Finance Committee on Nov. 21st, 2007

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you very much.

To you, Mr. Mallett, I was surprised by the numbers. Part of the reason we agreed to move forward with this investigation or this review, if you will, of the Canadian dollar is the work that you did. I'm always impressed with the fact that CFIB takes the time to make sure that they're hearing what their members are saying. I'm quite shocked to see how many sectors actually either prefer a high dollar or have no preference either way. I know that it's definitely an impact. I don't know whether you were surprised or not, but I'd like to get some further comments from you.

I know that it's in a graph or in a chart that you've given to everybody, at least to everyone around the table, and it's quite shocking to see how few of the industries--at least from their perspective--are actually directly impacted, or are not impacted at all, by the dollar.

[Ted Mallett]

What's interesting is that we conducted a survey on trade in 2003-04--this relates to my earlier discussion about 50% being directly or indirectly affected by trade issues and the other 50% not--and those numbers are reflected in our other surveys that show whether members would like to see a higher or lower dollar.

To some degree I'm a little surprised, but I'm never surprised when we keep getting consistent results. We're getting results of 8,000 small and mid-sized business owners every year on this issue, and we've been surveying on it for six years now. So these are pretty robust perspectives.

I think what we see is that certainly bad news travels faster and is heard more effectively than good news.

[Rick Dykstra, Conservative, St. Catharines, ON]

That's a great quote, Mr. Mallett, a great quote.

[Ted Mallett]

Thank you.

On the issue of those benefiting, sometimes you benefit but it's much more diffuse. You benefit in much smaller chunks than the harm, and that's what I think we're finding. There is real hurt in the manufacturing sector. There is real benefit in other areas of the economy. And that is part of it; I mean, that's why we're here.

[Rick Dykstra, Conservative, St. Catharines, ON]

I'm going to turn the mic over to my colleague, but one thing I did want to note just as a follow-up to that is despite the gloom and doom from across the row here from the opposition, full-time employment plans and expectations are certainly very positive from a small business perspective across this country.

Thank you.

[Ted Mallett]

Those are our September numbers. I believe we've seen good results.

[The Chair, Conservative, Rob Merrifield]

Mr. Wallace, go ahead.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair. I'll be very quick. I only have a half a minute anyway.

On the chart that my colleague was talking about in terms of the percentages, can you provide me or the rest of us with what the raw numbers are? If you only have three members who are in the agriculture business, just to use an example, it isn't much. Could you provide me the breakdown of where those numbers come from in terms of what the actual--

[Ted Mallett]

Our membership is highly representative of the economy itself. So manufacturing is approximately 10% to 12% of our membership; construction, about 10% to 15%; retail is approximately 25% of the membership; and agriculture, around 6%.

[Mike Wallace, Conservative, Burlington, ON]

I might give you my card, and if you can send that to me afterwards, I would appreciate that.

[Ted Mallett]

We can do that. Sure.

[Mike Wallace, Conservative, Burlington, ON]

My other comment is that I think it's been clear, we've had two days--

[The Chair, Conservative, Rob Merrifield]

If we could all have that information, that would be great.

[Mike Wallace, Conservative, Burlington, ON]

Yes.

It's been clear from the vast majority of people we spoke to in the last two days that the expectation that the Government of Canada will get involved with the Bank of Canada and make them change interest rates is none of our business; it's up to the Bank of Canada to make those decisions. There has been some discussion, and I quoted the former finance minister, who was a Liberal, in an article in the 20/20 magazine, the Canadian Manufacturers and Exporters magazine, which I know you're familiar with. He is saying in that magazine that it's mostly about productivity, and that if we really want to make some progress as a country, productivity is an issue.

I would appreciate any comment that the honourable Mr. Beatty would like to make on that.

[Perrin Beatty]

Mr. Chair, I strongly agree about the ability of the Bank of Canada to affect interest rates when the underlying pressures that we're dealing with--dramatic escalation in terms of commodity prices, particularly in the energy field, and the weakness of the American dollar--put very strong upward pressure on the Canadian dollar. My colleagues have talked as well about the mixed impacts there are in the economy. The fundamental question we should be asking ourselves is where should we be looking for action?

The Bank of Canada has relatively restricted room to manoeuvre on this, because the pressures are largely external. The real issue now is for governments and for business alike to make sure that we have our house in order, and to focus with laser-like precision on the whole issue of competitiveness. Governments, both federal and provincial, can take action now that can help to ensure that all businesses across Canada can be more competitive. Businesses themselves have to reinvest in capital and equipment. They have to reinvest in upgrading the skills of their workers. They have to develop new business plans, unconventional partnerships, and do a whole range of other things. But we need to have a sense of urgency on that.

To the extent to which the focus is on the Bank of Canada, I think we're diverting our attention from the fundamental issue, which is the productivity in Canada and the underlying competitiveness of us relative to our trading partners.

[The Chair, Conservative, Rob Merrifield]

That's it, time is up.

Ms. Nash, you have four minutes. Go ahead.

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

Mr. Laliberté, what kind of measures would truly and effectively help the manufacturing sector: across-the-board tax cuts or tax measures targeting those sectors currently experiencing problems?

[Pierre Laliberté]

In fact, we are already rather competitive in the area of taxation. There used to be a slight difference in the area of the taxation of capital, but the gap is gradually narrowing. If the government is to provide support, it must be targeted. Without being a producer as such, the government, to my mind, must become an industry facilitator. We need this kind of support. In the real world, in other countries, this is exactly what is happening. Nowadays, no major industry has any hope of expanding without the government in office providing ongoing support and buying the product that is being produced. This may break some of the basic rules of the economy, but this is the hard truth. We are not talking here about a theoretical model where all problems resolve themselves.

A concerted effort would be required. However, we've observed that in Canada, this is difficult to come by. I do not understand why that is so. In Quebec, cooperation is sometimes easier to achieve, but in the rest of Canada, it seems harder to get people to sit down and work together.

Contrary to what Mr. Beatty said, I do not believe, unfortunately, that monetary factors are minor. I wish that they were nothing more than a nuisance. On the contrary, their influence is significant. The reason we seem nervous and agitated over this issue is because we have the impression that people in Ottawa have not grasped the urgency of the matter. We are not in a recession. The global economy has recorded its five best years of growth since the 1970s. This has happened in many other sectors. However, if the US economy goes into a recession in the months to come, as many are predicting, it is not going to be pretty.

In that respect, we have to be intellectually honest and admit that we must show greater creativity and develop team spirit. This is exactly what we need to do in order to face up to this situation. I'm a bit disheartened to hear that some people are still trying to work the situation to their advantage. We need to reject this way of thinking.

Thank you.

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

Mr. Laliberté, some say that the manufacturing sector is a part of the old economy and that we are now moving towards a knowledge-based economy. What do you think?

[Pierre Laliberté]

Mr. Beatty could give you more exact figures than the ones I have here. The manufacturing sector accounts for 60% of R & D in Canada. To innovate means to improve a product's performance or to produce that product more efficiently. This does not happen through some magical process. Many industries are shutting down. If, for example, footwear is no longer manufactured in Canada, research in this area will come to a stop as well. That's obvious. The sporting equipment industry was once a very large sector in Quebec, but it has practically disappeared. Who is going to design better ice skates? Certainly not the Chinese, I can tell you that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have one more very quick question. We've offered one over here. There are two members who did not have an opportunity, so we'll give Mr. Menzies a couple of minutes; it's very tight.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair. I'll do it very quickly.

I've heard some very troubling statements. I don't like to individualize any witness, but Mr. Laliberté's first statement concerned me greatly.

You suggested that we should bring the dollar back down to 75¢ comparable to the U.S. dollar. That concerns me greatly. It suggests that Canadian businesses can't compete unless it's at a 75¢ dollar. That's very troubling.

You talk about creativity and working together, and yet you seem to have no suggestion of how that should happen. Working better and expecting no profit, that is very concerning to me.

Can you please clarify those comments?

[Pierre Laliberté]

What I said, essentially, is that when you try to establish what should be the fair value of the currency, there are many yardsticks you can use. But one yardstick that is surely a good one is to look at how productive your economy is relative to another one. If we compare how productive Canada is relative to the United States of America, we're unfortunately not as productive, and that differential is around that 20% to 25% that I mentioned.

Now, whether the currency should be set at that level is another issue altogether, but certainly not....

I'm sorry, go ahead.

[Ted Menzies, Conservative, Macleod, AB]

One final clarification: did I understand you correctly, that no business should expect to survive without government support?

[Pierre Laliberté]

You know, this is the problem I mentioned earlier--