Mr. Thomas Siddon (Richmond-South Delta) moved:
* That this House condemns the Government for imposing punitive tax measures; high energy and interest costs; and general economic uncertainty upon the mining sector, all of which have led to the loss of jobs in Canada and a loss of foreign markets and foreign exchange, and urges that a special committee of this House be struck to investigate and recommend immediate solutions to the problems facing the mining industry in Canada and the economic hardship and despair imposed upon thousands of Canadians in mining communities from coast to coast.
He said: Mr. Speaker, if this motion before the House today is adopted, we would see the creation of a special parliamentary committee to examine the very serious structural problems facing the Canadian mining industry today.
Naturally, the current slump in Canada's mineral production can be linked to a large extent with the world-wide economic recession. But many of the problems confronting our mines and their employees started over a decade ago and are unrelated to the recession. It is only during the past 18 months that this decline and the importance of this industry to Canada has become to visibly apparent to all Canadians because of the consequent widespread unemployment in the mining industry.
The result has been the hardship, the suffering, the uncertainty felt in mining communities across Canada, and the closing down of many company towns. These troubles began with the closing of Uranium City operations in northern Saskatchewan in December of 1981. Over subsequent months we have witnessed the decline of the potash industry in Saskatchewan, the asbestos industry in Quebec, iron ore in Quebec and northern Ontario, the closing of the major nickel mining and smelting operations in Sudbury for an extended period of time, the decline of our copper and molybdenum industries and, most recently and regrettably, the decline of our coal markets in Pacific Rim nations. This all translates into considerable human suffering and loss of income.
I want to say at the beginning that stop-gap measures will not be enough to solve these problems. The use of Section 38 under the Unemployment Insurance Act, the concept of work sharing and even programs like ILAP will only be useful if
they lead to a meaningful investment in future plant and opportunity to produce and to market more competitively those bountiful mineral resources which we have throughout Canada.
These kinds of stop-gap measures, which I am sure the Minister will be speaking of in her rebuttal, will not affect more than a small number of those thousands and thousands of Canadian mine workers who are presently unemployed. They will be of little value unless they are geared to certain long-range goals which are established by the Government of Canada in consultation with the mining industry.
A special parliamentary committee, as provided for under the new House rules, would be the best way to tackle this issue. It would deal with the issue openly and could act with the urgency needed as a consequence of years of neglect, not only by the federal Government but by provincial Governments, in coming to grips with these very serious problems.
In Canada we have a great untapped potential in bountiful mineral reserves. It is inexcusable for the Parliament of Canada to overlook this important sector of our economy and the contribution that that mineral wealth can make to the wellbeing of all Canadians. And it is obvious that policy papers prepared by the bureaucracy are not the way to go towards solving this problem.
It has now been a year and two months since the Minister of State for Mines (Mrs. Erola) released her ill-fated policy paper, which at the time was called a discussion paper on mineral policy, yet nothing has come of that paper that we have been able to detect. In spite of a great and costly work effort by hundreds of officials in the Minister's Department, the policy paper missed the mark in terms of the real issues of priority that should have been addressed. It is not surprising that this paper drew harsh criticism from every quarter. However, the concern created by the proposed mineral policy resulted in a number of thoughtful and detailed responses. It would be tragic if these responses were ignored by the Minister as she puts her embarrassment under the rug, so to speak, with respect to this policy paper.
It is time that the Minister, the Government and her Department began listening to the real and long-range needs of the industry. There is a chronic need for a whole new approach to rejuvenating our mining industry. A parliamentary committee could map out the ground rules and objectives in this regard that should be followed by all Government departments, both at the federal and provincial levels. This would go a long way toward establishing the security and confidence that is essential to the growth of mining in Canada.
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For example, some of the issues which such a committee would address might fall into the following categories. Such a committee should look at the elements of production costs such as wages, the impact of labour relations on those wages, the costs of energy, the costs of capital, in particular the interest rates available to Canadian investors and industry in comparison with those interest rates available in other parts of the world, the burden of taxation and the royalties. All of these elements of production costs should be compared with our other major world competitors to find out, for example, why it is that they can put nickel on the market at a dollar a pound cheaper than the Canadian producer can market it.
We must look at the question of efficiency of production. Canada's mining industry prides itself in being on the leading edge of modern technology. However, are we keeping abreast of the new and emerging developments that are being exploited in new mines being opened up around the world? On the question of economies of scale, can we justify a lot of small, marginal mines or should we be looking to larger scale activities? How does that question of scale relate to practices in other countries? What about marginal deposits and the important costs of infrastructure such as hydro-electric power and transportation?
These matters must be addressed and put into the context of what our chief competitors are doing in the Iron Curtain countries, such as the Soviet Union, in Australia and in Third World nations which are increasingly eroding our share of world markets. We must find out why it is that the Canadian mining industry of recent times has not been able to attract sufficient investment capital. We must think about world marketing strategies and the potential for growth in the Canadian mining industry. My colleagues and I this morning, and later today, will deal with many of these subjects in detail in order to provide the catalyst and framework in which a parliamentary committee could take a detailed and, I believe, very helpful look at this serious problem.
Surely, an industry which accounts for almost 10 per cent of our Gross National Product deserves better than it has been receiving at the hands of this Government. Eighty per cent of our mineral production is diverted to export which makes a very important contribution to our balance of payments and our Gross National Product. Therefore we must not merely pick away at the problem in a piecemeal fashion, Mr. Speaker, and I hope that will not be the practice of Liberal Members opposite. We must look at this problem in a very constructive and long-range way in order to restore that tremendous potential which had been developed over many years in the North and in the far-flung regions of Canada which created that important pool of wealth for the benefit of all Canadians.
The impact of mining, Mr. Speaker, is felt in every region of our country. It accounts for 4.1 per cent of all capital and repair expenditures and one-fifth of all our national exports. It normally employs 135,000 workers, and 10 per cent of our total labour force through indirect employment, with a multiplier of some five-fold over the actual number of people working
in mines and smelters. The mining industry makes up 60 per cent of all railway freight which is handled in our country.
Total metal and mineral production in 1981-82 was over $31 billion, but in 1982 there was a substantial loss. There was a 20 per cent decline in the value of our mineral production largely going to export with consequent multimillion dollar losses, both for the major mining industries of Canada and the Treasury of Canada; because with major losses being declared, the flow of tax revenue to Government has been heavily depleted in the past fiscal year.
In the policy paper called "Economic Development for Canada in the 1980s", which accompanied the 1981 budget, the Government actually identified the importance of the mining industry and said that one of its leading economic priorities, to quote from that document, "lies in the development of Canada's rich bounty of natural resources". The quote continues;
To back this up, the Government is allocating over $60 billion to economic development expenditures in the period to 1981-86.
That was a year and a half ago, Mr. Speaker, and as yet, other than some make-work help-out programs, we have seen little action in getting on with the important job of developing a greater opportunity for Canada's mineral industries around the world. Therefore, Mr. Speaker, in fact it has not merely been a matter of passiveness. Certain federal policies have amounted to a virtual attack on Canada's mining industry. This Government has indulged in destructive tax policies and interventionist adventures which have seriously eroded the investment climate for this resource sector in general. Thousands of jobs have been lost as these Government actions brought a curtailment of mineral development during the 1970s. It is a particularly upsetting situation for those who recognize the potential of the industry and the contributions it has made to Canada's past prosperity.
Mining established a foothold and flourished in Canada during the post-war period, Mr. Speaker, thanks to federal tax policies which encouraged resource exploration and development; but these policies were abandoned in the late 1960s and the industry came into a period of decline. The major step down the road to the present insanity was a decision to scrap the tax-free period, the three-year front end tax-free period, for new mines. This tax policy, or to call it by its more correct term, "tax deferral", allowed mining companies to be tax free for the first three years of developing a new mining project, with the understanding that that inducement would be repaid to Government, or there would be some recognition by way of profit sharing which would be extended to the Government after the mine had been developed. That program allowed the elimination of front-end loading on struggling marginal industries which were trying to raise capital and finance major new capital investment.
My hon. and eminent colleague, the Hon. Member for Qu'Appelle-Moose Mountain (Mr. Hamilton), will talk in
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greater detail later about how this tax policy was introduced and how effective it was, and then how over a period of time, because of various attempts by various provincial Governments and the federal Government to grab more of the revenues from these resources, the benefit of this particular measure was lost. It has been replaced by heavy front-end taxation which provides a tremendous disincentitve to getting on with the development of new mining projects at a world competitive price structure.
Destructive taxation, Mr. Speaker, has had a dramatic effect beause it not only took money away from struggling mineral operations but also created an unstable and unfriendly investment climate for an industry which requires long-term planning. The harm done by federal policy was unfortunately often magnified by provincial Governments, such as the shortlived experiment with socialism in British Columbia. There are a lot of British Columbians who are, since Friday, thanking their lucky stars that that Party did not take hold of Government again in British Columbia. We were able to witness on Friday morning the resurgence in trading even on the Toronto Stock Exchange in mining stocks which have been on hold for six months because of the concern that an NDP Government might have been re-elected in that Province last week. The British Columbia mine workers and mine companies are, of course, still recovering from the royalty on mineral production which was in effect under the NDP Government from 1972 to 1975. That short period alone chased thousands of jobs and millions of investment dollars out of British Columbia.
Similarly, the private sector potash industry in Saskatchewan was brought to its knees by the absurd levels of taxation introduced by the NDP regime in that Province. While the federal Government cannot be blamed therefore for all of the misdeeds of its provincial counterparts, it must also be held partially accountable for the absence of any meaningful progress on federal-provincial agreements on mining taxation during the 1970s. Such an agreement could have spared miners and mining companies and Canadians generally the insanity of taxes being compounded on taxes and payments to the various levels of Government which approached 100 per cent of profits, and more in many cases. This was certainly the case for certain operations in Saskatchewan under the Bla-keney Government.
Aside from trying to co-ordinate mineral policy with the Provinces, Mr. Speaker, the federal Government should get its own act together. Although the work of M and R scientists is often laudable, the Department of Finance and other Government agencies have been hostile to mining. This has never been so evident as it was in the case of the two MacEachen budgets in November, 1981 and June, 1982. To quote one unnamed spokesman for the mining industry, "after the two MacEachen disasters anything would be welcome, but it is interesting that now they screwed it up, they are giving the economy back to business saying: 'Fix it up' ",
That is a characteristic, Mr. Speaker, of the budget which was introduced on April 19, which did take certain positive measures, as I am sure the Minister will be proclaiming in a few moments, which are designed to assist the mining industry.
But there is no comment on the damage that was done by previous budgets with the reduction in the capital cost allowance, the non-deductibility of soft costs, the question of taxation of interest costs, tax on work in progress, and the tax audits being conducted vigorously against insider traders in mining companies and the general anti-investment thrust of previous Government policies.
It is commendable, Mr. Speaker, that in the budget of April 19 a decision was made to make the 33 1/3 per cent mining depletion allowance deductible against non-resource income for investors in the junior mining exploration companies. This is a welcome move, long overdue, but the benefits of the decision will be seriously undermined by the continuing unfair tax treatment of employees, officers and directors of junior mining companies, as I have already pointed out, where Revenue Canada is trying to tax as income the return on investment which was earned by consultants and professionals in exchange for their participation in junior mining companies. This sort of measure, which will be outlined further by one of my colleagues later today, has had a tremendous negative impact on the availability of investment capital to the mining industry.
The other matter the Minister will probably refer to relates to some changes in the investment tax credit and other initiatives contained in the April 19 budget. These are designed to provide an incentive to finance major capital projects in the mining sector. The only problem is that the industry is presently in a state of over capacity. Until we find a way to market our products more competitively internationally, no amount of additional investment capital will be able to deal with the long-range problem.
The most contentious of the initiatives of the Minister of Finance (Mr. Lalonde) in recent years is the plan to tax the housing and travel benefits traditionally received tax-free by workers in the North and other remote areas. This tax will add significantly to the cost of mining in northern Canada for both companies and, ultimately, employees. The decision last December to phase in the new taxes did nothing but reaffirm the industry's view that the Government is determined to destroy and weaken Canadian mining, particularly in the areas of Canada where new exploration and development are essential.
The assumption of the Minister of Finance that mine unions can negotiate contracts to make up for these lost benefits borders on the ridiculous. These unions are negotiating with companies which have been recording massive losses and which have often shut down their operations for extended periods, which is hardly an atmosphere for taxing increased benefits.
There are roughly 35,000 miners still off the job in Canada today, almost 30 per cent of the mining work force, despite the resumption of work in Sudbury and the promise of developments in the Hemlo gold field. The threat of the northern
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benefits tax remains as a major obstacle to the return to work for many of these workers.
The Minister of Finance and his colleagues have asserted that this tax will put northerners on an equal footing with other Canadians, but this ignores the reality that these benefits are essential to making life in the North comparable to that elsewhere. The tax also ignores the many long-term decisions which have been made by individuals and companies in the belief that this provision would not be changed.
As I mentioned before, a stable investment climate must be a major priority in order that the mining industry may prosper. However, instability has been the policy of the Government, not only through destructive tax policies, but also with its stand on foreign investment and Government involvement in the economy. The Foreign Investment Review Agency, which has influenced the ownership of operations such as the Cyprus Anvil mine in Faro, Yukon, remains a major concern to investors despite the Government's decision to back off on FIRA during the recession.
FIRA's unsettling effects in the investment community are augmented by the newly formed Canada Development Investment Corporation which hangs like a sword of Damocles over the heads of everyone in the private sector. The mining industry is acutely aware of the threat posed by this super holding company because of CDIC's 1980 takeover of the Kidd Creek mine near Timmins, Ontario. This little adventure, tied to the National Energy Program, resulted in $400 million in new debt being created and imposed on the once profitable mine.
Petro-Canada's expansionary activities can only be viewed with alarm by the mining industry, especially since Petro-Canada's involvement in coal production in northeastern British Columbia demonstrates its ability to become involved in the mining sector. Now the new Chairman of the Board of Westcoast Transmission, who happens to be the President of Petro-Canada, indicates that he is prepared to move in, take control of British Columbia's natural gas industry and intrude into other sectors of the economy as well.
Last year's purchase of BP interests show us that the Government has no intention of repairing the damage it has done to investor confidence over the years. These and other Government policies have had a staggering impact. As I pointed out at the beginning of my speech, in the late '60s, the start of the Trudeau years, we saw a move toward the harmful tax policies of today.
We have before us a rather bleak situation and much opportunity to improve upon it. We in this Party are suggesting today that a special committee of the House be initiated immediately and be mandated to travel the country to consult with industry and Government Departments at both federal and provincial levels. We need to come up with some constructive proposals for dealing with this serious problem as to why Canada is declining so miserably in its pursuit of competitive opportunities around the world.
Subtopic: BUSINESS OF SUPPLY
Sub-subtopic: ALLOTTED DAY, S.O. 62-MINING INDUSTRY