Industry Committee on May 16th, 2006

[David Stewart-Patterson]

Yes, that's what I'm saying.

[Garth Whyte]

In terms of elected officials as well.

[David Stewart-Patterson]

Yes, that comes back to social attitudes and the question of whether our communities welcome entrepreneurship as an activity or a calling. Do we welcome creative people, no matter where they work? Do we welcome creative people in our communities, even if they get rich doing it? Or do we only welcome them if they work in the public sector?

So that's a broader thing. It's not a matter of public policy, but I think it is an important element in terms of where the Canadian economy is going to grow.

[The Chair, Conservative, James Rajotte]

You have five seconds, Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's very encouraging to hear. So there's a disconnect; you're saying that in the civil service, the people who are implementing these regulations just don't understand the private sector. Is that correct?

[Garth Whyte]

I wouldn't paint them all with that brush. Often there's a—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But it's going in that direction.

[Garth Whyte]

Yes, often that's the case.

[The Chair, Conservative, James Rajotte]

We're back to Mr. Masse for five minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

It's good to hear some positive comments about the public service. I can tell you that in Windsor we witnessed a lack of positions being filled. Some of the attacks on the civil service over the years created a significant morale problem; and people have moved on because there has literally been attack after attack on individuals who have actually bridged a lot of industrial development together through government programs—HRDC, for example, and you also have the research and development programs, which are very important. We're losing those individuals.

I would like to move towards the border and get an idea from the panel members about the new legislation coming out: the WHTI, the western hemisphere travel initiative; the passport requirement, which is still progressing at this point in time; and impacts of the additional regulations placed upon Canadian exporters and importers. How should we as a government deal with those initiatives put forth to us from the United States?

We talk a lot about productivity, and we often place that too easily on individual workers' shoulders, but when you have papers and documents delayed by inefficiencies, as well as line-ups, that gap is just as significant, at around $9 billion a year.

[Garth Whyte]

That's a very good point. We're moving a little bit out of the manufacturing world into the hospitality and tourism world, and in a way, there's a perfect storm brewing: there's the western hemisphere travel initiative; there's also maybe a flu pandemic; and there are fuel prices. Can you imagine? We tend to look at these policies in isolation. We tend to look at the flu pandemic and prepare for that. The WHTI, let's prepare for that. And, oh, we have fuel prices. On these we go to different committees talking about three different things, when actually, if all these elements came together, they could be disastrous.

How should we handle the WHTI? There are two approaches. One approach you would have noticed Premier Charest taking yesterday, or the day before, when he was down visiting some northern state congressmen and senators, who were saying, we should stop this thing. We tend to think that's not the approach that should be taken, because we wouldn't like it if people came up here and told us how we should do our policies, and, quite frankly, the Americans aren't going to listen to us. All we're doing is reinforcing the fact that Canada doesn't care about security. I think we have to accept that this initiative is coming. What we want to see, as quickly as possible, is an understanding of what the rules of the game are going to be—and they're not developed yet.

The problem is the delay. If you talk to the tourism community, they're concerned about the travel initiative and what documents are going to be in place, but right now they're losing business because of the uncertainty. And if we drag this out two, three, or four years and play rope-a-dope, we'll have three to four more years of uncertainty. Already, they're losing up to $1 billion to $2 billion in lost convention and hotel business because of the uncertainty and visitors' view that, “I don't know what the rules are going to be and I'm not going to go to Canada”. That's their own estimate.

So I think the problem is going to be with the details of implementation, and I'm pretty convinced that they're going to have to delay it, because they're not prepared to implement it. They're going to run into problems, but for us to say, stop it, I think we're just causing ourselves problems.

[Dr. Jayson Myers]

On the border issues, we're seeing a lot of regulatory programs coming, particularly from the United States, that are, frankly, in some cases, being used to protect American industry from offshore competition.

I think the only way we can ensure that these don't become more burdensome is, number one, to make sure we do have security systems in place at the border to alleviate some concerns there. But this isn't just a Canadian issue; right across the Great Lakes states, this is a major issue for manufacturing. The Great Lakes Manufacturing Council has made this a priority issue, so there's a tremendous amount of concern on the American side as well. In the Great Lakes, in the western hemisphere travel initiative, or in making sure that we have FAST and NEXUS systems and expedited trade systems in place, our greatest allies are probably the manufacturers in the Great Lakes, the businesses there whose livelihoods also depend on making sure the border is working extremely efficiently, as well as being secure.

I think we should—and I know all of our business groups are—work very closely with our counterparts, particularly in the Great Lakes states, making sure the word does get down to the legislators in the United States that Canada is not only secure, but also that if there are problems at the Canadian border, they are going to be problems for U.S. industry as much as they are for Canadian industry.

[Brian Masse, NDP, Windsor West, ON]

Does your association work in assisting members in accessing NEXUS?

[The Chair, Conservative, James Rajotte]

Mr. Masse, I'm sorry, but we're running very short of time. There are 10 minutes left.

I have Mr. Holland, Mr. Carrie, Mr. McTeague, and Mr. Crête, and we have 10 minutes.

Basically, Mr. Holland has not had a chance for questions and I think he deserves five minutes. What I'm proposing is that the other three members ask a question when Mr. Holland is done and allow the witnesses to answer the questions at the end.

Mr. Holland, you have five minutes.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you, Mr. Chairman.

I'm going to start, if I could, with Mr. Myers. I just want to explore a little bit the comment you made toward the end of your presentation, which Mr. Lapierre referenced, with respect to 100,000 jobs being lost in the near term. I do so partially because of what Mr. Whyte said in terms of the expected increase in jobs.

First of all, where is that 100,000 figure coming from? Is that a net figure? Maybe you could just expand a little bit on it, so that we can have a better sense of what it means. When you say a loss of 100,000 jobs, over what period of time will that be and in what sector? What's driving your analysis to think that's going to occur? Is it net?

[Dr. Jayson Myers]

Very briefly, it is net, and it's the employment in manufacturing that I'm projecting will fall by about 100,000. We've seen 36,000 net job losses already on the books because of closures already slated for this year but which have not yet taken place. So we know there are going to be jobs lost over the course of the year.

Employment in manufacturing is cyclical. August is the peak; January is the bottom of the cycle, but it will pretty much be in any part of that. I think we'll see the weaknesses in the fabricated metal sectors and the suppliers into the automotive sector, particularly in Ontario and Quebec; and in the textiles sector in Quebec; and in the highly energy intensive sectors like paper, chemicals, and metal refining, in some cases. Those are the key sectors. The strength will be in western Canada. That's where the jobs will be.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you. I appreciate that. I think it will help the committee focus in terms of some of the issues and priorities.

I just wanted to come to the dollar, if I could. It was interesting to note that it perhaps isn't as major a concern for you as I would have thought it would be, coming into the presentation. This was stated in some way by all three of you. In fact, in the presentation by the CFIB, on pages 1 and 7, where you were talking about major business factors affecting performance in the last 12 months, I didn't see the currency listed as one of those major concerns. I don't know if it has been included in something else or if it's a separate concern.

I appreciate that your principal concern with the dollar is the speed at which it appreciates, so perhaps you can tell us.... I think we have a sense that the industry is coping with that and that there are other priorities for you.

What happens in the next year or 18 months if the dollar hits par or $1.08, as some are projecting? Of course, if we knew this with any degree of certainty, we'd all be playing the commodity markets. What kind of impact is that going to have on the manufacturing sector in terms of level of concern?

[Dr. Jayson Myers]

I can tell you that if the dollar hits par in the next year and stays there, we are going to see far more closures than the 100,000 job losses. Companies are improving productivity in line with the dollar, but, frankly, a dollar over 90¢ is.... As David was saying, you've got companies that can produce anywhere in the world today, and 90¢ is pretty close to taking Canadian operations out of that competitive list altogether. In fact we're seeing the closure of some of the most competitive, most productive, production facilities in Canada, and that production is moving to Mexico simply because the return on investment is better in Mexico than it is here, even with the productivity improvements we've seen.

So a dollar much over 90¢ means considerable problems. It's going to speed up those job losses and we're going to see more product lines closed. That's not to say that manufacturing is going out of business. The changes are going to accelerate, but we're seeing many, many more companies now that may have had plans to increase production in the United States, or to outsource to China, doing so over a five-year period. They are making those investment decisions today, and they're making them on the basis that the dollar is probably going to remain very high. If the dollar looks like it's going to be significantly above 90¢, then that offshore movement of product is going to accelerate, particularly in the automotive sector and those fabricated metal sectors. Unfortunately, once that production leaves, it's not coming back.

[Garth Whyte]

I just want to comment. The tendency is to cluster it all into one issue and there's no other message, but there are different subsectors within there, large and small, indigenous versus international. The international subsectors will relocate their plants to Mexico. Well, there are a lot of guys in Alberta who have one plant feeding the Alberta sector right now, and they're doing okay and are going to grow.

So it's not just the dollar; it's also where the markets are, and it's also the whole package. If you're going to start a business, you're going to wonder, am I going to be taxed more and am I going to be regulated more? There's also the dollar. And where are interest rates going? Can I get people? It's the whole picture; it's not just one issue.

[Mark Holland, Liberal, Ajax—Pickering, ON]

One last question?

[The Chair, Conservative, James Rajotte]

I'm sorry, but we're about 30 seconds over, Mr. Holland.

We've got three members who want to ask three questions, so can I ask you, Mr. Carrie, Mr. McTeague, and Mr. Crête, to put your questions succinctly, and then we'll ask the witnesses to answer succinctly. Then you can make any final wrap-up comments.

[Colin Carrie, Conservative, Oshawa, ON]

I come from Oshawa, and that's exactly the situation there. We build the best quality cars in North America and we're still seeing a contraction of the facility. Here in Ontario we could have huge manufacturing job losses, but what can we do as a new government to allow or maybe help somebody who's a tradesman, for example, and who loses his job in Ontario, to relocate? Do you have any ideas that would help as far as human resources are concerned and moving the people we have here in Canada, who are already trained, into other areas of the country, and that would make that happen a little better?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Chair, thank you.

There is a concern that has been raised that volatility in our currency is inextricably linked to energy. The question is not so much, in my view, whether we have a dollar at parity with the U.S. dollar, but whether we continue to see these rises in energy prices. How are your associations, or the organizations you represent, prepared to combat that and to respond to it, rather than throwing up our hands and saying there's nothing we can do?

Second, in a $20 billion industry like pharmaceuticals, there is very little in the way of manufacturing. Can you explain to us how we can do a better job in those industries, from a regulatory point of view, to promote the manufacturing that we need desperately in this country, rather than the $6 billion trade deficit we see in pharmaceuticals?

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

In my riding, there was a 10 million dollar investment under Technology Partnerships Canada which was very successful for Premier Tech.

Mr. Stewart-Patterson also asked this question. There is international competition in certain sectors, namely in the aeronautics sector, where other countries systematically subsidize production.

Do you think a federal government industrial strategy should include a support program for industrial research which would of course be well managed and deliver results? Could this possibly be a tool in the government's arsenal which would allow it to adequately support industrial development?