Industry Committee on Oct. 31st, 2006

[Russ Cameron]

I think the industry in the east is in big trouble. This softwood lumber thing is going to make it a lot worse. B.C. produced 58% of what went into the United States, and at least three-quarters of that comes out of the B.C. interior. B.C. has that beetle kill. So for the next few years you're going to see the stumpage in the interior of British Columbia go down, down, down. They're going to be selling blue wood that isn't going to command the same price as before.

We put in this market pricing system. That's where the little guys are supposed to go out and bid on timber, and then there's an equation that will take the prices paid and set the stumpage for the major licensees in the B.C. interior. These little guys are not going to be paying much, if anything, for that timber, because they're not going to make money. So you're going to see that stumpage go down.

At the same time, you've got the large companies—Canfor, West Fraser, and Tolko—ramping their production up. They now have their ability to run three by seven curtailed, because we just dumped all the wood we had in the province across the line to try to beat the tax. You heard the Americans squawking about that.

That lumber will get consumed. There's a theory I subscribe to—though I won't know for sure till it happens. You've got to figure that the CEOs of these big major licensees in the B.C. interior are talking to the CFOs. They're saying they know they're going to pay a 15% tax. They're looking at a smaller share of the market. If they increase production, they're going to go over what they're allowed with this 30% plus 10% type of thing, and they're going to have to pay 22.5%. So the question is, do they operate on a curtailed basis, so that they maintain themselves at 15%, or do they go flat out, three by seven, and try to lower costs by 7.5%?

If the CFOs come back and say, “With the declining stumpage, if we go three by seven, we can lower our costs by more than 7.5%”, then that's what they'll do. You'll see more wood coming out of the B.C. interior than you've ever seen before. Any vacuum left there by curtailment from Quebec and Ontario will be filled by the B.C. mills. Once they're paying 22.5%, which happens if they exceed 10% of their quota for the region, it doesn't matter if they do 150% or 200%, they're still at 22.5%. Once you're at 22.5%, the more you produce the better, because you're going to cut your fixed-cost component more. I think that's a very likely scenario. It's going to make things real tough on Quebec and Ontario.

[Tony Martin, NDP, Sault Ste. Marie, ON]

So in other words, it's going to get worse.

[Russ Cameron]

In my view, yes.

[Tony Martin, NDP, Sault Ste. Marie, ON]

You hear from the government side that we need to be more efficient to compete better. I know the company that has gone under protection in my community is producing more paper, at a higher quality, more efficiently than they have ever done before. Yet they're under protection, even without the scenario you just described.

We have another company, Flakeboard, in the community. In meetings I've had, they have indicated that they're doing everything in their power to become more efficient. They're making new investments in technology, so that there's less transporting of raw materials. They're doing more themselves, and making their operation less labour intensive. But even with that, they are not sure if they're going to survive, because they're in the furniture business and it's very competitive.

[The Chair, Conservative, James Rajotte]

About 30 seconds, sir.

[Tony Martin, NDP, Sault Ste. Marie, ON]

I think we're working as hard as we can, as smart as we can, but we're still not getting anywhere. It's like Alice and the looking-glass.

With the dollar, is there anything we can do about the dollar?

[Russ Cameron]

I don't know if you can artificially peg your currency, like Australia has done in the past type of thing; it goes where it goes. I think we are all facing developing pulp industries in other countries, eucalyptus with 15-year rotation ages, which affects the price of the fibre. What's negative for Ontario is that the cheapest chips you get are sawmill residuals. If the sawmills are not running, you don't have residuals and you're going to have to chip roundwood, and roundwood is probably double the input fibre cost. They can tell you better than I, because I am not a pulp guy, but I have calculated it in the past and those were the numbers I came out with.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you very much, Mr. Cameron. I know that was very short, but we appreciate you coming all this way to be with us here today.

I have a question. You did have a presentation, and I think we will endeavour to have that translated for members. But if you have anything further you would like to distribute to members, anything at all with respect to manufacturing, please do send it to the clerk and we will distribute that to all members.

[Russ Cameron]

I left a dozen copies with Jim.

[The Chair, Conservative, James Rajotte]

Okay, thank you very much.

[Russ Cameron]

Thank you very much for having me out here. I will take every opportunity I can to try to get you not to pass Bill C-24.

[The Chair, Conservative, James Rajotte]

Thank you.

If Ms. Maloney could quickly come to the table, we'll go right into her presentation.

Members, we have three 40-minute sessions today, so we'll go very quickly in.

The second witness today on the challenges facing the manufacturing sector is Ms. Sharon Maloney. She is the executive director of Polytechnics Canada.

Welcome, Ms. Maloney, to the committee.

[Sharon Maloney, Executive Director, Polytechnics Canada]

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you for being with us here today.

We have a maximum of ten minutes for a presentation from yourself, then we'll go right into questions and comments from members.

You can start your presentation.

[Sharon Maloney]

Thank you, Mr. Chairman and members of the committee, for inviting me here today.

As the chairman has said, I am the executive director of Polytechnics Canada, which is an alliance of Canada's eight leading public polytechnic institutions. Collectively we annually train over half a million Canadian skilled workers, essential to sustaining the mid-level infrastructure that supports the innovation, research, and productivity fundamental to Canada's competitiveness.

Located in the regions that drive the Canadian economy and that reflect our country's workforce diversity, they offer a critical mass of educational, training, and research resources focused on resolving industry problems.

Polytechnics are positioned to respond quickly to industry needs for new or modified programs and curricula, as well as applied research. For example, Conestoga College--our member--and Toyota developed the multi-skill maintenance program that is designed to train Toyota's technical staff in the skills required to keep state-of-the-art automated assembly lines operating effectively and efficiently.

The applied research conducted at polytechnics assists manufacturers in improving products and processes to ensure their competitiveness. Their research is focused on current opportunities and problems. It is completed quickly, with results that can be immediately implemented.

Canada's manufacturers have identified skill shortages and the need to enhance productivity as key challenges for the sector. For example, in the 2006-2007 management issues survey conducted by the Canadian Manufacturers & Exporters, respondents identified limited resources and the lack of qualified personnel as key factors limiting business performance and inhibiting innovation.

The 2006 World Intellectual Property Organization report provides more recent evidence of the weak performance of Canada's research investment. Since 1995 there has been a significant increase in the number of patent applications by residents of developing countries, including the Republic of Korea, China, India, and Brazil. Canada is not in the top 15 patent offices for patent filings by residents. Canada ranks 30th in the world in the number of patent filings by Canadian residents per $1 million of R and D spending, putting us at the bottom of all industrialized countries, slightly ahead of Israel, Mexico, Turkey and Belgium.

Several emerging economies and countries in transition have high rates of filings per GDP, particularly those that have embraced polytechnic education. Canada ranks 26th in the number of filings by Canadians per $1 billion of GDP, with a rate of 4.3. Clearly, past investments in post-secondary education, skills training, and pure research are not resolving Canada's current skill shortages or adequately enhancing the country's productivity.

Polytechnics Canada recommends that the following actions be taken to enhance the productivity of Canadian manufacturers and strengthen the Canadian economy: first, implement a national people and skills strategy, overseen by a high-level council with representatives from business, government, colleges, and universities, that is responsible for establishing short- and long-term goals to ensure we have the requisite workforce in place, to monitor progress, and to report national results.

Second, develop and implement a national credit transfer system to serve the mobile population, and prior learning and recognition standards to enable adult learners to fast-track their learning requirements and their credential opportunities.

Third, enhance Canada's e-learning capacity, both in delivery and content, to allow access for adult learners.

Fourth, maximize and leverage the cross-jurisdictional critical mass of applied education, training, and research available through the Polytechnics Canada alliance to produce the skilled workers necessary to diffuse technology and enhance the productivity of Canada's manufacturers. The recent announcement by our member NAIT, Shell Canada, and the provincial government to launch a campaign for the construction of the Centre for Applied Technologies and thereby increase its apprenticeship training capacity is an excellent example of what we need to be doing.

Fifth, invest in more applied research by supporting those institutions that have the ability to work with industry and provide solutions to industry problems while equipping students with the requisite technological skills. While a solid foundation has been established for basic research, we have not invested enough in applied projects leading to improved quality and productivity in manufacturing by using students and faculty of polytechnics as resources.

An example of what I am talking about is the integrated manufacturing centre recently established by our member, Humber College. The centre provided all the labs and technologies relating to everything from design through manufacturing processes to the customer in a single integrated location, which also acts as an integrated learning platform for technology learners.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Maloney. I appreciate the brevity and also the substantiveness of the recommendations.

We will go now to Ms. Kadis, for six minutes.

[Susan Kadis, Liberal, Thornhill, ON]

Thank you, yes.

Ms. Maloney, I have met with you briefly, and I agree there's tremendous potential within the polytechnical institutions, in terms of us being more productive and the competitiveness of the economy.

What do you think have been the impediments? We're hearing about some positive models, such as Humber College, which I'm very happy to hear about. What are the impediments to ensure that this linkage is made with governments, as well as business? And along the same lines, how did the Humber College one come about?

[Sharon Maloney]

The impediment that Polytechnics has experienced, as well as colleges, is a systemic bias in favour of one particular form of education and seeing it as superior to others. By that, I mean university education. And I'm not here to suggest a university education isn't a valuable education; of course it is.

I am here to say we have to be looking at all the available options. We need to be looking at what is complementary, what provides the kinds of skills and training that reflect the skill depths we have. Unfortunately, we are still living in a society and a culture where parents continue to say to their young people that they wish they'd go on to get a university degree, without recognizing that may just be the opening gambit with respect to being able to be properly trained and properly placed in the workforce.

One of the biggest issues is that systemic bias, which then has influenced key decision-makers of all governments, both political representatives as well as bureaucrats, because they come to it with a predisposition and with a lack of understanding of what the value is and what the value offer is in this type of education.

It's a challenge for people of my generation to be able to be more responsive to younger people and to recognize what they need to be properly employed and benefit from being in a very competitive economy.

The reason Humber and the other institutions I've mentioned in my opening remarks have been successful is that they have been at this for a while. These institutions really are leaders in their field. They are distinguished by the fact that they provide applied learning as well as applied research, meaning they have a laddered comprehensive offering that goes all the way from apprenticeship training right through in some cases to masters degrees, and they do applied research, so they have really completed the circle. Their students learn in the classroom and then they learn with industry, and they also conduct research, so they're helping industry solve problems at the same time they're learning.

When we talk about diffusing or being a knowledge-based economy, we are creating students who are trained to diffuse technology in the workforce. And Humber and BCIT and Conestoga and Seneca have been very good at that, because they've built those relationships with the private sector.

[Susan Kadis, Liberal, Thornhill, ON]

Do I have any more time, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have two and a half minutes.

[Susan Kadis, Liberal, Thornhill, ON]

You've given us some of your outlines, some of your recommendations. In a nutshell, what do you believe the federal government can do at this time to strengthen that relationship and the benefits that would accrue as a result?

[Sharon Maloney]

The federal government has started to do many things. The recent budget was very positive in the sense of recognizing dollars for infrastructure for post-secondary education. That's an important ingredient. Recognizing the value of apprenticeship training with tax credits is a positive thing. That's not enough, though. Even before getting into funding, as a country we have to identify education as a national priority, and that means leadership, and that means saying we need to be looking at where we want to be in the future; how we are going to be competitive; how we capture that 50% of the population that is not pursuing post-secondary education, not just students, but the underemployed, aboriginals, the disabled.

Education is the great liberator, and the greatest thing both federal and provincial governments can do is to start working together to get rid of the institutional barriers and in some instances jurisdictional barriers, which need to be respected but should not become inhibitors for us to be competitive as a country. When Canada goes out into the world, it does not compete as Saskatchewan; it competes as Canada.

Somehow, we have to be able to agree collectively that this is a priority and put in place some steps that would respond to that.

[The Chair, Conservative, James Rajotte]

Okay, thank you very much, Ms. Kadis.

We'll go now to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you for being here today.

I would like to ask a few questions. You talked about a national strategy, labour, a credit transfer system, concepts and skills. What type of labour is most problematic in your area? What is there a shortage of? What kind of people and skills do you need in your kind of operation?

[Sharon Maloney]

I think it's a full range. There are deficiencies in the energy sector. There's a crisis that people are experiencing in Alberta with respect to having skilled workers in the petroleum trade. There are deficiencies in British Columbia with respect to the construction trade. The mining industry is reporting that they have serious skill shortages.

I really think there are a number of sectors that this cuts across that are lacking in the skilled people they need--and even beyond that, the next stage when we talk about infrastructure, when you're working, for example, as a doctor, and you have a team that's probably made up of eight other technicians, radiologists, and technologists who support that role. Those areas are in need of skilled workers, and we're really not producing them at the rate that we actually should be.