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Chapter 4 - A Productive, Growing and Sustainable Economy
Investing in Regions and Sectors

Highlights

• $800 million over the next five years for new initiatives through the regional development agencies and the Federal Economic Development Initiative for Northern Ontario (FedNor).

• $110 million over five years for the NRC to support technology cluster development in Atlantic Canada.

• $120 million towards a comprehensive Northern Strategy.

• $150 million over four years to promote more sustainable energy development in the North.

• $111 million over five years for the Canadian Space Agency for the development of new space-based technologies.

• $85 million over five years for Geological Mapping and GeoConnections.

• $130 million over five years to further support Canadian farmers.

Introduction

The Government of Canada is committed to strengthening its support for regional and sectoral development. Priority is given to increasing innovation activity, building local capacity to deal with adjustment challenges, investing in the North, and targeting investments to enhance the contribution made by critical economic sectors to the standard of living of Canadians.

Regional Development

Over the previous decade, Canada has made significant progress in reducing regional economic disparities, as measured by the differences in provincial average income (GDP per capita) from the national average. The continuation of this positive trend will depend on the ability of each region to raise its income through productivity growth and innovation.

While progress has been made at the provincial level, new challenges are emerging. The gap in economic performance between Canada’s cities and rural and Northern communities has been growing. The emergence of new competition, the exhaustion of natural resources and other economic changes are challenging the economic viability of many communities.

The Government will invest over $1.5 billion in this and the next five years to strengthen support for innovation and local economic development through the regional development agencies, the National Research Council of Canada and special initiatives in the North.

Community Futures Program

The three regional development agencies—the Atlantic Canada Opportunities Agency (ACOA), Canada Economic Development for Quebec Regions (CEDQ), and Western Economic Diversification Canada (WD)—and the Federal Economic Development Initiative for Ontario (FedNor) administer the Community Futures Program that fosters local economic development in small, rural and urban communities across Canada. With a network of nearly 300 Community Futures Organizations (CFO) comprising over 5,000 volunteers, it provides communities with economic development assistance including lending to local small businesses. Budget 2005 will provide an additional $55 million over the next five years in support of the operating costs of CFOs across the country.

Atlantic Canada

Atlantic Canada has made progress in recent years in diversifying into new, knowledge-based industries. This progress was recognized in the report The Rising Tide: Our Continuing Commitment to Atlantic Canada, which emphasizes the continued importance of forming and developing knowledge-based industrial clusters in Atlantic Canada. Over the past five years, the Atlantic Canada Opportunities Agency (ACOA), through the Atlantic Innovation Fund (AIF), has assisted in the growth of knowledge-based industries by supporting increased research and development. The AIF has promoted stronger linkages among universities, and between universities and the private sector, and has supported research in information technology, aquaculture, offshore oil and gas technologies, and life sciences.

With Budget 2005, the Government sets out a new $708-million, five-year initiative to support economic development throughout the four Atlantic provinces. This initiative will be supported by: a $41-million permanent increase in ACOA’s annual budget, totalling $205 million over the five years; additional new funding of $95 million over the period; $290 million in funding from ACOA’s budget; and new funding of $110 million over five years to the National Research Council of Canada (NRC).

The Atlantic initiative will include a renewed $300-million Atlantic Innovation Fund that will support university research, commercialization and innovative companies. ACOA will also target close to $290 million in support of new Innovative Community programs to diversify the economies of vulnerable communities, and initiatives to strengthen human capital, trade, investment and tourism in Atlantic Canada.

The final component of the initiative is funding of $110 million over five years for the second phase of the NRC’s technology-based clusters in Atlantic Canada. Working with its research institutes and community partners, the NRC has invested in new research and technology capacity to underpin promising clusters in several Atlantic communities, including those focusing on information and communications technologies, life sciences and ocean technologies. In this second phase, the NRC’s efforts will increasingly focus on identifying and meeting the innovation needs of local businesses.

ACOA will also administer $8.4 million over the next five years in Atlantic Canada under the Community Futures program.

Quebec

Canada Economic Development for Quebec Regions (CEDQ) will invest more than $300 million over the next five years to support economic development in Quebec, of which $221.5 million, or $44.3 million per year, will be a permanent increase to CEDQ’s budget, enabling the agency to continue its support for local economic development and innovation among Quebec’s small and medium-sized enterprises. Additional funding of $73 million will be provided in the next five years to build on CEDQ’s success in working with vulnerable communities, especially single industry towns distant from an urban centre. Under the Community Futures Program, CEDQ will have an additional $14.2 million over five years to work with local stakeholders to provide access to financing, encourage youth entrepreneurship and to mobilize community resources for economic development.

Ontario

Budget 2005 will provide $88 million in funding over the next five years to the Federal Economic Development Initiative for Northern Ontario (FedNor) to support the economic development of communities throughout Northern Ontario and in rural Southern Ontario (through the Community Futures program). Of this, $11.9 million per year, totalling $59.5 million over five years, will be a permanent addition to FedNor’s budget, providing long-term certainty regarding its ability to make strategic investments focused on strengths in resource sectors and to support community planning, development and adjustment. In 2005–06, $6 million will be provided in support of FedNor’s priorities for Northern Ontario, and a further $8.2 million will be provided for FedNor’s Eastern Ontario Development Fund program. Under the Community Futures Program, FedNor will also have an additional $14.2 million over five years to strengthen its contribution to Ontario Community Futures Development Corporations.

Western Canada

Western Economic Diversification Canada (WD) will target $186 million over the next five years in support of a new economic development approach in Manitoba, Saskatchewan, Alberta and British Columbia. Of this amount, $35 million will be allocated over five years from its existing budget. Budget 2005 will provide $11.9 million per year, totalling $59.5 million over five years, as a permanent increase to WD’s budget, and new funding of $73.5 million in the next five years. With this funding, WD will launch a new Partnerships for Community Action initiative to work with communities vulnerable to economic adjustment pressures and with Western cities, such as Vancouver, Regina and Winnipeg, on their specific economic issues, and support other Western Canadian priorities. As well, WD will be provided with $18.2 million over five years to increase its contribution to Community Futures Development Corporations throughout Western Canada.

Northern Strategy

The Prime Minister and the three territorial First Ministers have agreed to work together to develop the first-ever comprehensive strategy for the North. The North is entering a time of unprecedented promise and opportunity, particularly with respect to economic opportunities relating to oil, gas and diamond development. The Northern Strategy will provide a basis for governments and other stakeholders to coordinate their actions and to take decisions on priorities and investments in the years ahead with the intent of improving the quality of life of Northerners. Budget 2005 provides the territorial governments additional capacity to help achieve the goals of the Northern Strategy and includes an investment of $120 million to be allocated equally among the three territories. The amount will be paid into a third-party trust upon passage of authorizing legislation. Territories will have flexibility to draw down funds as they require up to the end of 2007–08.

Northern Oil and Gas Development

Oil and gas development has the potential to provide unprecedented opportunities for Northern Canadians for decades to come. Development of these resources must be realized both in partnership with Northern communities and in a manner that ensures effective environmental stewardship. Building on the $108 million provided over the last three years, the Government of Canada will provide an additional $150 million over four years to increase federal and regional capacity to respond efficiently and effectively to environmental assessment and regulatory applications associated with the Mackenzie Gas Project and related resource development. An important component of this response will involve scientific research to help ensure that appropriate measures are taken to minimize environmental impacts, protect the public interest and assess the cumulative effects of individual projects on the broader northern landscape and people.

Sector Competitiveness

Canada has put in place an extremely attractive business climate that is leading to new investment, economic growth and new jobs. The Government of Canada is also working with business and labour groups and provincial governments to develop and implement strategies that will maximize the contribution of all sectors to our standard of living. Budget 2005 includes investments in support of sectors that have world-leading technologies, are important to particular regions, and that have been affected by extraordinary economic shocks.

Canada’s Space Industry

Canada’s space industry is a sophisticated research and innovation leader, one that has successfully turned its investment in knowledge into a global advantage in several niche areas, including robotics and satellite communications.

Through the Canadian Space Agency (CSA), the Government of Canada has played a crucial role in the development of the Canadian space sector, by investing in new industry-developed space technologies and applications. These are increasingly important in addressing many of Canada’s priorities, including sovereignty and security, the management of natural resources, and the responsible stewardship of the environment. The benefit of these investments is two-fold: the harnessing of space to serve Canadians, and the creation of leading-edge technologies that can be sold to the world. Canada’s space sector is highly export-oriented, with about half of sales coming from outside Canada’s borders.

With the launch of the Radarsat-II satellite, anticipated in early 2006, Canada will consolidate its position as a world leader in radar remote sensing from space. The wide range of applications for Radarsat data includes forestry, fisheries, minerals, and mapping.

To ensure Canada maintains its strong position in this important area, development of the next generation of radar remote sensing satellites must begin now. Budget 2005 therefore provides the Canadian Space Agency with an additional $111 million over the next five years, starting in 2005–06. Combined with a further $89 million from the CSA’s budget, a total of $200 million will be made available over the next five years for the CSA to work with the Canadian space industry on developing the next generation of advanced radar remote sensing satellites.

Geological Mapping

The Targeted Geoscience Initiative, first established in 2000, works with provinces, territories, industry and universities to provide integrated geoscience knowledge pertaining to areas of energy and mineral potential, with the intent of stimulating private sector resource exploration. The Government of Canada will provide $25 million over five years to renew the Targeted Geoscience Initiative, which will focus on mapping to help sustain the reserves of base metals in established mining communities.

GeoConnections

The GeoConnections program, established in 1999, provides consolidated geographic-related information to Canadians via the Internet, reducing duplication among and within orders of government, enabling better policy and business decisions, and advancing Canada as a world-class leader in the development, delivery and use of innovative on-line geospatial data. Under the program, governments, the private sector, academia and non-government organizations have partnered to develop the Canadian Geospatial Data Infrastructure, bringing together data previously held by different organizations and orders of government. Budget 2005 provides $60 million over five years for GeoConnections to continue this work and to support decision making on a broader range of issues, particularly health, public safety, sustainable development, the environment and issues of importance to Aboriginal people.

Agriculture

The year 2004 was another difficult year for Canadian farmers faced with challenges such as avian influenza in B.C., a cool, wet harvest season in the Prairies, and continued border closures due to bovine spongiform encephalopathy (BSE), affecting livestock producers throughout the country.

Since the initial discovery of BSE in Canada in May of 2003, the Government of Canada has provided $1.8 billion for BSE-specific programs, including $1.6 billion in direct assistance to farmers, and over $200 million for new surveillance, inspection and research measures (see Table 4.5).

Table 4.5
Bovine Spongiform Encephalopathy (BSE) Programs Since June 2003

In particular, since Budget 2004, the Government has provided $544 million for BSE programs, including the $488-million livestock industry repositioning strategy, announced on September 10, 2004, and $56 million for additional inspection and food safety research measures.

On February 9, 2005, the U.S. confirmed its intention to reopen its border on March 7, 2005, to Canadian cattle under 30 months of age. The Government is hopeful that such a reopening will facilitate the strong recovery of the Canadian livestock industry.

While continuing efforts to fully reopen borders, the Government will stand by the Canadian cattle and beef industry, and will continue to help reposition the industry to ensure its long-term viability. In this vein, to improve its repositioning strategy, the Government will redirect a portion of the funding announced on September 10, 2004, to increase the ruminant Loan Loss Reserve Program by $17.1 million. This will bring the total federal government contribution to the program to $55.6 million and help facilitate a more rapid expansion of ruminant slaughter capacity.

In addition to previous aggressive and comprehensive food safety measures based on internationally accepted science, the Government has proposed regulations further enhancing the food safety regime by removing specified risk materials from all animal feed. Since this removal will result in significant disposal issues, the Government will redirect $80 million of the funding announced on September 10, 2004, to start addressing these disposal issues, while further work is being completed in conjunction with industry, and provincial and territorial governments.

In June 2002, the Government launched the Agricultural Policy Framework (APF), which provided $1.1 billion in annual funding for Business Risk Management programs, including the Canadian Agricultural Income Stabilization (CAIS) Program, Production Insurance, and cash advance programs. To improve the business risk management tools available to farmers, Budget 2005 is providing $104 million over four years to extend agricultural cash advance programs to livestock producers, starting in the 2006 production year. Amendments to the Agricultural Marketing Programs Act will be proposed to ensure that current cash advance programs are consistent with the ";whole farm"; principles of the APF and provide additional support to producers facing difficulties due to BSE.

Canada’s farmers and farm communities have shown enormous resilience over the past several years in coping with an unprecedented combination of crises arising from weather, animal disease and difficult market conditions abroad. The Government will continue to support producers through its Agricultural Policy Framework to manage through these difficult times and be more competitive at home and abroad. To that end, the Government agrees with Canada’s farmers that producers should not be required to put funds on deposit annually in order to be eligible for the Canadian Agriculture Income Stabilization (CAIS) program. The Government is committed to working with its provincial partners and with stakeholders to find a better means of effectively engaging producers in joint management of business risk under CAIS.

For more than 60 years, the Prairie Farm Rehabilitation Administration (PFRA) has provided environmental and resource management services to help Prairie farmers adopt sustainable practices and technologies. To reinforce the Government’s commitment to sustainable farm management and to further equip farmers dealing with changing climatic conditions, the Government of Canada is mandating Agriculture and Agri-Food Canada and the PFRA to examine how PFRA services can be extended to farmers, nation-wide. Budget 2005 provides $5 million to complete this study.

For decades, the Canadian Grain Commission (CGC) has worked to ensure the safety and quality of Canadian grain. This quality assurance system has been a key element in the success of Canadian grain exports. To help the CGC to continue delivering this important service, the Government will provide it with additional funding of $21 million for the next fiscal year.

In total, the $544 million provided since Budget 2004, and the new funding of $130 million provided in Budget 2005, results in total funding of $674 million to support Canadian farmers.

Textiles

On December 14, 2004, the Government announced a package of initiatives designed to help Canada’s textile and apparel industries in their efforts to adjust to an ever-increasingly competitive global marketplace.

The three elements of the package are: i) extension of the duty remission orders benefiting textile and apparel manufacturers for five years, with a gradual phasing out of the benefits over the final three years worth $105 million over the next five years; ii) elimination of the tariffs on imports of fibres and yarns, and on imports of fabrics used in the production of apparel, effective January 1, 2005, worth $423.3 million over five years; and iii) the provision of an additional $50 million in funding to the Textiles Production Efficiency Component of the Canadian Apparel and Textile Industry Program over the next five years to increase competitiveness through a shift to higher value-added products and new market opportunities.

Table 4.6
Investing in Regions and Sectors

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