Finance Committee on Feb. 15th, 2017

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order. Under Standing Order 108(2), we are studying the second report of the Advisory Council on Economic Growth.

We would certainly like to thank two of the members of the minister's advisory council for coming today: Mr. Sabia and Ms. Treurnicht. Welcome.

As chair, I might say at the beginning that all members of the House thank you for the efforts you're putting into this advisory council and the good work that you do. We might not all agree on everything—that would be unusual around here—but a good effort opens up a lot of debate, and we appreciate the work you're doing.

I understand, and I think the committee is aware, that instead of the regular two hours, this meeting will be 90 minutes, as the advisory council members have other commitments—I believe some in the Senate.

I think you wanted to make a very brief introduction, and then we'll go to questions. Mr. Sabia, the floor is yours.

[Michael Sabia, Member, Advisory Council on Economic Growth]

Mr. Chairman, thank you.

On behalf of my colleague Ilse, and indeed all the other members of the minister's Advisory Council on Economic Growth, it is a pleasure for us to be here and to have the opportunity to talk about the recommendations that we have made so far to the government.

I'm going to speak initially in English. I'm not exactly sure how you prefer to do things, so I'll carry on in English for a while, but if you—

[The Chair, Liberal, Wayne Easter]

Both languages are translated, and we all have earpieces, so just speak whatever you're comfortable with.

[Michael Sabia]

Thank you, Mr. Chair.

Because of my work at the Caisse de dépôt et placement du Québec, I am very comfortable replying to committee members' questions in French.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

You can answer in either official language.

[Michael Sabia]

As I was saying, it's a pleasure for us to be here. We don't intend to make a long introductory statement at all. As you know, we have divided our work so far into two pieces.

The first piece was delivered to the government and released publicly in October that involved three recommendations with respect to infrastructure, foreign investment, and immigration. A second round released much more recently, if I recall probably at the beginning of last week, on a series of other issues I'll touch on, all to deal with this fundamental issue, which is what can be done to enhance the level of economic growth in Canada.

This is part of a global phenomenon of pretty weak economic growth, largely having to do with two fundamental factors, aging of the population in OECD countries, certainly here in Canada, and second, relatively weak productivity performance across the OECD, and certainly here in Canada. Economic growth is really just the combination of those two things.

We've set a quantitative target for the work, which is to increase average median household income by approximately $15,000 above where it would otherwise have been, which is about $90,000 in 2030. That's our goal. That's a substantial goal to increase household income by that amount.

As I say, you have seen our recommendations in the first round. Round two—again aimed at the same goal—is focused on some very important issues around innovation. We have a variety of recommendations in many different areas to make Canada a more innovative place, which is especially important these days for reasons we can talk about.

Second, we've addressed issue of skills development and re-skilling, which is so important, particularly for Canada's small open economy. That issue of re-skilling and the creation of opportunity through new skills is a very important part of our mandate.

Third, we have done some work and thinking on the importance of identifying some key sectors that offer substantial potential for growth and export for Canada's future. In the proposals we've made, we have identified the agrifood sector as one of those, but there are a number of others.

Beyond those three core areas, we've done some work around turning Canada into a trade hub. That is very important in light of the tendencies in the world today around protectionism, which we certainly regard as a threat to economic growth on a global basis.

Finally, and very importantly, we've focused on questions of workforce participation and encouraging greater participation by groups that are currently not as fully involved in the workforce as they could be, which would be of substantial benefit to them and, equally, to the national economy.

A lot of that is also focused on another of our very important goals in addition to the $15,000 increase, which is the inclusiveness of growth. That is an issue much discussed in the newspapers and media today on a global basis, because underlying some of the issues around trade and protectionism is a much deeper issue around the inclusiveness of growth.

So those two things, enhancing economic growth and reinforcing the inclusiveness of economic growth, are in effect what our work is about.

Thank you.

[The Chair, Liberal, Wayne Easter]

We will start the question round with Mr. Sorbara, for seven minutes.

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

Thank you, Mr. Chair.

I'd like to thank Mr. Sabia and Dr. Treurnicht for the time and effort they and all the members of the committee put into these reports and on the advisory council. We thank you for your service. Both of you obviously have a long history of service.

I ran for office and wanted to be an MP to make sure that we have a good future for all Canadians, including my two very young daughters whom I care about deeply.

Three factors drive economic growth. The first is capital accumulation, the capital stock in an economy. The next is labour, i.e., immigration, birth rates, hours worked, and so forth. The third, which is the magical one, is known as technological advancement, productivity, and in the economic literature, total factor productivity. We see those three factors as the drivers of long-term economic growth in Canada.

When I look at the first one, capital, we have a lot of capital in this country, I think. Mr. Sabia, we have public pension funds, which we don't talk enough about, with have a lot of capital available to be put to use, whether for infrastructure, private equity, or an M and A activity.

With labour there's a headwind. We have a rapidly aging population. Not only is our labour force participation rate expected to weaken, but our labour pool could be shrinking in the years to come. I'm looking at some of the reports from Finance Canada.

Then we have a stubbornly low level of productivity, which is related to sources of clustering or lack thereof—but the commercialization aspect is getting better, I think.

What are the top three things you would recommend that we do to get that little bump, so we could get increased real GDP growth, which was once at 4.8% and is now 1.5%? It was 4.8% back in the 1960s and 1970s. Now we've averaged 2.4% in the last while and 1.5% to 2.5% is projected.

[Michael Sabia]

Honestly, it's going to sound as if I'm trying to avoid your question, but I'm not.

It is so hard to do what we're proposing and what the country needs to do to increase its growth rate. I'll speak personally about this. This is not a one or two or three silver bullet issue; this is a lot of hard blocking and tackling on a variety of different fronts.

You've seen, in both the work that we did and was released in the fall and the work we've done more recently, the topic headings reflect the things that we think are most important.

Canada has an infrastructure problem and an infrastructure financing problem because it cannot all be done on government balance sheets. That's the way it used to be done. It doesn't work anymore.

You make a reference to pension capital. Wearing my Caisse de dépôt hat, we invest in infrastructure around the world. Big pools of capital can be brought into Canada to build infrastructure. We think foreign investment in Canada is really important.

Given your comments about the labour force. We think immigration into Canada is really important to augment the labour force, which is a critical contributor to economic growth. Many people, I think, misunderstand the issue of immigration. Immigration doesn't take people's jobs away; it creates jobs.

Ilse spent her life working around issues of innovation. That's critical.

The things that we've talked about more recently—skills, sectors, stuff like that, all of those things—need to be addressed. What's required here is a comprehensive effort to address all of these issues.

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

Would you like to comment, please?

[Dr. Ilse Treurnicht, Member, Advisory Council on Economic Growth]

Yes, I absolutely agree. That's certainly true across the innovation landscape as well, which is why we've broken our innovation recommendations into a number of pillars that need to self-reinforce each other's impact.

We also recognize that there are some lessons to be learned from what some other countries do well, but that we need to adapt those models to our unique, big, floppy geography and our low-density population.

Your reference to clusters is.... What does a cluster mean in the Canadian context? We need to be smart about building networks to get the required level of density, of ideas, of capital, and of talent to drive growth in certain key sectors. I think that was one of the nuances that we were very aware of, not to reinvent the wheel but to look at some of the global models and be honest and thoughtful about how they might be adapted to the Canadian context.

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

Do I have more time?

[The Chair, Liberal, Wayne Easter]

If you have a very short, snappy one—

We'll likely have a second round, Francesco, so you'll be able to get back in.

Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much, Mr. Chair.

Welcome, Ms. Treurnicht and Mr. Sabia. It is a pleasure and an honour to welcome you here to the Parliament of Canada.

Mr. Sabia, I am just going to take a moment to briefly describe your career for our colleagues.

The Government of Quebec appointed you to head the Caisse de dépôt et placement du Québec, where our pension funds and such are invested, the mattress under which we keep our savings, so to speak. At one of the most critical points of its history and after a major crisis, the Caisse de dépôt had a record that was dubious to say the least. When I was leader of the opposition party in the National Assembly, the language I used was not a little harsh. But since you are our guest, I will refrain this time.

I do so especially because, since you took up the position and in spite of the situation—which was dire, as I mentioned—you have shown beyond any doubt that, when you have people's trust, when you make sound choices, and when you surround yourself with good people, it is possible to correct the course of a ship so that it does not sail into an iceberg.

You really have made the Caisse de dépôt et placement into an example for the world.

Thank you, Mr. Sabia.

[Michael Sabia]

That is very kind of you. Thank you very much.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

It is not just kind, it is true.

Could you please give my regards to two people with whom you do very good work? They are Daniel Fournier and Christian Dubé, whom I knew well in a previous life. You literally captured the attention of the National Assembly. Mr. Dubé is a former MNA, but, as I said, he will be of very great service.

[Michael Sabia]

We are always on the lookout for talent.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Sabia, we are very pleased to see a man of your calibre join this brain trust in order to help the government in its actions. We are not opposed to the creation of an advisory committee made up of people as distinguished as you. Of course, it is up to us to assess your recommendations—for recommendations they are—and to pass judgment on them. A few months ago, you specifically recommended establishing an infrastructure bank, a suggestion that the government promptly endorsed.

Technically, we are not opposed to the principle, but why would we need a bank like that in Canada when another tool already exists—not in such a refined form as an investment bank, we acknowledge—by the name of PPP Canada?

PPP Canada is a fund set up some time ago by a government of the same political hue as mine—though that is not the point I wanted to make here—and which allows private investment. It also allows entities like yours to invest in infrastructure. To my knowledge, Canada has never shut the door to foreign investment. Those are the objectives that the investment bank is working towards.

As I told you, we are not against the principle, but why create this bank, given that it is a tool we already have?

Another of our concerns is that, for five years, we are going to create a new entity and free up $15 billion for it. So that money will not be available to meet the immediate infrastructure needs that you highlighted earlier. There really is a need.

In a word, why create a new entity to deal with infrastructure when we already have PPP Canada, which could perhaps do with some adjustments, but would do the job very well?

[Michael Sabia]

That is a reasonable question.

In our view, the bank has a number of objectives. What does that mean? We wanted to create a centre of expertise. As you are very well aware, the infrastructure finance market is highly sophisticated now. The idea is to establish a bank that could operate as a centre of expertise and attract people with the expertise needed to finance projects in as sophisticated a way as possible.

That financial expertise is not the basic expertise that PPP Canada currently has. Financial expertise is a major component of the bank's mandate.

Let me speak very directly and openly. I am very well aware that I am in Parliament, but I will still say that political decisions do not always make for the best investment opportunities and the best infrastructure projects.

By best infrastructure projects, I mean those that have the greatest impact on the productivity of our economy. Politically, other factors are always in play and they may even be very reasonable, but our mandate is to find ways to increase the Canada's level of productivity and economic growth.

Another important objective is to set the bank at a distance from government and to create an institution that can act a little more independently, so that its decisions are better. In other words, this is about increasing our country's productivity. Independence and the quality of decision-making are two reasons why we advocate the creation of a new bank.

[The Chair, Liberal, Wayne Easter]

Okay, a very quick snapper.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much for making those comments, Mr. Sabia.

In our view, your vision could very well have been applied, with some modifications, to PPP Canada. Independence and outside expertise would have been welcomed at PPP Canada Inc. Then there would have been no need to create a new institution.

[The Chair, Liberal, Wayne Easter]

Did you want to respond to that, Mr. Sabia? No?

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Ms. Treurnicht and Mr. Sabia, thank you for joining us, but thank you especially for spending the time to prepare, research and produce this second report. Congratulations.

My first question deals with the chapter you have called: “Tapping Economic Potential through Broader Workforce Participation”, and particularly with the ideas you have proposed to help women with young children become more active in the workforce.

In your recommendation in that part of the report, you are quite direct. You propose the creation of a national subsidized childcare program, using Quebec's as an example. I am already convinced that allowing women and men with young children to participate more actively in the workforce would have a beneficial effect on our economy.

To help us in our work, could you share with us the research and the data you used to come to that conclusion. I imagine you based yourselves on facts before you made that proposal to the Department of Finance.

[Michael Sabia]

As you know, we identified four groups that are very important, in our view. One of those groups is women with children. There are a number of ways to meet the important challenge of encouraging an increase in the participation rate of women in the workforce in Canada. The Quebec model works quite well. Why is that so?

We could compare two figures. The workforce participation rate of women with children in Canada outside Quebec is about 86%. In Quebec, the figure is 93%. Given the size of those populations, the difference is quite significant. If we increased the participation rate outside Quebec to be identical to the one in Quebec, it would represent an additional contribution to our GDP, in the order of about an extra $13 or $14 billion per year. That is very significant.

The Quebec model, with subsidized day cares, is one way to go but there are also others. It would perhaps not be exactly the same, but you could, for example, create tax credits in order to achieve similar objectives. Clearly, the difference, the gap in the participation rate in Quebec and in the rest of Canada, reveals something.

We highlighted the program in Quebec because I feel that it is working and achieving its objective.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

As you said, a small additional percentage of people joining the active workforce makes a significant impact on the GDP and on our economy.

Would you be prepared to say that the government could afford to invest directly in order to allow that particular group, women with young children, to be more active in the workforce?