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Context: House Hansard - 181 - Apr/20/23

Mr. Ryan Williams (Bay of Quinte, CPC)

Apr/20/23 12:35:51 p.m.
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Madam Speaker, this is an exciting time for aerospace. Just this morning, we got to watch Starship, SpaceX's newest project, live in our office. Starship is twice as big as the Saturn V rockets, with 35 rocket engines. It blasted off this morning from Boca Chica, Texas. It went almost into space and unfortunately got caught in a spiral and kept going around and around before they had to hit the self-destruct button. It reminds me a bit of the Liberal government, but that is a story for another time. It is very exciting, because we are seeing private space companies in the U.S., and of course representing the whole world, involved in space travel. With respect to another story, the Artemis II crew was announced a couple of weeks ago, including Canadian Space Agency astronaut and RCAF captain Jeremy Hansen. It is very exciting that we have a Canadian astronaut joining the U.S. on the Artemis missions as we go back to the moon. That is something we can be very proud of. From the field of engineering that deals with the design, development, production and operation of vehicles and systems that operate in the earth's atmosphere or in space, Canada has a dynamic industry with aircraft, spacecraft, satellite and missile systems, which of course we call the aerospace sector. I know that many of our colleagues have talked about great companies that are operating here in Canada, including in Montreal and other parts of the country, all working on different systems in the aerospace sector. Let us be clear on this, and this report is very clear: We need to get back to the basics. The Canadian aerospace sector is not broken, but the government's role is. In my last point, I am going to talk about what this report really spoke about and what we need to do. Number one, we need to identify aerospace as a pillar of Canadian industrial policy again. We have seen it blanketed. We have a term that we hear from experts and from witnesses all the time when we are talking about the spectrum of industrial policy. It is that we spread the peanut butter too thin. In Canada, we seem to think that we are just going to give everything to everyone and that at the end of the day maybe that is going to be a really good strategy with which Canada evolves, but it is not. We seem to spread it all too thin. Aerospace is one of those industries in Canada that we can afford to put more into, and we are going to get more out of it. I am going to talk specifically about that. Before I do that, I want to say that I am happily splitting my time today with the member for South Shore—St. Margarets. The second part is very important. When we talk about aerospace, it means that we put an emphasis on research and development and first-stage innovation. When we talk about other sectors in Canada where we need to succeed, it is about putting an emphasis on first-stage innovation, research and development, because when we put an emphasis on research and development, we are getting something out of that. Something that we are also studying in the science and research committee right now is owning what we create or commercializing our IP. When we are looking at all these strategies, there is not just one thing we have to do. We have to do all these complex things at the same time, but we really need to commercialize IP and put more money into research, and then of course focus on aerospace as being one of those industries. Part of that is going to be deregulating the industry. Also, what is probably most important is establishing a national procurement strategy to support defence and the aerospace sector. I really want to focus on that last point first, because it is the most important. The Washington Post had an article yesterday that was really concerning because it mentioned that the Prime Minister told NATO that Canada will never meet its spending goal. That is very concerning. Canada's widespread military deficiencies are harming ties with security partners and allies. These shortfalls lead the Canadian Armed Forces to not be able to participate fully across the world. We have had really big problems with not meeting our commitments with NATO and our commitments across the world. The Americans are concerned about our ability to protect our Arctic against Russian and Chinese aggression. The Germans are concerned about whether Canada will continue to aid Ukraine. Turkey is disappointed by the Canadian military not being funded enough to support transport of humanitarian aid when it had an earthquake earlier last month. Haiti is frustrated by Ottawa's reluctance to lead a multinational security mission. However, this is the biggest glaring hole in economic opportunity. Other nations, like Germany, the U.K., Australia and the U.S., have figured out how to make defence policy industrial policy, and have that policy create powerful paycheques to their citizens and proud, private enterprises that provide income to their countries. This is what Canada needs to do, and what it needs to do with defence when it relates to aerospace. The key differential between our approach to defence policy and the British approach is that industry is included in the definition of defence policy from the outset. By the time the British defence and security policy is stable, most of the companies selected to deliver the products and services have already been identified as part of a defence strategy and then a procurement strategy. In 2017, 56% of the U.K. procurement was sole-sourced with a large majority awarded to the British industry providing billions to the country's GDP. How does that relate to Canada and the aerospace industry? Well, let us look at our neighbour south of us and, of course, to the rocket launch this morning. A really big stat is from NASA, which has a bigger budget than Canada's defence budget as a whole. When we look at SpaceX, a private industry, 85% of its budget comes from NASA. When we talk about that rocket this morning exploding, probably bad news for Elon Musk, but great news for the engineers and part of the product, because they are going to build a new rocket and try again. That is part of first-stage innovation with companies. They are going to put more of that money into those industries. The thousands of engineers, product designers and workers, as I alluded to earlier, who are part of that process is just astounding as well as the GDP that is put back from it. One side note is that SpaceX is involved with Starlink, and that American company, funded, of course, by the defence policy and NASA, is actually providing Internet to Canadians. Hundreds of thousands of Canadians are getting Internet not from Canadian companies but from the U.S. company Starlink, from Elon Musk, which is a part again of this procurement policy that was started by NASA. NASA funds 85% of SpaceX and no doubt will be funding all new projects for space going forward. We can see how defence spending ends up being a Canadian prosperity plan. It is good for Canadians and powerful paycheques, and it also can be, of course, a great industrial policy. I want to go back to R and D and what we used to have. We used have a couple of programs with the Conservative government, prior to the Liberal government, like SADI and AIAC that were specific to the aerospace sector. Again, those specific programs went into research and development for the sector for certain companies. We had a witness come to the committee from Héroux-Devtek Inc., Mr. Gilles Labbé, who talked about a landing gear process. This is a company in Quebec that had a landing gear project, and when he talked about the project, he talked about a ticket that normally costs between $50 million and $70 million U.S. with the process taking as long as five years. Through those SADI programs that we used to have from the government, that was almost entirely funded by the government. It helped that company save five years and evolve. That company went from having 200 employees to now over 2,000 employees. What happened with that R and D program is that the SADI was evolved into the SIF program. However, again, with that peanut butter spread too thin, the SIF program looks at many different industries and not aerospace specifically or targeted specifically. What has happened is that those companies are finding they are missing out on that first-stage innovation and the R and D. When we look at R and D as a specific purpose of industrial policy, what we should be looking at are examples such as DARPA advanced manufacturing in the U.S. and, of course, looking at specific sectors. Again, to my point, aerospace needs to be a specific sector that we put R and D into, and when we look at procurement policies, we should certainly see it as a bright future and Canadian industrial policy, which is the only way we are going to help this industry succeed. We have a lot of different issues that we need to look at across the defence spectrum, but certainly aerospace is going to be able to fulfill that. As Canadians, we certainly we need to reach for the stars and start looking at aerospace again as not just an industry but a major industry for industrial policy, research and development, procurement policy and, again, looking at investing in defence and linking that to the aerospace industry to ensure that Canada succeeds, those workers succeed and those companies succeed.

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Mr. Kevin Lamoureux (Parliamentary Secretary to the Leader of the Government in the House of Commons, Lib.)

Apr/20/23 12:45:39 p.m.
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Madam Speaker, I could not help but notice that the member made reference to Elon Musk and the fact that his SpaceX company's rocket blew up, which he says is good news, because that means more research and technology. The member seems to be a big fan of the private sector. Now, I am thinking, and I am sure my colleague, the member for Abbotsford, is thinking too just wait a minute. John Diefenbaker, on the Avro Arrow, destroyed the program, which was not good news. All this science and technology and advances have been lost as a result of a bad decision by a former prime minister. Does the member not recognize that maybe the government does have a role to play in terms of research and technology, something that we have been doing and supporting in the aerospace industry for the last number of years as a government, or does he believe that the private sector, people like Elon Musk, is better off to advance the aerospace industry?

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Mr. Ryan Williams

Apr/20/23 12:46:41 p.m.
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Madam Speaker, Elon Musk is doing great things. I wish the member had listened to a bit more of my speech. The government has a role. The problem is the government has not been playing the role it needs to with the industry. The industry has spoken to our committee, and the industry has stated that it wants the government's role to be more in R&D and target specific, and that government should announce aerospace is a growing, specific, major sector for Canadian industrial policy. Then it should play the role it needs to. At first-stage innovation, government should put money into growing companies, and then let the private sector commercialize the IP of those companies and make all the money they can, so they provide paycheques to Canadians.

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Ms. Niki Ashton (Churchill—Keewatinook Aski, NDP)

Apr/20/23 12:47:30 p.m.
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Madam Speaker, I also want to share my surprise at the defence of Elon Musk and the SpaceX rocket that just blew up. While there was some reference to that being problematic, we need to cycle back and recognize that Elon Musk and anyone seeking to profit off space or space exploration is very problematic. We need to be talking about what is in the interest of the public good. Speaking about Elon Musk, I also want to acknowledge, besides aerospace, this is somebody who is making major profits off communities, particularly in our riding, when it comes to the service delivery of Internet. That is because the federal government has abdicated its responsibility. Both Conservative and Liberal governments have failed to deliver accessible, affordable, quality Internet to so many communities in our region. It is time for the federal government to step up on aerospace and on Internet provision. Will the member recognize that we should not be here defending Elon Musk, and instead we should be defending Canada's role in seeking the public good when it comes to space?

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The Assistant Deputy Speaker (Mrs. Carol Hughes)

Apr/20/23 12:48:44 p.m.
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I think it is very disrespectful that a lot of parliamentarians are having side conversations when someone else has the floor. I would say that if they want to have those conversations, they should take them out into the lobby. The hon. member for Bay of Quinte.

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Mr. Ryan Williams

Apr/20/23 12:49:04 p.m.
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Madam Speaker, we could get into debate about whether socialism is really something that provides wealth to its citizens or just takes away from its citizens. On this side of the House we really believe in private capital and a capitalist society that has been beneficial to Canadians. Its powerful paycheques could provide wealth to Canadians, instead of having the government run deficit after deficit until Canadians are broke. Certainly this country is broken. We really believe in the private sector, and that Canadians can and will create good jobs, great ideas and provide powerful paycheques for their own citizens, for the people here in Canada. Conservatives will always stand on the side of those citizens.

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Mrs. Julie Vignola (Beauport—Limoilou, BQ)

Apr/20/23 12:49:55 p.m.
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Madam Speaker, my colleague on the other side mentioned the Avro Arrow project several times. The project was scrapped by Mr. Diefenbaker, but the initial push to sideline it began under St. Laurent's Liberal government. The current Liberal government has also ignored an airline that wanted to develop the aviation sector further by supplying aircraft. Instead, the government turned to a U.S. company that played a role in the demise of the Avro Arrow. What are my colleague's thoughts on the matter?

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Mr. Ryan Williams

Apr/20/23 12:50:37 p.m.
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Madam Speaker, I agree. The whole point is we need to look at Canadian companies and Canada's role in contributing to the aerospace sector, not only in Canada but in North America. We have a lot of great companies that already contribute to some of the procurement projects that are happening in the U.S. Let us face it, there are a lot of procurement projects coming from the U.S. that we can contribute to, that we should be playing a greater role in, not just a small role but a bigger role. The government's role is to ensure that we have the research and development, and to ensure that we have the funding for first-stage innovation. Then, it is the private sector's role to develop and commercialize that next sector, so they could carry it on. That is what we want to happen. That is what we are going to have under a Conservative government.

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Mr. Rick Perkins (South Shore—St. Margarets, CPC)

Apr/20/23 12:51:26 p.m.
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Madam Speaker, I am pleased to follow such a great speech from my colleague from Bay of Quinte. I would remind those watching at home and my constituents what we are discussing today. Today we are discussing a report done by the Standing Committee on Industry and Technology of the House of Commons, entitled “Development and Support of the Aerospace Industry”. It was tabled in this Parliament in June 2022, but is actually a study that spans two Parliaments. It was started in the last Parliament before the last election when the now Conservative leader was the vice-chair of the committee and then continued in this Parliament after COVID. It is quite a span of time, but affects a lot of the tone and position of where the industry is. I should start by saying that we are all mentioning aerospace companies within our regions or ridings. There is a company in my riding, the beautiful UNESCO heritage town called Lunenburg, which everyone may have heard of. The company is called Stelia North America, which makes parts for the Airbus 737 Max and the F-35 aircraft. Unfortunately, because of the dithering by the government on the purchasing of the aircraft that it said it was not going to buy and now has ended up buying, a lot of jobs were lost in that interim period in Lunenburg that it now has to try get back since the government is now going to buy the aircraft it said it was not going to buy. It is important to understand what has happened to this industry. There is a really interesting section in this report, on page 6, that says, “Canada’s aerospace sector had fallen from the fifth-largest in the world in the 1980s to the ninth largest.” It goes on to say, “Canada was once the fourth-largest aircraft manufacturer but it has dropped to the 12th”. Recommendation 5 in the report has been mentioned before, which talks about having an aerospace strategy. There were aerospace strategies in previous governments that led us to be a much larger player in the world than we are now, but in the last eight years of the Liberal government, we have not had any strategies, and that is what this unanimous report points out in recommendation 5. I would point out that the Liberals agreed with this, too. After eight years, what has been the Liberal strategy? The Liberal strategy was to bring in a luxury tax on aircraft. That was their strategy because they have never met a tax they did not like. In fact, the Minister of Finance said, when she introduced it last year, that this would make the wealthy pay their fair share. However, the reality is that when we look at the numbers and the performance of the industry, the cost of this tax is actually being borne by the workers in the aerospace industry, not by the corporations. I will go through that in a few minutes. There was a report done by an economist out of Montreal, Jacques Roy, who words for HEC, an economic think tank in Montreal. He talks about that tax, which was introduced on September 1, 2022, by the Liberals, and the impact it had. The tax revenues expected from the new aircraft tax he says are negligible. A May 2022 Parliamentary Budget Officer report estimated the tax on cars, planes and boats, which were all included in that tax, would raise $163 million in 2023-24, but only an insignificant $9 million of this total was expected to come from the aircraft tax. The PBO also projected an annual reduction in aircraft sales, as a result of that tax, of $30 million. Obviously, the impact is much greater on jobs and the economy than the tax benefits the government. That tax also affects the reputation of our industry. The PBO cautioned that estimates were qualified by several uncertainties and unknown behavioural responses to the tax. There are always behavioural responses to taxes when they are brought in. This economist did a deeper dive into the impacts of that tax, and I will share with the House what the findings of that were. It has a qualification that it has to be 90% business use in order to be exempted from the tax. That has proven to be unworkable because the jets that companies like Bombardier sell are not used by that company 100% of the time. Because of the way those jets are utilized, the qualification does not apply to the businesses. Commentators have noted that the 90% threshold is harsh in comparison with the primary use standard; in other countries that have done this, this is usually only 50%. This is commonly used in the United States and Europe as an alternative source of determining whether the tax applies to the jets. The PBO's research expressed a concern about the narrowness of the exception. Although the tax targets aircraft sold to private individuals for nonbusiness use, it also applies in practice to situations involving mixed use; that is, for some business use and some personal use where it cannot be confidently determined that the 90% test has been met. In this regard, it is important to understand the unique practices of the aerospace sector. Buyers of business jets and helicopters usually outsource the management, servicing and maintenance of these aircraft to management and leasing companies. Even owners who acquire a jet principally for business purposes, and do not intend for it to be used for personal purposes, will face considerable difficulty in determining whether that 90% test applies. They will ask leasing companies to rent the aircraft out to other customers when they are not using them. This is where the issue comes into play. Canadian-based leasing companies may rent these aircraft to U.S.-based charter brokers. They, in turn, may charter the aircraft for their own clients. The person who is subrenting or leasing it may use the aircraft for business or personal use. Very limited information, if any, is available to the owner regarding the other uses of the aircraft in these circumstances, partially because of privacy laws. It may therefore be quite challenging, if not impossible, to determine whether the purpose of the trips taken in such cases is business or personal. That makes the determination of whether the 90% test has been met especially difficult. According to the PBO's interviews in doing this research, the introduction of the luxury tax has already had a huge impact. The negative reaction from clients has translated into lost sales for Canadian aerospace manufacturers and their supply chain. It is estimated that the business aircraft segment experienced a drop of 8% in sales in 2022 because of the tax. This represents roughly $480 million in lost sales. That figure is significantly higher than the $30 million projected by the Parliamentary Budget Officer. He estimated that this drop in sales would result in the loss of approximately 750 direct jobs in Canada. The estimate is based on the number of direct jobs required to produce the aircraft for which sales have been lost. Personal income taxes paid by just these individuals exceed the annual revenues expected by the government from the luxury tax. For helicopters, research indicates that private individuals are likely to postpone or abandon the purchase of approximately five new helicopters per year or to buy a used model. This will result in the loss of 15 full-time jobs and lost annual salaries of approximately $1.3 million. The impact of lost sales also ripples down through the aerospace industry and supply chain. For business jets alone, it is estimated that the loss of 750 direct jobs will cause the loss of an additional 1,200 jobs in the industry's Canadian supply chain. The PBO estimates that these workers' personal income taxes at the federal level alone will be approximately $14.3 million. In my view, these figures are fairly conservative. They would be much higher if we were to add the figures for all of the indirect and induced job losses in the industry. These figures also underestimate the impact of the maintenance, repair and overhaul activities on other small and medium-sized enterprises not interviewed in the course of the research. I am running out of time, so I will just say that the strategy called for in this report is a strategy to tax. That is the only one we have after eight years with the Liberal government. That is where the government goes to, and the result will be massive job and economic losses for our country.

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Mr. Kevin Lamoureux (Parliamentary Secretary to the Leader of the Government in the House of Commons, Lib.)

Apr/20/23 1:01:31 p.m.
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Madam Speaker, that is not true. Through procurements, contracts and the enhancement of skills and during the pandemic, we have seen direct and indirect supports to Canada's aerospace industry. The government has consistently, from day one, recognized the importance of the industry and invested appropriately and accordingly. What surprises me to a certain degree is what the Conservative member is saying about having a luxury tax applied to the wealthiest. Many Canadians believe in paying taxes but say that it should be fair. It is just like when we brought in a tax increase for Canada's wealthiest 1%, which the Conservatives voted against. What does the Conservative Party of Canada have against Canada's wealthiest 1% having to pay a fair share of taxes?

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Mr. Rick Perkins

Apr/20/23 1:02:28 p.m.
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Madam Speaker, what the Conservative Party is against is taxes that kill jobs and kill industry, which is the habit of the government. I just went through a speech saying that over 750 jobs had already been lost in the aerospace and jet-manufacturing industries because of the government. If that is support for an industry, I do not want support for anything I do in the future.

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Mr. Sébastien Lemire (Abitibi—Témiscamingue, BQ)

Apr/20/23 1:02:52 p.m.
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Madam Speaker, I thank my colleague and fellow vice-chair of the Standing Committee on Industry and Technology for his powerful speech today. I would like to know whether he would agree, as per recommendation 2, that the government put in place significant financial incentives for basic research, to develop a greener aircraft and expertise in the energy transition of this industry through green technologies. I would add to that the importance of having predictable funding. Predictability is absolutely essential for this industry. There needs to be a national aerospace policy that will allow us to ensure sustainable funding for the next 15 or 20 years, because that is how many years of R and D it takes to build an aircraft.

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Mr. Rick Perkins

Apr/20/23 1:03:38 p.m.
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Madam Speaker, I enjoy sitting on the industry committee with the member. We are doing good, collegial work together on it. On that particular issue, I absolutely agree. Part of the challenge of what happened when the government created the strategic investment fund, or SIF, program is that it collapsed other tax credits for specific industries to help with the very issue the member is talking about. That issue is that the government lost the sectoral focus in how to support the aerospace industry on issues like greening the engines and the fuel usage of aircraft in Canada. This is another thing the government has done to hurt the aerospace industry.

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Mr. Blake Desjarlais (Edmonton Griesbach, NDP)

Apr/20/23 1:04:32 p.m.
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Madam Speaker, in this place, I find it is often our goal to disagree without being disagreeable. I believe this member often does that in an extraordinary way, and I respect him for that. However, I do have comments directed to the many lengthy speeches the Conservatives have made today and the great appetite they have for the companies that are seeking federal funds. They often talk in this place about how evil socialism is or how evil it is to help regular, everyday people in this country. However, when companies come to the table asking for money, whether it is big oil companies, big banks, or in this case, aerospace mega-companies, all of a sudden, they are for it. Whether in tax breaks or other means of revenue generation, it is like coming to the government trough. How does the member reconcile the fact that his party is so willing to support massive corporations but does not allow that same opportunity for single moms, persons with disabilities or those who need the government's support most?

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Mr. Rick Perkins

Apr/20/23 1:05:30 p.m.
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Madam Speaker, I will first answer the part about why we do not support socialism. It is because it has failed everywhere and reduced economies to totalitarian regimes. Everywhere socialism has been tried as a government entity, we have seen less freedom. That is why we do not support it. We think freedom creates opportunity, and the capitalist system produces the opportunity and the profit incentive that moves—

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The Assistant Deputy Speaker (Mrs. Carol Hughes)

Apr/20/23 1:06:05 p.m.
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I must interrupt the member. The hon. member for Drummond on a point of order.

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Mr. Martin Champoux

Apr/20/23 1:06:07 p.m.
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Madam Speaker, the interpreters are saying that there is a lot of interference when my colleague speaks. I do not know whether it is because there is a device or a phone near the microphone, but the interpreters have indicated several times now that there is frequent interference.

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The Assistant Deputy Speaker (Mrs. Carol Hughes)

Apr/20/23 1:06:22 p.m.
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I appreciate the point of order. I also mentioned yesterday that it is very important for members who are speaking or asking questions to make sure that they put their phones on silent or somewhere other than their lecterns, because the microphones definitely pick up sound. This is hard on interpreters, and we want to make sure they can work safely. The hon. member has 30 seconds to finish his response.

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Mr. Rick Perkins

Apr/20/23 1:07:01 p.m.
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Madam Speaker, I think I dealt with the socialism part well. On the capitalist side, the profit incentive creates invention, which is what moves society forward. That is why the member has an iPhone or Samsung phone in his pocket that he uses to help him do his job. That is why he has a Microsoft Surface laptop from the House of Commons, a nice thin computer, to do his job. Those things are all inventions created by a capitalism profit motive.

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Mr. Kelly McCauley (Edmonton West, CPC)

Apr/20/23 1:07:48 p.m.
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Madam Speaker, I want to thank my colleague from South Shore—St. Margarets for his comment with respect to Liberal government support. Industry is always saying, “With a government like that, who needs enemies?” He touched upon the so-called luxury tax. The Aerospace Industries Association of Canada figures that it is going to cost about 3,000 jobs. When asked about this, the finance minister said that such losses are “negligible”. What government has ever been so out of touch that a finance minister tells 3,000 people in the middle class, who are earning good wages, that their job loss is negligible? This is what we have seen from the government again and again. It attacks businesses and regular, everyday Canadians for ideological reasons. The government again stated, with respect to the 3,000 lost jobs, that the wealthy have to pay their fair share. With the current government, every time it asks people to pay their fair share, the middle class and the little guy bear the brunt of its incompetence. We do not need a national strategy for aerospace; we need a national strategy to replace the incompetent, out-of-touch Liberal government.

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