Competitiveness and Trade related articles

Les membres de l’ACIC au Québec développent une stratégie de relations gouvernementales pour 2017

Le 23 janvier dernier, conjointement avec le Comité Affaires et Économies (A&E) et le Comité de Leadership du Québec (CLQ), l’ACIC présentait sa stratégie de relations gouvernementales pour 2017.  

Suite à une bonne discussion sur les objectifs et les enjeux prioritaires, la stratégie a été adoptée. La stratégie comprend les publics cibles ainsi que les actions concrètes qui permettront à l’ACIC et à ses membres de concrétiser les objectifs de la stratégie au cours de 2017. Elle identifie les enjeux prioritaires de l’industrie qui seront au premier plan aux représentations avec les parlementaires, cabinet de ministre et des représentants du gouvernement dans divers ministères. 

Autour de ces enjeux, et de concert avec le CLQ et l’A&E, l’ACIC a finalisé ses messages clés afin de sensibiliser le gouvernement à l’importance de l’industrie de la chimie pour développement durable et économique du Québec et de mettre au premier plan les conditions qui pourront améliorer la compétitivité de l’industrie et favoriser l’essor économique de l’industrie de la chimie au Québec.  

La stratégie de 2017 réitère l’importance de continuer à informer, éduquer et travailler en partenariat avec les acteurs clés du gouvernement (p. ex. les élus, et fonctionnaires), afin de trouver des solutions aux enjeux de l’industrie. 

Au cours des prochains mois, l’ACIC, de concert avec ses membres, rencontrera des élus politiques et fonctionnaires des ministères clés pour les sensibiliser à nos enjeux prioritaires et établir un dialogue qui pourra générer des solutions qui favoriseront le développement économique du Québec et de l’industrie de la chimie.   

Canada is failing to attract sufficient foreign direct investment in its chemistry sector

On January 19, Bob Masterson, President and CEO of the Chemistry Industry Association of Canada, participated in the annual stakeholder luncheon held by the Alberta Industrial Heartland Association. The purpose of the luncheon was to take stock of 2016, discuss future opportunities for investment in Alberta, and provide attendees with updates on industrial development. Masterson spoke about the state of Canada’s chemistry industry as well as the global petrochemical sector in his presentation, Navigating Choppy Waters.

Masterson noted that global chemical production continues to grow, outpacing global GDP. In 2015 chemical sales totaled more than US$4 trillion, and analysts expect the figure to exceed $5 trillion by 2020.

“This should come as no surprise,” said Masterson. “Chemical demand is closely linked with population growth, societal development, and the needs and aspirations of a modern, growing middle class.”

But it is the U.S. that is benefitting from much of this growth, added Masterson. In the past five years, the U.S. has initiated more than 250 projects in the chemistry industry with a book value of almost CA$250 billion. Unfortunately, Canada has seen only 1 percent of this project value. This has been due to overly complex carbon pricing initiatives, indecision on energy infrastructure projects, and more.

But there is hope. A report published by the Canadian Energy Research Institute last year found that Canada can compete with the U.S. on a level playing field. This is where Alberta has been leading the way.

“Alberta is the one jurisdiction that gets it and is being creative to attract a greater share of value-added chemistry sector investment,” said Masterson. Late last year Alberta announced the two projects selected under the $500 million petrochemical diversification program, which should translate into more than $6 billion in private sector capital expenditures in the next few years.  That’s a tremendous return on investment.

This initiative complements the more than $800 million provided under the previous provincial enhanced ethane extraction program, which realized significant increases to existing capacity utilization and investments in the province.

Alberta also seems intent on developing a greenhouse gas management approach that is capable of recognizing, rather than punishing, those firms that have invested in high-performing assets in recent years.

Masterson ended his presentation with a call to action. “If Canada is to survive and thrive during the next U.S. administration, we cannot continue to be indifferent to the deterioration of our investment competitiveness… If we are to safely navigate the increasingly choppy waters of the global economy during this period of change and uncertainty, we will need to be bullish.”

Masterson’s full speech is available here.

A Trump presidency could mean anything but “business as usual’ for Canada’s chemistry industry

Since the stunning results of the U.S. election, I’ve been asked a number of times: “What affect do you think the Trump presidency will have on Canada’s chemistry industry and the broader Canadian economy?”

The easy answer, of course is that its too early to tell. And yet, the one thing we can say with some certainty is that the “business as usual” we are accustomed to, is unlikely to prevail.
Trump’s ‘no apologies’, ‘America first’ approach that has been the hall mark of his campaign and transition has raised expectations that the tepid economic growth over much of the past decade may give way to a renewed and more robust expansion in manufacturing sectors.

What does this mean for Canada’s chemistry industry? The business of chemistry continues to expand faster than broad-based GDP. And, with more than 60 per cent of Canada’s chemistry exports shipping to the U.S., there is good reason for us to expect a more bullish outlook in the months and years to come
But, there are also some potentially significant risks.

The first major area of concern is market access. Not only U.S. access to Canadian chemistry products, but also to primary, intermediate and finished goods produced in Canada. Canadian manufacturers purchase more than half of all chemicals produced in the country: from the auto sector, to the textile and forest products industries; to the energy sector, which is not only a significant consumer of our products, but also a important feedstock source. The domino effect from any disruption that impedes Canadian manufactured products and energy resources from reaching American markets is a threat to the well being of our industry. Whether its through renegotiation of trade agreements, tariffs, or an aggressive ‘Buy America’ strategy.

The second major risk would be adjustments to American taxation and regulatory regimes – changes that could put the U.S. even further ahead of Canada as a more attractive destination for investment. Changes in these areas could weaken or eliminate the one key advantage Canada has had for many years: competitive corporate tax rates (before US exemptions and adjustments) that are currently well below those of U.S. or other OECD jurisdictions.

The third risk is self-imposed in nature. With the exception of corporate tax rates, Canada’s competitiveness has been allowed to deteriorate as governments — at all levels and affiliations — have introduced a flurry of new regulatory activity that has imposed additional costs on business. At the same time, governments and society have been prone to near paralysis in decision making on major policies and projects. If this trend continues while the U.S. heads in the opposite direction, the impacts will be keenly felt.

If Canadian governments are unwilling to meet the competition head on and take measures to improve the investment climate, the downside risks of a Trump Presidency will far outweigh the upside opportunities for Canada’s chemistry sector.

Canadians and their governments have proven to be pragmatic and capable of course change in the past. With the New Year upon us, here’s hoping we remain capable of doing so in 2017.

Masterson: “More to be done to attract investments in Ontario’s chemistry industry”

In advance of the drafting of the 2017 Ontario Budget, the Chemistry Industry Association of Canada (CIAC) has been actively engaged in key advocacy initiatives on behalf of its members. On January 10th, Bob Masterson, CIAC President and CEO, had the opportunity to participate in a pre-budget roundtable discussion hosted by the Honourable Charles Sousa, Ontario Minister of Finance.

Hearing the fiscal concerns raised by participants in the roundtable, Masterson took the opportunity to highlight the ways in which the chemistry industry, as solutions provider, can make significant contributions to many areas of the Ontario economy. “To achieve those contributions however,” Masterson explains, “the province will need to encourage economic growth by improving the investment environment.” 

While the Chemistry industry has been in decline for more than two decades in Ontario, the sector does have several strengths to spur growth. These include: 

  • Sarnia’s proximity to cost-competitive shale gas production in the northeastern U.S.; 
  • established clusters with key infrastructure and skilled labour; 
  • the combined federal/provincial corporate tax rate of 25%; 
  • accelerated capital cost allowance treatment for manufacturing machinery; and 
  • the onset of commercialization of new technologies for producing chemicals from biomass. 

These strengths have contributed to CIAC member companies making over $1 billion in new production capacity in Ontario since 2012. However, the province has the potential to attract much more chemistry investment activity. Based on historical trends, it should have seen a further $8 to $10 billion worth of investments.

Only economic growth will deliver the solutions needed to address the investment gap and generate jobs and prosperity for Ontarians. Action in the areas of: taxation, environmental regulation, Ontario’s regulatory framework, the integrity of industrial lands, and industrial electricity rates could all improve the investment conditions.  

On January 20th, CIAC will have another opportunity to present its detailed recommendations in the identified areas when Don Fusco, CIAC’s Director, Government and Stakeholder Relations – Ontario, appears before Standing Committee on Finance and Economic Affairs as part of the 2017 pre-budget consultation. 

Canada needs more chemistry

Bold leadership is needed to attract and win new investments

The flurry of consultations by various departments over the past summer was a clear indication that the Government of Canada is focussing on low carbon, innovative, economic growth.

An effective innovation strategy should foster the development of products, services and industries that can best capitalize on the natural resources and talent that already exist in our country. The chemistry industry is well positioned to deliver on these expectations, if Canada can build and maintain a competitive, long-term investment environment.

Written off as a mature industry decades ago, North America’s chemistry industry has experienced a dramatic resurgence following the advent of abundant, low-carbon feedstock associated with the shale gas revolution. Today, more than 270 projects are being tracked totalling over $250 billion in new investments, with more than 600 additional investments in the downstream plastics sector. This makes chemistry the fastest growing manufacturing sector in North America and the poster child for reshoring manufacturing.

This new feedstock means chemistry facilities can operate with half the energy demand and half the greenhouse gas emissions compared to older facilities fuelled by crude oil. Moreover, compared to coal-fed chemistry processes in China, this abundant and advantageously priced feedstock provides a ten to one energy and greenhouse gas advantage – to make the same finished product. The economic and environmental advantages of shale gas feedstocks are so great that European chemistry operations are now being retrofitted to receive feedstocks imported from North America.

This rapid re-tooling and expansion is a testament to the industry’s commitment to innovation, to adopting cutting-edge technologies, and to the reduction of carbon emissions. Other factors reinforce this view.

It is not a widely appreciated that more than 95 per cent of all products manufactured today rely on chemistry. Addressing the challenges of clean energy, air and water, and a sufficient supply of safe and nutritious food on a global scale is entirely dependent on chemistry-based solutions. From improved building insulation to lighter plastics for automobiles, and the production of solar and wind energy equipment, innovative chemistry products and processes are essential in helping society meet its needs while reducing its carbon emissions.

While there have been some important investments in recent years in Ontario, and Alberta is poised to attract additional investments, Canada has not kept pace with growth in the U.S. Based on historical patterns, Canada should have attracted $25 billion of new investment. Instead, only about one tenth of that has found its way here.

The good news is Canada is at least making the short lists for companies considering North American investments. Canada has market and feedstock access and has taken some measures to improve the country’s fiscal competitiveness with the 10-year extension of the accelerated capital cost allowance and lowering corporate tax rates. But, more is needed to create the winning conditions for investments. In the end, it is a winner takes all game.

By recognizing opportunities, partnering closely with the provinces and working to further strengthen the country’s investment climate, Canada can position itself as a destination of choice for sustainable investments.

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