Finance Committee on Oct. 16th, 2012

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

May I interrupt you for just a second? I just want to understand this. When you talk about decentralization, are you talking about a lessening of the top-down so there's more control and, in essence, a shrinking of government, thus allowing the organizations like yours to do what they're good at?

[Bernard Brun]

Well, for example, as you know, there are the banks, and the banks are really centralized organizations. They have a head office, and all the major decisions are made at head office. They have branches, and the branches basically execute the orders, the directives, from head office.

In a co-op, the governance is really different. We also have to adapt the rules regarding good governance, because it is quite different from what you would see in a bank. At the same time, when you look into a co-op, if we say “decentralized”, it's the individual co-op in the whole region, but you need to have a structure with real powers at the same time. For example, in the federation we have those kinds of powers, so it helps us throughout the whole model, but then we have challenges.

For example, you were talking about red tape—

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Bernard Brun]

—in financial institutions. We've talked about money laundering. It's very hard for us to address all those issues with every individual financial institution or every individual co-op, so we've asked the government to let us be able to answer to or to comply with the rules from a group level. That would help a lot. That would help a lot in every different type of co-op.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Caron now has the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My first question is for Mr. Brun.

I read your brief and the answers to the questions raised.

Firstly, I am interested in the issue of Canada's productivity. This has been a problematic issue for some time now, even prior to the free trade agreement with the United States. Moreover, one of the arguments in favour of signing the free trade agreements, both the agreement with the United States and then NAFTA later on, was the lessening of the productivity gap between us and the United States. This did not occur. The gap has grown despite the various measures that different Canadian governments have tried to implement.

You mentioned that the service sector was one that was really lagging behind in terms of productivity. This is true, but there are not necessarily many productivity gains that we can expect to achieve in this sector because of its structure and its very nature.

We know that services and natural resources are probably the two sectors that are growing the most and that the manufacturing sector is on the decline. How can the government deal with productivity in a constructive manner through budget, tax or general economic measures?

[Bernard Brun]

An example of a general economic measure would be the support programs for research and development. We will always need these types of programs. We are strongly urging the government to continue its efforts in this area and implement programs to promote research and development.

As for productivity, this is an extremely complex issue and one that is difficult to resolve. Even the economists do not all agree about the exact causes. We know that we have an aging population and that labour is becoming increasingly rare. One theory based on these factors purports that companies sometimes prefer to keep a certain pool of employees for fear that they will not have enough appropriate human resources. Maintaining these employees has an impact on productivity.

So we have to encourage companies, those in the natural resource sector among others, to increase production and investment. The Governor of the Bank of Canada has mentioned several times that companies are sitting on significant amounts of cash. Investing more would have an impact on this productivity.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My next question has to do with the nature of your co-op. One of the elements you mentioned here interests me. I've asked different people to answer several questions about this matter during meetings in Rimouski and elsewhere. The idea is to make Industry Canada responsible for co-ops, rather than Agriculture and Agri-Food Canada. It's one of the recommendations made by the special committee studying cooperatives. I would like to hear from you in particular about the advantages and the benefits of making Industry Canada responsible for co-ops, rather than Agriculture and Agri-Food Canada, which is as it stands now.

[Bernard Brun]

I would like to thank you especially for this question. This is an extremely important issue that has not received enough attention. There are historical reasons explaining why cooperatives fall under Agriculture and Agri-Food Canada's mandate. There are very large co-ops in Canada's agricultural sector. Co-ops have diversified and they've taken on many aspects. It is time to stop reducing cooperatives to the type of services or products that they offer their members, and start thinking of them as corporate structures. They are a distinct type of business, which is profitable, which creates a lot of jobs, and which offers a great deal of stability, because their structure is different from that of the share capital model.

Why should this be Industry Canada's responsibility? Because it's important that the government, when it examines its programs and policies, take into account the co-op structure in order to make programs accessible to them in the same way. It is not a matter of favouring one model to the detriment of the other. It's simply offering the same access. Industry Canada's portfolio is considered to be the best place.

How should this be done? That's another significant issue. To deal appropriately with the issue, Industry Canada should not set up a small entity or a subentity. Instead, it should create a co-op secretariat within the department.

[The Chair, Conservative, James Rajotte]

You have 15 seconds.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Very well, thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Caron.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

I thank all the witnesses for being here today.

I'd like to focus my questions on Mr. Brun. I have before me a copy of the speech Mark Carney gave yesterday in Nanaimo, in which he said—and of course I paraphrase—that Canada's public finances are sound and our financial system showed itself to be among the most resilient in the world through the crisis. One thing Canadian businesses can expect is that their financial system will be there if times get tough again. He went on to say that in this uncertain world, Canada is rightly viewed as an attractive investment destination.

I was wondering if you could comment on the governor's remarks yesterday in Nanaimo.

[Bernard Brun]

Well, we pretty much agree with what Governor Carney says. We believe—and it's actually a fact—and we are glad that Canada is in a really good economic position. However, for the mid-term, we think the government should pursue the objective to have a balanced budget. That is one of the major points that he has to reach.

Also, yesterday the Bank of Canada issued a statement and new data regarding the indebtedness of people. It's again on the rise. Household debt, which we thought might stay at the same level, is still on the rise. We have to be really careful with this level of indebtedness, which basically might challenge the economy.

[Mark Adler, Conservative, York Centre, ON]

Yes, and a prime-plus-5% cap on credit card interest rates, as proposed by the NDP in the last election campaign, wouldn't help that, would it?

[Voices]

Oh, oh!

[Mark Adler, Conservative, York Centre, ON]

I think you'd say no to that. Thank you.

I want to talk a bit about Dutch disease, but before I go to that, our government, as you know, has been very active in cutting red tape and in lowering corporate tax to 15%. Could you talk about how helpful that has been to your clients, to the business community in general, and to the economy and job creation?

[Bernard Brun]

Well, cutting the red tape for small and medium-sized companies is a major issue. For example, in the financial sector we know that by having a cohesive group with the federation, we were able to manage a lot of the compliance issues, but for small credit unions red tape is something major that we have to address.

Some steps have been made, but I think there are still new measures that can be taken. For example, we're saying that we would like to comply as a whole group, as a federation, instead of 420 financial institutions that are federated. That would help a lot. This is something that we keep working on.

[Mark Adler, Conservative, York Centre, ON]

So we're certainly moving in the right direction—

[Bernard Brun]

Yes.

[Mark Adler, Conservative, York Centre, ON]

—which is what you're saying.

How much time do I have, Chair?

[The Chair, Conservative, James Rajotte]

You have a minute and a half.

[Mark Adler, Conservative, York Centre, ON]

I just want to turn for a bit to the so-called Dutch disease. For those who don't know what it is, it means being completely reliant on one industry at the expense of others. Our friends across the way have said that because we rely too much on a resource-based economy, other sectors of our economy are suffering as a result.

How much stock do you put in that? Do you consider that to be sound in terms of Canada's economy, as diverse as it is?

[Bernard Brun]

If you don't mind, I will answer the question in French.

With regard to Dutch disease, one must be very careful. Theories that apply to one territory or country cannot necessarily be transferred in their entirety to another. An important part of Canada's economy depends on its resources, but services also represent a significant part of it. In my opinion, it is important to diversify the economy and to further encourage its diversification. We've talked about corporate structures. This means placing greater emphasis on the cooperative model in order to counterbalance the share capital model. The same applies to diversifying the economy in general and to geographic diversity.

[Mark Adler, Conservative, York Centre, ON]

Thank you.