Formative Evaluation of the Canadian Apparel and Textile Industries Program (CATIP) — Textile Production Efficiency Component (TPEC/CANtex)

2.0 Overview of the Program

The Canadian apparel and textile industries represent two related, but very distinct manufacturing sectors.

Canadian apparel manufacturers are engaged in the design, cutting, sewing, finishing and marketing of a wide range of products to meet the needs of consumers, both at home and abroad. The apparel industry produces a wide range of garments for consumer markets and for specialized applications, such as industrial and military uniforms. While Canada has many large and highly-sophisticated manufacturing companies, small firms predominate the industry.

Canada's textile industry is made up of companies who manufacture fibres, yarns, fabrics, and finished textile products. The industry, which is modern and capital-intensive, supplies consumer and household markets as well as industrial customers in Canada and worldwide. Manufacturing processes range from the spinning of yarn to the production of woven, knitted, and nonwoven fabrics, and finished textile goods such as household linens and carpets. Dyeing and finishing processes are available within vertically integrated operations as well as from commission processors.

On January 1, 2003, the Government removed all tariffs and quotas on textiles and apparel imports from 48 Least Developed Countries, known as the "LDC initiative." The Canadian apparel and textile industries are among the sectors most likely to be affected and are particularly susceptible to import competition from LDC's because apparel production tends to be a labour intensive manufacturing process and LDC's are low wage countries. As a result, it was decided that certain measures would be put in place to help these sectors accommodate the additional competitive pressures brought to bear on these sectors.

In recognition of these LDC Initiative impacts, the Government created a $33 million Canadian Apparel and Textile Industries Program (CATIP) to operate from 2002 to 2006. The fundamental objective of CATIP is to assist apparel and textile firms increase their competitiveness through initiatives such as the introduction of best practices, the exploitation of leading edge technologies and the development of global market strategies. This funding was apportioned between contributions for recipients and expenditures for program operations. Contributions have been directed at specific projects by companies, and not-for-profit organizations such as associations. The portion for companies was closed in March 2005; delivery to not-for-profits continues on a limited basis using residual funds. Under CATIP, Industry Canada has supported a total of 240 projects and Canada Economic Development for Quebec Regions (CED-Q) has supported 171, for a total of $28.4 million in authorized assistance.

TPEC/CANtex

On February 27, 2004, the Government announced a new Textile Production Efficiency Component for CATIP, called "CANtex", aimed at improving the global competitiveness of Canadian textile manufacturers.

Funding for CANtex was originally $26.7 million over a three year period. Additional funding of $50 million was announced in December 2004, together with a program extension to March 31, 2010. This brought total funding for CANtex to $76.7 million.

On September 25, 2006, the government announced a reduction in CANtex funding by $24.9 million, thereby reducing the overall funding for CANtex to $51.8 million. As of October 18, 2006, under CANtex, Industry Canada had supported 70 companies with 134 projects, and CED-Q had supported 69 companies with 96 projects. As of October 18, 2006 there was $23.6 million still available for future projects.

Capital intensive, the textile industry makes cost reductions and internalizes productivity gains through the acquisition and upgrading of equipment and the implementation of improved production processes. While initially, the CANtex program supported projects aimed at improving productivity, effective September 30, 2005, the program was changed to reflect two components: a Productivity Component and a Transformative Component. The Productivity Component is a continuation of CANtex assistance for textile manufacturing companies undertaking initiatives to improve their production efficiencies. The new Transformative Component is for textile manufacturing companies wanting to transform at least a portion of their current textile production from lesser value-added products to higher value-added textile products.

On these bases, program funding is used as an incentive tool covering costs related to encouraging textile company investments in:

• Improved textile production processes to increase productivity, and
• Projects to re-engineer production processes and/or retool equipment and facilities to produce higher-value added textile products.

CANtex includes both non-repayable and repayable contributions. Non-repayable contributions are provided up to 50% of eligible project costs, to a maximum of $100,000. Repayable contributions are provided at a rate of 50% on the first $2 million of eligible costs, 40% on the next $2 million, and 30% on costs above this amount, to a maximum total repayable contribution of $3 million.

CANtex is delivered by Industry Canada and Canada Economic Development for Quebec Regions (CED-Q). Responsibility for the overall administration and reporting for CANtex resides with Industry Canada. Consistent with the original CATIP, funding for CANtex has been allocated in accordance with the distribution of potentially eligible recipient firms. Approximately 55% of textile shipments are from firms located in Quebec; Ontario accounts for 26%; together Manitoba, Saskatchewan, and Alberta for 9% of firms; British Columbia for 7% of firms; with the remaining 3% spread across the Atlantic region.

CANtex was promoted to potential recipient firms through a variety of mechanisms, including seminars, company visits, direct mail and telephone contact, a website and work through representative organizations.

CANtex can contribute up to 50% of a project's total cost. The average percentage of the project's total cost that was covered by contributions from CANtex, broken down by total project size, is displayed below. Some companies with larger projects (i.e. greater than $200,000) still qualified for funding under the $100,000 repayable threshold.