Business leaders say budget ignores U.S. threat

It’s been almost 15 years since one of Saskatoon’s largest metal fabricators stopped exporting significant quantities of cut and welded steel into the United States. The company’s president says that is unlikely to change because the barriers to entry keep getting higher.

The cost of doing business — including materials and facilities, wages and taxes — is higher in Canada, and the gap has widened over the last year amid heated rhetoric and the prospect of U.S. tax reform, said JNE Welding Limited Partnership’s Jim Nowakowski.

“There’s a lot of the vessel manufacturers in the U.S. that are tapped out for capacity right now … there may very well be some opportunities for us even as things are right now, but quite frankly it is tough for us to compete,” Nowakowski said Wednesday.

He’s not the only one concerned about robust economic growth and increased competitiveness in the U.S. Saskatoon’s two largest business advocacy groups say the 2018 federal budget doesn’t do enough to address the threat to Canadian firms. North Saskatoon Business Association (NSBA) executive director Keith Moen said the U.S. is becoming a “vacuum” for capital — which flows to low taxes and stronger economies — which could further curb business investment in Saskatchewan.

“It appears that this government is oblivious to the fact that we have a strong competitive force south of the border … Our government is choosing not to stay in line with what the U.S. federal government is doing,” Moen said.

Delivered Tuesday in Ottawa by Finance Minister Bill Morneau, the Liberal government’s third budget since taking office contains billions of dollars in new spending, including investments aimed at scientific research and supporting women in the workforce.

The 367-page document briefly acknowledges robust economic growth, low unemployment and rising wages in the U.S. but contains little policy, save a pledge that Finance officials will conduct a “detailed analysis” of incoming tax reforms.

Since the budget was released, Morneau has emphasized that Ottawa will continue to work through the impending tax changes — which have alarmed business leaders across the country — and ongoing North American Free Trade Agreement negotiations.

Greater Saskatoon Chamber of Commerce CEO Darla Lindbjerg questioned the budget’s title, “Equality + Growth.” The document offers plenty of the former but very little of the latter, which puts Canadian firms at a disadvantage, she said.

“We need to address (U.S. competitiveness) and make sure we are being competitive, and we’re not focused on just Canada as a bubble, but we’re looking at Canada both in terms of a domestic internal economy and an international economy,” Lindbjerg sad.

Moen and Lindbjerg also questioned a separate proposal that would limit a corporation’s ability to claim the corporate tax rate on more than $50,000 of so-called passive income. Both said the move would make businesses less liquid at a time they can least afford it.

The proposal is a much-diminished version of small business tax changes proposed in October, which left Morneau the target of attacks from business groups who disagreed with his view that it would close loopholes exploited by the wealthy.

Nowakowski said while concerns about NAFTA may have been overblown, the federal government nevertheless needs to concentrate on establishing a tax regime that benefits Canadian businesses and find other ways to encourage business.