I know. Sounds exciting doesn’t it? Are all of you furiously reading on in anticipation? What’s that you say – You won’t minimize until you’re finally filled in on the interactions of a group of small European nations and Canada?
Well if you’re a fan of our shipbuilding industry, you’ll get a kick outta this.
Karl Risser Jr. grew up in a common maritime household. A shipyard worker himself, both his father and grandfather lived their lives building and repairing ships.
Coming out of World War 2, Risser’s grandfather established himself in the shipyard at a time when work was abundant. In Risser’s father’s era, much of the work was government procurement and heavily subsidized.
For Riser, the industry is drying up, and the harmony between government policy and the industry is lost.
Risser is now the president of Canadian Auto Workers, Local 1, and represents the interests of marine workers in the Maritimes.
Today, he sits in front of the Standing Committee on International Trade and pleads his case.
“Building ships is like a continuation of your childhood. You build something Canada needs, and you get to watch it sail out to harbor. We take a lot of pride in that,” says Risser.
The shipbuilding industry is not what it used to be. The industry has lagged due to deregulation and shrinking subsidies, unfairly leaving them on even playing ground with international competitors, says Risser.
The committee is discussing Canada’s inclusion in the European Free Trade Agreement (EFTA). Canada signed on to the partnership of Iceland, Norway, Switzerland and Liechtenstein on Jan. 26, 2008. Although the legislation was delayed by the election, it could be brought into effect as early as July 1, 2009.
Negotiations of this deal have been in the works for over 10 years.
The deal was first established by Prime Minister Chrétien in 1997, and still is based on fundamentally positive factors of free trade: reduced tariffs on Canadian products entering EFTA nations, Canada as an appealing investment location, and a gateway to further befriend European markets.
EFTA is especially attractive to Canadian industry such as processed food and fish, with all tax eliminated, says Dean Beyea, head of trade in goods in the Department of Finance. “Although our trade with the EFTA countries is already quite substantial, there’s no doubt trade will increase with Canada part of the free trade agreement.”
Total trade between Canada and EFTA nations was just short of $13 billion in 2007, with the nations ranking fifth in export destination, according to Foreign Affairs and International Trade Canada.
Although, when it comes to competing, Canada’s shipbuilding industry is not prepared to go up against European markets that have benefited from years of substantial government subsidy, says Risser.
“It’s disturbing to me when I hear some Canadian politicians talking about our industry not being able to compete with Asian and European yards,” says Risser. “What you’re asking us to do is jump into the ring and fight a professional when we haven’t had any training.”
Last week, International Trade Minister Stockwell Day addressed the House of Commons about the benefits of expanding our free trade agreements, especially during a recession.
“We understand that if we really want to protect industries within our country, if we really want to protect our workers, then what we do is we open the doors and the opportunities for them to sell their products and services and manufacture those things which are wanted in other parts of the world,” says Day.
Opposition MPs think too much is being given up in the name of free trade.
“…the Conservative government…basically handed over our shipbuilding industry without attaining more than the ideological platitudes we heard from the Minister,” says NDP MP Peter Julian. “Essentially what we have seen from the government is a steady drumbeat of wanting to sign trade agreements at any cost.”
According to some MPs, shipbuilding should be “carved out” of EFTA.
The Norwegian shipbuilding industry has been heavily subsidized for 30 years and is one of, if not the strongest in the world.
During that time, they used protectionist methods to keep out foreign competition, says Liberal MP Scott Brison. He emphasized the need for government to keep the shipbuilding industry out of harm’s way with this legislation.
“The fact is that things have changed dramatically in terms of the global economic situation, which is one of the reasons why we as parliamentarians have a responsibility, at the committee level, to ensure due diligence as we are evaluating these types of agreements in terms of making sense for Canada,” says Brison.
The government has taken funds, previously earmarked for shipbuilding, and assigned them elsewhere as part of their stimulus plan – a response to the dismal economic situation.
“There is enough work for the Canadian shipyards on both coasts and in Quebec to keep people employed, and to keep that sector of the economy going full-tilt,” says Defence Minister Peter MacKay in an interview with The Canadian Press.
Alternatively, the Canadian shipbuilding industry has endured a hard decade, and in some places, is running below 50 per cent capacity. Davie yard, a shipyard outside of Quebec City, was closed temporarily in December, leaving 1,100 workers without work and no date for reopening. “We know full well that this agreement will destroy shipbuilding in Canada,” says Julian.
Although the upcoming budget includes $175 million for new ships and repairs, Liberal MP Larry Bagnell says the government cannot ensure the work is done in Canada, as the budget states, if indeed Canada joins the EFTA, making foreign products more easily available.
When it comes to protecting our shipbuilding and waterways, Risser says Canadians don’t care because we don’t see the problems.
“If we regulated our highways the way we regulated the St. Lawrence, people would go crazy. Average Canadians don’t know what’s going on in our industry,” says Risser.
In 1920, the United States passed the Jones Act, regulatory measures that applied to American waterways and vessels. The law included no foreign presence of ship operators or owners on US coastline, ensuring a level of sovereignty and economic benefit. It also limited the amount of repair a US ship could undergo in foreign territory.
During the negotiations of the Jones Act, Canada should have realized it was a smart move and established a similar law, says Risser. To this day, Canada has no such legislation.
“Canada is a maritime nation – the only maritime nation that has not introduced similar policy to the Jones Act in 50 years. The shipbuilding industry is unique in that it affects our sovereignty, our ability to be able to stand alone. All of the waterways that we are responsible for, especially the arctic passage need to be protected,” says Risser.
Yet another development surrounding the issue is this year’s trade deficit – our first in 32 years. According to Statistics Canada, Canadians bought more from foreign suppliers than we sold abroad – to the tune of $458 million.
We rely heavily on decreasing resources, says Risser about the trade deficit. “We have to find things we have to produce in Canada to send overseas, and ships are one of them.” The production of ships is a big job, one that creates many jobs in itself.
While these jobs are not as highly subsidized as before, the government has enacted some policies to make it easier for Canadian shipbuilders and owners to operate in the country.
A measure called the Accelerated Capital Cost Allowance (ACCA) was introduced to financially help ship owners. Only a limited number of owners qualified for the program, so another program was introduced.
The other, Structured Finance Facility (SFF), is meant to ease interest costs for domestic and foreign ship owners when they choose to operate within a Canadian shipyard. In 2007, this program was renewed until 2011 and given $50 million. Though, in just a year, almost half of the money had been spent already.
The government also announced a shipbuilding policy for procurement in Canada; a plan that would span several years and spend a total of $43 billion.
Within the Canada-EFTA deal, there is record 15-year tariff built in, and is meant to give Canadian shipbuilders a chance to catch up to their European counterparts.
“I feel that our shipbuilding sector can compete and that our workers are some of the best in the world,” says Conservative MP Gerald Keddy, who says Canada’s shipbuilding industry is tough. “I fail to understand why one party…does not have any faith in the shipbuilding sector and is not willing to allow it to compete in the international marketplace.”
But Risser says tariff protection is the wrong way to go. “Instead of protecting a wounded industry, we need to build our industry and make it healthy again. In order to do that we need to put the right policies in place.”
“EFTA is a bad deal for Canada, and I believe it will destroy our industry.”
While there are critics who have labeled shipbuilding a “sunset industry,” Risser believes there will always be jobs along Canada’s coastlines.
Congratulations! You’ve made it through a B+ piece that deserved a B-.
As a reward, you all can wait in agony for my next post, probably sometime in April, and probably just as random.