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April 27, 2015 02:00 AM

Canada offering help to small manufacturers

Michael Lauzon
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    Remy Steinegger
    Prime Minister Stephen Harper

    The drop in world prices for oil, gas, gold and other basis resources has forced Canada's federal government to be a lot more interested in small- to medium-sized businesses. Unable to lever hefty, reliable royalties from petroleum and minerals to balance its budget, Ottawa is becoming more friendly with the companies that are the main engine for economic growth and job creation.

    Minister of Finance Joe Oliver delivered a budget speech April 21 with some modest enticements for small and medium size firms to invest, and with luck, grow and hire more staff. Prominent was a 10-year accelerated capital cost allowance to encourage spending on machinery and equipment. This program is an extension of one originally introduced in 2007 and extended already several times, but it was due to end in December.

    “We must give manufacturers the tools they need to create the products — and the jobs — of the future,” Oliver stated in the House of Commons. “Manufacturing accounts for more than 10 percent of our GDP and over 60 percent of our merchandise exports and employs 1.7 million people all across the country.”

    Another goodie is reduction of the small business tax, now 11 percent, to 9 percent by 2019. Smaller incentives, but still useful, are improved access to financing and export help for small businesses under the Canada Small Business Financing Program;, the Business Development Bank of Canada and Export Development Canada. Export help is especially welcome if Canada is to resume significant GDP growth because its economy relies heavily on trade with the United States, whose ongoing recovery could pull Canada along with it.

    Canada's economy is not in dire straits but GDP growth is expected to be an anemic 2 percent this year so it wouldn't hurt to goose the manufacturing sector. Despite a devalued Canadian dollar, exporters still face headwinds in much of the world. Relieving companies of some of their tax burdens is a welcome and rational way to stimulate manufacturing activity. Plastics firms also should warm up to the new Automotive Supplier Innovation Program, a five-year, C$100 million (US$80 million) boost to support auto parts producers. And Ottawa will address the chronic skills shortage by supporting post-secondary schools in developing workplace-specific curricula.

    All in all, Prime Minister Stephen Harper gets a passing grade for offering up some modest but tasty carrots.

    Ontario's government next weighed in on business in its budget pronouncement a few days after the feds. The province will add C$200 million to the Jobs and Prosperity Fund to entice companies to establish operations in Ontario or expand current ones. It too is supporting programs for an educated workforce nimble enough to fill emerging needs. On the downside, Ontario Premier Kathleen Wynne's government has signaled it wants to pursue a carbon tax, feared by many to add another layer to the costs of doing business.

    Amidst chaotic disruptions to the global economy such as the current slump in oil prices, government can't reverse the big impacts. Market forces, with a little regulatory guidance, should do the heavy work. But it doesn't hurt to have government onside. In Canada, the obsession with oil sands development has abated, to be replaced we hope with a revived interest in the companies that are the bedrock of the economy.

    (Thanks to Toronto-based correspondent Michael Lauzon for this post).

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