Finance Committee on Oct. 29th, 2013

[Jean-Denis Fréchette]

I want to say two things. I like going to see the dentist, and I still like the atmosphere of parliamentary committees after 25 years.

I will answer your question. That chart shows that the period during which individuals are unemployed is getting longer. You can see that drop in the proportion. The increase is caused by the recession and an extended period of sluggish economic activity. In addition, the growth as such is an adjustment that will only be made afterwards because the growth is not as rapid as anticipated. That is basically what the chart shows. It is not necessarily due to there being more unemployed persons. It is due to the fact that those who were unemployed reached the end of their period, while we know very well that some people were no longer receiving employment insurance before the 45-day period.

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

I assume you have taken this into consideration, but I would like to know what impact the changes made to the employment insurance program—especially the restrictions imposed on seasonal employment—have had on your office's calculations and estimates. Accessibility has obviously been restricted. What kind of an impact has that had on the pattern and the ratio?

[Jean-Denis Fréchette]

We took into consideration employment insurance as a whole and not just that particular factor.

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

Changes have been made to seasonal employment, but the general provisions of the employment insurance reform that has been imposed have had a fairly significant impact on accessibility. There has been little increase in the number of unemployed individuals, but the number of beneficiaries will not necessarily follow the same pattern, given the reduced accessibility. You are saying that you did not take the provisions of the reform into account when establishing the ratio forecasts.

[Jean-Denis Fréchette]

We did take them into account—not as a specific factor, but as a whole. Basically, our figures cover all those measures, including those applied to seasonal workers. We have no specific measures for seasonal workers. Everything is included in the chart curve.

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

I agree with you, but the reduced accessibility does not affect only seasonal workers. The main measures associated with accessibility have an impact on seasonal employment, but they also affect all categories of employment.

[Jean-Denis Fréchette]

Exactly.

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

Could you analyze the chart by providing the number of beneficiaries to unemployed persons? What impact has the reform had so far on the proportion of beneficiaries? Had there been no reform, what would have changed in terms of your forecasts and the chart we have had so far since last year, as the reform came into effect in January?

[Scott Cameron, Economic Advisor, Analyst, Library of Parliament]

We don't yet have reason to believe that the downward trend in the BU ratio is a result of the changes to suitable employment and reasonable and customary efforts to obtain suitable employment, for a number of reasons. First, the decline in the BU ratio preceded January 6, 2013, when the changes came into place. Second, we put the government's estimate of the impact into our projections.

The government estimated that the effect would be small, at about 8,000 claimants, which is 1.5% of claimants overall. This seems to be a reasonable estimate. They also estimated that the effects would be temporary until these 8,000 claimants had demonstrated the new requirements.

So instead, we believe that it's mostly attributable to the longer durations of unemployment following the recession, and we expect that trend to kind of reverse and go back to a long-term trend.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Welcome, J.D. It's good to see you here with your colleagues. It's great to have you back.

I'm going into a series of questions based off the U.S. and then going to the trades factor and how you forecast something like the European trade agreement, for example.

You have a downward forecast on U.S. growth. I'm curious; on what you base that downward prediction?

[Jean-Denis Fréchette]

I was expecting a question on western grains and the Wheat Board, but thank you, Mr. Hoback. I'll ask Mostafa to answer that question.

[Mostafa Askari]

There are a number of factors in the U.S., including the significant fiscal drag in the economy, that certainly affect the growth rate. Although there have been some improvements recently, the forecast we have is pretty consistent with the U.S. private sector forecast.

[Randy Hoback, Conservative, Prince Albert, SK]

So it would be fair to say that when we start looking at markets, a U.S. market with a downward projection does impact back into Canada quite substantially. Is that correct?

[Mostafa Askari]

Certainly.

[Randy Hoback, Conservative, Prince Albert, SK]

That gives weight to the argument about diversifying our trade markets and taking in countries like the European trade agreement that the Prime Minister signed last week. How do you take an agreement like that, which has so much potential, when you talk about 500 million new customers, when you start looking at the size and the wealth of those countries in that area...? I go back to Saskatchewan and I look at our farmers with $119 tariff on oats, $190 per tonne tariff on wheat. How do you take that and put that into your model going forward, let's say 2015 and beyond?

[Jean-Denis Fréchette]

We haven't taken that into account, the CETA, not yet, because we don't have all the details. As you know, because you went through CUSTA and NAFTA, it will take time before you have the real transition. We can estimate some of these measures, but for the moment they are not included.

[Randy Hoback, Conservative, Prince Albert, SK]

So when you look at a forecast surplus and your numbers of $4.2 billion in 2015, you haven't even taken into consideration the fact that the European trade agreement could actually be in play at that point in time. That would have an impact on that number, would it not?

[Mostafa Askari]

First of all it takes a long time for it to be implemented and be in place. We still really don't have a timeframe as to when that's going to be approved and then the impacts will be observed on the Canadian economy.

There are a number of issues. First of all, typically in any trade agreement—NAFTA was exactly the same thing—there is a transition period and there will be huge adjustments, some of them very negative adjustments for the domestic economy because the sectors that are not competitive will obviously be negatively impacted. During the transition period you may actually see some negative impacts, whereas in the long run, certainly in principle, trade agreements and liberal trade and freer trade will add to productivity, will add to competitiveness, and will add to access, so they will have a positive impact. Exactly how much is an open question. Once the trade is in place, once all the details are in place, then one could provide some estimate of their long-term impact.

[Randy Hoback, Conservative, Prince Albert, SK]

I know that we heard some of those arguments in the NAFTA days about what the negative impacts would be. The reality is that if you look at the picture today, if it weren't for NAFTA and the U.S. and Mexican markets, Canada would be a very different country for sure. I think one would say the same thing with the European trade agreement or TPP or some of the Asian bilaterals we're working on. When you start factoring those in there, Canada being an exporting country.... When I look at my province, Saskatchewan, we export. That's what we do. The downside risk is very little compared to the upside gain from all those customers.

[Mostafa Askari]

To clarify, that's exactly what I said. There is a transition temporary negative impact that will come with any kind of free trade agreement, but in the longer term, certainly, the net impact will be positive.

[Randy Hoback, Conservative, Prince Albert, SK]

And that impact would be felt right across Canada.

[Mostafa Askari]

I think so.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Mr. Rankin, please.