export markets, and there are early signs that the global economy and
financial markets are beginning to stabilize. The timely implementation of Canada’s Economic Action Plan is supporting our return to growth and mitigating the impact
of the global recession. Private sector forecasters continue to point to
economic recovery beginning the latter half of 2009 and gaining momentum in
industrial sectors studied by the Committee remain critical drivers of the
Canadian economy. Their future competitiveness depends on their ability to not
only respond to the challenges brought on by the global economic recession, but
also a need to position themselves for long-term success in increasingly
competitive global markets. The measures in Budget 2009 go well beyond
near-term economic support. They also deepen the actions already taken by the
Government and further the implementation of Advantage Canada, the
Government’s long-term economic plan. Budget 2009 helps to ensure that Canada maintains all of its economic advantages including its Tax Advantage, Knowledge
Advantage, Infrastructure Advantage, Entrepreneurial Advantage, and Fiscal
Advantage, which will make it more competitive and help promote long-run
global economic landscape continues to evolve and Canadian industry is making
adjustments to sustain its long-term competitiveness. The Government will
continue to work closely with INDU, industry, and other stakeholders to support
Canada’s industries and workers and to enable them to realize their
opportunities, and to compete and grow.
Government of Canada focus on establishing conditions that make Canadian
businesses competitive around the world. In particular, this means establishing
regulatory consistency and predictability, and keeping down the taxes paid by both Canadian consumers and businesses,
including payroll taxes.
Government of Canada is focused on establishing conditions that make Canadian
businesses competitive around the world. Through Canada’s Economic Action Plan
and other key measures introduced in recent years, particularly with respect to
regulation and taxation, the Government of Canada is laying the foundation for
industry and its workers to innovate, grow and succeed in the increasingly
competitive global marketplace.
2007 included three specific initiatives to ensure Canadian markets remain
competitive by establishing regulatory consistency and predictability. The
three-pronged approach consisted of (i) imple-menting the Cabinet Directive on
Streamlining Regulation; (ii) reducing the federal paper burden on small
business by 20 percent; and (iii) creating a Major Projects Management Office
to streamline the review of large natural resource projects.
Cabinet Directive on Streamlining Regulation underlined a commitment to protect
the health and safety of Canadians and the quality of the environment while
promoting a competitive market economy in an efficient and timely manner. The
Cabinet Directive on Streamlining Regulation promotes cooperation with
provincial and territorial governments and key trading partners, including the United States and Mexico as well as the European community, to seek comprehensive
regulatory cooperation initiatives that encourage the compatibility of
regulations; eliminate redundant testing and certification requirements; and,
promote greater consistency with other jurisdictions. For example, since last
fall, fourteen automotive sector regulations have come forward to harmonize
with the requirements of the United States to improve the free flow of goods,
while ensuring high levels of safety, in an integrated North American
automobile industry. The Cabinet Directive on Streamlining Regulation also
requires rigorous cost-benefit analysis with a focus on evaluating high impact
regulations to ensure their effectiveness and that the benefits clearly exceed
the costs to Canadians.
the 20 percent paper burden reduction exercise, 13 key regulatory departments
and agencies first established an inventory of administrative requirements and
information obligations with which businesses must comply. The 13 departments
and agencies then worked together to achieve the 20 percent reduction by
streamlining regulations, eliminating duplicate requirements, getting rid of
overlapping obligations, and reducing how often documents need to be filed. In
support of this exercise, 41 regulatory proposals were processed.
and agencies also introduced complementary measures that did not reduce the
number of requirements or obligations but that eased the overall compliance
burden on small businesses. These measures included simplifying existing
administrative processes, creating single-window access to multiple government
services, harmonizing definitions and requirements across departments or orders
of government, and creating tools to provide relevant and timely information to
entrepreneurs. One example is BizPaL, an online service that provides
entrepreneurs with simplified access to the information on permits and licences
needed to establish and run a business. This unique partnership among federal,
territorial, provincial, regional and local governments is designed to cut
through the paperwork burden and red tape that small businesses encounter.
leading the implementation of the Cabinet Directive on Streamlining Regulation,
Treasury Board of Canada Secretariat ensures that new regulations minimize
administrative burden and build on gains achieved through the 20 percent
reduction exercise. For example, amendments to the Organic Product Regulations
allow producers to adopt one Canadian standard instead of using a patchwork of
provincial standards, to decrease compliance burden.
create a more accountable, predictable and timely regulatory review process,
the Government allocated $150 million over five years through Budget 2007 to
establish the Major Projects Management Office and to increase the scientific
and technical capacity of key regulatory departments. The Government remains
committed to establishing a modern, performance based regulatory system for
major natural resource projects that is timely, effective and improves the
competitiveness of Canada’s resource industries.
the Major Projects Management Office, strong project management systems and
governance mechanisms have been put in place to improve integration of federal
decision-making and to improve the predictability and accountability of the
federal regulatory review process. In its first full year of operations, the
Major Projects Management Office has made significant progress towards
improving the performance of the federal regulatory system for major natural
important steps have been taken towards improving the management and
performance of the federal regulatory system for major resource projects, there
is room for further improvements. The Major Projects Management Office is
leading federal efforts to identify and implement effective longer-term
solutions to further enhance the performance of the federal regulatory system,
including examining opportunities to improve the federal legislative framework.
the Government’s long-term economic plan, made a commitment to improving Canada’s tax system, focusing on initiatives that contribute the most to economic growth, including:
establishing a business tax advantage; reducing taxes on saving; supporting
low-income workers; and, generally reducing taxes, particularly for low- to
taken by the Government of Canada since 2006, including those proposed under
Budget 2009, Canada’s Economic Action Plan, will reduce taxes on individuals,
families and businesses by an estimated $220 billion over 2008-09 and the
following five fiscal years. This includes the implementation of significant
elements of Advantage Canada such as:
taxes in every way the Government collects revenues, and ensuring that Canadian
families, students, workers, seniors and businesses, large and small, continue
to keep more of their hard-earned money;
corporate income taxes so that Canada will have the lowest statutory corporate
tax rate in the G7 by 2012 and the lowest overall tax rate on new business
investment in the G7 by 2010; and,
the Working Income Tax Benefit to make work pay for low-income Canadians, and
the Tax-Free Savings Account to improve incentives to save.
Action Plan goes well beyond near-term economic support to deepen actions
already taken by the Government, and furthers the implementation of Advantage
Canada. Some key initiatives from the Plan, which enhance business
of the temporary 50 percent straight-line accelerated capital cost allowance
(CCA) rate for investment in manufacturing or processing machinery and
temporary two-year 100 percent CCA rate for computers that allows businesses in
all sectors to fully expense their investment in computers in the year they are
increase in the amount of small business income eligible for the reduced
federal income tax rate of 11 percent to $500 000 in 2009.
a result of these actions, Canada is better positioned than most countries to
withstand the effects of today’s global economic challenges. At the same time, Canada is building a solid foundation for future economic growth and higher living
standards for Canadians.
the Government of Canada, in order to preserve Canada’s vital oil and gas,
mining, and chemical production sectors, and to allow industries to better
assess the resulting cost implications, establish a clear and predictable
environmental regulatory framework that protects our natural environment, while
ensuring a balanced approach for sectors that play a pivotal role in creating
jobs and generating new economic opportunities for Canadians.
Government of Canada agrees that a clear and predictable environmental
regulatory framework is a critical element for the on-going vitality of our oil
and gas, mining, and chemical production industries. The Government has an
ambitious agenda to improve the environment and the health of Canadians through
a series of concrete, innovative measures to reduce emissions of greenhouse
gases and air pollutants. Coordination across jurisdictions would help avoid
overlap and duplication of policies, and balance the key concerns of
environmental protection and economic prosperity.
respect to climate change, the Government of Canada is committed to address
this serious global problem through sustained action to build a low-carbon
economy that includes reaching a global agreement, working with our North
American partners and taking action domestically. The Government of Canada
remains committed to reducing Canada’s total greenhouse gas emissions by 20
percent from 2006 levels by 2020 and 60-70 percent by 2050.
fall, prior to the Copenhagen Climate Change Conference, Environment Canada
intends to table a full suite of specific policies covering all major sources
of Canadian greenhouse gas emissions. On return from Copenhagen, Environment
Canada will complete the detailed regulatory work and begin the implementation
process. While the specifics have not yet been finalized, the regulatory
framework will be guided by the Government’s emission reduction goals and will
be designed in such a way as to provide regulatory certainty, promote
technology development, provide maximum flexibility for industry’s compliance
and to ensure comparable levels of effort for Canadian industries compared to
their key competitors. The content and timing of the regulations will be driven
by Canada’s national interests, while also accounting for what our trading partners,
including the United States, are doing.
in early June of this year, the Government of Canada took an important step in
the development of an emissions trading system, by presenting for consultation
two guidance documents outlining Canada’s Offset System for Greenhouse Gas
Emissions. Once finalized, these guides will provide clarity and direction on
the operation of the offset system.
Government of Canada is engaged in discussions with provinces, industry and environmental
and health groups to protect the health of Canadians and their environment from
the impacts of air pollution. The Government intends to use the authority of
the Canadian Environmental Protection Act (CEPA, 1999) to put in place
regulations and other regulatory instruments that will provide clarity and
predictability to the affected industrial sectors.
December 8, 2006, Prime Minister Harper announced the Chemicals Management Plan
as part of the Government’s environmental regulatory framework. The Chemicals
Management Plan brings all existing federal programs together into a single
strategy to ensure that chemicals are managed appropriately to prevent harm to
Canadians and their environment. This plan is expected to run until 2020,
providing the chemicals and oil and gas industries with regulatory certainty
and clarity over the next several years.
Major Projects Management Office, as noted in Recommendation 1, provides
overarching project management and accountability for major resource projects
in the federal regulatory review process, and facilitates improvements to the
regulatory system for major resource projects.
Government of Canada is committed to ensuring that the Canadian
Environmental Assessment Act is administered in a predictable, certain and
timely manner that produces high quality environmental assessments, so that
federal decisions about projects safeguard the environment and promote
sustainable development. Current activities to support improvements include the
Major Resource Projects (MRP) Initiative,
(http://www.mpmo-bggp.gc.ca/index-eng.php) and work through the Canadian
Council of Ministers of the Environment to develop options to better align
their respective environmental assessment processes. A review by a Parliamentary
Committee of the provisions and operation of the Act, scheduled to begin in
2010, is expected to result in recommendations for further improvements.
Government of Canada review its fiscal and regulatory measures and policies to
ensure that they make a significant contribution to the development of clean
and renewable energy sources, foster research and development (R&D) in this
area and provide significant support to companies and provinces engaged in
Government of Canada recognizes the importance of investing in clean and
renewable energy technologies that will play a key role in Canada’s future
economic growth while advancing environmental objectives. New clean energy
technologies offer promising solutions which will contribute to achieving real
progress towards a sustainable energy future for Canada. The advancement of
promising new technologies is enabled by a combination of co-funded Research
& Development & Deployment collaborations with industry, provincial and
territorial governments, universites and the Government’s science and
technology facilities, to open up new technology possibilities that support new
environmental regulations and policy development. The Government’s commitment
to science and technology is demonstrated through its strategy Mobilizing
Science and Technology to Canada’s Advantage that sets out a focused
approach to mobilize science and technology to our long-term economic and
advancement and innovation are critical to achieving significant, long-term
reductions in greenhouse gas emissions. The Government of Canada intends to
promote the development, deployment, and diffusion of technologies that reduce
greenhouse gases emissions across industry.
Canada’s renewable fuel regulations will require an average renewable fuel
content of at least 5 percent based on the volume of gasoline, to be
implemented by September 2010. In addition, the Government of Canada intends to
implement a requirement for 2 percent renewable content in diesel fuel and
heating oil by 2011 or earlier, subject to technical feasibility. These
regulations will not only reduce greenhouse gas emissions, but will also help
stimulate the demand for renewable fuels in Canada. Stimulating demand supports
and complements the other pillars of the renewable fuels strategy, which
include: encouraging greater domestic production of biofuels, accelerating the
commercialization of new technologies and providing new market opportunities
for agricultural producers and rural communities.
Government of Canada is also encouraging an integrated set of initiatives that
include basic R&D, applied R&D, demonstrations, standards and
regulations and technology transfer. The Government of Canada has already taken
firm action in this area including:
the ecoENERGY Technology Initiative to fund research, development and
demonstration to support the development of the next-generation clean-energy
technologies - to increase clean energy supply, to reduce energy waste, and to
reduce pollution from conventional energy sources;
the recently announced Clean Energy Fund to further advance clean energy
the Pulp and Paper Green Transformation Program that will help pulp and paper
companies make investments that improve the energy efficiency and environmental
performance of their facilities;
the Green Infrastructure Fund that supports sustainable energy generation and
transmission, along with municipal wastewater and solid waste management
in Sustainable Development Technology Canada, a not-for-profit foundation that
finances and supports the development and demonstration of clean technologies
which provide solutions to issues of climate change, clean air, water quality
and soil, and which deliver economic, environmental and health benefits to
Government also provides a tax incentive in the form of the accelerated capital
cost allowance (CCA) to encourage use, by industry, of clean energy generation
equipment. CCA Class 43.2 covers a range of equipment that generates
electricity or heat by using renewable sources (e.g. wind, solar, geothermal),
waste sources (e.g. wood waste, landfill gas), or by using fossil fuel
efficiently (e.g. cogeneration). To expand support in this area, Budget 2006
extended Class 43.2 to cogeneration systems in the pulp and paper sector
fuelled by so-called “black liquor.” Budget 2007 extended Class 43.2 to a
broader range of applications involving wave and tidal energy, active solar
heating, photovoltaics, stationary fuel cells and fuels from waste (including
certain pulp and paper plant effluents). It also extended general eligibility
for the Class to assets acquired before 2020.
2008 further extended eligibility to additional ground-source heat pump and
waste-to-energy applications. As announced in Canada’s Economic Action Plan,
the Government has been consulting on potential extension of accelerated CCA to
equipment used in carbon capture and storage.
Government of Canada will continue to review Class 43.2 on an ongoing basis to
ensure inclusion of appropriate energy generation technologies that have the
potential to contribute to energy efficiency and the use of alternative energy
scientific research and experimental development (SR&ED) tax incentive
program is one of the most advantageous systems in the industrialized world for
research and development (R&D), providing about $4 billion in tax
assistance to businesses in 2008, including businesses that undertake SR&ED
in clean and renewable energy sources.
That the Government of Canada introduce a tax credit for young graduates in resource regions to provide regional
economies with a qualified workforce.
outlined in Canada’s plan for long-term economic growth, Advantage Canada,
the Government is committed to increasing economic growth in all regions of
Canada, by lowering taxes, investing in skills, training and education as well
Government has recently increased its support for tradespersons and apprentices
with key measures that will help ensure that employers in the resource regions
can find the skilled labour they need. These measures include:
Apprenticeship Job Creation Tax Credit, which provides eligible employers with
a tax credit equal to 10 percent of the wages paid to qualifying apprentices in
the first two years of their contract, to a maximum credit of $2000 per
apprentice per year;
Apprenticeship Incentive Grant that provides eligible apprentices with a $1000 grant
in each of the first two years of an eligible apprenticeship; and,
new Apprenticeship Completion Grant, announced in Budget 2009, will provide
eligible apprentices who complete an eligible apprenticeship with a grant of
Government’s actions are positioning employers in all regions of Canada to succeed, and to be in a position to offer wages that can attract and retain the
talent they need.
income tax system contains provisions that allow for the non-taxation of board
or lodging and travel allowances or benefits where employees are required to
work temporarily at a special or remote work site. This approach recognizes
that, in many instances, employers need to provide these benefits in order to
attract workers to a particular worksite; and,
taken by the Government of Canada since 2006, including those announced in
Budget 2009, provide tax relief to individuals, families and businesses of $220
billion over 2008-09 and the following five fiscal years.
addition, Canada’s regional development agencies provide an integrated approach
to helping regions realize their full potential in terms of productivity, competitiveness, economic growth and standard
Government provides approximately
$1 billion annually to support the work of the Atlantic Canada Opportunities
Agency, the Economic Development Agency of Canada for the Regions of Quebec,
Western Economic Diversification Canada, and the Federal Economic Development
Initiative in Northern Ontario;
addition, Budget 2009 further increases the coverage of regional development
agencies in Canada by providing more than $1 billion over five years for the
recently launched Federal Economic Development Agency for Southern Ontario
(FedDev Ontario) and $50 million over five years to establish the Canadian
Northern Economic Development Agency; and,
2009 also provides $1 billion over two years for a Community Adjustment Fund,
to be delivered by the regional development agencies. The Fund focuses on
projects that will create and maintain employment and mitigate the short-term
impacts of restructuring in communities across Canada.
That the Government of Canada examine the issue of Scientific Research and
Experimental Development (SR&ED) tax credits, including partial
refundability, and consider making changes as a potential mechanism to increase
greater private sector investment in R&D.
Government of Canada recognizes that science and technology, particularly
business sector research and development (R&D), are crucial to the
long-term growth and prosperity of our economy. The fundamental importance of
such activities was recognized both in Advantage Canada: Building a Strong
Economy for Canadians, the Government’s long term economic plan, and in Mobilizing
Science and Technology to Canada’s Advantage, the Government’s strategic
plan for science and technology.
key role that the Government of Canada can play in this regard is to ensure a
competitive marketplace and create an investment climate that promotes private
line with the long-term economic plan laid out in Advantage Canada, the
Government of Canada has acted in the last four budgets to build an economic
climate that encourages investment and innovation. Other important instruments,
including intellectual property policies and tax policies, also encourage
private-sector investment in R&D. The SR&ED tax incentive program is
one of the most advantageous systems in the industrialized world for promoting
business investment in R&D, providing about
$4 billion in tax assistance to innovative Canadian businesses in 2008. It is
the single largest federal program supporting business R&D in Canada, and it will continue to play a leading role in fostering a competitive and dynamic
on the SR&ED tax incentive program were undertaken in October and November
2007 with businesses, industry associations, and tax practitioners.
Stakeholders were asked about the effectiveness of the program, and ways
through which it could be improved, whether through legislative or
the basis of these consultations, Budget 2008 enhanced the availability and
accessibility of the financial support for small and medium-sized R&D
the expenditure limit for the enhanced refundable SR&ED investment tax
credit available to small Canadian-controlled private corporations; and,
the enhanced SR&ED investment tax credit to medium-sized companies by
increasing the upper limits of the taxable capital and taxable income phase-out
2009 announced a further increase to the taxable income phase-out range for the
expenditure limit of the enhanced refundable SR&ED investment tax credit.
Government of Canada is also investing an additional $10 million annually to
allow the Canada Revenue Agency to implement an action plan to improve the
administration of the SR&ED program by increasing the Canada Revenue
Agency’s scientific capacity and improving its services to claimants.
That the Government of Canada review its procurement policies and practices, especially those relating to National
Defence acquisitions, and:
A. Review the government’s approach
to procurement and associated Industrial and
Regional Benefits (IRBs) as a way of increasing
Canadian industrial capability; and,
B. Review the approach to In-Service
Support (ISS) in the case of government aerospace
sector procurements as a way of increasing
Canadian industrial capability.
Government of Canada continually reviews its procurement policies and practices
to improve effectiveness.
the Government has been specifically reviewing military procurement processes
to make them simpler and more streamlined. These changes make it easier for
industry to provide products and services to the Government while, at the same,
deliver better results for Canadians. The Government has also moved toward a
performance-based, best-value, competitive process, wherein industry is provided
with broad, high-level, mandatory performance criteria and invited to propose
Government of Canada continually engages with industry to enable better
planning and provide more predictable investment for industry, placing industry
in a better position to respond to Canada’s needs and facilitate the supply of
critical procurement. An example of this ongoing engagement is the Government’s
establishment of a Shipbuilding Forum and consultation process in July 2009 to
consult with Canada’s shipbuilding companies, and key shipbuilding
stakeholders, to get broad input into the development of comprehensive and
viable options to establish a long term, sustainable shipbuilding strategy. In
addition, the Government is currently engaged in consultations with defence and
security industries across Canada on factors that affect the military
procurement process and how best to align domestic and industrial objectives
with procurement priorities.
Government intends to continue improving the procurement system in a manner
that responds effectively to the evolution of Canadian industry, ensures fair,
open and transparent procurement processes, and maintains prudence and probity
in the expenditure of public funds.
Committee’s recommendations on the IRB policy and the approach to In-Service
Support are timely and important. The IRB policy is both an integral part of
the military procurement process for major acquisitions of both goods and
in-service support, and a means to ensure that benefits flow back to Canadians
for all tax dollars spent on such public goods. The Government is seeking to
ensure that the policy continues generating long-term, strategic business
relationships for Canadian suppliers for years to come.
Government purchases, and the contracting of in-service support,
for defence and aerospace systems, maintain and develop Canadian technology
industries by giving domestic companies opportunities to become part of major
equipment manufacturers’ global supply chains.
the IRB provisions of in-service support contracts, stipulate minimum levels of
high-value work to be done in Canada. The prime contractor can meet their
in-service and acquisition IRB requirements through a variety of commitments
that range from the purchase of goods and services from domestic
sub-contractors to the creation of partnerships with industry research groups,
and other government agencies such as the National Research Council. Therefore,
it is not uncommon for companies to exceed minimum IRB requirements.
should be noted that Industry Canada monitors the performance of prime
contractors and enforces the contract provisions to ensure that IRB
requirements and expectations are met. The regional development agencies also
play a key role in IRBs by supporting the implementation of the policy in their
a consequence, major defence and aerospace in-service support programs continue
to be delivered in Canada; high-value engineering work has continued to be done
in Canada, with Canadian companies getting access to advanced technologies;
and, a number of international prime contractors have expanded their Canadian
the winter of 2008, Industry Canada, supported by the regional development
agencies, launched a detailed IRB review with the goal of ensuring that the
benefits sought from prime contractors took globalization into account; weighed
heavily on the importance of technology to modern production and in-servicing;
and, took full advantage of the growth in military procurement.
this end, Industry Canada sponsored a series of industry roundtables to gather
insights into policy effectiveness and program efficiency. All major industry
sectors and key suppliers (aerospace, land systems and marine) were consulted.
Through these roundtable discussions, seven key operational improvements were
identified. These improvements speak directly to the Committee’s
recommendations. The Government made the announcement of these new practices on
September 24, 2009.
changes will result in major prime contractors engaging in senior level
discussion regarding long-term strategic planning for meeting their IRB
obligations, a greater focus on priority technologies, and stronger incentives
to create public/private consortia. The changes will also provide incentives
for prime contractors to bring Canadian manufacturing and in-service companies
into their global value chain; build on the business cycles of prime
contractors to secure investments today against future procurements (i.e.
banking of IRB credits); and, encourage firm level R&D and technology
together these changes will ensure that Canada has a modern and efficient
program to ensure that economic benefits are returned to Canada as result of
major defence procurements.
the Government of Canada examine the flow-through share regime with a view to
stimulating greater access to capital for exploration activities in the junior
oil and gas and mining sectors.
exploration and development of Canada’s rich natural resources provides
significant benefits in terms of employment, investment and infrastructure.
Action Plan extended the
15 percent Mineral Exploration Tax Credit for flow-through share investors to
March 31, 2010, which will assist companies to raise capital for exploration.
The international competitiveness of Canada’s resource sector also continues to
improve as a result of significant reductions in corporate taxes. The federal
corporate tax rate for resource income will have been reduced by almost half –
from 29.12 percent in 2002 (including the corporate surtax) to 15 percent by
2012. The Government also eliminated the federal capital tax in 2006, a
significant benefit to the capital-intensive resource industry.
initiatives build on an already attractive tax system for exploration.
Exploration and development expenses, for example, benefit from accelerated
deductions and the availability of flow-through share financing. Small oil and
gas companies issuing flow-through shares are entitled to treat a certain
portion of their development costs as exploration expenses, which receive a
more enhanced deduction rate. Meanwhile, new and expanded mines are eligible
for accelerated capital cost allowance.
Action Plan includes other measures that support the resource sector. These
include investments in aboriginal skills development, the
$1 billion Community Adjustment Fund, and investments in infrastructure. The
Government has also announced funding of $100 million for the Geo-Mapping for
Energy and Minerals program, to provide the geoscience information necessary to
guide investment decisions leading to the discovery and development of new
energy and mineral resources.
Government of Canada explore measures to increase foreign venture capital
investment in Canada.
Government recognizes the challenges facing innovative businesses seeking
venture capital (VC) investments and the need for an internationally competitive
policy for attracting and increasing foreign venture capital in Canada. It has implemented a number of tax measures and other policies, including those
highlighted below, that aim to improve the supply of VC. These actions to date
have helped ease concerns with respect to investment from abroad.
the U.S., many VC investors are structured as limited liability corporations
(LLCs). Following Budget 2007, the Government worked with the U.S. Government
to extend the Canada-U.S. tax treaty to include LLCs. This action has removed
disincentives to LLCs in placing VC investments in Canada.
Canadian small and medium-sized enterprises raise expansion capital by listing
on junior foreign stock exchanges in OECD countries that have tax treaties with
Canada. The Government has incorporated changes into the Income Tax Act
that exempt the sale of those shares from tax withholding requirements. This
removes disincentives for foreign investors to buy shares of Canadian firms
listed on foreign exchanges. Budget 2008 introduced further changes in this
regard. The Government continues to discuss this issue with stakeholders to
ensure that the rules do not inappropriately impede foreign investment.
Export Development Canada (EDC) also helps to attract
foreign VC investment with its Equity Investment Program. This program includes
investments in foreign private equity funds that strengthens EDC’s
collaboration with foreign funds and investors to invest in Canadian
businesses. As well, Canada’s embassies and consulates located in active VC
markets work with local funds to encourage them to partner with Canadian VC’s
and invest in innovative Canadian companies.
investors are attracted to mature VC markets which possess strong local VC
investment partners. The Government has taken a number of recent actions to
strengthen the VC market, including:
$75 million for the Business Development Bank of Canada (BDC) to help create
and invest in a new privately run late-stage venture capital fund; and,
a $350 million investment in the BDC, announced in June 2009, to support
existing VC-backed firms, new seed stage firms, and Canadian VC funds.
investments will allow the Canadian VC industry to continue to develop and
attract foreign VC.
Government of Canada maintain and expand the Strategic Aerospace Defence
Initiative, while continuing to require loans to be refunded in order to ensure
taxpayers are getting value for money.
keeping with the Government’s priority to stimulate the economy through various
initiatives such as supporting scientific and technological research and
development (R&D), the Strategic Aerospace and Defence Initiative program
was created in April 2007. This program focuses on supporting R&D in the
aerospace, defence, security and space industries. Successful applicants are
provided with repayable contributions towards eligible R&D activities. The
program not only expects repayments, but numerous other benefits which provide
value to the taxpayer, including:
strategic R&D that will result in innovation and excellence in new products
the competitiveness of Canadian aerospace and defence companies; and,
collaboration between research institutes, universities, colleges, and the
Strategic Aerospace and Defence Initiative also supports the strategic plan for
science and technology—Mobilizing Science and Technology to Canada’s
Advantage— also known as the S&T Strategy announced in the Budget Plan
2007, which recognizes the important role the Government of Canada plays in
ensuring a competitive marketplace and fostering an investment climate that
encourages the private sector to innovate.
keeping with this recommendation, the Government solidified its commitment to
maintaining long term support to the aerospace and defence industries by
announcing an additional $200 million to the Strategic Aerospace and Defence
Initiative over four years. The incremental funding will assist the program in
meeting an increased demand for R&D support in this sector.
Government of Canada identify, as soon as possible, a replacement program or
alternative funding mechanism for Technology Partnerships Canada in order to
support strategic R&D and demonstration projects by industry that are
intended to produce social, economic and environmental benefits for Canadians.
Government believes that industrial R&D in Canada is best supported by a
combination of broad-based support for research and development, and support
for strategic R&D and demonstration projects by industry, as recommended by
the Committee. The Scientific Research and Experimental Development tax
incentive program is the largest federal program supporting business R&D in
the country. In 2008, the program provided about $4 billion in tax assistance
to a diverse range of Canadian enterprises engaged in R&D. The Government
enhanced the availability and accessibility of the financial support for small
and medium-sized R&D performers in Budget 2008 and Budget 2009.
Government has also taken action to create complementary programs supporting
strategic R&D such as the Strategic Aerospace and Defence Initiative and
the Automotive Innovation Fund. The Automotive Innovation Fund provides $250
million over five years to automotive firms in support of large-scale,
strategic R&D projects to build innovative, greener and more fuel-efficient
vehicles. The Government created the Strategic Aerospace and Defence Initiative
to support the vital research and development investments by Canadian aerospace
and defence industries (See Recommendation 9). These programs encourage
innovation, improve industry competitiveness and produce benefits for
government investments across a range of programs also support strategic
R&D and demonstration projects including:
$1 billion Clean Energy Fund invests in technology development and
demonstration, protecting long-term energy security and creating a stimulus for
high-quality jobs for Canadians;
Economic Action Plan provided an additional $200 million over two years to the
National Research Council’s Industrial Research Assistance Program, which
stimulates wealth creation through technological innovation by providing
technology advice, assistance and services to small and medium sized
enterprises to help them build their innovation capacity;
- Canada’s Economic Action Plan provided
$110 million over three years to support Canada’s
continued leadership in the design and
construction of space robotics. The funding will enable
Canadian space companies to maintain and increase their research and development
capacity, and develop the new technologies that will position them to benefit
from future space missions; and,
federal or federally supported R&D related initiatives include Sustainable
Development Technology Canada, Precarn Inc., CANARIE, the Canada Foundation for
Innovation, Centres of Excellence for the Commercialization of Research and
Canada’s granting councils.
That the Government of Canada develop a long-term space plan.
Government of Canada recognizes the importance of the space industry in Canada and the contribution of space assets as they relate to Government priorities – Arctic sovereignty, security, the environment and economic prosperity. The
strategic and effective use of space is critical for Canada. Our country’s vast
territory, long coastlines, low population density and northern latitude make
it imperative to use the vantage point of space to observe, monitor and
communicate across the country. As a result, Canada has become a world leader
in space technologies such as the Earth Observation satellites RADARSAT-1 and
-2, the Anik series of telecommunication satellites and space robotics, for
example Canadarm-1 and Canadarm-2 and Dextre on the International Space
Canada’s Economic Action Plan invested
million for the development of terrestrial prototypes for space robotic
vehicles, such as the Mars Lander and Lunar Rover, and for the further
development of other technologies and space robotics. These investments
contribute to Canada’s strong tradition in space and demonstrate the
Government’s commitment to the space industry in Canada. Furthermore, the
Canadian Space Agency is already engaged in a consultative process with the
Canadian space industry, academia, international partners and federal
government departments and agencies to develop a path forward on how best to
use space capabilities into the future.
That the Government of Canada review Canadian anti-dumping and countervailing policies and practices and their
application to ensure that Canada’s trade remedy laws and practices remain
current and effective. This review would also include comparisons with other
World Trade Organization members such as the European Union and the United States.
remedy laws implement Canada’s rights and obligations under the relevant World
Trade Organization (WTO) agreements. The WTO agreements on anti-dumping and
subsidies and countervailing measures are currently under negotiation as part
of the Doha Round of multilateral trade talks. The objective of these
negotiations is to clarify and improve the international rules governing the
application of trade remedy measures and subsidies disciplines. The outcome of
this process, as well as ongoing communications between the Department of
Finance and interested stakeholders, will inform the appropriate timing of any
Government has consulted extensively with stakeholders throughout the Doha
Round to ensure that its approach reflects the diverse interests of Canadian
businesses and consumers. The Government recognizes that in order for Canada to remain competitive in a rapidly changing international trade environment, trade
remedy laws must protect Canadian producers when warranted, while ensuring that
Canadian businesses have stable and predictable access to global supply chains.
Government ensures that all interested stakeholders are kept apprised of Doha
Round developments via the Trade Negotiations and Agreements web site at
Government of Canada expand Canadian manufacturers’ access to export markets
and proactively address trade irritants, such as the U.S. “black liquor”
subsidy to the pulp and paper sector; the International Trade in Arms (ITAR)
regulations; and “Buy American” legislation, which hurt Canada’s manufacturing
part of Advantage Canada – the Government’s broader economic agenda –
the Global Commerce Strategy is founded on the notion that higher productivity
and better access to markets both in North America and beyond will create
opportunity by strengthening Canada’s position as a partner of choice for
this context, Canada is moving forward with an ambitious free trade agreement
(FTA) agenda to ensure global competitiveness. Canada’s FTA with the European
Free Trade Association (EFTA) entered into force on July 1, 2009, and Canada’s FTA with Peru came into effect on August 1, 2009. Canada has also recently signed
FTAs with Jordan and Colombia. On August 11, 2009 Prime Minister Harper
announced the conclusion of FTA negotiations with Panama. The Government has
also launched negotiations with the European Union toward a Comprehensive
Economic and Trade Agreement, and remains committed to concluding FTA
negotiations with dynamic markets abroad such as South Korea, and others. Canada is exploring the possibility of FTA negotiations with India and Morocco, and
Canadian officials are also working with their Japanese counterparts to
identify specific areas of trade that would form the basis of an eventual free
trade agreement or economic partnership agreement. Furthermore, Canada continues to work within the framework of the North American Free Trade Agreement
(NAFTA) to facilitate North American market access.
Canada is also
taking action to ensure that markets around the world remain open to Canadian
exporters, and that the long-term strength and competitiveness of the Canadian
economy will improve. This is one of the reasons why Canada remains committed
to the multilateral process of the WTO and continues to seek a broad and
ambitious Doha round outcome. For the manufacturing sector, Canada’s objective
is to obtain real improvements in market access for Canadian exporters in both
developed and large developing country markets by lowering tariffs below their
current applied rates and by reducing or eliminating non-tariff barriers
wherever possible. In this regard, Canada is pressing for the full elimination
of tariffs in certain sectors including forest products, industrial machinery,
fish and fish products, chemicals (including fertilizers), and gems and
should also be noted that international investment is an essential corporate
strategy for many Canadian companies competing in today’s global economy. By
investing abroad, companies can gain access to overseas markets, reduce input
costs, secure access to key resources, acquire new technologies and provide
better support to foreign customers. On the other hand, the risks of investing
in a foreign country can include issues related to political stability, and
differences in legal institutions and regulatory regimes. For this reason, the
Canadian government pursues a policy of negotiating Foreign Investment
Promotion and Protection Agreements (FIPAs) in order to provide a more
transparent and predictable climate for Canadian investors abroad. To date, Canada has twenty-four FIPAs signed or in force. In addition, Canada has concluded
negotiations with India, Kuwait and Madagascar and is also negotiating with Bahrain, China, Indonesia, Mongolia, Tanzania, Tunisia and Vietnam.
a small number of issues continue to pose serious concerns for Canada, the vast majority of Canada’s trade is dispute-free. Canada makes use of a full
complement of formal and informal measures with which to address trade
irritants. Formal measures include the dispute settlement provisions of the WTO
and the NAFTA. As a member of the WTO, Canada advocates on behalf of Canadian
exporters by challenging unfair trading practices that materially affect Canada’s manufacturing sector. For example, Canada, along with the U.S. and the European
Union, successfully challenged Chinese tariff measures on auto parts. Bilaterally,
Canada and the U.S. concluded a Softwood Lumber Agreement in 2006 and overall
implementation is going well. Informal measures include bilateral and
multilateral working groups associated with both the WTO and NAFTA and ongoing
bilateral representations by officials at all levels to their counterparts in
respect to specific trade issues, Canada is very concerned about the negative
impacts of “Buy American” provisions in the American Recovery and Reinvestment
Act being felt by Canadian businesses. The Government is working on a
number of fronts to resolve the situation. Canada is building a coalition of
U.S. allies to advocate against Buy American and the spread of these provisions
into other legislation, liaising directly with U.S. legislators, the U.S. Trade
Representative and Secretary of Commerce, engaging Consuls General to support
advocacy efforts, and working with Canadian industry to take constructive
action and to inform businesses about the opportunities and challenges of doing
business in the U.S. As well, Canada is working with the provinces and
territories on a negotiated solution to address the immediate concerns posed by
these provisions as well as existing gaps in government procurement coverage
between Canada and the United States.
Government has been calling on American legislators to end the tax credit for
black liquor as soon as possible in advance of its expiry on December 31, 2009.
The Minister of International Trade has pressed the matter with the United
States Trade Representative, as well as key Congressional members of the House
Committee on Ways and Means and Subcommittee on Trade. The Minister of Natural
Resources has written to the U.S. Secretary of Energy expressing Canada’s concerns. Canada’s Ambassador to the United States has pursued the issue with key
members of the Senate Finance Committee. Canadian Embassy officials continue to
work to address Canada’s concerns with the U.S. Congress. On June 11, 2009, the
Senate Finance Committee Chairman and Ranking Member released a legislative
“staff draft” proposal to clarify the types of fuels that qualify for the
Alternative Fuel Mixture Credit and to exclude black liquor. The Government of
Canada has submitted comments welcoming this effort to end the eligibility of
black liquor for this tax credit, and will continue to press to have it
terminated as early as possible.
International Traffic in Arms Regulations (ITAR), governing transfers of
military technologies to Canada (and other countries), also cause concern for Canada. In 2001, Canada successfully negotiated the return of its ITAR exemption (which had
been lost in 1999) for companies registered in the newly created Controlled
Goods Program. In 2007, four Government of Canada departments-agencies
(Department of National Defence, Canadian Space Agency, National Research
Council, and Communications Security Establishment) successfully negotiated a
work around solution to ITAR provisions that affect dual nationals through an
Exchanges of Letters with the Department of State.
continuing to try to find a more compre-hensive solution to ITAR related
challenges. There is on-going dialogue with interlocutors in the U.S.
Department of State. This dialogue has touched on a variety of issues including
security, enforcement, the processing of ITAR licenses and the definitions used
by the U.S. in its licensing.
Government of Canada examine the removal of barriers to competition in the rail
industry in order to stimulate competition for the transport of goods.
Government of Canada’s transportation economic policy framework aims to strike
a balance between competition and market forces on the one hand and regulation
and strategic public intervention on the other. In most cases this framework
has worked well to the benefit of transportation providers and shippers of
goods and commodities in Canada.
Canada Transportation Act, however, contains certain provisions to
assist and to protect shippers in their relationship (dealings) with the
railways. Several of these provisions were strengthened in 2008 after extensive
discussions and consultations that culminated in the passage of Bill C-8, an Act
to Amend the Canada Transportation Act (railway transportation).
comprehensive review of rail freight service is currently underway to identify
ways to improve the efficiency, effectiveness and reliability of Canada’s rail-based logistics system, which includes railways, shippers, terminal
operators, ports and vessel operators. The review will focus on identifying
service issues and their impacts and will make recommendations on potential
solutions. This process will recognize best practices and how these can be
expanded to address service-related matters.
Government of Canada continue to support Canada’s forest economy by developing
policies that support innovation in the forestry sector, including R&D
investments in greener technologies such as the development and production of
cellulosic ethanol and forest biomass, by investing in retraining, and by
supporting communities which have historically depended on sub-sectors that are
in structural decline. In particular, the government should continue to use
Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) to support new investment in this area, and ensure that EDC has the
flexibility to provide financing to any domestic company. While supporting the
forest economy, the government must remain mindful of its obligations under the
Softwood Lumber Agreement, North American Free Trade Agreement and other trade
Government accepts the Standing Committee recommendation that the federal
government develop policies in support of forest sector innovation, retraining
and community adjustment that will support Canada’s forest sector in the
current economic downturn. The Government also accepts that all measures
arising from policies developed will be administered in a manner consistent
with the terms and conditions of the Softwood Lumber Agreement and other trade
agreements currently in place.
Government of Canada is committed to helping the Canadian forest sector develop
the next generation of Canadian forest products and the technologies and
processes used to make them. Canada’s Economic Action Plan (Budget 2009)
provides a total of
$120 million over two years (2009-10 and 2010-11) to Natural Resources Canada
to support innovation initiatives for the forestry sector, including:
million for the Transformative Technologies program that is administered by
FPInnovations, a not-for-profit forest research institute that focuses on the
development of emerging and breakthrough technologies including a significant
research effort to develop technologies to convert forest biomass to bioenergy,
fuels, chemicals and materials; and,
million to develop pilot-scale demonstration projects of new products for use
in commercial applications, developed, for the most part, from the research of
the Transformative Technologies program.
the Government of Canada introduced the Pulp and Paper Green Transformation
Program that will help pulp and paper companies make investments that improve
the energy efficiency and environmental performance of their facilities.
2007 made $500 million available to Sustainable Development Technology Canada
(SDTC) to invest with the private sector in establishing large scale
demonstration facilities for the production of next-generation biofuels.
Proposals from several forest firms are currently being considered. As well
through SDTC, investments have been made to develop technologies to produce
biofuels from forest biomass.
Government recognized the need to provide increased access to financing for
Canadian firms during the economic downturn. Through Canada’s Economic Action
Plan, the federal government has enhanced the capacity of two Crown
corporations, Export Development Canada (EDC) and Business Development Bank of
Canada (BDC) to extend additional financing to viable Canadian businesses on
commercial terms. Budget 2009 responded to gaps in the credit markets through
the Extraordinary Financing Framework including $13 billion in additional
credit provisions being made available through financial Crown corporations,
including $5 billion under the Business Credit Availability Program. This
program extends additional financing to Canadian businesses through enhanced
cooperation between EDC and BDC and private sector financial institutions. In
addition to expanded lending resources, among other things, EDC will now be
able to support financing in the domestic market for a temporary period, which
will complement the activities of financial institutions and insurance
Government recognizes the importance of rural communities and the need to
mitigate the short term impacts of restructuring in communities as a result of
the economic downturn. Budget 2009 provides
$1 billion over two years for a Community Adjustment Fund that will support
activities such as community transition plans that foster economic development,
science and technology initiatives, and other measures to promote economic
diversification. The Fund is expected to have positive impacts on various
resource-based communities (including forestry) by helping to mitigate the
short-term impacts of restructuring in these communities.
Government recognizes the need to re-train workers in key sectors that have
experienced structural decline. Budget 2009 launched the Canada Skills and
Transition Strategy ($8.3 billion), which will help Canadian workers and
their families through a three-pronged approach to strengthen benefits for
workers, enhance the availability of training, and keep Employment Insurance
(EI) rates low for 2009 and 2010.
measures to strengthen benefits for workers include: extension of EI benefits
to a maximum of 50 weeks; increased funding for and availability of training;
and extension of work-sharing benefits to a maximum of 52 weeks.
training measures include:
funding for training delivered through the EI program by $1 billion over two
older workers and their families with an additional $60 million over three
years for the Targeted Initiative for Older Workers and expanding it to include
workers in small cities;
an additional $100 million over three years in the Aboriginal Skills and
Employment Partnership initiative, expected to support the creation of 6,000
jobs for Aboriginal Canadians; and,
$75 million in a two-year Aboriginal Skills and Training Strategic Investment
Government of Canada adopt a policy to encourage the use of lumber in the
construction and renovation of federal buildings.
Government of Canada always seeks to ensure value for money in the construction
of federal buildings, securing the best return on investment for taxpayers, and
further, continually seeks to strengthen government procurement processes,
making them more open, fair and transparent. The Government of Canada also
promotes the efficient use of resources, in the design, procurement and
construction phases of renovation and new building projects.
Government of Canada recognizes the importance of Canada’s forestry industry to
the Canadian economy. It also recognizes the importance of supporting the
forest industry while also respecting Canada’s international obligations.
Recently announced investments demonstrate the Government’s commitment to the
forest sector, including:
2009 provided $170 million over two years to support market diversification and
innovation initiatives, such as:
million over two years for the Transformative Technologies program that is
administered by FPInnovations, a not-for-profit forest research institute that
focuses on the development of emerging and breakthrough technologies;
million over two years for the Canada Wood, Value to Wood, and North American
Wood First programs. These programs help forestry companies to market
innovative products internationally. The North American Wood First Initiative
(Wood First) supports wood products associations in Canada and the U.S. to promote the increased use of wood in North America non-residential construction.
Introduced in 2007 as a two-year, $12 million initiative, Wood First was
renewed for another two years in the Economic Action Plan (i.e , Budget 2009).
Wood First is a project-based program that focuses on educating designers,
specifiers and architects on the advantages of and opportunities for using wood
in commercial, institutional and recreational applications (project examples
include support to the Canadian Wood Council for its pan-Canadian WoodWORKS!
million in 2009-10 to support large-scale demonstration of Canadian-style use
of wood in targeted off-shore markets, and non-traditional uses of wood in
domestic markets; and,
million in 2010-11 to develop pilot-scale demonstration projects of new
products for use in commercial applications.
its own action plan for infrastructure, Public Works and Government Services
Canada will increase spending on its portfolio of buildings and office
accommodation by $323 million over two years. This will drive a corresponding
increase in demand for wood products.
through Canada’s Economic Action Plan, the Government is providing $7.8 billion
to build housing, encourage home ownership and enhance energy efficiency.
These actions, including the temporary Home Renovation Tax Credit (HRTC), will
promote demand for labour, building materials and other goods and services, including
lumber and other forest products.
Government of Canada review all of the recommendations made by witnesses, which
are laid out in earlier sections of the report.
Government thanks all of the witnesses who appeared
and made recommendations. The Government has reviewed all of the
recommendations in the report and will take them into account in going forward
with its economic policies.
Budget 2009, the Government is providing strong and immediate support to the
Canadian economy in addition to furthering the implementation of Advantage
Canada, the Government’s long-term economic plan. Individuals, families,
businesses and communities are already benefiting from the measures introduced
by the Government.