Industry Committee on Jan. 29th, 2008

[The Chair, Conservative, James Rajotte]

You are out of time, unfortunately.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay, thank you.

[The Chair, Conservative, James Rajotte]

We'll go now to Mr. McTeague.

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

Mr. Chair, thank you, and witnesses, thank you for being here.

It's not the first time for most of you, but for those who are here for the first time, we welcome you. It is going to be very helpful to us in terms of providing a concrete report.

Many of us are concerned about what has happened in manufacturing. I'm wondering if any of you here could perhaps give us a more concrete example of the absorption of lost manufacturing jobs into your sectors. I realize it's a general question.

The second one that concerns me is, could you identify weaknesses within your own areas, within your own sectors, where you foresee the possibility of a replication of what we're seeing in manufacturing? It's great that we have this wonderful world—Mr. Marchi talked at great length about opportunities that exist internationally to export our service prowess—but at the same time there is a quid pro quo. Most of us understand, for instance, that one of the traditional service jobs that we recognized in the past, telecentres, has now been farmed out to the cheapest jurisdictions around the world. That's not to suggest that is a scary phenomenon, but in order to look critically at the service sector, we'd like to anticipate where there will be losses, if indeed those are going to take place in the future.

I leave this open to anyone to comment.

[David Stewart-Patterson]

From the point of view of where lost manufacturing jobs are going, there are two things you can look at. One is, we know they are being replaced, because we continue to look at unemployment rates that are at 30-year lows. So we know that people are getting re-employed; the more interesting question is, what they are being re-employed as.

The CIBC job quality index is an interesting indicator, because it gives some sense of where those jobs are coming from. Some of the higher-quality jobs are being created in the public sector, not just in the private sector.

There also seems to be a shift even within manufacturing. It's the lower-wage manufacturing jobs in general that seem to be dropping off. In some cases, there are higher-end sectors of manufacturing that are growing.

I think we are also seeing, even within manufacturing companies, a shift in the kinds of jobs. The automotive sector is an interesting example of that. In Ontario we are now seeing a building up of the research and design kind of employment within the auto sector, and not just of the assembly plants and the parts operation.

It's moving up the value chain that is important to Canada, and certainly something that public policy ought to encourage.

[Shirley-Ann George]

I think we have to recognize that while there's definitely a shift towards services, and there's definitely some re-employment happening for some individuals who are unfortunate enough to lose their jobs, it doesn't change the fact that for a single individual.... When people lose their jobs who had been making $80,000 or $90,000 doing some manufacturing job and are looking around and there's difficulty, it's incumbent on all of us to think through what we do to help these people make the adjustment more quickly and easily.

Where are our training programs? Some of these jobs that are being created in the services sector take a significant amount of skill. You don't just take a two-week course and go into an IBM lab and start developing software. What are we doing towards some of this extensive retraining that's needed? I think we need to be fair and open in recognizing that there is a need for this kind of investment as well.

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

Mr. Marchi, I want to point out that we have made several recommendations, in the context of manufacturing, with respect to retraining and temporary workers, etc., so we're on that. We just hope the government responds as soon as possible.

Mr. Marchi.

[Sergio Marchi]

I was simply going to add that I didn't try to make a perfect-case scenario. I tried to paint a picture that talked about huge potential gains.

But you're absolutely right. Trade in goods and trade in services obviously occur on a two-way street; that's what trade is. I think some of the problems we're seeing in some of the older parts of our more traditional economy are in part linked to the ebb and flow of the globalized marketplace. We can't just say in speeches that we're part of the global village and then not also talk about the ramifications, either positive or negative.

There are clearly going to be adjustments. It's clearly imperfect. Clearly, countries are going to be demanding of us to open up our service sectors, as we are asking them to do. There's no question that it's an imperfect world, but if you look at the last number of years and the movement towards services and ideas, it's obviously something we're doing quite well at and that should be reinforced, notwithstanding the imperfection of it.

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

I'm just hoping we don't have a sort of—I hate to use the term—Maginot line of defence that services can answer all the problems we're seeing with unemployment. I don't know whether Wood Gundy has had an opportunity to talk about this, other than predicting that gasoline will be $1.50 this month, which is of course incorrect.

That's my PSA for the moment, Mr. Chair.

I'm concerned that the two last reports on unemployment showed the last gain we had was really in the government services sector, which was then followed more recently by an actual drop in employment.

We also recognize the statistics relating to how EI is collected. Former Minister Marchi might know this better than most. After several months, the person who can't find work and hasn't been able to make the transition is in fact simply lost in the statistics. So the numbers may be greater out there. We're seeing it in our constituency offices and we know it's real.

I'm just hoping there is in all of the recommendations you've given to us an opportunity to put together a platform, an idea, that would allow us to make your industry successful, as it were, to weather the consequences of high unemployment.

[The Chair, Conservative, James Rajotte]

Madame Gagné.

[Brigitte Gagné]

The cooperative world has suffered losses in the manufacturing and agriculture sectors, and over the last couple of years, also in the forestry sector. As a result, there's been an increase in other hot sectors such as environment, the energy sector, and the health care services delivery sector. Things are now beginning to balance out.

In the coop world we're relying on the Cooperative Development Fund to help cooperatives develop their own ways and means of finding funding for and developing major projects, and so that they can make the necessary changes. There's also the Cooperative Investment System which enables workers to invest themselves and to get a tax credit.

These are two things we're currently working on.

[The Chair, Conservative, James Rajotte]

Merci.

Thank you, Mr. McTeague.

We'll go to Monsieur Arthur.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chairman.

Mr. Stewart-Patterson, I'd like the study to help me understand why the services sector in Canada is not successful at exporting as much as it could be. Even after all this study, I am still interested to know why we aren't reaching our full export potential.

In your presentation you referred to the trouble corporations are having maintaining or setting up headquarters in Canada. You spoke of company heads for whom it is easier to set up shop in the United States, for example. You spoke about the fiscal considerations and problems with border crossing.

Mr. Marchi told us that it may be far more difficult crossing the border to export services than to export manufacturing goods. Is it easier for a Canadian company or international company operating in Canada to export its managers and top staff than it is to export its services?

[David Stewart-Patterson]

I think people and services go together; services are delivered by people. They can be delivered long distance via communications and they can be delivered in person.

So when we talk about how do we expand Canada's exports of services, inevitably that means the movement of people. The ideas can move regardless, but movement of people is important. That's why I think I focused so much on the importance of the Canada-United States border.

After September 11, 2001, we saw the lineups of trucks, but the lineups of people were just as important. People movement is important, not just for the export of the high-end jobs I was talking about, for the head offices and the marketing trips by investment managers, and so on, but also for tourism in Canada—though you may not think of it this way—which is effectively an exported service. People come from other countries to buy our services here in Canada, and a lot of those tourists come from the United States. We're very worried about the new rules partly in place already, which are going to become more strict and make it more difficult for Americans to come to buy Canadian tourism services.

So these border issues are very important.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

In answering a question from Mr. Simard concerning the formation of manpower, you said that “you do whatever you have to do”, to quote you exactly. Are we far from the situation in the service industry, notably in the health sector, where in localities like Belleville in Ontario—I don't know of it elsewhere in Canada—you can go to universities, recruit bright students, pay them a salary for the remainder of their schooling, and then bring them home to work in their field for a certain number of years, because they have talent? Is this solution on the verge of becoming more universal in Canada?

[David Stewart-Patterson]

I think that approach has been used for many years. When I was in university it was a standard process for the armed forces. I served in the naval reserve and that was part of it. There was a trade-off. People who went to military college, generally speaking, had their education paid for, but they owed the armed forces four years of service. That gave the forces not only a minimal return on investment, but a chance to recruit that person over the longer term. So I think that kind of approach can be used in other areas.

On business investment, it's quite common for companies to pay their employees to take courses. At the management and executive MBA levels, those kinds of courses are quite common in large corporations. What I'm worried about on the training side is that smaller companies are not as well equipped to meet the needs of their employees as larger ones are. Large companies can develop the courses they need and deliver them internally on a cost-efficient basis. Smaller businesses don't have that capability internally.

Community colleges are doing a very good job working with businesses in their communities to develop courses appropriate to the needs of those communities, but I'm worried that we don't have the capacity we need as a community going forward to make sure small businesses can recruit the successors or employees they don't have right now and make sure they have the skills they need as their businesses evolve.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, sir.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Arthur.

I have a couple of wrap-up comments and questions.

I want to put Mr. Marchi on the spot, because he did reference the manufacturing report, and I certainly appreciate the comments.

We're more than halfway through our study on the services sector, but one of the things in actually drafting a report with recommendations is identifying some common challenges and then hopefully getting the committee to agree on some recommendations--unanimously or not. On the manufacturing report, we had skilled labour, the appreciating dollar, energy as an input cost, the challenge from emerging economies, and regulation.

You represent the services coalition, Mr. Marchi, and I understand there are issues with the border. You've highlighted issues with trade, and tax policy was highlighted by both you and Mr. Stewart-Patterson.

Starting from a challenge point of view, would skilled labour be one of the five challenges we've identified in manufacturing? On the appreciating dollar, frankly, we have not heard much mentioned with respect to the service sector. Would the appreciating dollar be mentioned or would that be a negligible factor?

[Sergio Marchi]

I certainly think that skilled labour would be an issue—training that labour and making training fluid. We listed those seven recommendations to try to strategically focus your attention on a number of areas.

An additional area that I think a number of us touched upon is the whole issue of internal trade barriers. When Mr. McTeague was talking about his questions—as well as other members of Parliament—if we visualize an increasingly liberalized world, our internal trade barriers become shackles to us to better compete in that liberalized world. Therefore, I think the whole issue of internal trade barriers as a potential dysfunction facing that liberalized world, and also internal trade barriers as a function of our competiveness, should be high on that list.

On the earlier line of questioning about a level playing field in how you treat companies and sectors, when you look at services internationally, because there's a great growth potential from the current 13%, what areas should we push in parts of the world geographically? It's not an attempt to pick winners or losers; it's an attempt to try to connect the dots much better with what we produce, who our competition is, and where those services ought to be going. So it's a matter of sharpening the trade and investment side internationally and linking it with the things we can do well and can do more of.

Those are certainly some issues.

You're pointing to the numbers.

[Shirley-Ann George]

I'm sorry, we desperately need better statistics on this industry.

[Sergio Marchi]

The question is how you measure services, and that's where I didn't get a chance to go into much detail, but in regard to the U.S. Coalition of Service Industries—we provided you with a copy of their report—it's amazing what they can gather in terms of information based on how their census is organized and how the service-related questions are asked. It's not an easy issue, because measuring a truckload of widgets going to Detroit from Windsor is one thing; how different services are provided across the border is something very different.

Again, I think how Statistics Canada looks at that new and growing service sector is absolutely crucial, because in that American report they were able to break it down state by state, congressional district by district, GDP sector and company, which provides not only a great wealth of information for the public sector leadership but also in terms of the private sector. So how we measure services is going to give governments and parliamentarians the kind of basic information they need to craft future policy and trade negotiating strategies around.

[The Chair, Conservative, James Rajotte]

I think the report also highlights the fact that you can't really silo manufacturing from services or any other sectors.

I'm out of time, but, Mr. Stewart-Patterson, you can make a 10-second comment.

[David Stewart-Patterson]

I have two quick comments.

One is that over the past few years I've watched people issues become more and more top-of-mind with our member chief executives at every meeting. We had an example of that just recently, in January. When the members of the competition policy review panel attended our meeting they were struck by the number of comments from the floor that focused on people issues.

On the final thing we talked about, things that matter that might generate consensus, I think you've already generated consensus around intellectual property issues. I think there are now two reports from two different committees that have done very useful work in that area—

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

Hear, hear!

[David Stewart-Patterson]

—and incorporating that by reference would certainly be a useful part of the puzzle in dealing with research and innovation.