OTTAWA – Ottawa is giving a boost to southwestern Ontario’s battered manufacturing sector with more than $1 billion in spending over the next two years to help the auto industry and to build a new bridge to the U.S. at Windsor.
The federal budget Tuesday called for spending $631 million over the next two years to help build a new Detroit-Windsor crossing.
“Our investment in the new Windsor-Detroit crossing means Canadian goods will get to market faster, allowing businesses to grow, expand trade and help secure a prosperous future,” Finance Minister Jim Flaherty said.
The commitment includes $470 million in new funding, which is in addition to money already in department budgets, and is up from a plan to spend $25 million over three years in last year’s budget to help advance to project.
The Windsor-Detroit trade corridor handles roughly 30 per cent of Canada-U.S. trade by truck, the government estimates.
Delays in crossing the border are a major headache for the auto industry, which relies on the timely delivery of parts and other supplies to keep their production lines moving.
Southwestern Ontario also stands to benefit from an additional $500 million over two years being added to the Automotive Innovation Fund.
The fund was launched in 2008 with a commitment of $250 million over five years and renewed last year for another five years. The program has handed out a total of some $316 million to six projects since it was started.
The boost for the fund Tuesday comes as Chrysler contemplates a billion-dollar upgrade to its minivan plant in Windsor. The automaker has been in talks with the federal and provincial governments about an incentive package that would help offset what it says are higher costs in Canada.
“The opportunities for new assembly plants don’t come around that often, so if they are able to attract that new product mandate into Windsor, that would be excellent and have huge impact on the local economy and manufacturing overall,” said Jayson Myers, president and chief executive of Canadian Manufacturers and Exporters.
Myers said the new money for the fund sends a important signal that the government is ready and able to help the sector.
“These are the measures that the government needs to take to support automotive investment, particularly because I think the government is preparing to announce a free trade deal with South Korea
“There’s also a number of auto parts companies too that are coming up with new products.”
The downturn in the economy during the recession and the strong Canadian dollar hammered Ontario’s manufacturing sector leading to thousands of jobs lost. However, the U.S. economy has started to gather steam and the loonie has fallen in recent weeks, both positives for the factories producing goods destined for export.
Broadly, the budget contained little new spending for businesses and while it pledged no new taxes on business, it did close a number of tax loopholes including the use of certain derivatives.
Walter Pela, the tax partner in charge of KPMG’s office in Vancouver, noted the government was moving to stop companies from taking advantage of the tax treaties Canada has with various countries around the world.
“It might not sound like a big change, but when you think of Canada’s open economy and the amount of foreign investment that we are attracting, this is going to introduce some uncertainty,” he said.
“All countries are looking at how to curb their perceived abuse of treaties and Canada here is basically taking a stab at putting forward an approach.”
The government also promised to provide $28 million over two years to the National Energy Board to help with the review of the projects, including TransCanada’s (TSX:TRP) Energy East pipeline, within the legislated timelines.
The tariff on mobile offshore drilling units will also be permanently eliminated. Their duty-free status was set to expire this year.
Many of the changes proposed in the budget did not carry a price tag, including encouragement of internal trade between the provinces.
The federal government has also proposed to bring the regulation of over-the-counter derivatives under its Co-operative Capital Markets Regulator, once it is operational.