Sault Ste Marie Chamber Of Commerce

Your Recognized Voice of Business in Sault Ste Marie

2016 OCC Policy Submissions by the SSMCOC

Moving the Ontario Colleges of Trades from Regulator to Promoter - Authored by the Greater Sudbury Chamber of Commerce, Co-Sponsored by the Greater Peterborough Chamber of Commerce, the Sault Ste. Marie Chamber of Commerce, the Thunder Bay Chamber of Commerce, and the Timmins Chamber of Commerce
 
Issue:
 
The Ontario College of Trades (OCoT) is overly focused on enforcement and regulation, limiting its ability to serve the public interest in attracting and training new tradespeople.
 
Background:
 
The Ontario government passed the Ontario College of Trades and Apprenticeship Act (OCTAA), 2009 to establish the College of Trades to modernize the province’s apprenticeship and skilled trades system. OCoT began accepting members in April 2013. Although one of the objectives of the College as set out in the OCTAA is to promote the practice of the trades, concern exists among industry that OCoT is overly regulatory to the detriment of its other functions such as trades promotion and training.
 
Employers have raised concerns about overlapping regulation and enforcement practices between OCoT and other provincial ministries. The trades is an interconnected system where a large number of other parties are involved in aspects of regulating skilled trades and apprenticeship training, alongside the College. This includes various government ministries, departments and agencies, other Ontario regulatory bodies, Ontario Colleges and apprentice training institutions. College enforcement activities should avoid overlap with existing regulatory agencies. OCOT is just one component of many. Greater co-ordination and communication between the College and these other bodies is required to avoid duplication and increasing the restrictiveness of trades regulation in Ontario. Many employers remain confused as to what ministry or body regulates what function. An integrated and coordinated regulation framework for the trades will allow employers and tradespeople to more easily navigate through the system.
 
Although the College is a self-regulating body, it also has the ability to regulate non-members through enforcement of compulsory trade provisions under the OCTAA. By focusing on non-members already working in the trades rather than the public at large, the College runs the risk of falling short in addressing one of its core responsibilities- skills shortages in the trades across the province. The OCC found that 30% of businesses have difficulty finding qualified candidates for job openings; this number rises in rural and northern regions of the province. Skills mismatches are predicted to cost the Ontario economy more than $4.1 billion in GDP. Over 40% of employers are seeking employees with training in the trades. Enforcement of non-members is often better dealt with by existing regimes with particular expertise in different regulatory schemes. OCoT should move away from duplicative enforcement to enhancing Ontarians ability to access training and promoting the trades especially among underrepresented groups.
 
Although the College has done some positive outreach over social media and has created a new website that aims to champion careers in the trades, additional resources, focus and time should be dedicated to OCoT’s promotion and training function. In addition to the promotion of the trades, OCoT should bolster its research function in order to address current and predicted skills shortages though timely and thorough advanced planning. This research can include an examination of obstacles small businesses face in hiring apprentices.
 
In December 2015, Tony Dean, appointed by the government to review certain aspects of OCoT’s mandate, published a report with recommendations for the College. Although the College’s role in the promotion of the trades fell outside the scope of the review, Tony Dean highlighted that the important role the College should have in promoting and elevating the trades, including streamlining access and providing guidance and support for those interested in apprenticeship came up in every single consultation that was held. The value proposition of the College to employers will be improved when industry sees benefit in the form of new tradespeople, easier access to skills and economic growth.
 
Recommendations:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:
 
1. Enhance co-ordination and communication between the College and other bodies to create an integrated regulatory framework that avoids duplication and over-regulation.
 
2. Work with colleges, industry and other stakeholders to create, execute, and make public a plan to promote the skilled trades to youth and underrepresented groups such as women, persons with disabilities and Aboriginal peoples.
 

3. Ensure the Ontario College of Trades’ website acts as an online portal and leading source of up-to-date information on current and projected labour market needs in the trades, as well as research on addressing skilled labour shortages across the province. The website should also contain clear information to help apprentices better navigate the trades system.

Mitigating the Risks of Cap and Trade on Business - Authored by the Halton Hills Chamber of Commerce, Greater Sudbury Chamber of Commerce, and Windsor-Essex Regional Chamber of Commerce; Co-sponsored by the Greater Kitchener Waterloo Chamber of Commerce, North Bay & District Chamber of Commerce, Sault Ste. Marie Chamber of Commerce, Tillsonburg District Chamber of Commerce, and Timmins Chamber of Commerce
 
Issue:
 
The province is moving forward with a cap-and-trade system for Ontario. A proposed cap and trade must be designed in a way that reduces greenhouse gas emissions (GHGs) but that does not unfairly hurt or penalize Ontario businesses in the process, particularly in the face of growing regulatory and cost burdens.
 
Background:
 
In April 2015, the Government of Ontario announced that it will implement a cap and trade system as part of its overall strategy to address climate change. This approach will enable the government to set a limit on the total level of greenhouse gas emissions (GHGs) produced by entities covered by the cap and trade system. Further, these entities will be able to purchase and trade the ability to emit GHGs. The provincial government has set GHG emissions targets of 15% below 1990 levels in 2020 and 80% by 2050.
 
On November 16, 2015 the province released its Cap and Trade Program Design Options paper, setting out both its program design proposal and the options under consideration for a provincial cap and trade program. The Ontario Chamber of Commerce has responded with recommendations to government regarding design options and outlining outstanding questions about a cap and trade system.
 
Ontario has made strides in reducing the carbon footprint of electricity by ending coal-fired generation in 2014. Additionally, the province’s emissions have fallen by 20 percent since 2005. The business community supports further efforts to reduce Greenhouse Gas Emissions (GHGs) and to fight climate change in the province. Industry is however concerned about the potential impact a cap and trade system will have on Ontario businesses in the face of increasing regulatory and costs burdens. A cap and trade system has the ability to greatly impact the competitiveness of Ontario businesses if not designed properly.
 
In order to mitigate the risk of a cap and trade system on industry, three important elements should be considered 1) getting the timing right; 2) considering the potential impact on electricity prices; 3) re-investing revenues collected to support Ontario industries. Taking the time necessary to consult and develop a system that is responsive to local conditions is essential. The government has proposed that the program would begin on January 1, 2017, with the first emissions allowance auction to be held in March 2017. Ontario is attempting to develop a cap and trade legislation in 12 months while other jurisdictions such as Quebec and California took several years to develop their systems. Industry is concerned about this compressed timeframe. This short timeframe and quickly approaching start date is particularly worrisome for those industry players currently impacted by the downturn in commodities and volatility in global markets. These industries are vulnerable to the added cost a cap and trade could impose at this time. The current economic climate as well as the numerous other regulations that employers face should be factored into decisions on timing and the design of the cap and trade system in Ontario. Additionally there are outstanding questions and issues that need to be addressed before implementation can occur. Initiating the cap and trade system in 2018 rather than 2017 with a three year compliance period that aligns with that of California and Quebec is a more appropriate timeframe that would allow businesses adequate time to prepare for the system and to ensure stakeholder readiness at all levels. An extended timeframe would also provide additional time for training and outreach programs to be directed towards businesses prior to the implementation date to assist them with the transition into the cap and trade system.
 
In addition to timing, industry is also concerned with the potential impact a cap and trade system can have on electricity costs due to potential flow through costs of a carbon tax. Electricity costs are one of the top barriers to competitiveness faced by Ontario businesses. Over the next five years, industrial customers’ bills are expected to increase by 13 percent, while rates for households and small businesses are predicted to rise by 25 percent (IESO 2014). To maximize the proportion of emissions that is covered by cap and trade, Ontario is proposing to include electricity generation and fuel distribution, as well as industrial facilities that exceed the emissions threshold. The impact of the carbon price will therefore be felt by smaller emitters and consumers through an increase in the cost of inputs, namely electricity and fossil fuels. Businesses are particularly concerned about the cumulative effect of these pass-through costs on their supply chains. By increasing the costs of production, the rising costs of inputs as a result of a carbon price could make Ontario-based suppliers less attractive to their existing customers. If these customers decide to source their supplies elsewhere, then Ontario’s supply base suffers.
 
Being that there will be a component of electricity generation covered by cap and trade, businesses are concerned that the cap and trade system will further contribute to rising electricity prices. The government needs to factor in the potential impact to electricity prices in its decision making and consider how other policies to reduce GHGs such as nuclear refurbishment might also impact the price of electricity in the coming years. It is essential that the province carefully analyze the interaction of all these policies and ensure the cap and trade system is aligned with other programs intended to reduce GHGs. The chamber network also recommends phasing in emissions from electricity at the end of the first compliance period to ensure industry has time to adapt to the financial implications of pricing carbon.
 
Lastly, the revenue generated from a cap and trade system should be recycled back into the business community to facilitate industry’s transition to a low carbon economy. For example, re-investing revenues in effective programs and policies that help businesses adopt new and innovative technologies to curb their emissions will enable Ontario businesses to better compete. The government should introduce incentives alongside a cap and trade system to accelerate the adaption and commercialization of more productive and less emission intensive technologies.
 
Taking a proactive approach to mitigate potential risks to business is essential to creating a responsible cap and trade policy that reduces GHGs but still enables business to compete in an increasingly complex regulatory environment. The government should also take further steps to create mechanisms to reward and recognize industry players that have invested in environmental sustainability and that have already reduced GHGs significantly.
 
Recommendations:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:
 
1. Initiate the cap and trade system in 2018 rather than 2017 to provide industry adequate time to prepare and to allow the province to address the business community’s outstanding concerns.
 
2. Conduct and publicly release an economic impact analysis of the incoming cap and trade system for Ontario, including the potential cumulative impact that cap and trade and other GHG-reduction policies will have on the price of electricity.
 
3. Reduce competitiveness impacts of the cap and trade system by distributing free allowances to those sectors that are most exposed to a carbon price, and to develop a set of objective and transparent criteria to do so.
 
4. Direct cap and trade revenue towards efforts that directly facilitate businesses’ transition to a lower carbon economy, such as investments in low-carbon processes, technology, and other capital. It is important that the allocation of the revenue be objective and transparent. To increase transparency, the government should consider creating or retaining an arms-length third party organization to administer this revenue.
 
5. Take action to reduce GHG emissions from all major sources of emissions in the province so that businesses do not bear a disproportionate burden in achieving emissions reductions. These actions should reflect the relative contributions of different sectors to Ontario’s total GHG output.
 
6. Recognize and reward companies that have taken early, substantial action to reduce GHGs.
 

Bending the Cost Curve of Ontario’s Electricity Prices - Authored by the Timmins Chamber of Commerce, Co-Sponsored by the Greater Sudbury Chamber of Commerce, the Sault Ste. Marie Chamber of Commerce, and the Thunder Bay Chamber of Commerce

Issue:

As the province undertakes development of Ontario’s new Long-Term Energy Plan, it must seek to incorporate business input, transparency measures, and other means of addressing escalating costs which currently render it a jurisdiction with one of the highest electricity rates in North America.

Background:

At a time where rising electricity prices are consistently reported as the most pressing issue impacting the competitiveness of businesses in Ontario, the provincial government is beginning to undertake development of a new Long-Term Energy Plan (LTEP) for 2017.

As the province’s blueprint for “clean, reliable and affordable energy”, the LTEP will guide the government’s future decisions on this file. The need to include business input as part of the process is key, as a 2015 Ontario Chamber of Commerce report indicates that not only is the province’s advertised electricity rate one of the highest in North America, but industrial customers’ bills were forecast to increase by 13 percent over the next five years; rates for small businesses are predicted to climb by 25 percent over that same period.

Greater transparency around these costs is also required in order to render government more accountable on any related decision-making: businesses remain unclear as to the nature and full extent of costs for such items as the Global Adjustment, as well as Ontario’s annual average electricity prices.

However, the provincial government has taken some positive steps to address these and other issues, including an announcement in the 2015 budget of tax measures designed to incent voluntary consolidation of local distribution companies. As consolidation will help achieve economies of scale and improve access to capital, the effectiveness of these tax measures should be measured, with an eye on maintaining those with demonstrated success.

Recommendations:

The Ontario Chamber of Commerce urges the Government of Ontario to:

1. Incorporate business input into the development of the new Long-Term Energy Plan as an opportunity to ensure a reliable, modern and efficient supply at rates that enable Ontario businesses to be competitive in a global market.

2. Provide regular public reporting and greater transparency on the costs associated with business energy bills in Ontario, including annual average electricity prices, the allocation and breakdown of Global Adjustment fees, and other costs related to the current energy supply mix.

3. Evaluate existing tax exemptions and other incentives designed to encourage voluntary consolidation of local distribution companies with the goal of extending those which have achieved their intended purpose.

Strengthening and Modernizing Workplace Defined Benefit Pension Plans - Authored by the Sault Ste. Marie Chamber of Commerce
 
Issue:
 
The current solvency funding model in Ontario is out of date and highly uncompetitive for private sector employers that sponsor traditional Defined Benefit Pension Plans. Due to the use of historically low interest rates, it is causing financial difficulties and putting retirement plan security at risk as the plan sponsors compete with neighbouring jurisdictions that have much lower pension costs as a result of pension funding reform such as Quebec and the US.
 
Background:
 
Global businesses see Ontario as one of many geographies where they can conduct business, however, they will not invest where pension regulations impose such a heavy burden on a company’s cost structure. In addition to this competitive disadvantage, funds allocated by Ontario businesses to pension funding cannot be used to invest in operations, improve productivity or create jobs. It has been their experience that lenders charge more, or simply refuse to lend to businesses whose cash flows are committed to pension solvency funding. This drives up the cost of capital for businesses due to reductions in free cash flow available to the company's creditors, investors, including shareholders and bondholders, after the company has made all investments necessary to sustain its ongoing operations.
 
Ontario’s strict solvency funding requirements, introduced in the late 1980’s in a high interest rate environment, have paradoxically decreased retirement income security in Ontario today. A 2015 Statistics Canada Report indicated the proportion of private sector pension plan members in Defined Benefit Pension Plans has decreased from 72% in 2003 to 47% in 2013. Statistics were not readily available, but almost all private sector plans were defined benefit in the 1980’s.
 
The burden of pension funding has caused a dramatic decline in defined benefit pension plan coverage as companies have closed their plans, replacing them largely with defined contribution plans. They have also reduced the competiveness of the remaining defined benefit plan sponsors, contributing to a decrease in Ontario business investment and employment opportunities, as profoundly evidenced in the large scale manufacturing, industrial, automotive and service sectors. For example, the following table compares the estimated, projected Ontario, U.S. and Quebec funding requirements for a Defined Benefit Pension Plan as at April 1, 2017:
 
 
Many long standing organization now face significant global competitive pressures from jurisdictions that have no or significantly lower pension solvency burdens, environmental and overall cumulative cost associated with the regulatory environment in Ontario. Further reform of the legislation will allow for a freer movement of international capital to sponsors that are faced with potential negative operational viability as a going concern. Acquisition of those sponsors is made less attractive by significant pension liabilities attached to DB pension solvency rules and makes share valuations difficult in mergers and acquisitions, and especially difficult when contemplating mergers and acquisitions that can remedy sponsor insolvency.
 
A viable pension plan requires a viable plan sponsor and that is the best security for pension benefits. When unaffordable pension costs threaten that viability, those funding requirements no longer serve their purpose. Through improving sponsor viability and profitability the Ontario Government will benefit from increased tax revenue directly, indirectly from the supply chain and from the reinvestment of available cash flows into innovation and productivity improvements.
 
In May of 2014 the Association of Canadian Pension Management produced the document “DB Pension Plan Funding: Sustainability Requires a New Model”. In this publication there are 5 recommendations that would lead to the economic benefits that Ontario needs, they call for the following reforms in:
I. The Discount Rate
II. Provisions for Adverse Deviations (PfADs)
III. Amortization Periods
IV. Benefit Improvements
V. Portability
 
As announced in the Ontario Budget 2016 the government indicated that it is putting together a stakeholder reference group to review the current solvency rules and make recommendations to the Ministry of Finance regarding proposed funding reforms. While a step in the right direction it is critical that the Ministry of Finance realize the importance of the need for immediate reform and for Ontario to reap the economic benefits thereof by moving forward with constructive draft reform regulations in the Fall.
 
Recommendations:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:
 
1. To move quickly in consultation with DB Pension Plan Sponsors, employers, industry associations and the Ontario Chamber of Commerce, giving consideration to the recommendations made by Association of Canadian Pension Management as defined in the document “DB Pension Plan Funding: Sustainability Requires a New Model” along with others, for example the Canadian Institute of Actuaries and the Canadian Manufactures and Exporters.
 
2. Move quickly from review to reform by expediting the consultation process with the goal of submitting draft regulations by the Fall of 2016.
 
The Sault Ste. Marie Chamber of Commerce urges the Ontario Chamber of Commerce to:
 
Strike a Task Force to actively participate in the solvency funding review consultation process that will be launched in Spring 2016.
 
Modernizing the Connecting Links Funding Program - Authored by the Sault Ste. Marie Chamber of Commerce and the Timmins Chamber of Commerce, Co-sponsored by the Greater Sudbury Chamber of Commerce and the Thunder Bay Chamber of Commerce
 
Issue:
 
Municipalities struggle to adequately address the true cost of maintaining portions of provincial highways that have been downloaded by the Government of Ontario, particularly in light of chronic underfunding or outright cancellation of provincial partnership programs.
 
Current Situation (Why the issue matters)
 
Already facing numerous infrastructure funding challenges, the 77 municipalities to which the Province has downloaded the responsibility of maintaining 350 kilometres of Connecting Links – portions of provincial highways traveling through municipalities – are under particular financial duress.
 
The Province has long recognized its responsibility for assisting in that maintenance through the Connecting Link funding program, which provided an annual $15 million to cover up to 90% of project costs until 2013; however, communities still face considerable struggles to address these additional responsibilities. For example, the City of Timmins faces an estimated $100 million of repairs over 10 years for its 24 kilometres of Connecting Link. Moreover, municipalities cannot use capital funding from any other provincial program for projects funded under the Connecting Links program.
 
These challenges became pronounced in 2013, when the Province cancelled the Connecting Link program, urging communities to turn to the Municipal Infrastructure Investment Initiative (MIII). With less than $100 million, MIII was open to 350 municipalities for a broad range of projects, leaving many Connecting Link projects without funding as a result of competition. While the Province recognized this and reinstated the program in 2015 – and in Feb. 2016 committed to raise it to $30 million by 2018 – the loss of $30 million in funding over two years forced communities to defer much-needed maintenance, adding to already substantial costs. This includes the City of Sault Ste. Marie, whose roads budget took a “significant hit” of $3 million in that time.
 
RECOMMENDATIONS:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:

1. Provide a one-time, $30-million enhancement of the Connecting Links fund as a transitional measure to assist affected communities in addressing the two-year gap in which the program was discontinued;
 
2. Work with the federal government to determine joint opportunities to improve funding for the Connecting Links program; and
 
3. In conjunction with the affected communities, develop a strategy to annually revise the Connecting Link funding envelope and criteria to more accurately reflect the development of high-priority projects as they arise.
 
 
Supporting Ontario to Become a Leader in Global Mining Innovation - Authored by the Greater Sudbury Chamber of Commerce, Co-Sponsored by the Timmins Chamber of Commerce, the North Bay & District Chamber of Commerce, and the Sault Ste. Marie Chamber of Commerce
 
Issue:
 
The current commodity downturn is impacting the competitiveness of Ontario’s mining sector. Strategic government investments in areas such as mining research and innovation is needed to stimulate this sector in a challenging economic time and to position the province for success when global mining fortunes begin to turn for the better.
 
Background:
 
Mining is a competitive advantage for the province. In 2014, mining and quarrying activities generated over $8.3 billion in real GDP in the province. The Ontario Mining Association estimates that each additional $1 billion of mineral production in Ontario contributes $858 million to the province’s GDP and creates nearly 4,500 jobs. Ontario’s expertise in mineral production, mining supply and services, finance and innovation are in global demand.
 
With the current commodities downturn however, it is essential that the government take active steps, such as investing in innovation, to ensure the mining sector’s continued role as an economic driver in the province. In face of a difficult economic environment, innovation and creative ideas are needed more than ever to reduce costs and increase production. Mining innovation allows for the development of new technologies, products, and business processes necessary for Ontario firms to stay competitive. With mines becoming deeper and more remote, research and innovation is increasingly essential to developing new tools and techniques to address these challenges.
 
Ontario is home to a number of nation-leading mining research and innovation groups and initiatives, including the Centre for Excellence in Mining Innovation (CEMI), the Mining Innovation Rehabilitation and Applied Research Corporation (MIRARCO), the Northern Centre for Advanced Technology (NORCAT), and important mining programs at postsecondary institutions including those offered at the recently established Goodman School of Mines. The Northern Ontario Mining Supply and Services Association (SAMSSA) also represents the largest concentration of expertise in mining supply/products and services including innovation.
 
Despite the importance of research and innovation, Ontario mining firms have been scaling back on investments in these areas in recent years and focusing on core operating priorities due to the difficult economic environment they are facing. Direct government investment is needed to fill this gap. Although we are encouraged by the 2015 Ontario Mineral Development Strategy which includes innovation objectives, we believe specific and measurable action items are needed to bring this vision to reality. Improved funding flows and ratios as well as a broader vision of innovation will both contribute to sustaining mining innovation throughout the downturn and enhancing Ontario’s mining innovation expertise on the global stage.
 
The success of mining innovation is impacted by the time it takes for funding to flow and the government to industry ratio of funding. In some jurisdictions proposals can take over a year to be processed and it can take another year before approved funding begins to flow. The time required impacts the momentum of the project as a whole, available talent and resources, as well as the delay in the potential economic impact and adoption. It also impacts the willingness of management within industry to commit to funds. Most managers and business heads are willing to commit to funds for projects that accrue benefits within their “lifetime” within a particular position, generally between 1-3 years. This incents shorter term thinking, unless the commitments are approved at the highest levels.
 
Generally, Ontario mining companies and government contribute research and innovation funds on a 1:1 ratio. Matching investments are provided regardless of the type of project. With fewer resources available from industry, this skews investments towards cheaper and lower-risk research projects, and away from the innovation and commercialization projects that are necessary to realize productivity gains in the sector. In order to attract funds and partnership from global mining companies, the Government of Ontario needs to consider adjusting its funding ratios and consider options such as increasing ratios to 4:1 or 5:1 to provide incentives to support larger-scale, longer-term, visionary provincial mining innovation projects given that the projects have a strong business case and a high return on investment. Increasing the relative-government-to-industry ratio for innovation and commercialization projects will incentivize greater industry investment in higher risk projects and boost productivity enhancing activity in Ontario during this downturn in the mining cycle. The chamber network encourages the province to work with the federal government to enhance funding ratios in mining innovation to better leverage private sector funds.
 
Further, for innovation to work, it must be adopted. Mining innovations need to be demonstrated and implemented as workable beyond the theoretical, but also show commercial viability. The lack of commercialization is one of the reasons why so little of the funding for mining research has impacted mine operations. The majority of funding in the province is targeted at research in academia that may not necessarily translate into industry-relevant innovation or commercialization. While university-based research is essential, research in operating mines and with suppliers is equally important. The Research, Demonstration and Implementation (RD +I) approach to focus on practical applications, distinct from academic research was developed by the Centre for Excellence in Mining Innovation (CEMI) in 2011 and is aimed at addressing this very important issue. Mining service and supply firms also make significant contributions to the commercialization process and their efforts should be supported in an integrated manner. Funding and programming in such areas will further encourage commercialization and industry adoption of important mining innovations.
 
In face of the current economic environment and competition from jurisdictions with lower wages, operating costs, and less stringent environmental regulations, Ontario has little choice but to innovate. Given the relative strength and coherence of the mining industry, research and innovation organizations and our mining service and supply sector in Ontario, we have a tremendous opportunity to become a global powerhouse in this field – so long as all the factors for success are in place in which mining innovators can thrive. Conventional approaches are failing to deliver new mines at greater depths and in more remote locations; innovation is essential if we are to sustain our strength in mining. With the downturn in the global mining sector fueling the development of fewer projects, there is an opportunity for the industry to focus efforts towards innovation and developing the technologies that will increase the productivity of mining operations.
 
Recommendations:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:
 
1. Increase the relative government-to-industry funding ratio for innovation and commercialization projects, and manage funding flows as appropriate based on the size and timeframe of such projects.
 
2. Provide funding for mining innovation projects that go beyond academic research and incorporate the mining industry, the supply and service industry, and other cross-sector industries to support implementation and commercialization requirements.

 

Support Ontario’s Steel Industry and its Supply Chain Clusters - Authored by the Hamilton Chamber of Commerce and the Sault Ste. Marie Chamber of Commerce

Issue:
 
The Ontario steel industry, includes steel producers as well as manufacturing industries within its value chain and geographical clusters and has long been a cornerstone of the provincial economy. Recently, a combination of regulatory burdens, instability of the global market economy and foreign competition from industries benefitting from unfair economic advantages has led to a sharp decline in their ability to compete globally.
 
The Ontario government needs to focus public policy and investment efforts towards supporting this important industry, clusters and the innovation it creates.
 
Background:
 
Steel is a versatile material whose local production is essential to supporting local industries, consumer products, building and maintenance of our transportation and physical infrastructure. It is also a major component of the evolution towards sustainable energy planning in Ontario through its utilization in the construction of traditional and renewable energy systems.
 
The rise of the steel industry was integral part of Canada’s development as a world-class economy in the 20th century. From Algoma in Sault Ste Marie to Dofasco and Stelco in Hamilton, Ontario firms especially distinguished themselves as centers of excellence and advancement in new varieties of steel. According to a study by Informetrica 15, the steel industry has a multiplier of approximately 3.3:1; that is, there are 3.3 jobs outside of the steel industry for every direct job within the industry, other approaches suggest that the multiplier may be larger; In the auto industry, a recent projection for the Ontario Manufacturing Council by Spatial Economics has estimated a multiplier of seven or more 16.
 
Given their successes (by the 1980’s, Canada was seen as having the second most successful steel industry after Japan) most Ontario firms were inevitably bought out by foreign firms looking to capitalize on their knowledge and operational assets and geographic proximity to American manufacturing hubs.
 
Foreign mergers and other market challenges have led to the once prosperous steelmakers to experience serious crisis. Essar Steel Algoma is currently operating under the Companies’ Creditors Arrangement Act putting 2700 direct jobs at risk, while Stelco, after its sale in 2007 to US Steel, entered creditor protection in 2014, with over 7000 local of pensioners left owed pension funds and millions in creditor backlog 17. Many related SME companies and suppliers have downsized or gone out of businesses across Ontario due to the challenges experienced by this industry.
 
According to the Canadian Steel Producers Association 18, Canada has the most open steel market in the world, placing domestic producers in fierce competition in domestic and export markets. Steel producers by principle agree to compete against imports on a fair commercial basis but are in global competition against foreign government subsidies, state-owned enterprises, and other forms of support that run counter to the trade rules. Market conditions are jeopardized by an ongoing violations of WTO practices, the ineffectiveness of trade remedy laws and lack of full reciprocation within trade treaties.
 
While the majority of media coverage has focused on the decline of the industry, foreign competition and oversupply in the existing market, experts remain optimistic that fundamental forces, which if harnessed, will continue to support the prosperity and global demand for Ontario steel. While challenges related to international markets remain a federal issue, the province can still play a critical role in:
 
1. Supporting investments for organizations to invest in new technologies under various funding envelopes;
 
2. Working with the federal government to negotiate more equitable trade regimes and adjudications processes;
 
3. Incentivizing the development of a skilled workforce equipped to participate in the transition towards advanced manufacturing;
 
4. Easing goods movement infrastructure bottlenecks, especially near trading hubs;
 
5. Incentivizing the development and participation of steel industry clusters and value chains.
 
Recommendations:
 
The Ontario Chamber of Commerce urges the Government of Ontario to:
 
1. Taking inspiration from the European Steel Technology Platform and “Framework for American Manufacturing” by the United States, work with the federal government to develop a coordinated steel manufacturing strategy that especially prioritizes investment in trade-enabling infrastructure near major clusters.
 
2. Explore the legislated and voluntary expansion of procurement tools to include fair and preferential treatment for Canadian steel products where the exported alternative doesn’t meet or exceed Canadian and provincial environmental, health and safety regulations and does not allow similar, fair and equal access to their markets for the same product.
 
3. Given their role as suppliers of high-performance material in the manufacturing supply chain and in flowing down R&D improvements19, prioritize allocation of cap and trade revenue to help energy-intensive businesses like steel industry to invest in low-carbon processes, technology and innovation and other capital investments.
 
4. Given that steel manufacturing is one of Ontario’s trade-exposed industrial facilities, maintain and evaluate expanding the free allowance coverage under cap and trade as well as additional concessions for fixed process emissions within such industries.
 
 
15 Warrian, Peter. The Importance of Steel Manufacturing to Canada: A Research Study. Munk School of Global Affairs, University of Toronto, 2010.
16 Ibid.
17 City of Hamilton. U.S. STEEL CANADA Economic Impact Study. 2015. http://www.thespec.com/newsstory/5278638-hamilton-would-take-50-million-annual-hit-if-u-s-steel-canada-fails-report/
18 Canadian Steel Producers Association. Public Policy Agenda. 2014. http://canadiansteel.ca/newsmedia/supporting-documentation/