10 Questions for Industry Minister Christian Paradis

July 22, 2011

Industry Minister talks auto sector, aerospace, and R&D

As part of the federal government’s recent shuffling of cabinet portfolios, Canada has a new minister of industry. Christian Paradis, formerly the minister of natural resources, now holds the post. Canadian Industrial Machinery (CIM) recently asked Paradis about the state of Canadian manufacturing and the role government plays in it.

CIM: How has Canada’s manufacturing base rebounded following the recent recession?

Paradis: While the manufacturing sector in Canada and in other industrialized countries was already undergoing a major structural shift well before 2008, manufacturers were especially hard-hit during the global recession, and challenges remain.  However, the sector gained momentum in 2010 and 2011, and Canada’s manufacturing sector grew 3.9 percent from March 2010 to March 2011. 

CIM: How has the government helped shepherd this growth?

Paradis: Investments made by the government of Canada through its Economic Action Plan in business innovation, skills training, and infrastructure provided significant support to Canadian firms to help them create jobs, modernize their operations, and better compete globally.

CIM: Is lowering corporate tax rates on the agenda?

Paradis: Yes. As of January 2011, the federal general corporate income tax rate was reduced to 16.5 percent [from 18 percent], and will be reduced further to 15 percent by 2012. As a result, Canada now has an overall tax rate on new business investment that is substantially lower than in any other G7 country. 

CIM: Where are we headed as a nation in terms of manufacturing?

Paradis: Canadian manufacturers continue to shift toward higher-value-added manufactured products that require customization, highly skilled labor, and the newest technologies. 

CIM: What is the government doing to ease the burden of these large investments in new technology?

Paradis: The temporary 50 percent straight-line accelerated capital cost allowance rate for investments in machinery and equipment has been extended to include investments made in 2010 and 2011. This measure improves the long-term prospects for manufacturing by encouraging the retooling needed to boost productivity.  

The federal government also has eliminated tariffs on machinery and equipment and goods imported for further manufacturing, making Canada the first among its G20 partners to be a tariff-free zone for manufacturing. This lowers production costs, increases competitiveness, and enhances innovation and productivity. 

 CIM: What would you tell the shop owners not involved in the automotive supply chain who disagree with bailouts to large corporations?

Paradis: Canada’s automotive industry is an important driver in our economy. In 2010 the auto industry directly employed more than 110,000 Canadians, plus another 332,000 indirectly.  It is the largest manufacturing sector in Canada, representing 12 percent of our manufacturing output and 14 percent of manufactured exports.  

For every assembly plant opened in North America, 19 direct suppliers open up within 100 km of the plant.  Each auto assembly job creates 6.11 indirect jobs [working with] rubber, plastic, fabricated metals, and steel products.  

The governments of Canada and Ontario provided restructuring assistance to GM and Chrysler to prevent the disorderly collapse of one or more companies, including those in the parts sector, which would have had potentially negative effects across the auto industry. 

Because the North American automotive sector is highly integrated, not providing the financial restructuring assistance packages would have had a negative effect all across the industry.  

CIM: Will Canadian manufacturers see work come in their doors as a result of our participation in the F-35 Lightning II program?

Paradis: Given Canada’s early involvement in the Joint Strike Fighter (JSF) program, Canadian manufacturers have benefited from long-lasting, high-quality business opportunities by direct involvement in the design and development of the F-35 aircraft’s parts and subsystems. 

More than 60 Canadian companies have received approximately U.S. $350 million in contracts. These numbers are expected to grow by the time the F-35 enters full production. The production of more than 3,100 aircraft for partner countries will benefit Canada by providing significant work for Canadian companies.

These opportunities are expected to benefit small, medium-sized, and large firms across the country. According to Lockheed Martin and the two engine manufacturers, Canadian companies will have access to opportunities in the production of the aircraft valued at U.S. $12 billion. Further opportunities will be available to Canadian industry in areas such as sustainment, maintenance, repair, training, and simulation. The JSF program is also helping to position Canadian firms to take advantage of opportunities linked to future aerospace and defense projects.

CIM: How important is an investment in R&D for Canadian businesses for tomorrow’s automotive and aerospace work?

Paradis: The government recognizes that increasing business investment in R&D will be crucial for our long-term competitiveness.  While the manufacturing sector accounts for close to half of the total R&D expenditures in Canada, Canadian manufacturers can and must do better in terms of investments in commercially oriented R&D. 

To support this, the government has undertaken a comprehensive review of federal support to R&D to gauge its contribution to innovation and economic opportunities for business.   

CIM: How do programs such as the Strategic Aerospace and Defense Initiative (SADI) create work and jobs in this country?

Paradis: SADI provides repayable financial support to firms in the aerospace and defense sector for strategic research and development projects. SADI investments help firms work with universities and colleges to develop advanced technologies and attract and retain a highly skilled workforce. The program also levers private sector investment in R&D and attracts foreign investment to Canada.  These factors all contribute to helping Canadian aerospace and defense companies become more innovative and competitive.

CIM: What is the role of government in promoting our manufacturing strengths to the world market?

Paradis: Canadian companies can compete with the best in the world.  That’s why the government is negotiating free-trade agreements with more than 50 countries. Freer trade, investment, and open markets have helped Canada exit the recession faster and stronger.  Government is helping Canadian businesses compete by negotiating market access, by setting the stage, and by focusing on economic recovery.  

For more information, visit www.ic.gc.ca.