Finance Committee on Oct. 7th, 2009

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to welcome everyone and thank you for joining us this morning. I will be speaking in English, unfortunately.

My first question is for Réseau SOLIDARITÉ. First of all, I want to thank you and your members for the work you do. I'm from Ontario, and we have people who are working hard on the homeless issue. I just want to thank you for your effort.

You were saying that your organization in Quebec gets $18.5 million annually and you'd like it to go to $50 million. Would that be overnight, or would you like that increased over time? Have you given any thought to how that would be implemented?

[Marie-Claude Vézina]

The increase in funding, from $18 million to $50 million, is based on requests that have been received from various groups throughout Quebec. Furthermore, those requests do not even fully reflect all needs. In Sherbrooke, we did not submit any new projects, because we knew there was not enough money.

Since the very beginning of the program 10 years ago, it has not even been indexed. We would like to see that happen very soon. The goal is $50 million, which makes sense, since the program has not been indexed. In Sherbrooke, for example, we lost money because of the amalgamation, since we became wealthier.

[Mike Wallace, Conservative, Burlington, ON]

Merci.

I have a question for McGill. With respect to your third point, which you didn't really get a lot of time to talk about, in my reading of it you're asking for seed money for innovation that can be commercialized. Do you have any sense of what that would be? You're not the only research university in Canada. How do you foresee that being divvied up?

[Vaughan Dowie]

This is not a request for McGill; this is a request for a program from the Government of Canada. The example we use right now is the Canada-California...what we call CCSIP. There is a certain amount of seed money that the Government of Canada has put on the table to develop relationships between universities and industry, both within Canada and California, to try to find good fits to do international research together. McGill is not the only one; UBC, U of T, and others are involved as well.

Another example that come to mind, for instance, would be that Canada is interested in trying to develop more relationships with Brazil, China, Israel, India. So this would be an attempt to try to--

[Mike Wallace, Conservative, Burlington, ON]

Expand that program.

[Vaughan Dowie]

--expand that program so those initiatives can be seeded; and second, when there are good fits, as there is right now between Canada and California on stem cell research, where money can be put on the table in strategic areas of work for this country.

[Mike Wallace, Conservative, Burlington, ON]

What kind of money are we talking about?

[Vaughan Dowie]

With respect to stem cell research right now, Canada has put $100 million on the table to work between Canada and California in this area.

The costs would very much depend. We haven't costed them because it would very much depend on the strategic choices that Canada makes. Say Canada wants to be in clean technology; then how much money would it like to be able to encourage the support for international--

[Mike Wallace, Conservative, Burlington, ON]

So the program we talked about already exists, in one sense, but you'd like to see it expanded into other areas.

[Vaughan Dowie]

Exactly.

[Mike Wallace, Conservative, Burlington, ON]

What you have explained to me is not what I read here. You're not talking about something that was developed at McGill and we have an industry that's interested or has a potential to be commercialized.

[Vaughan Dowie]

No, we're talking about trying to develop research consortiums internationally, where Canada would choose the sectors and the parts of the world it wants to work in. There are, for instance, existing programs, such as ISTP.

[Mike Wallace, Conservative, Burlington, ON]

Right. Is that funding coming out of Trade, or is it coming out of Industry Canada?

[Vaughan Dowie]

Some of it is coming out of Trade and some out of Industry Canada.

[Mike Wallace, Conservative, Burlington, ON]

My last question is for Merck.

With respect to the $300 million for the vaccine for young women, is the $100 million a leverage issue that we try to get other provinces on board with? Who decides which vaccine--it might not be a Merck vaccine, because other people do produce vaccines in the world--gets funded and which one doesn't?

[Christian Blouin]

In Canada, after any vaccine—not only the Merck vaccine, but any vaccine—has been approved and has passed the tests of safety and efficacy, there's a national body called the National Advisory Committee on Immunization, composed of specialists and representatives from every single province in Canada, which recommends that the vaccine be utilized for public programs.

After that, it is up to each of the provinces to decide for themselves. However, as I was explaining earlier, the federal government must show some leadership when it comes to public health, given that the programs are not being implemented soon enough or in a timely manner.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

I would like to thank everyone for their presentations and answers to our questions.

We will suspend the meeting for two minutes.

We will bring the other panel forward.

[The Chair, Conservative, James Rajotte]

Good morning, everyone. I would like to thank you for joining us.

You are the second panel we have received here today. Each panel has an hour and a half, and each witness has five minutes to give his or her presentation. After all the presentations have been given, members from all the parties will have a chance to ask questions.

Since Ms. Samson of the Association des producteurs de films et de télévision du Québec is absent, we will begin with the Shipping Federation of Canada.

[Michael Broad, President, Shipping Federation of Canada]

Merci. Thank you.

Mr. Chair, distinguished members of the House standing committee, thank you for providing us the opportunity today to participate in this committee's hearings on the 2009 budget consultations.

My name is Michael Broad, and I am president of the Shipping Federation of Canada. I'm accompanied by Captain Ivan Lantz, our director of marine operations, who will assist in responding to your difficult questions.

The Shipping Federation of Canada represents the ships and their operators that carry Canada's international trade. Our contribution to the 2009 pre-budget consultations is to raise a red flag regarding the urgent need to provide funds for the replacement of the Canadian Coast Guard's icebreaking fleet.

As past budgets have earmarked funds for the coast guard's fleet, there is a widespread belief that renewal of the icebreaking fleet is being taken care of and that the government can therefore focus on other priorities. We are here to advise that the funds announced in previous budgets were actually flagged for other types of vessels. Indeed the only icebreaking funds that have been allocated are to a polar icebreaker dedicated to Arctic waters. This means that navigation south of the 60th parallel, which is where almost all shipping activity takes place in this part of the country, has had to make do with an aging icebreaker fleet that is stretched to its limits in terms of capacity and liability and provides no margin for error. Unforeseen circumstances are emergencies, and it is increasingly costly to maintain.

The essence of our testimony is simple. Canada is already at the precipice with respect to its icebreaker fleet and must act now to address the situation. More specifically, the coast guard needs funds to replace seven icebreakers, six medium and one light, and one ice-strengthened vessel, and to add one more ice-strengthened vessel to its fleet. Our recommendations cover nine out of the existing fleet of 18 vessels supporting ice navigation. We estimate they will cost between $330 million and $990 million to build, depending on whether the icebreakers were purchased under commercial terms on the international market or built in Canada.

Although these funds have to be earmarked now to get the process started, the actual delivery of the vessels could take as long as 10 years due to the complexity of the government procurement process. In the meantime, eight of the existing ships that have to be replaced will need to be refurbished, which we estimate will cost some $130 million. Therefore the total cost of our recommendations for replacement and refurbishment translate into a budget proposal ranging between $460 million and $1.12 billion.

Our written brief refers to the coast guard's 2008-2011 business plan, which was the most recent plan available when we wrote the brief this past summer. However, the coast guard has released its plan for 2009-2012, which includes the following points of interest. We've printed the relevant excerpts of the new business plan in French and English for circulation by the clerk.

The coast guard will develop its first integrated investment plan in 2009-10, announced under priority three. We recommend a comprehensive fleet replacement plan be integrated into this plan and that the government earmark the corresponding funds. The cost of replacing the coast guard's entire fleet--that's not just icebreakers, that's everything including 22 helicopters--is about $10 billion, while the fleet's net book value is only $463 million. This clearly reflects the extent to which the coast guard's asset base is deteriorating.

Furthermore, fleet replacement estimates have doubled over last year, when they were about $5 billion, due to a marked escalation in vessel replacement costs--and I quote the coast guard on that.

The report--that's the 2009-2012 coast guard business plan--acknowledges, and I quote from section 5, “Financial Information, Assets and Liabilities”:

In recent years it has become apparent that the inadequate recapitalization of our Fleet assets would result in the eventual inability of CCG to sustain its required levels of service.

Table 22 of this report, which provides an overview of the coast guard's major capital and planned expenditures, shows vessel life extension totalling $74.5 million and vessel refits and refurbishments totalling close to $330 million over the next five years. Such a budget would cover, at least in part, the cost of extending the life and refurbishing eight of the existing vessels mentioned in our recommendations. However, the budget item entitled “Procurement of Major Vessels”, which totals $1.1 billion over five years, does not include any icebreaker for navigation south of the 60th parallel.

Annex D to the 2009-2012 plan represents the follow-up actions taken in response to the nearly ten-year-old Auditor General's recommendations of 2000 and 2002, which include the need to procure new and replacement vessels. Although the coast guard lists a number of vessels for which it has taken action, it makes no mention of replacing the icebreaker fleet.

As mentioned in our brief, we along with a number of other stakeholders are seriously concerned with the government's inaction with respect to planning the renewal of the icebreaking fleet. Such planning is particularly important given the age of the existing fleet, the key role it plays in ensuring the safety of winter navigation, and the huge delays that are intrinsic to the process of procuring and delivering new ships. Starting to plan today will allow for new ships to be delivered in eight to ten years. Each year of inaction or postponed action generates escalating maintenance and refurbishment costs and increases the vulnerability of the system as a whole.

Mr. Chair, distinguished members of the committee, we thank you for your attention. I'd be pleased to answer questions later.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to the Fédération des producteurs de porcs du Québec, s'il vous plaît.

[Bernard Verret, Executive Director, Fédération des producteurs de porcs du Québec]

Thank you, Mr. Chair.

Distinguished committee members, this morning I will be presenting a report prepared by Jean Lecours and Rémy Laterreur. The Fédération des producteurs de porcs du Québec is giving this presentation in order to demonstrate how this group's recommendations correspond to the opinions of the Fédération des producteurs de porcs du Québec and the Canadian Pork Council.

Given the many problems facing the pork industry in recent years, a group of individuals within that industry decided to join forces to try to come up with new solutions to address the pork production crises we have seen. These problems include rapidly changing exchange rates, new grain-based products like ethanol, emerging diseases like circovirus and, more recently, A (H1N1), commonly known as swine flu. People met over the summer to try to find some long-term solutions for the pork industry.

I would like to point out a few facts. In Quebec alone, the pork industry employs 24,000 people. It is one of the 10 largest export industries in Quebec and it generates a great deal of business.

The working group decided to present this report as part of the annual hearings on pre-budget consultations. In this report, we did not describe the problems, but rather the solutions to be implemented over the next few years.

The working group recommends pursuing three main objectives. First of all, funding is needed to allow an organization—one that is independent of the federal and provincial governments—to analyze the competitiveness of Canadian pork producers compared to our foreign competitors, primarily the United States, Brazil and Europe.

The Government of Canada should also launch a campaign to promote Canadian pork products, since we are seeing more and more American pork products on our supermarket shelves. It is estimated that in Quebec and Canada, an exporting country, approximately 20% to 30% of the meat on our shelves is American. Financial assistance must be given to pork producers in specific regions in Canada that are facing the common problem of disease, in order to help them reposition themselves so they can be more competitive on the international free market.

The first recommendation—which involves obtaining financial assistance for a stakeholder organization to analyze competitiveness—would be more like structural assistance, rather than a major budgetary expenditure. The cost of this would be somewhere in the hundreds of thousands of dollars, not millions. For the past few years, managers in the pork industry have been plagued by financial difficulties for the reasons I mentioned a moment ago. These issues have caused a certain amount of pessimism about the future among pork producers.

However, considering the increased pork production in emerging countries, as well as in the United States, for instance, farmers are wondering if the cost of producing pork in Canada is similar to and competitive with the cost in other countries. In Canada, particularly in Quebec, pork producers face a number of environment restrictions and other restrictions regarding the use of drugs. Our social and environmental costs are sometimes higher than those of our competitors on the international free market.

Do these increased production costs allow businesses to remain competitive in the global market, and what weaknesses can be identified in the pork industry? Do they have to do with grains, pork production, processing or access to foreign markets?

In order to enhance the legitimacy of the competitiveness study, it must be conducted by an organization that operates independently of the pork industry and the various levels of government. It would be inappropriate for the Government of Canada to conduct such a study, since it provides financial assistance to pork producers through programs like AgriStability and AgriInvest. We believe that managers in the pork industry and the various levels of government must be given this information as soon as possible so they can make the right decisions to help grow our pork industry. This recommendation is supported by the Canadian Pork Council as well as the Fédération des producteurs de porcs du Québec.

The second recommendation calls on the Government of Canada to launch a campaign to promote Canadian pork products. As I explained in my introduction, foreign pork products, especially from the United States, are now filling store shelves on a regular basis in many major Canadian grocery stores. However, we would like to work with various partners to create an organization to promote Canadian pork.

Lastly, the third recommendation calls for more money, but that must come third. In very specific regions of Canada where producers face particular problems, such as environmental problems or competition-related problems because of specific diseases, it is a question of upgrading the buildings with new technology in order to eliminate disease, the main cause of decreased competitiveness and profitability among Canadian producers.

This concludes my presentation.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now go to the Fédération étudiante universitaire du Québec.

[Jean Grégoire, President, Fédération étudiante universitaire du Québec]

Thank you, Mr. Chair, honourable members, and distinguished participants of this pre-budgetary consultation.

Before I begin, I would like to introduce Lysiane Boucher, federal and international affairs coordinator for the Fédération étudiante universitaire du Québec. My name is Jean Grégoire, and I am the president of the FEUQ.

The FEUQ represents 16 member associations and over 125,000 university students in Quebec. For over 20 years now, it has been defending the rights and interests of students before, during and after their studies.

One thing that all political parties can agree on is the fact that Canada must work hard to get through the economic crisis. Several scenarios come to mind, but one aspect that often comes up has to do with the knowledge economy.

The knowledge economy is developing in several ways, but primarily through education and research. Of course education falls under provincial jurisdiction. That said, the federal government can help Canada as a whole actively develop by stimulating economic recovery through knowledge-based investments, for the well being of all Canadians. Specifically, this could be done by restoring the Canada social transfer, by providing adequate funding to granting agencies and by funding indirect research costs.

Regarding the Canada social transfer, in 1994, the Liberal government drastically cut provincial funding by eliminating much of those transfers, in order to achieve a zero deficit.

At this time, taking inflation into account, along with the increased number of beneficiaries, $3.5 billion is missing from Canada's social programs, including the post-secondary education system. Some $820 million is owed to Quebec. We are not asking for a funding increase; rather, we are simply asking that the funding provided to the provinces in the past be restored. In concrete terms, the under-funding of our university system is a direct result of this shortfall, as is the trend of researchers going abroad, allowing others to benefit from their knowledge and talents.

As for the funding provided to granting agencies, this relates to another crucial aspect of the Canadian economy: the development of knowledge and innovation. Quebec and Canadian universities provide the framework for the development of ideas and technology. Granting agencies were created to fund such research projects. At present, this major funding shortfall is crushing granting agencies, which means that many grant applications cannot be funded. As we know, the university selection process is already extremely rigorous regarding students who can apply for grants from these granting agencies. So, by limiting their funding, Canada is depriving itself of the best students and the best research opportunities that could help this country become really competitive on the international stage in terms of knowledge.

Regarding indirect research costs, not only are research projects underfunded, but all research activities are suffering from a lack of resources. Indirect costs—such as service costs and the cost of maintaining research space—total approximately 65% of all research costs. Universities are not in a position to cover these costs, which can be astronomical, and this also limits Canada's ability to develop a very highly qualified work force.

In conclusion, although education falls under provincial jurisdiction, it must be regarded as a tool for economic development and prosperity for Canadians. The current government must correct the mistakes made by previous governments and restore Canadian social transfers. Furthermore, in order to remain competitive on the international stage, develop its knowledge economy and get out of this crisis, Canada must focus more on research funding, particularly by increasing funding to granting agencies and by funding indirect research costs.

A university education generally translates into a higher salary. Higher salaries mean more income for the state. It is high time the government stopped thinking of education and research as an expenditure, when really, they should be considered an investment.

This is what the Fédération étudiante universitaire du Québec believes that Canada must do to get out of this crisis and prepare for the future.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

As our final presenter, we now have the Quebec Port Authority, please.