Finance Committee on May 14th, 2008

[The Chair, Conservative, Rob Merrifield]

I will call the meeting to order.

We want to thank our witnesses for coming and being able to present to the committee.

We are on Bill C-50, dealing with our budget bill. We look forward to what you have to present to the committee. Although some of the committee members aren't quite here yet, we have enough of the committee to be able to start.

We'll start with the Chinese Canadian Community Alliance. We have Tom Pang. Welcome to the committee.

[Tom Pang, Acting President, Chinese Canadian Community Alliance]

Good afternoon.

I'm a representative of the Chinese Canadian Community Alliance. We are a non-profit organization based in Toronto. Because we're part of the Chinese community, we are very concerned about changes in immigration law. After studying these amendments, our organization has decided to support the amendments.

Basically, the community is concerned about two problems with the Immigration Act. The first is the backlog. Everybody, especially from China, has to queue up and wait—four to six years, according to the ministry. The increase in the backlog could soon go over a million people, resulting in a wait time of ten years. This is something that's not acceptable to potential immigrants.

The other problem we see is with the newcomers. At this point, we're basing the immigration application on a point system. We're basing it on people's age, educational background, and experiences, without much consideration of whether they will fit into our job market. Consequently, we see all kinds of people coming here who can't find a job and have to move back to where they came from.

During the past month or so, I was helping a friend who runs a piano school. Typically, all the students are new immigrants. I was surprised by the number of families who had only one person in Canada. The other half of the family was in China, Taiwan, or Hong Kong, because they couldn't find a suitable job. There are even people who have to move down to Brazil or Argentina, because it's much easier for them to find a job down there.

Recently I saw a Chinese TV program, a program that tells how successful new immigrants are. One of the programs surprised me. It was about a person who was a famous opera singer in Shanghai. He qualified under the present system and came here, but he couldn't find a job at all. Eventually he went to a factory and had to sing an Italian song to convince the Italian owner to give him a job on the assembly line.

We would support this bill if the amendments fulfilled two conditions: reducing wait times, and bringing in people who can find a job. It goes without saying that there are pros and cons within the community. There are people for and against the amendments.

Some of the arguments concentrate on things that, to me, have nothing to do with these amendments at all. This morning I came by train, so I was reading the Chinese paper on the train. There was an article about a person who appeared before one of the committees, either this one or the one on citizenship and immigration. He was using the minister's statement that Canada cannot take in all the qualified applicants from China and India as a means to say that the immigration minister is a racist.

Now, in a rough estimate, if even 10% of the people in China alone qualified under the system, we're talking about 130 million people. I don't think any government official would dare to say that we must, we shall, take in that number of people, but this is the kind of thing used against the amendments. To me and to our association, it has nothing to do with the real meaning of these amendments.

I repeat: our association has decided we will support these immigration amendments.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I'm sure we'll get some questions as we go into the question-and-answer part of our meeting, but we'll continue with our presenters.

Next we have Peter Ferreira, from the Canadian Ethnocultural Council. The floor is yours, sir, for seven minutes.

[Peter Ferreira, President, Canadian Ethnocultural Council]

Thank you very much.

Good afternoon, Mr. Chairperson.

Founded in 1980, the Canadian Ethnocultural Council is a non-profit, non-partisan coalition of national ethnocultural umbrella organizations, which in turn represent a cross-section of ethnocultural groups across Canada. The CEC's objectives are to ensure the preservation, enhancement, and sharing of the cultural heritage of Canadians, the removal of barriers that prevent some Canadians from participating fully and equally in society, the elimination of racism, and the preservation of a united Canada. While my notes don't suggest it, we have 32 member organizations, and they're all national organizations.

It is a cliché but one worth repeating: we are blessed to be living in a wonderful nation with such a diversity of people. They are our strength, and our diversity will continue to define us as we seek to build and bolster our economy. Canada's economy continues to be strong, but it is no secret that as our population ages we may be faced with labour market shortages that could slow this growth. In the past we have looked to immigration as an answer to this challenge.

Today's newcomers come ready to work but may face challenges that are more complex, as we move from a resource-based to a knowledge economy. Systemic barriers to full inclusion for Canada's ethnic and racial communities still exist. Language barriers, lack of training opportunities, and difficulties with recognition of foreign credentials are some examples of obstacles that impede immigrants' joining the labour force.

When these are overcome, lack of Canadian experience and even indirect discrimination still frustrate the creation of a fully-integrated workforce. Skilled immigrants are critical to keeping our economy healthy, and immigration has long been the main source of population growth in Canada. Tapping into the skills and the expertise of newcomers benefits just about every industry. As an immigrant myself, I see both sides of the coin, and I know that immigration is also good for those who choose to leave their countries of origin and come to live here. They may even sacrifice high-paying jobs to do so.

Can Canada do more to attract immigrants? Yes, and we will need to. We need to acknowledge that it takes a lot of courage to uproot a family and come here. I believe we need immigration reform that creates an even more welcoming environment, with reductions in lengthy processing times, enhanced language training, and anything else that will help ease the transition from newcomers to productive members of society.

In addition to competing globally for trade, Canada is competing with other countries for people. There is a lack of skilled workers worldwide, a trend that has been increasing for years. As an example, many of our member organizations have been telling the government since the 1980s that we need more people in construction and that immigration is one way to fill the gap.

Today the potential immigrants we could use in this sector from countries such as Ireland and Portugal, to name but two, are staying where they are because there is such a shortage in the European Union. We need to promote that coming to Canada is a more attractive option, and it usually is. Immigration is a win-win situation, both for those who choose to relocate here and for Canada as a whole. As a Canadian citizen, I'm pleased and proud that we have put out such a substantial welcome mat, and I hope that platform widens in the near future for even more newcomers.

The Canadian government is promoting its controversial bill by including, in part 6 of Bill C-50, immigration amendments to the Immigration and Refugee Protection Act, promising that it will reduce our current backlog of some 950,000 applications, produce faster processing times, and make our system more responsive to Canada's labour market needs. To accomplish this, the government proposes giving the immigration minister unprecedented new powers. The government maintains that the minister needs these powers to cherry-pick applicants who are needed here on a priority basis.

Our current legislation states that the federal cabinet “may make any regulation...relating to classes of permanent residents or foreign nationals”, including “selection criteria, the weight, if any, to be given to all or some of those criteria, the procedures to be followed in evaluating all or some of those criteria...the number of applications to be processed or approved in a year”, etc.

The reality is that our current legislation authorizes the minister to set target levels and to prioritize certain classes of applicants without even a regulation being passed. I would respectfully argue that the minister has the power under our current legislation to make virtually any changes she wants, subject to the charter. The CEC is concerned with the passage of this bill, as we believe that the proposals set forth belong in an immigration bill simply because we have far too little debate on the kind of immigration program Canada needs.

If the bill passes as presented, this minister and others who follow her would be free to govern by decree and eliminate public debate on immigration policy. The publication of the minister's instructions in the Canada Gazette would be no substitute for an open debate.

The CEC proposes that the best way to eliminate the backlog and speed up the immigration process is by dedicating more resources to them, increasing the levels, and/or by simplifying the process. This bill does not address this, and it is simply a transfer of power from the cabinet to the minister.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to Mr. James Bissett. In your agenda he is listed as an individual. I would like to remind the committee that he is the former ambassador to Yugoslavia and Albania and the former head of the Canadian immigration system.

Mr. Bissett, the floor is yours.

[James Bissett, As an Individual]

Thank you, Mr. Chairman. I am pleased to come before the committee.

I believe the proposed changes are needed, and I think they are urgently needed, to regain control of an immigration movement that is rapidly getting out of control. Canada is facing a growing backlog of people who have met all the immigration requirements. They've paid their fees and are waiting in a backlog that, as Mr. Pang has pointed out, may take them six to ten years to get here. The numbers are estimated to be almost one million--950,000-some people--who are waiting to come in.

In addition, the minister has announced that next year the government intends to increase immigration levels, I think to 265,000 additional immigrants. You have a problem of not only dealing with the backlog, but also dealing with the new arrivals. The system is desperately unfair. It's making people wait for years and years to join their relatives here or to come to jobs and start a new life. As has already been mentioned, a lot of the people in the backlog have gone to other countries.

The problem stems from the Immigration and Refugee Protection Act that was passed by the previous government, in 2001. That act didn't include any mechanism for controlling or adjusting the flow of people, or turning it up or down. Consequently, anyone now who meets the immigration selection requirements has to be accepted. That's really the problem. There's no mechanism for turning off the flow or slowing it down, even if the numbers who are applying can't possibly be processed in any one year by the number of visa officers abroad.

As Mr. Pang pointed out, the reality is that in China alone, you may easily find 130 million young people who can meet our selection criteria. Probably the number is close to that in India as well. There are many of them who would like to come to Canada. If they apply and meet the requirements, we have to take them. That's essentially the problem.

I think the proposed regulatory changes are therefore designed to enable Canada to get control of the immigration flow back and to manage it properly before we're faced with a complete fiasco with two or three million people having met all of the requirements, having paid their fees, and are waiting to get here. It's certainly not fair to the immigrant, and it doesn't give Canada a very good image.

There has been a lot of speculation about the intent of these regulations. I think perhaps it was the Standing Committee on Citizenship and Immigration that yesterday heard immigration lawyers say that the proposed changes are simply a plot on the part of bureaucrats to satisfy their lust for power. Others have said it's simply the forerunner of very drastic changes that are going to come about.

I think most of these charges are nonsense. The current act is flawed because it doesn't provide the mechanism for controlling or managing immigration flow. I think there are plenty of safeguards to ensure the minister does as she says she will do, which is to consult with business, labour, and ethnic organizations about the rules she proposes. She must report to Parliament every year, and in that report she has to explain and table the categories she has established, the order of their processing, and the disposition of the applications.

The previous government recognized, a year after they passed the act, that there was a problem. They tried to solve it a year later, in June 2002, by passing regulations that required those in the backlog to meet much higher criteria. That regulation was taken to the courts, and the courts ruled it was ex post facto and could not apply. Nothing has been done since then, and that's why we have close to a million people waiting to get here.

Prior to the 2001 act, the flow used to be controlled by one of the factors in the selection criteria that was called “occupational demand”. It was worth ten points in the total number of points. If you got zero on occupational demand, it didn't matter how many points you received in the other factors, you were turned down.

The government controlled the flow by adjusting this occupational demand factor. When the economy was booming and the labour force needed workers, a long list of occupations were given weight on the demand side. When we were going into a recession or things were slowing down, we sent out hundreds of occupations with zero demand. This cut off the flow and ensured that we didn't get large numbers of people coming in who couldn't find work.

Canada has earned a reputation for managing its immigration program in an excellent fashion. Many countries have tried to emulate our point system. Australia has done so. But the 2001 act changed this, and it needs fixing. I think this proposal is the thing to do. We should get it done, and get it done quickly. We are already facing an amazing number of people who want to come here. If this problem isn't fixed, we could become an international embarrassment for mismanaging a program that we used to manage so well.

Thank you.

[The Chair, Conservative, Rob Merrifield]

We now have Mr. Fred Carsley, a lawyer.

[Fred Carsley, Lawyer, As an Individual]

Thank you, Mr. Chairman.

This afternoon I'd like to introduce some diversity to this session by restricting my remarks to the Canada Interest Act.

Good afternoon. My name is Fred Carsley. I am a partner with the Montreal law firm of De Grandpré Chait and head our real estate practice. I specialize in the acquisition, sale, development, leasing and financing of commercial real estate.

In addition, I am the past Canadian chair of the government relations committee for the International Council of Shopping Centers. This is a trade association for the retail real estate industry, with over 75,000 members in Canada, the United States, and over 80 other countries around the globe.

I wish to thank the committee for the opportunity to appear before you today and discuss an issue that is of great interest and concern to the commercial real estate sector in this country.

Although the budget implementation bill is rather omnibus in scope, I wish to focus on the consequential amendment that involves the Interest Act. I want to consider clause 155 of the budget implementation bill. It deals with the amendment of section 10 of the Interest Act.

I must admit that this issue is nowhere near as exciting as it sounds—nothing like immigration. However, let me assure the committee that this issue has arisen in every longer-than-five-year mortgage financing I have been involved with. Simply put, the lenders need the assurance, as an essential condition to lending the money, that after month 60, the negotiated loan terms on prepayment will be respected through to maturity.

This part of the Interest Act was last amended in the 1880s. Initially, section 10 was added to provide protection to the Canadian farmers who were being forced to lock into long-term, high-interest mortgages. The section essentially states that after five years any mortgage can be paid off with a penalty of three months' interest. This rule is a public order. As such, it overrides any contractual stipulation to the contrary.

The next amendment, also made during the 1880s, was brought into force to facilitate the building of the trans-Canada rail system. It soon became apparent that lenders were reluctant to enter into long-term financing deals with corporate entities as long as section 10 could jeopardize their yield maintenance. The solution was to add subsection 10(2). It exempts corporations from the rule in subsection 10(1), and allows for long-term, clear, and consistent transactions. This amendment reflected the ownership structure in vogue at the time, namely, a corporation that successfully met the concerns of the sector.

During the next 100 years, the commercial real estate industry evolved, adapted, and reacted to market forces. As a result, new ownership structures have been developed, such as limited partnerships and trusts, as the vehicles of choice. We are asking that the exemption for corporations be extended to apply to limited partnerships and trusts. Without the amendments to subsection 10(2) of the Interest Act, these entities are disadvantaged, in comparison with the treatment of corporations, when arranging mortgage financing for longer than five years.

In addition, the differences inherent in the ownership and property rules of Quebec civil law from those in the common law provinces require complicated and expensive gymnastics for Quebec loans to reach identical results.

In 2006, a number of industry leaders approached the Department of Finance and asked that they consider adding limited partnerships and trusts to the exceptions for corporations in section 10(2) of the Interest Act.

After several extremely detailed and valuable exchanges, as well as Department of Finance consultations with all provinces and interest groups, the decision was made to go forward and draft amendments to reflect the change.

While we are pleased with the Department of Finance's timely recognition of the problem, the amendments to the bill open the door to some unintended consequences. Under the normal legislative process, the opportunities for industry consultation would be ongoing. However, the decision to include these amendments in the budget implementation bill meant that, given the confidential nature of the process involved, holding the normal consultations around legislative wording would be precluded, as doing so would violate a long-standing parliamentary convention. As a result, this hearing represents our first opportunity to discuss the proposed amendments with you, honourable members.

There are four short points I would like to raise, and then I will conclude my remarks and allow for any questions that committee members may have.

First, the current corporate exemption applies to all mortgage loans. The proposed amendments suggest a new category of prescribed mortgages, which, pursuant to proposed subsection 10(3) of the Interest Act, would be determined by regulation of the Governor in Council. This would mean that each time a borrower that was not a corporation wished to borrow money for more than five years on a closed mortgage basis, or prepayment, for that matter, with yield maintenance, the lender would be obliged to determine if the mortgage qualified. This process might result in significant uncertainty around which products met the qualification and therefore could severely limit the range of financial options available.

Second, the same argument applies to the definition of prescribed entity. If the regulations distinguished between types of entities of the same nature, then we would be discriminating against others.

Third, there is no reason why we cannot achieve the desired result directly in the legislation, rather than complicating matters through the cumbersome and uncertain regulation of the Governor-in-Council process. Simply put, limited partnerships and trusts should be placed on an equal footing with corporations for the purpose of the exemption from the rule in subsection 10(1) of the Interest Act.

Fourth, thanks to some Ontario Court of Appeal decisions, this is currently not as problematic an issue in the common-law provinces as it is in Quebec. The proposed legislative plan, while levelling the playing field throughout the country, could detrimentally change this existing situation outside of Quebec. Simply adding the limited partnership and trust exceptions to the existing subsection 10(2) will make the law uniform throughout Canada, without creating adverse risk to existing practice.

Real estate is a capital-intensive industry in which mortgage financing is both critical and basic. Every effort should be made to facilitate the process.

Mr. Chairman, I have support letters from the director of legal affairs of MCAP and from the vice-president of legal affairs and corporate secretary of Desjardins Asset Management, previously given to the Department of Finance, which I would like to table with this committee.

I respectfully submit that the current subsection 10(2) be amended to include limited partnerships and trusts and that amendments under clause 155 of Bill C-50 be eliminated. This approach will provide to all parties simplicity, transparency, and clarity.

Thank you for your attention. I invite any questions you may have.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Just before we present those to the committee, are they in both official languages?

[Fred Carsley]

No, they are not, which is why we haven't done this.

[The Chair, Conservative, Rob Merrifield]

We will have them translated and distributed.

[Fred Carsley]

One is in English, and one is in French.

[The Chair, Conservative, Rob Merrifield]

That's fine. We'll translate and distribute those.

We'll move now to our question-and-answer portion of the meeting. We will start with Mr. Rae. You have seven minutes.

[Bob Rae, Liberal, Toronto Centre, ON]

Thank you.

Mr. Bissett, thank you. I'm going to ask you a couple of questions, and I hope to get one to Mr. Pang and Mr. Ferreira in the time available.

I appreciate your intervention, Mr. Bissett. If I heard you correctly, the reason we have a backlog is that we have no means of telling people they can't apply, and we have no means of turning people down provided they meet the criteria that are established in the act and the regulations. Is that right?

[James Bissett]

That's right.

[Bob Rae, Liberal, Toronto Centre, ON]

As I understand it, the law being proposed by the government doesn't change the central provision. It doesn't change that feature of it, but it gives the minister the capacity, in a sense, to pick and choose from individuals who have applied so that if there is somebody who is on the waiting list or in the backlog who the minister, or essentially the government, feels should be brought forward, they will bring that person or that group or that class of people forward more quickly. Is that correct?

[James Bissett]

I think that's correct. I think that's what the minister has said, at least publicly--that if, in the backlog or in the applications that are received, there are some highly qualified people who are desperately needed by Canadian business or the labour force, they would, in effect, be put at the head of the line and be brought forward.

[Bob Rae, Liberal, Toronto Centre, ON]

I agree there's a problem with our current system, but the minister's not actually dealing with the backlog.

[James Bissett]

That's right. The proposed regulations do not touch the backlog.

[Bob Rae, Liberal, Toronto Centre, ON]

So the problem we have, which you've identified, is that under our current system anyone can apply. There's no logical reason why the backlog couldn't go to two million, three million, or four million, because anybody can apply and we can't turn people down because they don't have enough points.

[James Bissett]

We can turn them down if they don't meet the selection criteria. But as Mr. Pang has said, the problem is that there are probably 130 million to 150 million people in China who could meet the selection criteria.

[Bob Rae, Liberal, Toronto Centre, ON]

How do the Americans, Australians, and Brits deal with backlogs? Do they have backlogs, in your experience?

[James Bissett]

I'm not sure how the Brits do it. I think the Australians have a system somewhat similar to what we had prior to this act in 2001. If they don't meet a particular part of the selection criteria they can be refused, even though they may score high on other points.

[Bob Rae, Liberal, Toronto Centre, ON]

How do you deal with Mr. Pang's or Mr. Ferreira's argument that what the government is proposing won't deal with the backlog, but it will lead to first-class and second-class choices? In other words, some people will be moved forward more quickly. We know enough about life to know that if some people are being fast-tracked, then other people are being slow-tracked. How do we deal with that problem?

[James Bissett]

That again would be the minister's responsibility. But someone has said--I'm not sure if it was the minister--that if she had applications she would pull the nurse out and give priority to the nurse, even though the exotic dancer had applied several months beforehand.