Durham Economic Prosperity Committee

Ontario Budget Must Seize the Manufacturing and Exporting Opportunity

January 21, 2016—Amid plummeting oil prices and a tumultuous start to 2016 for stock markets around the world, the Ontario Minister of Finance has launched pre-budget consultations that will attempt to show progress towards a budget surplus by 2017-18.

Canadian Manufacturers & Exporters (CME) will be looking for government to focus limited resources on three main areas: regulatory burden reduction, electricity rate competitiveness and stimulating investment in innovation, commercialization and productivity improvements.

The Fall Economic Statement launched a number of important initiatives including regulatory burden reduction and defined benefit reform consultations. Now is the time to work with industry to drive action and results. Ontario, through the Ministry of Economic Development, Employment & Infrastructure has undertaken two pilots to identify the scale of regulatory burden in the food processing and auto parts sectors. The results serve to validate the significant regulatory burden Ontario manufacturers face. The critical next step ought to be to determine which regulations are particularly onerous and/or duplicative and either streamline or eliminate them as quickly as possible.

Despite a number of positive initiatives by the Ministry of Energy to bend the cost curve, Ontario continues to have among the highest cost electricity rates in North America. A vibrant manufacturing sector requires a competitive electricity rate environment with reliability to match. CME will be urging the government to accelerate the progress to a more competitive electricity rate for manufacturers. Some opportunities include eliminating the debt retirement charge for manufacturers (currently scheduled for April 2018), providing surplus capacity to manufacturers during the spring and fall at a reduced rate (vs. giving it away to competing jurisdictions) and enhancing incentives for conservation and demand management programs.

The low dollar environment makes Ontario produced products more competitive in export markets. But it also makes re-investing in more productive assets more expensive as equipment is often priced in US dollars. The painful lesson of the last low dollar environment a decade ago is that we cannot rely on a low dollar for long-term viability. Ontario manufacturers have to be competitive at par or higher ($1.10 peak). Therefore, it is critical that manufacturers continue to re-invest throughout this low dollar environment. Government supports this through grants and incentives that focus resources on innovation, commercialization and other productivity enhancing investments.

Ontario has a great opportunity to grow the manufacturing sector, the Ontario economy and our standard of living. The time for action is now.

Submitted by Ian Howcroft, Vice President (Ontario division) of Canadian Manufacturers & Exporters (CME). For more information on CME, contact policy@cme-mec.ca or visit www.cme-mec.ca.

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