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CME welcomes Finance Minister Morneau’s Fall Economic Statement

Finance Minister Bill Morneau tabled the Government of Canada’s annual Fall Economic Statement today announcing new measures recommended in Canadian Manufacturers & Exporters’ (CME) Industrie 2030 Action Plan: Manufacturing Growth, Innovation and Prosperity for Canada.

CME commends the Government on its announcement to establish an investment concierge service to attract more foreign investments in Canada, and measures around the newly announced global skills strategy that will set an ambitious two-week standard for processing visas and work permits for global talent.

New measures referenced in the Economic Statement that will impact Canadian manufacturers include:

Additional investment in infrastructure, including transportation and logistics for Canadian exporters

  • Additional investment of $81 billion over 11 years, starting in 2017–18, in public transit, green infrastructure, social infrastructure, and transportation; and,
  • Increased capacity for Canadian exporters: Budget 2017 will announce further details on the approach the government will take for the allocation of this new investment in transportation to facilitate and expand the access of Canadian goods to global markets.

Creation of a new Canada Infrastructure Bank

  • To provide innovative financing for infrastructure projects, and help more projects get built in Canada, where public capital can be leveraged;
  • The Canada Infrastructure Bank will be responsible for investing at least $35 billion on a cash basis from the federal government into large infrastructure projects that contribute to economic growth through direct investments, loans, loan guarantees and equity investments. Part of this amount—$15 billion—will be sourced from the announced funding for public transit, green infrastructure, social infrastructure, trade and transportation, and rural and northern communities;
  • An additional $20 billion in capital will be available to the Canada Infrastructure Bank for investments, which will result in the Bank holding assets—in the form of equity or debt. This $20 billion will therefore not result in a fiscal impact for the government; and,
  • The Canada Infrastructure Bank will be accountable to, and partner with, government, but will operate at greater arm’s length than a department—working with provincial, territorial, municipal, Indigenous and investment partners to transform the way infrastructure is planned, funded and delivered in Canada.

Invest in Canada Hub

  • To ensure that Canada makes the most of every opportunity to attract global investment and the jobs that come with it, the government is allocating $218 million over five years to create a new federal body, the Invest in Canada Hub, and to increase the number of trade commissioners focused on investment attraction in strategic markets; and
  • The Invest in Canada Hub will employ a new, dedicated high-impact sales force to promote Canada, and to work with global companies to increase investment that will benefit Canada. Under the leadership of a new Chief Executive Officer, the Invest in Canada Hub will be established by the end of 2017, and will work globally, in partnership with Global Affairs Canada, the Canadian Trade Commissioner Service, and Innovation, Science and Economic Development Canada, as well as with provincial and municipal investment attraction offices.

Changes in the Invest in Canada Legislation

  • To ensure that Canada’s legislative framework supports these increased foreign investments, the threshold for review under the Investment Canada Act will be raised to $1 billion in 2017, two years sooner than the planned date in 2019. Before the end of 2016, the government will also publish guidelines under which investments are examined under national security provisions.

Global Skills Strategy

  • The government proposes to launch a Global Skills Strategy that will set an ambitious two-week standard for processing visas and work permits for global talent.

This initiative will look to support:

  • High-growth Canadian companies that need to access global talent in order to facilitate and accelerate investments that create jobs and growth. This will include companies that can demonstrate;
  • Labour market benefits, such as increasing investments, knowledge transfer and Canadian job creation; and
  • Global companies that are making large investments, relocating to Canada, establishing new production or expanding production, and creating new Canadian jobs.

In addition to the Global Skills Strategy, the government will introduce a new work permit exemption for short-duration work terms. The short-duration work permit exemption will apply for work terms of fewer than 30 days in a year—or for brief academic stays—and will be used to facilitate short-term, inter-company work exchange, study exchanges, or the entrance of temporary expertise.

ECONOMIC UPDATE

The economic and fiscal update recognizes the uncertainty that the current global economic situation brings on the Canadian economy. However, growth in Canada is expected to remain higher than the OECD average.

Minister Morneau noted a resilience from the Canadian economy, outside the oil sector. Employment for example, has remained relatively firm, as total employment in Canada has risen by almost 240,000 since October 2014. This reflects gains outside the oil-producing regions, where employment has increased by nearly 275,000 over this period. Employment in the oil-producing regions has fallen by more than 35,000 since October 2014, with more than 70 per cent of this decline occurring in Alberta.

The Finance Minister is somewhat optimistic about business investment, he noted that business investment declined only modestly in the second quarter of 2016, compared to the double-digit declines in 2015, and is likely to return to positive growth moving forward. This is primarily due to oil and gas investment, where the pace of contraction has slowed in recent quarters and the decline is expected to have run its course by 2017.

Exports are not as high as what should be expected with the low dollar: The sizeable depreciation of the Canadian dollar over the past two years is providing a boost to Canadian exporters. Indeed, non-energy subsectors whose exports are more sensitive to the exchange rate have been doing better, with the volume of goods exports in these subsectors increasing by more than six per cent since mid-2014. However, overall, Canadian non-energy goods export growth has been disappointing, slowing from 5.3 per cent in 2014 to 3.4 per cent in 2015, and contracting by 0.1 per cent so far in 2016. Part of the reason is due to many of our competitors’ currencies depreciating against the US dollar. This situation will necessarily impact budgetary and deficit projections for 2016-17:

  • The deficit for 2016-17 is expected to be $25.1 billion, but that does not include a reserve for rainy days. In last spring’s budget, the government projected a $29.4-billion deficit, but that number included a $6-billion reserve.
  • The deficit is gradually expected to shrink over the coming five years to $14.6-billion in 2021-2022, not including any provisions set aside for a rainy day. There is no projection to balance the budget.
  • Over five years, the government will add a total of $31.8-billion more to deficits than was expected in the last budget, mostly because of changes to expectations for the economy.
  • The debt burden — the size of the federal debt as a percentage of gross domestic product — will slowly slide to 30.4 per cent in 2021-22 from 31.8 per cent in 2016-17.

ABOUT CME’S INDUSTRIE 2030 ACTION PLAN

Manufacturing Growth, Innovation and Prosperity for Canada is an action plan resulting from the input of more than 1,250 Canadian manufacturers and exporters. The plan defines specific recommendations to overcome challenges and create a roadmap for the future of manufacturing, to strengthen its footprint across the country, and to drive growth, innovation, wealth creation and jobs. Core recommendations include:

  • Building a strong labour pool and skilled workforce;
  • Accelerating adoption of advanced manufacturing technologies;
  • Fostering innovation, commercialization and new product development;
  • Creating a competitive business environment in Canada; and
  • Increasing access to domestic and foreign markets.

Click here to view the report and specific recommendations

For more information on new measures announced in the Fall Economic Statement or CME’s Industrie 2030 Action Plan, email policy@cme-mec.ca

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