Industry Committee on May 30th, 2007

[Maxime Bernier, Conservative, Beauce, QC]

Thank you for your question.

The reason we did that is that our government listened to Canadians and entrepreneurs. What the entrepreneurs told us was that they have too much government in their pockets and too much government on their backs.

What we did was lower taxes for our businesses. We're also going to work on the regulatory framework in this country to be sure that when we have regulation, if it's needed, we'll have efficient regulation or smart regulation. We're working on that.

I think that's important for the competitiveness of our businesses. If they have more money in their pockets, they're going to be able to invest this money in better equipment and be able to compete and create jobs and wealth in this country.

As you know, we as politicians don't create jobs and we don't create wealth in this country. It's the entrepreneurs who create jobs. Bureaucrats also don't create jobs. What we can do to be sure we have job creation in this country is put forward the best environment for businesses, and that's what we did in the last budget.

For this reason, I want to thank the committee for what you did. You listened to manufacturers when they were here and you made a very good report, and we as government, I can assure you, are following your recommendations. Most of the recommendations have been adopted by our government, and we're working on some of them. It was a very important step, and I want to congratulate all colleagues at the table for this very important report.

On the other point you asked about, concerning the competition panel, as you know, there was a commitment in our budget. We said in the budget that the competition policies in this country have an impact on the growth of entrepreneurs and the creation of wealth in the country. We want to be sure that all policies this government has in place will favour competition; we believe it's important to have competition.

As you know, the definition of competition is very simple: business must be able to compete in a market and compete for a market. We want to be sure we won't have any policies that will work against that. We want to be sure that the framework and all the policies we adopt as a government will be good for businesses and will help them compete for a certain market.

It's an important decision that we have taken. I can let you know that this panel will be settled as soon as possible. They're going to have to give their recommendations before the next budget, and as soon as we receive the recommendations they will be public. We'll have a debate, and I will study all their recommendations. We may have recommendations on foreign ownership, on competition legislation, competition policy, and on a lot of subjects that may involve a threat to competition.

This panel, I can assure you, will have hearings all across the country. Our goal is to have the same kind of panel as we put in place in the telecom forum. As you know, I received a report from a telecom expert panel and acted on it. I want to have the same kind of panel. They'll hold hearings, and they're going to have an independent secretariat. They're going to listen, and after that they'll give a report to the government. This report will be public. You will have time in this committee to hold some hearings on it if you want, and after that the government will act. We want to be sure this government has the best policies to foster the competitiveness of our enterprise in this country.

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

I'm going to continue.

How much time do I have?

[The Chair, Conservative, James Rajotte]

Three seconds.

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

That more or less wraps up what we've been saying. Concerning the report, which we spent a considerable amount of time with, first of all, the areas you moved in obviously went right across the country, and we see that now there's going to be some cooperation between the provinces. I can take it, then, that as a result of our report you've taken many of our recommendations and are putting them to work.

[Maxime Bernier, Conservative, Beauce, QC]

Yes, I think you're right.

The report you did was very serious and efficient for us as a government. I did a press conference yesterday with Perrin Beatty and the manufacturers and other associations, who said it was a very good report. It's your work, as a committee, and you can be proud of that, because all of industry is behind your report, and also the government. It's an example of how we can work in this committee very efficiently, so I want to thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

We'll go to Mr. Masse, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chairman.

Thank you, Mr. Minister, for appearing here today.

With regard to recommendation 1 of the report the committee reported to you, the capital cost reduction allowance, the recommendation was five years plus a five-year renewal pending an investigation. Why are you only doing two years?

[Maxime Bernier, Conservative, Beauce, QC]

As a government, we have decided to give businesses an opportunity to amortize their new investments in equipment and machinery over a two-year period; you are absolutely right. The cost of that measure is nevertheless quite high: $1.3 billion over three years. We want to see what kind of impact it has over the medium term. Entrepreneurs and business people have commended us on this new measure. Why? Because by amortizing their equipment as a result of this new initiative, they will now be in a position to purchase new equipment.

There has been a lot of discussion about the rise in the Canadian dollar. That is having quite an impact, one that can have negative repercussions for Canadian businesses. However, there is also a positive side to a strong Canadian dollar. Entrepreneurs buying new equipment in order to be more productive often look overseas or to other countries for that purpose. The strength of the Canadian dollar now means they can acquire that equipment at a better price. So, that is one of the upsides to a high Canadian dollar that is sometimes forgotten.

[Brian Masse, NDP, Windsor West, ON]

I understand that, Mr. Minister, but my question asked why you chose two years as opposed to five years. Is it a cost factor? Is it an ideological factor? I'm asking the reason for bringing it to two years from five years, and what analysis was done in terms of the impact on the industry? It's as simple as that.

I understand the value of it. We all debated that. I'm asking why you chose a different path to what we recommended.

[Maxime Bernier, Conservative, Beauce, QC]

We decided on a two-year period for a fairly obvious reason. As you just stated in your question, the cost of this measure is $1.3 billion. This is a first in Canada, and we want to ensure that it has the desired effects.

As you know, in every budget cycle, and for every budget the Minister of Finance prepares, consultations are always held. I can tell you that the Minister of Finance and the government will sit down, at the end of the two-year period, and listen to what the manufacturing industry has to say, what its recommendations are and all of that will be considered as part of the next budget.

However, what is important is that in relation to G-8 countries, Canada is now, as a result of this initiative, the country with the lowest tax rate on investment in business equipment and machinery. That will attract investment to Canada, and at the same time, we will not be discouraging entrepreneurs from investing in new equipment and machinery in order to become more productive. Our tax rate in that regard is the lowest of all the G-8 countries. That is something we can be proud of. I should also say that this low rate, this new tax measure, will mean that entrepreneurs will be investing more and more in equipment, and will be increasingly productive as a result.

As to your question about why we chose a two-year period, I already answered that. There was a question of cost, but once the two-year period has ended, we will be very open to discussing it with manufacturers. Indeed, there is ongoing communication with various groups in society when a budget is being prepared.

[Brian Masse, NDP, Windsor West, ON]

With regard to the auto industry and the introduction of your government's decision for a feebates policy, rebating automotives, I'm wondering about the consultations with your department and also how you're going to deal with the situation.

General Motors, for example, estimates that a $47 million benefit will go to Toyota from this plan, mostly because of the Yaris, which is not produced here in North America; it's produced overseas. They're going to have an immediate swing of $47 million into their operations. The argument that's coming from the big three as they go through transition at this point in time is that it will allow Toyota and other companies to use that to compete against even some of their high-gas-usage vehicles at the expense of themselves.

What is your department going to do, or what do you have in place structurally to follow the feebate program and its impacts on the economy? You claim to be a free market person, but this is a direct intervention right out of the blue with very little consultation. What is your next stage and plan to deal with how this program is rolled out and its impact on the Canadian manufacturing sector in automobiles?

[Maxime Bernier, Conservative, Beauce, QC]

To answer your question, I would first like to give you the context associated with that new program, Mr. Chairman. That program was developed following consultations with industry. I have the privilege of sitting on an industry committee with colleagues from CAPC, on which the entire automobile industry is represented. All the major auto industry players in Ontario are there, as well as my colleague from the government of Ontario. Even the unions are part of that forum. The purpose of that forum is to discuss priorities or challenges facing the auto industry.

Participants in that forum have expressed a number of their concerns to us. One of them was the fact that the movement of automotive products between Canada and the United States is currently not as efficient as it might be, because of congestion on the bridge between Windsor and Detroit. As I said earlier, we have earmarked more than $16 billion over the next several years to resolving that problem. That will have a very positive impact on the auto industry as a whole, since the movement of goods and services between Canada and the United States will be more effective.

[Brian Masse, NDP, Windsor West, ON]

That's if the factory is left to ship them there.

[Maxime Bernier, Conservative, Beauce, QC]

That is something they raised with us. They also talked about the last program. The last time, they also spoke of the rebate program. That program is based on standards. It was developed in cooperation with the Minister of Transport and the Minister of Finance, in consultation with myself. It is regularly evaluated and updated. Consultations are currently underway between the auto industry and the Minister of Transport to ensure that the program will be up to date when the first new 2008 model year vehicles come onto the market. As the Minister of Finance has said, we are open to discussions. We are currently in discussion with the auto industry to ensure that upcoming models can be considered as this program is rolled out.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Masse.

We'll go to Mr. McTeague.

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

Thank you for being with us today, Minister. Allow me to thank you kindly for offering to give us 15 seconds. I will be sharing my time, so that Mr. Boshcoff can ask you a question at the end, but before he does that, I have three of my own for you. Perhaps you could then answer all four questions at the same time, if you don't mind.

Minister, in your forbearance ruling you suggested--and I think you also said this in the House--that only the largest and biggest communities would be affected, or there would be deregulation when there was a competitor presence in many of those areas. We now learn that as of the beginning of May, well over 60 communities, many of them smaller than 2,000 to 3,000 in population, i.e. rural Canada, have seen applications by the incumbents for forbearance. I'd like you to explain how your policy now works. We're clearly going beyond the big cities into small cities, in effect snuffing out small competition.

The current range of people who may be part of your expert panel on competitiveness includes members of the industry who have had a stake in the past in managing the Competition Act, like George Addy, and people who are with the oil industry, like Mr. Gwyn Morgan. I'm wondering if you have a concern about whether or not such a panel that you're putting together would have the benefit of being transparent and independent from industry.

We know that the current Competition Act was written by lawyers representing large oil companies. We also know that this committee has done a lot of work on the issue of competition policy in the past, has made several recommendations and has watered down a lot of controversial ones. I'm wondering if you'll take those up.

On the subject of copyright, you are very proud that you have implemented some of the recommendations of this committee. We have 21 others out of the 22 that we'd like you to look at when you have a moment. I don't think having one of 22 is something to be very boastful of, but it's a good start, given that there has been consensus by this committee.

What is your recommendation, and how soon will you implement the recommendation dealing with copyright legislation to make sure those who are pirating and stealing intellectual property of our goods are prosecuted?

I'll go to Mr. Boshcoff for his one question. Then we'll have the minister respond, if that's okay with you.

[The Chair, Conservative, James Rajotte]

Okay.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

In 2005, the Liberal government increased the annual funding for the FedNor program to $51.5 million. You'll see it on page 16.7. In August 2006, Minister Clement announced a cut in the annual funding of $6.4 million. The funding level for FedNor is much lower than it has been in the past five years, despite the economic challenges in northern Ontario.

Can the minister explain why the FedNor budget was cut so drastically in 2006-07, in spite of the surplus it inherited, and will he restore it to the $51.5 million?

[Maxime Bernier, Conservative, Beauce, QC]

Thank you.

With respect to the first part of your question regarding the deregulation of telecommunications in the major urban centres, that process is now being managed by the CRTC.

In the forbearance ruling, as a government, we set some objective and simple criteria for the CRTC to apply. And the CRTC will be applying those criteria when a traditional phone company, such as Bell or Telus, comes forward with an application to deregulate services in a given urban centre. The criteria are that there must be competition and that the quality of service has to be maintained.

The CRTC has three months to carry out it analysis—or possibly four; I will be providing additional clarification in that regard subsequently. Following that analysis, deregulation is automatic, if the criteria are met. So, I expect people living in major urban centres, such as Montreal, Toronto, Vancouver or Halifax, to benefit from deregulation—in other words, from better offers and better prices—and that deregulation will be truly effective.

I cannot tell you when all of Canada will be deregulated, but we do expect the impact of this new policy to be felt within months. Consumers will then benefit from better products and better prices, something which is healthy for the economy as a whole.

As regards the expert panel on competition that we intend to create, I want to thank you for the names that you have suggested. I have noted them, because we are now at the point where we need to find competent individuals to be part of that expert panel. We are looking for people who are independent. As I mentioned a little earlier, their mandate will, to some extent, reflect the model used for the expert panel on telecommunications, and it will be very transparent.

I expect that expert panel to be able to put questions directly to Canadians and hear their answers, hold public hearings and, finally, carry out its work. They will be supported by the experts they have selected. This is important work that we are asking of the panel and it will not be limited only to the Competition Act; it's important to state that. There may be other statutes, other policies or other government orders that inhibit competition here in Canada, and it will be the job of that expert panel to make that known to us.

With respect to copyright, I am currently working in close cooperation with Bev Oda . We are preparing legislation to ensure that Canada can meet its international obligation to protect against infringement of copyright. Indeed, I believe it was announced this morning that the Minister of Justice will soon be tabling a bill regarding film piracy.

In some areas of the country, people now go to see movies, record them and make them available over the Internet or sell them. When we table a bill this week or next, we will be attempting to ensure that this kind of action becomes a criminal offence under the Criminal Code. We are very serious about wanting to combat forgery. In addition, there will likely be other measures brought forward through that bill on copyright which I am currently working on with Ms. Oda.

Thank you for that question, which gave me an opportunity to provide you with an update.

[The Chair, Conservative, James Rajotte]

Mr. Minister, just on the FedNor question, FedNor is technically Minister Clement's responsibility. If you or your officials would like to address that....

Would you address Mr. Boshcoff's question?

[Richard Dicerni, Deputy Minister, Department of Industry]

I would like to ask Kevin Lindsey, who is our chief financial officer, to speak to the estimates matter.

[Kevin Lindsey, Chief Financial Officer, Department of Industry]

Sir, I believe you referred to the historical level of $57 million for FedNor funding. In fact, the estimates for 2007-08 do reflect approximately $57 million for FedNor: $20 million allocated to the community futures program, which is the historical level, and about $37.2 million for the core FedNor program, which is about $2 million, actually, that was allocated in 2006-07.

[The Chair, Conservative, James Rajotte]

We'll now to go Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

I'd like to ask one question and my colleague would like to ask one.

Mr. Minister, thank you for being here.

The question I'd like to ask you is about manufacturing. As you know, I come from Oshawa, and we had some great news today. J.D. Power and Associates again awarded the Oshawa plant number one and two for quality in North America. That was some really good news. Again, it was announced today that in mean family income in Canada, Oshawa was number two. So there's a lot of good things happening in Oshawa.

However, there are some challenges too. That's why I was so proud this past year that the committee got out and studied Canada's manufacturing sector. We put together a comprehensive but very relevant report on the challenges it faces, and I want to thank you very much for your kind remarks at the beginning of your speech.

At the press conference yesterday, something struck me, and it was praise for our government from CME's Perrin Beatty. I quote:

What's important today is that for many years the M-word wouldn't be uttered by politicians or bureaucrats. There was a sense that manufacturing was passé, but we have now brought manufacturing back to the agenda.

For many years, manufacturing was neglected, and that kind of leads us to where we are today.

I'd like to correct my colleague across the way. There was not one positive response, but we had 21 out of 22 recommendations...positive responses. Could you let us know what the government's response to a report means for workers in my riding of Oshawa?

Then there's another question from my colleague.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Minister. I also want to thank you for taking the time to come.

I'll get right to my point. I think all of us here would want to applaud the science and technology file, where we have moved, and the manufacturing report that has come forward. I do want to touch on the illustration that has happened through science and technology.

One, can you please expand on our government's vision? The first part is the vision for science and technology.

Second, what is our government doing in terms of support? We have a vision; now we want to support the research and development in Canada. What are we doing? Could you expand on that a little?

Third, I think all of us agree that competitiveness and prosperity is not only our government's focus but it's also the economy. It's sort of the engine of the country. That's what hires people, that's what employs people, that's what keeps the engine going. How will our strategy for science and technology fit with that goal?

Those are three small components.