Finance Committee on Oct. 27th, 2016

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

I'm looking at the comment that Claude Lamoureux, the ex-CEO of the teachers' pension fund, actually made, following the announcement that we might be going in that direction. He said that for the government, this is a way to offload its responsibility and to give that to someone else, and that in his opinion, that someone else can be more efficient than government.

The former CEO of the teachers' pension fund gets it.

I would submit that the government—and once again this is not an attack on you, because I understand your role in this. When the government created this advisory council on economic growth, it was supposed to be advising on economic growth, not bringing it to a foregone conclusion. By having you here—you have been working on infrastructure for many, many years and you've been talking across the world on this—and having Michael Sabia and having Mark Wiseman, all who actually had very strong views about going in that direction, I would tell you that for the advisory council to be coming to this suggestion was actually a foregone conclusion, without any debate in the population, and without any mention of it during the campaign.

I think at some point we'll need to look at it and make what's going on here a bit better known.

[The Chair, Liberal, Wayne Easter]

I don't think that's up to Mr. Barton to answer.

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

I understand, and I mentioned that at the beginning.

[The Chair, Liberal, Wayne Easter]

That's a debate for us to have in the House, no question about it.

Thank you both for that discussion. It was a good discussion, nonetheless.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Good morning, Mr. Chair.

Thank you, Mr. Barton, for your service, on both the public side and the private side, for many years, for Canada.

Earlier this week, we had the Bank of Canada governor and the deputy governor come speak to us. In their writings in the last few papers they've put out, they've talked about two broad impediments to increasing our long-term growth rate. I think their forecast is about 1.5%. One is the labour force, specifically, the labour force growth rate. The other is the broad bucket of innovation/productivity and how Canada can do better.

I'm just specifically looking at the labour force growth rate, not really the participation rate, because that hasn't really changed in the last 20 years. The labour force growth rate is slowing down. Our demographics are not the worst in the world, but they definitely could be better, and we have this immigration system. One of the key recommendations you and the Wise Persons' Committee put forward is to increase immigration from 300,000, gradually, up to 450,000.

I'm a proponent of that. I think it's been proven that immigration is good. My concerns right now are that when I look at a number of very, very successful entrepreneurs in this country, people such as my parents, under our current system, they wouldn't get in. I would say that probably the top business people in Canada currently could not immigrate to Canada under the current system.

The LMIA process by employers is broken, as I call it. It's slow. It's tedious. I've heard a lot of feedback that basically you are guilty until proven innocent when you are trying to prove that you actually need the person to come through.

I'll stop in a second, but I'm an individual who had the privilege of working for a U.S. investment bank for almost a decade, in the United States, going there under an H-1B visa, and seeing how their system worked. I'm not saying it's better or worse.

I want you to focus your comments this morning on the importance of immigration, not only attracting the best but having a larger piece of the pie come over.

[Dominic Barton]

Thank you.

Yes, we have a similar view to yours. This declining workforce worries us, because, again, it's happening so quickly. My personal view is that for Japan it's too late; they've gone beyond the curve. The amount of immigration they would require to do it would be too significant to be practical in the time frame, so I think there's an urgency to it.

The way we looked at it, just quickly, one thing was to facilitate entry for top talent. That goes to your point about delays with the LMIA exemptions, and how you go through it. It just takes too long. In the round tables and discussions we had around the country, we saw countless examples of Canadian companies that ended up putting a key part of their business in New York because they couldn't bring that capability into Canada. Doing that was just too arduous. We did want to expand the exemptions for some of the senior executive roles. We wanted to have a two-week process. We said let's put a time frame on it; it takes too long.

Also then, relax some of the restrictions once the permit's in place, because there is also quite significant retention. So there's a top talent piece that we felt was important, and we think it actually leads to fewer jobs being created in Canada because that occurs so slowly today.

The second was around the students. To your point about not qualifying, we have a lot of superb international students who come in and who we think would be terrific entrepreneurs and people who would create jobs and build businesses, but the point system makes it very difficult for them to stay. That's quite different from how it typically would be in the U.S. Obviously, the U.S. is a lot worse right now than it has been, but that's a very big source for Canada.

Australia's third-largest export is education, foreign students coming in, and we think that's something. Then there's this 300,000 to 450,000 target we're trying to hit, but flanging it in 15,000 people at a time to move it.

The last thing is the accreditation standards, because we also need to make sure that when people come in they actually can get a job. The number of people who are electrical engineers or medical doctors and who are driving taxis because the accreditation service doesn't work is a problem, so we have tried to make some recommendations around that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

You brought up Australia. I think there are a number of policies that Australians have adopted on immigration, which we could emulate. They've basically opened it up to young people from 18 to 35 who have graduated from a university either back home or in Australia, or who want to come over to study in Australia. Australia has said please come over and work, because they're young; they don't need health care; they contribute, and they have a real desire to be engaged in the labour force and to open businesses.

I'll finish with a question on FDI, because I believe my time is running out. The group has advocated for a single point of entry, if I can call it that, on foreign direct investment. How would the coordination work between the federal government and the provinces? I think you know the Canadian system much better than I do on that level.

[Dominic Barton]

I think one way we could see it working is by, first, having a targeted set of types of companies or investments that we want. For example, I think we would like to have more people—and I'll use Thomson Reuters as a recent example—in the information technology area. It's going to help us with our innovation, and my view is that there are probably 45 companies out there we would love to attract.

This group would go out literally to try to figure out what it would take to get those 45 companies to do something in Canada. Once we, in a sense, brought them in, it would then be a matter of coordinating with the provinces to determine the best place to then operate and work with them. It would have to be coordinated with the provinces and not be done in a way that says whoever gets to them first is the one, because they're just looking for a straightforward path. So there would be some targeting of this group to bring it in and then work on the provincial side and also on the city side to see where those people would ideally be placed.

This is where it can get controversial, because we're probably not going to build a quantum computing capability in St. John's, Newfoundland, so we have to make sure we're focusing on where the people are going to want to go and where we think it will make sense for them to go, and then do it.

I don't know if that makes sense or not or it is flawed in your view.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for that, and Thomson Reuters is a perfect example.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Before I turn to Mr. Albas, I have a question.

At the beginning of our pre-budget consultation, we had all the regional development agencies in before the committee. My thinking from having had them all in, to a great extent, is that Canada is a country of very different economic regions, with a lot of similarities but different economic regions. Is your advisory committee factoring that in, in any way?

I am from Prince Edward Island. The last thing we want to see us do is fall further behind than some of our regions because all the investment is going elsewhere. In terms of your discussions, are you factoring any of that in?

[Dominic Barton]

Yes, we are. We're trying, Mr. Chairman, and you should tell us whether we're doing so adequately.

One of the things we've been doing is regional round tables. They've been exactly instructive, as you've said. The first one we did was in eastern Canada, in Halifax. I know that's not in Prince Edward Island. The notion there was to ask what opportunities we see in this region in terms of the sectors that we could bring in and in terms of the types of companies, and also what is going on with the universities. That was quite different from what we saw in Vancouver, where there was a different range of things. We got very clear feedback from those. It was a mixture. It was small business, large business, academia, and labour unions. We had a broad mix of people. That's one way we're trying to do it, and we're continuing that.

We've done that in five parts of the country. I'm going to Regina on November 10, for an agrifood one, looking at pulses and what we could do on those, and wherever that will move, with some technologists who we think we can bring in from Israel and from parts of Europe—Switzerland in particular. There are companies that we think we can bring into that.

We are trying to recognize that there are very big regional variations. I think this national agency has to look at it that way. That's why we think there's a need, in a sense, to have a bit of strategy around the types of companies that we want to have in Canada, in these different regions, and then go after them and try to bring them in, as opposed to doing it from the bottom up.

[The Chair, Liberal, Wayne Easter]

Okay, that's good to hear. Thank you very much.

Dan, go ahead. The floor is yours.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you, Mr. Barton. I do appreciate that you've been doing this work as a volunteer. Thank you for your service to our country.

I think you'll find that many Conservatives have been critical of the government's current plan, with good reason. With regard to your mandate, were you instructed to work from the Liberal election platform on the fiscal and economic side, or were you given more of a blue sky approach?

[Dominic Barton]

We were given a blue sky approach. When Minister Morneau called, I had never met him before. I didn't know him. He basically said, “Your job is to come up with bold ideas that can help jolt growth.”

Sometimes we got into things such as “Well, that's an interprovincial issue”, or “What is the Department of Finance going to think about this?” He would say that it was his job to figure that out, and that, by the way, we were to come up with our ideas, but that didn't mean they were going to use them.

For example, we talked about—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Fair enough—

[Dominic Barton]

I don't know if you get it—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I appreciate your honesty and your dedication to putting forward some ideas, because, quite frankly, one thing we've been very critical of is the lack of economic growth despite the high costs. As you said, higher deficits down the road, if we invest in the wrong kind of infrastructure, could leave us saddled with long-term debts. Seeing our ability to promote economic growth is important.

I will say, though, that Mr. Caron does raise a good point. Many of the things you're proposing here are, in some cases, polar opposites of what the Liberals campaigned on. For example, you've suggested that tolls can actually help pay for infrastructure and bring foreign direct investment. The Liberals campaigned on removing tolls.

The Liberals have said they want to see 67% of their infrastructure budget going towards social and green infrastructure. You instead have said it should go into more transit infrastructure that's productive, such as rail and ports, and whatnot.

Is your report basically somewhat of a tacit admission that the current plan the Liberals have offered, and ran on, is not working?

[Dominic Barton]

Mr. Chairman, I'm not going to go to that place, because I think you can decide how you feel. All we're doing is trying to come up with the ideas we think will move the dial. We are not wedded to any particular forum.

We have a lot of debate in council, by the way, on the different pieces. To be very open with you, I didn't study the Liberal Party. I couldn't tell you what that was. In the group we have Jennifer Blanke from the World Economic Forum, who would have no clue what that is. We just said let's look at what's going to drive it.

The other thing I would say is on the green side. This isn't anti-green. There are many things that can be done in a profitable way that actually benefits everyone.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I don't disagree at all. My skepticism isn't towards you, sir. I appreciate people who are actually willing to help out and help their country. Again, the question is how can we raise economic growth?

You have suggested an infrastructure development bank. In the Liberal platform they talked about directing an infrastructure bank to invest in social housing. It also said it would focus on giving low- or no-interest loans to municipalities.

Your proposal is quite different. Is that correct?

[Dominic Barton]

Yes. I still think the government should have the capacity, if it wants to, for social policy issues to invest in that type of infrastructure that doesn't have a return. I don't know of any country in the world that doesn't do that.

All we're saying is there's not enough capital, unless you want to run massive deficits, and if we played that out, it would add 15% to the deficit level, which is unsustainable. We think we need to try to tap into private capital both within Canada and outside of Canada, and that's very doable.

The infrastructure bank would be focused on these $100 million-plus.... That's on the more commercially oriented side of it. The other types of infrastructure investments, which I'm sure will still be done, would need to be done through a different process, because private companies wouldn't want to participate in those.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I appreciate your point about foreign direct investments. Since last October we've seen a lot of foreign direct investment leave.

I do question, however, the proposition that Canadian pension funds and other private equity firms should be investing here in Canada. Pension funds are obviously for the benefit of the pensioners, and diversification is an important part. Right now, it's a bit of a chicken-and-egg situation. This is not your fault. I'm happy you're raising the point that we need to attract direct foreign investment.

The challenge is, though, that there are more growth levels outside of Canada. If you're from the Canadian market, you're going to want to see returns that are greater than inflation. We just don't see that as much.

How do you reconcile your view that we should be getting more pension funds from Canada investing within Canada, given that set of circumstances?

[Dominic Barton]

I fully agree with you on diversification. I think it's good. It's in all our interests that the Canadian pension funds are investing overseas.

The only thing I would say, though, is that there is a humongous oversupply of long-term capital versus infrastructure projects. Every pension fund in Canada, in the United States, in Japan, and in Europe would love to invest more in infrastructure. There are simply not enough projects that have been put forward.

That's what I said about the competition. That's why I'm not worried about private equity coming into this. They won't play. They won't get the returns they want in this. That's why when someone in Australia puts in a bankable project for people, you literally have a swarm of people because there are just not that many. We think there are those in Canada; they just need to be structured.

We want this infrastructure bank to be independent and to have world-class structuring skills, so that it can set up these types of things to be attractive but also good for Canadians. It takes a specialized set of skills to do that.

Again, I agree with you on diversification, but there are simply not enough infrastructure projects. It's one of the strangest problems in the world, because we have all this infrastructure and we have all this money, but it's not happening.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Barton.

We will probably go about eight minutes over our scheduled video feed. I'm told the video feed will stay on, so we'll have time for three more questions.

I should remind Dan as well that Liberals are always open to new ideas, as long as they're good ones.

Ms. O'Connell, you're next.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you very much for joining us here today. You've spoken a lot about private investment and the trillions of dollars out there. I apologize to my colleagues, because I've been sounding like a broken record over the past couple of days, but you also spoke about renewable energy. I would really love it if you could highlight the focus on having that private investment for moving the climate change agenda along. It's good business, but it's also good in the long term. From my understanding, for renewable energy in particular, you spoke about investments wanting any type of growth, and with renewable, the costs have gone down dramatically and the payback is short term in comparison. Can you speak about whether this is a particular focus? You touched on it, but I'm just wondering if you had something else to elaborate on.

[Dominic Barton]

We definitely think that's an important category for the reasons you mention. It isn't just because doing renewables is a good thing; it's actually because doing them is profitable and drives productivity benefits.

For the electricity grids, we're looking at clean tech in innovation. We just don't know why in Canada we're not a powerhouse on clean tech, in everything from how we use our existing energy resources.... I think we see that with some of the Canadian energy companies, such as COSIA and what it's trying to do. We think a lot more can be done on that front. We're looking, for example, at solar for greenhouses for food in the Prairies. Infrastructure is going to be required to build the greenhouses that would allow for more crops. That's not just good for the environment; it's good for productivity growth, and it is a renewable resource. Water systems are another very important category. I could go on.