Industry Committee on May 30th, 2007

[The Chair, Conservative, James Rajotte]

Good afternoon, ladies and gentlemen. This is the 64th meeting of the Standing Committee on Industry, Science and Technology. We are discussing here, pursuant to Standing Order 81(4), the main estimates for 2007-08.

I just want to remind members that under the orders they have before them, all of the main estimates are listed on the agenda and are referred to this committee, but the minister is here to answer the estimates and the votes under “Industry”, which are votes 1, 5, 10, L15, L20, 25, 30, 35, 40, 45, 50, 55, 60, all the way up to 95 under “Industry”. Those are the votes that the industry minister is responsible for, and I know members will limit their questions directly to those estimates in all forms.

We do have with us today a special guest. We have the Minister of Industry, the Hon. Maxime Bernier. Welcome, Minister. The minister is joined by two of his officials. He's joined by the Deputy Minister of Industry Canada, Mr. Richard Dicerni. Welcome, Mr. Dicerni. We have also visiting senior ADM, strategic policy sector, Mr. Ron Parker. Welcome, Mr. Parker, as well.

Welcome, Minister, back to the committee. You have about 10 minutes for an opening statement, and then we will go directly into questions from members. We have an hour allotted for your entire time, so we will go until about 4:45.

Do you have a point of order, Mr. Brison?

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, would the minister consent to an additional 30 minutes? I know there are a lot of questions here today, and I know the minister would like to provide fulsome answers to our questions. Would he consent to an additional 30 minutes?

[Maxime Bernier, Conservative, Minister of Industry]

As you know, I have a busy schedule, but I will consent to another 15 minutes.

[Scott Brison, Liberal, Kings—Hants, NS]

Okay. Thank you very much.

[An hon. member]

Hear, hear!

[The Chair, Conservative, James Rajotte]

Thank you, Minister, for being so agreeable. And thank you for showing up, Mr. Brison, by overdressing over him today. He's very jealous of this.

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

Anyway, Minister, you can begin at any time for your 10-minute opening statement.

[Maxime Bernier, Conservative, Beauce, QC]

Thank you, Mr. Chair.

It's very important for me to be here today. I'm pleased to be here with you. I'm pleased to be before the Standing Committee on Industry, Science and Technology. I'm happy to be here because it's all important, industry in Canada, and I know that it's important to you also.

As you said, I'm here with Richard Dicerni and Ron Parker. Richard is the deputy minister and Ron is the visiting assistant deputy minister.

Mr. Chairman, I am proud to say that my Department and other organizations that make up the portfolio, and for which I am accountable, have accomplished many significant achievements in the last number of months. It is these accomplishments and some future business that I would like to take the next ten minutes to talk about.

Recently I was pleased to join the Prime Minister and the finance minister to release our government's new science and technology strategy. Our strategy can be summed up in two words: excellence and commercialization. Our plan builds on Canada's research excellence, and it improves the ability of researchers and entrepreneurs to turn their ideas into innovative commercial products.

As most of you know, another major undertaking has been the work we've done on telecommunications. Our government telecommunication package includes varying a CRTC decision on access to an independent voice-over-Internet protocol; issuing a policy direction to the CRTC asking them to rely on market forces to the maximum extent possible rather than regulation; establishing the framework for the CRTC and the industry to work together to develop a consumer ombudsman; and, most significantly, varying the CRTC decision on forbearance to introduce true competition to Canada's local telephone markets.

As well, I introduced Bill C-41 to further protect consumers as the telecom regulatory framework moves to a more deregulated and market-based system.

In short, we have reformed the way in which our telecommunications are regulated in Canada, and I'm proud of the work we've done on this file to date.

In all areas of our economy, our government is strongly committed to improving competitiveness and prosperity. Last November we presented an ambitious long-term plan called Advantage Canada to create a positive economic climate. In March, with Budget 2007, we started implementing major elements of that plan. To create a positive economic climate, our government delivered on elements that will work for the economy as a whole.

In Budget 2007 our government increased the capital cost allowance rate on investments for manufacturing businesses. As you know, that was one of the major recommendations of your committee, and I thank you for this recommendation. I'm proud that we followed all the important recommendations in your report.

We also, as a government, reduced the federal debt while making substantial investments in education, research, and training programs, and we put more than $16 billion into infrastructure investments. These measures assist all industrial sectors as they are designed to drive our economy and make Canadian companies international leaders.

As you know, the Canadian aerospace and defence sector is an example of an industry that competes globally every day.

On April 2, we announced the launch of a new, transparent research and development initiative.

We came to office with a very significant piece of legislation—the government accountability bill. Accountability applies across government, as well as to Industry Canada, and specifically to a new program we have introduced, called the Strategic Aerospace and Defence Initiative.

This is a highly transparent program based on new criteria, and aimed at promoting research and accelerating innovation in the Canadian aerospace, defence, security and space industries. This program is expected to invest $900 million over the next five years into new projects. It will support strategic research and development, and new commercial products and services. It will result in significant spinoffs for industry, and it will be my job to ensure that those spinoffs are as positive as they can be and are linked to high technology.

While we've seen positives in the aerospace and defence sectors, the North American automobile sector is experiencing some challenges. Despite these challenges, the Canadian auto sector continues to attract billions of dollars in new investment and new product mandates. Last year, Ontario automobile plants produced more cars and trucks than any other auto-making region in North America. Canadian auto workers are consistently noted for the quality of the cars they make.

Another area we are watching closely is our forest products sector. Canada's forest products industry is an integral part of our nation's economy. Our government is working closely with the industry to enhance opportunities for this sector. We will help the industry grow offshore markets, promote value-added manufacturing, and help protect it from the growing threat of forest pests.

The manufacturing sector is also facing its own challenges. Although there have been job losses in this sector, as I was saying earlier, those job losses have been offset in many regions by strong job gains—jobs that are full-time and pay well. So far this year, close to 153,000 new jobs have been created in Canada. Our unemployment rate is 6.1 per cent, an historic 33-year low.

Yesterday, our government, along with Canadian manufacturers and exporters, responded in a very positive way to the recommendations made by your Committee on manufacturing. We are now taking action to help manufacturers. In Budget 2007, we came forward with measures to address the short-term priorities and long-term competitive needs of this industry sector.

Part of building a competitive and efficient economy is ensuring that goods and services can move to where there is demand. North-south trade, while vital to the Canadian economy, is not the only direction this government is looking at.

As a government, it is our goal to build a stronger Canadian economic union. I'm pleased to report the federal and provincial governments are working together on the removal of internal trade barriers. A key component of this plan is an agreement to implement full labour mobility within Canada by April 2009.

On going forward, Budget 2007 gave me the mandate to establish an independent expert panel to review Canada's competition policies. As the telecommunications policy review panel was helpful in setting a course for telecom reform, it is my hope that we will see the same types of constructive recommendations from the competition panel on how to improve the state of Canadian competitiveness.

We will soon have Bill C-47, the Olympic and Paralympic Marks Act, before this committee for your consideration. This bill will meet the Government of Canada's commitment to the International Olympic Committee to protect the Olympic and Paralympic brands. It is balanced legislation in line with what other countries have done and are doing when they host similar kinds of international sporting events.

Finally, Mr. Chairman, as an update, I'm pleased to say that Bill C-26, the payday loan legislation we introduced to help protect consumers, received royal assent on May 16. Already several provinces are passing their own consumer protection legislation to apply this exemption and regulate the payday loan industry.

Mr. Chairman, in closing, I'd like to thank the Committee for its diligent work these past months. I can assure Committee members that they will have my full cooperation.

I would now be very pleased to answer any questions you may have over the course of the next hour. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Minister, for your presentation.

We will now go to questions from members. The first round will be six minutes. I would hope that we'll keep our questions and answers brief.

We'll start with Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Thanks to the minister for appearing here today, along with the public servants.

Thank you very much for being here and for your generosity in spending some extra time. We know you're busy. I often did the same thing when I was a minister appearing before committee. We appreciate it.

Minister, on May 1 in question period, you said “we did not cut the CAP funding”, yet in 2006 the community access program was cut by $6 million, which is almost 25%.

In your estimates, in part I, it says “Industry Canada is anticipating a net decrease of $202.0 million in spending largely due to reductions” in funding. “Some of the most significant reductions include such items as: the Community Access Program”.

Don't you know your estimates, Minister?

[Maxime Bernier, Conservative, Beauce, QC]

Yes, and I'm pleased to report that

our government has pledged to work hard and provide new opportunities to all Canadians through that program. That is why we have extended it into 2007-08. We extended it because we have listened to what Canadians and parliamentarians representing all parties have said. This is an important program in remote areas that allows communities to access Internet. Therefore, I am very pleased to announce today that we have taken steps to ensure that this program will receive the necessary funding over the next fiscal year.

Our government has shown its commitment to this program by extending its funding. We are responding to the needs that are out there by providing funds for the coming year. I can assure you that current program recipients now know that funding is available, and will be in a position to sign contribution agreements with their partners.

As you know, government budgets are approved on an annual basis. For the time being, no decision has been made with respect to the funding of this program in future years. So, we're talking about guaranteed funding for fiscal 2007-08. As regards future years, we will be making a further assessment as part of next year's budget process.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Minister.

We'll get further clarification in terms of the amounts, but that is certainly a reversal from the position at the time of the budget. Thank you.

I have another question on broadband, which is particularly important for rural and small-town Canada. The capacity to compete in the 21st century is predicated on high-speed Internet. Why is there a $21 million cut in the broadband for rural and northern development program as part of your estimates?

[Maxime Bernier, Conservative, Beauce, QC]

There are a number of government initiatives in place which help rural and remote areas access broadband service. These initiatives are greatly appreciated by Canadians as a whole.

In 2002, we launched a pilot project to provide broadband service as part of a rural and northern development plan. That pilot, which relied on the participation of the private sector, local communities and municipalities, was aimed at helping communities access broadband service, where it was not currently available.

That program ended on March 31, 2007, and it was a success. Indeed, we helped more than 900 communities develop a broadband infrastructure. Approximately 2,000 Canadian communities still have very limited access to broadband. However, I can assure you that for the 900 communities that have been able to access this program in recent years, it has been a major success.

However, the program was clearly designed to be a pilot project. The Government of Canada has developed new complementary programs to facilitate access to broadband service. I am thinking here of a specific program which partly replaces the one that has now ended. The National Satellite Initiative is a project that was developed jointly by a number of federal government agencies, with a view to providing satellite capacity at an affordable price, so that broadband service can be made available to communities in remote areas and in the Far North. As a result of this initiative, people living in the Far North will now have access to broadband service.

[Scott Brison, Liberal, Kings—Hants, NS]

Minister, if it was a successful program, I'd suggest you should build it into a national broadband strategy, as recommended by the TPRP report in fact. If it was a successful pilot, it ought to become part of a national broadband strategy. That would be consistent with the TPRP recommendations.

On rural phone rates, Minister, on February 19 you told this committee that deregulation “will result in better prices and lower service costs”. That's not the case for rural and remote customers. In fact, the CRTC announcement on April 30 made it clear that rural customers would be paying more. In fact, the CRTC is going to be covering the higher costs of rural services through higher prices.

The Federal Communications Commission in the U.S. has undertaken measures to offset these costs in rural communities, in small-town communities. Will you be offsetting these costs with an explicit subsidy or some similar approach to the United States' Federal Communications Commission in order to cover the increased phone costs for rural Canada that have resulted from your deregulation of phone services?

[Maxime Bernier, Conservative, Beauce, QC]

The premise of your question is quite correct. As you stated, the Canadian Radio-Television and Telecommunications Commission, or CRTC, issued new rules on April 30, 2007. It is important to point out that these are not government rules. The CRTC brought in these new rules in order to regulate the rates being charged by large telephone companies for local telephone service.

That decision resulted in a system whereby prices are now capped. The CRTC has updated the former price cap system set up four years ago. The price cap method is a method of regulation designed to reproduce free market conditions. Finally, the CRTC has allowed telephone companies to increase their prices in rural areas, based on the Consumer Price Index and the annual inflation rate. So, the regulations have now been updated.

We want people living in remote areas, as well as those in large urban centres, to benefit from low cost telephone service. As a result of this ruling, costs remain very competitive in remote areas.

Having said that, I cannot make any further comment with respect to this CRTC ruling. As you know, under section 12 of the Telecommunications Act, the Governor in Council may amend or overturn a CRTC ruling. Groups have 90 days to appeal a decision to the Governor in Council. If there is an appeal, we will carry out the needed analysis and make a decision in this regard, at the appropriate time.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

We will go to Madame Brunelle, please.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good afternoon, Minister. I am very pleased to be meeting with you here for the first time. I would like to talk about the Quebec economy, which you are very familiar with.

We know, speaking in very general terms, that it is characterized by a large number of high-tech industries, on the one hand, and some low-tech industries, on the other. As regards the high-tech industries, competition from other industrialized countries is causing some major problems. Indeed, Canada is providing too little support, in my opinion, for research, development and innovation, unlike its competitors in other countries.

As regards the low-tech industries which, in many cases, are part of the manufacturing sector, the current situation is really quite discouraging. Some 130,000 jobs have been lost in the manufacturing sector. Two days ago, the Canadian Labour Congress organized a demonstration. People are realizing that the situation is absolutely catastrophic. These lost jobs affect the lives of many people and their families. As far as we are concerned, solutions have to be found.

It is unfortunate that since you came to office, 65,000 manufacturing jobs have been lost in Quebec. Since the beginning of the year, the situation has not improved. We are now talking about a loss of 10,000 jobs a month in Quebec in that particular sector. It's a disaster. You are fully aware of the situation; you know what is going on.

Does that mean your policy has been a complete failure and that you should simply acknowledge that fact? More generally, I would ask you this: when do you plan to implement a truly proactive industrial policy?

[Maxime Bernier, Conservative, Beauce, QC]

Thank you for those questions. My answer will address three specific points.

The first part of your question dealt with the Government of Canada's science and technology policy, which we announced several weeks ago. You are right that we need to promote science, technology and innovation in Canada. That is the reason why we launched a new strategy, which has been well received by the various stakeholders, both by entrepreneurs and by the research and academic communities.

That policy is now on a solid footing because we have set funding priorities for research in the environmental sector, which is important to all Canadians, in the health sector, in the natural resources sector and several others as well. Thus we have targeted research in Canada to ensure that it jibes with what Canadians want and with their priorities in the different industry sectors. We wanted to ensure that this basic research could continue to develop and be of practical use to entrepreneurs and business people in Canada. Our policy is intended to ensure that the research comes out of the labs and flows to the entrepreneurs' drafting tables, so that it can ultimately be translated into commercial products to be sold all across the planet.

So, we have launched this new policy and I can tell you that during the summer, we will continue our discussions with the stakeholders, and with entrepreneurs, to ensure that it is well understood, and that they are aware of our government's priorities.

With respect to the manufacturing sector, which you referred to in the second part of your question, I would first like to commend you, in the Bloc Québécois, for supporting our last budget, unlike the Liberal Party and the NDP, who did not support our budget. We have delivered the goods with respect to manufacturing, as a unanimous report was released here by all members—by the NDP, the Liberals and the Conservatives—with respect to the challenges the manufacturing sector is currently facing and some possible solutions. Those solutions were brought forward by this government in the last budget, and that is why I believe congratulations are in order. You acted on the basis of your convictions as a party, unlike some of our other colleagues.

Having said that, the policy being what it is, the important thing for us is to promote the manufacturing sector, and that is what we have done. One of the major recommendations the Committee made was for an accelerated capital cost allowance for new investments in equipment and production assets. We did that over a two-year period, as the Committee and the manufacturing industry had suggested.

Why is this an important measure? Because it allows the industry to amortize equipment over a shorter period and, thus, have better cash flow, thereby allowing companies to invest in and purchase modern equipment in order to remain competitive. As you know, that initiative has received very strong support from Perrin Beatty, who represents Canadian Manufacturers and Exporters. He told us that we are a government that listens to the manufacturing industry and takes the necessary action. So, this has meant that this industry will now be receiving the support it requires.

Is the manufacturing industry doing well in Canada? No. It is a fact that the manufacturing industry here is facing challenges. In your report, you identified one of those challenges, which is the very high Canadian dollar, which results in…

[The Chair, Conservative, James Rajotte]

Minister, I'm sorry, we're—

[Maxime Bernier, Conservative, Beauce, QC]

I will just end on this point.

[The Chair, Conservative, James Rajotte]

Yes, just briefly. We're over time.

[Maxime Bernier, Conservative, Beauce, QC]

I just want to say that the Canadian dollar has an impact on industry, and the best way to deal with it is to be sure that all of industry has some money in its pockets. Lowering the taxes as we did in the last budget will give more money to industry and entrepreneurs to allow them to invest in new equipment and be more productive.

Thank you.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go now to Mr. Van Kesteren.

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

Mr. Chair, I'll be sharing my time with Mr. Shipley.

Thank you, Minister, for appearing before us. I'm just reading in your introduction that you are planning to implement full labour mobility within Canada by April 2009. That's very encouraging. I commend you on your action, and I hope you are successful.

My question has to do with competitiveness. I think it's safe to say that the state of our nation's economy depends largely on our level of competition. In Budget 2007 you were given a mandate to create an expert panel on competitiveness that will make recommendations on how Canada can improve its competitive advantage globally.

Can you tell us why our government has placed such a high priority on fostering a competitive environment for Canadian companies to succeed?