Industry Committee on Feb. 5th, 2008

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. McTeague.

We'll go to Mr. Stanton, please.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Ms. McCready, that was actually a very good segue into my question. That's exactly where I wanted to head.

You advocate for updating of the tax credit for types of businesses outside of Canada, larger businesses, refundability, all those issues. However, when you look at the government's current share of R and D investment, we're already well above the average of the OECD. You look at a situation where the private sector is lagging behind in relative terms to where we're going, so how could a government be sure that an expansion of investment beyond the $3 billion currently invested each year is going to stimulate and lever the extra share being sought from the private sector?

[Cate McCready]

One of the things I hark back to is that our particular sector actually is contributing in excess of 12% to the overall business expenditure on research and development in this country. So for us as a small technology group like us compared to some of our colleagues at the table, we are pretty active in terms of that investment dynamic for the country--as, I would suggest to you, writ large, are companies that have established products in the global marketplace.

Nobody is trying to suggest that one aspect of a SR and ED change will change the dynamic overall, but it's a slice in a series of opportunities for an integrated system of an investment climate that this country needs to look at. I look at countries like Indonesia, for instance, which is putting in $50 billion biotech strategies. I look at a nation like India, which has established a ministry of biotechnology. When we see South American companies making investments in the tens of billions of dollars in this technology, if they get it, why don't we?

Again, it's slices of opportunity and building for a bigger picture.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

I don't want to let this opportunity go by. To our friend from the OECD, with regard to the work you do in looking at models of what lies ahead for the member countries, I wonder if you could shed a little light on what you see ahead for Canada in terms of its current economy and the struggles it's going to face in the near term.

[Dirk Pilat]

It's difficult for me to comment on all aspects of the Canadian economy, because I'm not responsible for that part, but as far as science innovation issues go, I think there is a lot to be done in Canada, like in many OECD countries. In general, many countries are currently struggling with what they can do about innovation in services, so you're not alone in that. This is an issue we see everywhere.

I think the other issue we see everywhere at the moment is the whole issue of knowing a lot about how we can get more supply of R and D, how we can get more science and technology coming from the supply side, but not knowing much about commercialization and how we do that properly, how we can create markets for innovation, how we can get more involved in innovation. And I think that's where some of the real tensions are at the moment, where some of the real questions are.

A third area, I think, is how you deal with the globalization of innovation, how you deal with the fact that China is now becoming one of the largest economies in the world, not only in terms of the economy but even in terms of science and innovation. How do you adjust to that, and how do you find your own niche in that global economy? I think that's the struggle we're all having.

The fourth one, of course, is human resources. I think you discussed this in quite some detail already, but this is an issue that is common across most OECD countries. Everybody is dealing with this. We have an aging society. We have people dropping out of the marketplace and not a lot of people coming through the system in terms of creating human resources, so it's a problem we all have. I think we're trying to help with our work to try to see how we can deal with it, but there are no easy solutions to any of this.

[The Chair, Conservative, James Rajotte]

Thirty seconds, Mr. Stanton.

[Bruce Stanton, Conservative, Simcoe North, ON]

If I could summarize, what I've heard from you as well as the representatives from BIOTECanada is that we really need to look beyond the 30 member countries to see what's going on outside that realm, and that's a more accurate picture of where Canada fits into that global environment.

Do I have that right? Your comment about having to feed into a chain of order or being part of a system was interesting. Its exactly where we seem to go, just as manufacturing is part of a global supply chain.... The chair is trying to cut me off.

[The Chair, Conservative, James Rajotte]

It's a wonderful final comment.

We do have a motion, members. That's why we're trying to end early tonight.

As the chair, I wanted to thank all of you for your presentations, for your session here today.

I know this issue has been touched upon, but I wanted to wrap up with this, with the issue of productivity and innovation.

Mr. Pilat, on page 3 in your presentation you talk about productivity growth and the relationship between the services sector and productivity. The committee was told earlier that the growth in productivity in the services sector has been better relative to other sectors, so there's been more productivity growth in the services sector than in other sectors, but you talk about the services sector making a small contribution to productivity growth in several OECD countries. If you wanted to wrap up, you could talk about the relationship between productivity innovation and the services sector and some things we could do better in that sector to improve productivity?

[Dirk Pilat]

I think what we have seen in the past decade is that a few countries in the OECD, in particular Australia and the United States, have seen a surge of productivity growth in the services sector. Canada hasn't been doing too badly there, but probably not as well as the U.S. and some other countries.

I think a lot of that comes from more innovation in the services sector, new products, new ways of delivering services. A lot of it has to do with how we are using information technology to our benefit. And I think what we still see in many European countries is that we haven't seen that dynamism from the services sector. Canada is probably halfway there, in between what has happened in the U.S. and Australia and what is happening in Europe. You're probably more dynamic than many European countries in the services sector but not quite as dynamic as you probably could be--a brief summary.

[The Chair, Conservative, James Rajotte]

Thank you.

Does anyone else want to offer a final comment? Could we be doing better on the productivity side?

[Barry Gander]

I would just stress the importance of productivity in the service sector area. Because it's such a chunk of our economy, in order to get our productivity up to the growth rate of the ICT industry of about 7% or 8%, you'd have to increase service sector productivity by about 12%. To do that in the manufacturing sector, you'd have to increase productivity by 50%, which is a pretty tall order.

So this committee is definitely focusing on the right area, the service sector and, certainly, supply chains. I could go into what members like Xerox are doing, and nanotechnology, and the whole thing--

[The Chair, Conservative, James Rajotte]

Well, thank you very much.

I want to thank you all for being here.

Mr. Pilat, I want to thank you very much for joining us by video conference.

If any of you have anything further to submit to the committee, please do so. We will ensure it goes into our final report.

Members, we will suspend for about two to three minutes, and then we will go on to Madame Brunelle's motion. Thank you.

[The Chair, Conservative, James Rajotte]

I call the meeting to order, please.

We will now move to the motion by Madame Brunelle. I don't think we need her to read it into the record, as it's already been read into the record.

Madame Brunelle, we'll start with you.

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

Mr. Chairman, I would simply like to remind everyone that we were supposed to await the decision of the finance committee, where a similar motion was tabled, before coming back to this one. Yesterday, the motion was voted down by the finance committee, which explains why I am bringing up this motion today.

In my opinion, it is entirely appropriate that the committee adopt this motion, since it did look into the major crisis affecting the forestry and manufacturing sectors. The motion calls for the government to implement an assistance plan for the industry, to allocate funding to Technology Partnerships Canada and to provide reimbursable contributions to companies. This motion ties is perfectly with the report that was unanimously endorsed by the committee. Therefore, I would encourage committee members to back this motion. In so doing, we would be able to continue this debate in the House and help the manufacturing and forestry sectors. Our assistance would certainly be greatly appreciated by stakeholders in these sectors.

[The Chair, Conservative, James Rajotte]

Merci , Madame Brunelle.

Would anyone else like to address this?

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

We won't be supporting this motion. If you look at what it's asking for, the Liberals would be cancelling the Technology Partnerships Canada program announced in 2005, even though it still exists to pay out obligations. There were severe issues with that program.

And some of the other things they're asking for could jeopardize our international trade agreements.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie.

I have Ms. McDonough.

[Alexa McDonough, NDP, Halifax, NS]

I want to speak in support of the motion.

I think we all know there have been horrendous job losses in both manufacturing and forestry. While it appears as though the government is moving to respond in a somewhat more appropriate and timely way, we know that the proposal now coming before the House is one that is very, very inadequate in light of the massive impact of the job losses.

I think this goes a step in the right direction of a strong recommendation for more resources to meet this truly national crisis in terms of job losses.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Mr. Stanton next.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

We've heard over the course of the last few months how reserved the government has to be in these kinds of interventions, in allowing public dollars. It's not to say that they can't be made, but when a government chooses to make particularly these kinds of monetary weighty interventions to bolster the economy, we've heard testimony going back several meetings now about how that is in fact 180 degrees away from the right kind of economic policy.

We recognize, as my honourable colleague has in fact just mentioned, that the government has forged ahead with the community development fund for specific industries, particularly in one-industry communities, to help them—and we don't know what the outcomes might be—to recognize that there needs to be some transition when you have potential economic softening such as we've seen.

But the fact is that the best approach, the approach that has stood the test of time, particularly since the eighties, has been to make sure that good, sound economic policies are practised in a broader sphere, not to try to.... You recognize that there will be adjustments. I think we heard not too long ago that things will continue to come our way that happen in the global economic framework and that will impact here at home. The very best way we can protect ourselves against that impact is by good, sound macro-economic policies and a dynamic competitive environment, but not to the point where we're using public dollars to try to stop-gap what we know is going to involve these kinds of adjustments. There will be some job losses, and nobody likes that situation, but we continue to hear that this is going to be the reality we as a country will deal with from time to time and sector by sector.

What we have to look at is how we make sure that there will be opportunities coming forward and that investment will continue to be vibrant in Canada. That kind of investment is going to provide good-paying jobs in a knowledge industry, in industries that in fact can give to families the kind of income they need to improve their lot in life and carry on and bolster our economy.

It seems to me, Mr. Chair, that this is in fact the course Canada set out several years ago, and that we need to continue to keep it as our focus and resist the urge, as politically expedient as it might be, to get too top-heavy with our monetary interventions this way.

So I argue against the motion, recognizing that we've already committed to a part of it. The community development fund is very specific, and I hope it will enjoy broad party support in the House. But I think that initiative on its own is a good and sensible approach that will get us where we need to go, and that we do not need this motion.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Mr. Brison, Mr. Carrie, and Monsieur Arthur.

Mr. Brison.

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

Thank you, Mr. Chair. I have a couple of points.

First, to Mr. Carrie's point that the Liberals have cancelled Technology Partnerships Canada, in fact it was David Emerson, who was, I believe, if memory serves me correctly, a Liberal member of cabinet at the time, who did not cancel but in fact introduced a new program, repositioned it, changed the criteria and name, and the rest. It wasn't exactly the same as cancelling it.

In terms of the intent of the motion, we share with the Bloc a view that important investments in manufacturing competitiveness, forestry, and industries in distress are critically important now. We mourn the cancellation of the $1.5 billion forestry fund that our government had introduced prior to the last election. The Liberals introduced that, a $1.5 billion program. The Conservatives waited two years to introduce a $1 billion program that is less focused, two years later, so we mourn that.

So we agree with the intent. Our concern, Madame Brunelle, is with the specific numbers.

I've talked with both our finance critic and people in our economic group, and one of the reasons was the specific numbers. So we support the intent and would consider support of a motion that is less granular in terms of numbers, because we have to fit this into a fiscal envelope that is defendable.

One of the challenges we have right now--and in fact there were some articles in Report on Business today--is that with the GST cut taking $14 billion per year out of the federal treasury, the numbers are tightening. We have to be responsible both in opposition and in government that what we do offer is absolutely solid in terms of not taking the country back into deficit.

That's our concern, around the specific numbers. We support the intent and would consider support of a proposal with the same intent but less specific in terms of the numbers.

[The Chair, Conservative, James Rajotte]

Do you have an amendment, Mr. Brison?

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

I would ask the Bloc. I assume Madame Brunelle would want to respond to that first.

[The Chair, Conservative, James Rajotte]

Okay. I have Mr. Carrie, Monsieur Arthur, Mr. Van Kesteren, and then Madame Brunelle.

Mr. Carrie.