By AED recently surveyed its Canadian members to develop baseline information about the impact heavy equipment distributors have on the Canadian economy and to find out what keeps them up at night.
AED recently surveyed its Canadian members to develop baseline information about the impact heavy equipment distributors have on the Canadian economy and to find out what keeps them up at night. Having this information is vital to conducting effective advocacy engagement with politicians and bureaucrats on behalf of the members – changing policy where necessary and creating an environment in which to conduct business.
About 30 percent of the Canadian membership responded to our survey. Those responses have provided a good basis for prioritizing our advocacy goals in Canada. We will discuss the results in greater detail at the Canadian Breakfast during the AED Summit in Las Vegas, on Thursday, January 18, 2018, and with a number of roundtables and presentations at the Ottawa Briefing, February 28 to March 1, 2018.
So, what did Canadian members identify as their top priorities? Aggregating the responses, the top five concerns are as follows:
▶ Availability of skilled laborers, trained and ready to work
▶ The uncertainty and instability of NAFTA negotiations
▶ Currency fluctuation
▶ Tax changes
▶ General economic instability
Let’s take a further look at some of those concerns.
Virtually everyone who responded to the survey made it clear to us that they are increasingly concerned about the double threat of an aging workforce and a shortage of skilled laborers. With the continuous technology upshift of increased complexity of systems, onboard computers, autonomous/remote controls and sensors, and more, it is vital that we maintain an accredited and knowledgeable workforce. Simply put, members are not able to fill the many positions available across our sector.
To its credit, the Canadian government recognized in the 2017 federal budget that as technology advances there may be many people left behind without the skills needed for modern job requirements.
Canada does not want to undergo the same experience as other Western countries, where increased automation has seen people let go from their manufacturing jobs with nowhere to turn. There will be more money going to postsecondary workforce training programs. There will also be reforms to the policy that caused people to lose their unemployment insurance and welfare payments if they enrolled in a postsecondary institution.
This is being done to further incentivize people of all ages to gain skills needed to work in skilled labor jobs. AED’s goal is to make sure that the heavy equipment industry is well-positioned with the federal government so that the funding and skills training programs align with our needs.
The second-most-cited concern among members was the uncertainty of trade and tariffs with the North American Free Trade Agreement (NAFTA) negotiations underway. Of concern to Canadian members, especially with the magnitude of what’s at stake, is the bellicose language coming out of the White House to “tear up” and “cancel” NAFTA if the U.S. doesn’t get its way. When NAFTA replaced the Canada–U.S. Free Trade Agreement 20 years ago, it led to an industry that was inextricably linked across the border, with thousands of jobs and billions of dollars in trade dependent on the free flow of goods and services. Following are some of the relevant numbers (provided by U.S. and Canadian government officials):
▶ Canada is the largest trade and investment partner with the U.S. In 2016, cross-border goods and services totaled USD $627.8 billion. Exports from the U.S. to Canada were USD $320.1 billion; imports were USD $307.6 billion.
▶ U.S. foreign direct investment (FDI) in Canada (stock) was $352.9 billion in 2015 and Canada’s FDI in the United States was $269.0 billion.
▶ Top export categories for goods from the U.S. to Canada in 2016: vehicles ($48 billion), machinery ($40 billion), electrical machinery ($24 billion), mineral fuels ($16 billion), and plastics ($12 billion).
▶ Top imports from Canada to the U.S.: vehicles ($58 billion), mineral fuels ($54 billion), machinery ($19 billion), special other (returns) ($15 billion), and plastics ($10 billion).
▶ Canada is the biggest export market for 35 states, with nine million U.S. jobs dependent on trade and investment from Canada.
▶ 600,000 Americans work for Canadian-owned businesses in the U.S.
As with the automobile industry, as much as 80 percent of the content of heavy equipment sold in Canada crosses the Canada–U.S. border at least once. “Buy America” provisions and minimum content requirements have the potential to drive up the cost of products and harm sales on both sides of the border.
NAFTA does need updating. The internet didn’t exist when NAFTA was enacted. Fixes to e-commerce and labor mobility would benefit members on both sides of the border. As a North American association representing member interests in Canada and the U.S., AED is an important voice in both Ottawa and Washington on ensuring that a robust, fair trade is maintained and improved for mutual benefit.
AED members also expressed concern about proposed federal government taxation reforms and the impact on their businesses, especially family-owned operations. This was compounded during the summer when Finance Minister Bill Morneau introduced a number of measures which were seen as an attack on small business, as they sought to reduce benefits from family trusts, income sprinkling and passive income. Facing a huge backlash from many quarters, the government scaled back a number of the measures. At the same time, the Liberal government followed through on its 2015 election commitment to lower the small business tax rate from 10.5 percent to 9 percent. However, with the remaining tax changes set to come into force, this was now billed as ensuring that those changes would have a neutral impact on business.
AED will remain vigilant for any new measures that might impact the transfer of family businesses; protection of income to offset the cyclical nature and external impacts on our members’ businesses; and fair compensation to family members down the road to compensate for unpaid work, “bootstrapping,” and self-funding of businesses during the startup and growth years.
NAFTA negotiations and tax measures here and in the U.S. – particularly where the approaches are philosophically opposite – will unfortunately continue to impact currency rates and economic prosperity. On the trade front, Canada’s embracing of other regional free trade agreements, such as the Trans-Pacific Partnership (TPP), the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), and even, cautiously, the prospect of a free trade agreement in China, may provide some of the strength and economic stability AED members are seeking as a balance to the NAFTA turbulence.