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Feds to ease out tariff

Chronicle Herald, Halifax

Feds to ease out tariff

But shipbuilder worries Norway’s subsidized ships will be sold duty-free in Canada

By Tom Peters, Business Reporter

9 June 2007

The Canadian shipbuilding industry’s feared loss of a protective tariff has come to pass and now the industry will have three years to adjust to new market conditions.

International Trade Minister David Emerson announced Thursday that Canada has reached a free trade deal with the European Free Trade Association, which consists of Iceland, Norway, Switzerland and Liechtenstein. Within that agreement, which is subject to government approvals, the minister says the tariff, up to 25 per cent on foreign-built vessels coming into Canada, will be phased out.

"The agreement provides for a generous phase-out of our tariff over a 15-year period, with a grace period of three years before any cuts begin," he said. "This will give the industry a significant period of time to adjust to the new market conditions."

The Canadian industry’s major concern in a deal with the association is Norway, a shipbuilding country with a government-subsidized industry that has its sights set on the Canadian market.

Mary Keith, spokeswoman for Irving Shipbuilding Inc, said the extension announced by Mr. MacKay "is good news."

"But it will not compensate for the tough blow of duty free entry of subsidized ships and the impact on Canadian shipbuilding and marine operators."

Les Holloway, the Canadian Auto Workers’ union national representative for the Marine Workers Federation, said Thursday the problem is that Ottawa hasn’t "done anything to our industry to adjust."

"That’s the single biggest problem with his announcement. He is saying there is three years for adjustment, then start the phase-out over an extended period, but what is the government doing to allow industry to adjust? The industry can’t deal with issues it has no control of."

Mr. Holloway said the industry has issues that require policies to address and that would allow the industry to adjust.

"They talk in this smoke-and-mirrors kind of thing," he said. "Now that we have this free trade agreement and have this phase-in period of time, now you can adjust. If we couldn’t adjust with what we’ve had over the last decade, we will still have an inability to adjust because there are flaws in the programs they have in place."

He added that the industry has discussed these flaws with Ottawa.

Foreign Affairs Minister Peter MacKay announced earlier Thursday in Halifax that the federal government was supporting the country’s shipbuilding industry by renewing the structured financing facility program.

"Government recognizes that there are serious challenges today facing the national shipbuilding industry; that is why, after careful consideration, our government has decided to renew multifaceted approaches to shipbuilding," he said at an news conference.

"We will enhance the structured financing facility or the SFF. The SFF helps buyers to purchase ships built in Canada by buying down the interest rate of the loan that they use to finance the purchase. It has enabled shipyards to capture new business in the past, and our government believes by investing an additional $50 million over the next three years starting in 2007-08, this will be a significant boost to our shipbuilding industry."

Mr. Holloway called Mr. MacKay’s announcement "a feeble approach of wanting to make it look like their government is doing something when it is not."

The $50 million is a small amount, he said, and it is not consistent with other programs.

"We have an accelerated capital cost allowance and if you build a vessel in Canada you can get the write-down of that vessel over four years," he said. "Well, if you use the SFF, you can’t use the accelerated program. We have been saying combine the two."

Mr. MacKay reiterated government plans to proceed with the more than $3 billion in procurement of ships, which includes $324 million for the procurement, operation and maintenance of six new coast guard vessels as well as the previously announced $2.9 billion joint support ship procurement.

Mr. Holloway said there is more to the issue than just building government ships. He said when he met with Mr. MacKay a few months ago, the main issue was ensuring the industry could meet domestic commercial shipbuilding needs so the industry could sustain itself between procurement contracts.

"Just to say we are going to do all that work in Canadian shipyards is not enough," he said. "The Americans have done it; other nations have done it. They have done something to ensure they can do their commercial domestic work, so that allows them to be there when they are called upon to do procurement work."

Mr. MacKay alluded to "specific announcements we hope to make very soon, which will be more good news for the province and the region.

Ottawa will look for ways "to even out shipbuilding work," he said.