Evidence of meeting #115 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mark Carney  Governor, Bank of Canada
Tiff Macklem  Senior Deputy Governor, Bank of Canada

9:50 a.m.

Conservative

Shelly Glover Conservative Saint Boniface, MB

If you want to continue, please do.

9:50 a.m.

Governor, Bank of Canada

Mark Carney

Okay.

One of the factors that has been important is the distribution system in Canada. MPs are probably more familiar than anybody with the breadth of the country and how spread out the major retail centres and smaller retail centres are in Canada. The ability to have concentrated distribution hubs that cover that breadth mean that on the margin the so-called economies of scale are not as big in Canada as they are in the United States.

The second factor is that our businesses use relatively more labour, and on balance that increases the cost; it's less productive, effectively. I should say as well that the Canadian retail sector, from a retail productivity perspective, is a fraction of the U.S. retail sector. Mr. Macklem can confirm this, but I think 70% is the level.

So we would expect to see over time, with greater competition, improvement in retail productivity. That creates opportunity for individuals to work in some of the higher-paying, higher-skilled jobs that Mr. Jean was talking about. These are some of the factors that we think will persist.

9:50 a.m.

Conservative

Shelly Glover Conservative Saint Boniface, MB

I'm running out of time, unfortunately, and I want to get to what you said about tariffs.

As we all know, in the 1970s the general preferential tariff regime was started so that we could help the poorest of countries in the world to compete and grow. I note in your monetary policy report, on page 1 in fact, that China is listed over the next three years as having growth of 7.7%. Taking that into consideration, would you consider China as one of those poor countries that deserves a special tariff rate so they can compete with Canadian companies?

9:50 a.m.

Governor, Bank of Canada

Mark Carney

Boy, there are a lot of ways I can go wrong answering that question, Ms. Glover.

9:50 a.m.

Voices

Oh, oh!

9:50 a.m.

Governor, Bank of Canada

Mark Carney

The reality of China...China is a study in contrasts. As you know, it's the second largest economy in the world now. Measured in market terms, that 7.7% is as big a contribution to the global economy in dollar terms as our forecast U.S. growth of 2%.

At the same time, China still has just under 300 million people who live in what would be described as poverty, and that is one of the factors that has allowed Chinese manufacturing enterprises to remain quite competitive. As those individuals move from the countryside—

9:50 a.m.

Conservative

Shelly Glover Conservative Saint Boniface, MB

I am glad that you compared it to the U.S. because we don't give a special tax break to the U.S. either; they are not considered a poor country. Having said that, I was certainly glad to see that you've actually addressed in your monetary policy that China is doing better than most.

I do want to get to job recovery, because when you leave here...every time you appear and you address job recovery, someone goes out and says we haven't recovered all of the jobs since the recession. So would you repeat, for the last time perhaps, how Canada has fared with regard to jobs following the recession?

9:50 a.m.

Governor, Bank of Canada

Mark Carney

Okay. These numbers get slightly revised over time, but the Canadian economy lost about 430,000 jobs in the recession, from the peak to the trough. We recovered all of those jobs. In fact, we've recovered the same amount again on top of that, so we've added the same amount again.

In terms of the jobs, the overall numbers, about three-quarters of the jobs are in industries that pay above-average wages. There is about the same percentage point in the private sector, and about 85%, on current figures, are full-time jobs.

We've recovered them all. We've added the same amount in the full-time private sector, and on the whole in above-average wage sectors.

As you're well aware, and this is important from a monetary policy perspective, there continues to be slack in the labour market. There are more Canadians out there who want to work. As well, the recovery in hours worked has not been as strong as the recovery of jobs. It's better that people are in work, but in a number of industries I think Canadians and businesses, if the demand were there, would work more hours.

9:50 a.m.

Conservative

Shelly Glover Conservative Saint Boniface, MB

Very good.

9:55 a.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

We will have time for more rounds.

9:55 a.m.

Conservative

Shelly Glover Conservative Saint Boniface, MB

Okay. Thanks.

9:55 a.m.

Conservative

The Chair Conservative James Rajotte

Ms. Nash, please, for your second round.

9:55 a.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Thank you, Mr. Chair.

Mr. Carney, I don't know if this is your last appearance before our committee, but I did want to thank you for your service to the people of Canada in your role as governor. I guess you've done such a good job that you've become a hot commodity in your own right. I do want to thank you for your role.

Of course, there has been a lot of speculation about who will replace you, so I have a couple of questions.

Mr. Macklem, there has been a lot of speculation that you will be the next Governor of the Bank of Canada. You certainly seem to be the front-runner. I have two questions.

The first is, if asked, will you serve? Are you interested in the job?

My second question is, can you describe what some of the challenges are following in the footsteps of Governor Carney?

9:55 a.m.

Some hon. members

Oh, oh!

9:55 a.m.

A voice

That's a little challenging.

9:55 a.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

I thought I'd give you an easy question.

9:55 a.m.

Conservative

The Chair Conservative James Rajotte

Don't worry—nobody's listening.

9:55 a.m.

Voices

Oh, oh!

9:55 a.m.

Senior Deputy Governor, Bank of Canada

Tiff Macklem

How about I answer the first question?

9:55 a.m.

Conservative

The Chair Conservative James Rajotte

You can answer whatever you want to answer.

9:55 a.m.

Senior Deputy Governor, Bank of Canada

Tiff Macklem

Yes. If asked, I will serve.

There is a process that is ongoing. I don't think it would be appropriate for me to start answering interview questions here when there is a separate process. Respectfully, yes, if asked, I'll serve, but I will leave it there.

9:55 a.m.

Conservative

The Chair Conservative James Rajotte

[Inaudible—Editor]

9:55 a.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Yes. Diplomacy, I think, is a qualification.

Let me return, then, to the issue of tariffs. The general preferential tariff, of course, applies not just to China but to 72 countries, included in which are countries like Gabon, Namibia, Dominican Republic, Grenada, Guam—many countries that don't have quite the growth rate of China.

I want to refer to a 2008 research paper from the Bank of Canada, which is discussing increasing tariffs on other countries. It concludes, and I'm quoting:

As regards the political dimension, we conclude that a “benevolent” policymaker would not adopt tariffs, because of negative long-term economic consequences, but “myopic” policymakers might be tempted to exploit short-term political gains.

I wonder if, in the light of that paper, you might have any views on the recent changes that would increase the tariffs on 72 countries with which Canada trades.

9:55 a.m.

Governor, Bank of Canada

Mark Carney

I have not read the paper in question—now I'm going to have to.

I would say this, not having the benefit of having read it, that those terms are terms used in economic modelling, in game theoretic models. It depends in part on the objective function of the policy-maker as is modelled and the horizon over which they discount benefits and costs from any particular policy action.

The terminology is strong, but I suspect it relates to the nature of the theoretical construct of the model. But I haven't seen the paper, I'm afraid. I didn't write it.

10 a.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

It is a Bank of Canada paper.

Let me ask you, if tariffs increase on products that we do not manufacture here, what do you think would be the benefit to Canada in increasing tariffs on imported goods?