Finance Committee on April 4th, 2017

[The Chair, Liberal, Wayne Easter]

I will call the meeting to order. Pursuant to Standing Order 108(2), we are doing a study of economic growth in the territories.

With us we have, as a witness from the Government of Yukon, the Honourable Sandy Silver, premier, by video conference. Welcome, Premier.

I don't see her, but I believe Katherine White, deputy minister, Department of Finance, is there as well.

Before we start, we have a notice of motion from Mr. Deltell. I believe you want to read that into the record at the start.

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

Thank you, Mr. Chair.

Mr. Premier, I just have a few words to say and then I will yield the floor to you.

I would like to table the following notice of motion:

That the committee, in response to remuneration granted to executives at Bombardier, invite the chairman and chief executive officer from bombardier and the Minister of Innovation, Science and Economic Development to appear before it; that the committee report the evidence heard and its recommendations to the House of Commons.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Deltell. That notice is given and can be debated in 48 hours.

With that, we will turn to the premier. Just to start, Premier, you are aware we did pre-budget hearings, as the finance committee, in the fall. We tabled that report in December, and part of that study was economic development. At that time we looked at all the regions of Canada, so this testimony of yours is pertinent to the committee, and we thank you for appearing.

The floor is yours.

[Sandy Silver, Premier, Government of Yukon]

Thank you very much, Mr. Chair.

Good afternoon to the vice-chairs and the other members of the committee as well.

Thank you for the invitation to appear before the committee today to discuss economic growth. We appreciate the committee's attention and focus on the north. I would also like to give my thanks for the opportunity to speak to the economic growth and well-being of our communities in Yukon in general.

All Canadians have a vested interest in a strong and robust north. Canada's overall economic position absolutely improves as the north develops. The reality is, Canada's north is a bigger picture of our national identity and economy than it has ever been in the past. New economic opportunities are opening up across the north, through both Arctic and subarctic regions. Across all three territories, you'll find a wide range of economic drivers, each with its own unique benefits and opportunities. These opportunities present themselves as the obvious drivers, like access to resources, but also as strong collaboration among territorial, municipal, and first nations governments.

In the north, first nations governments are both leaders and partners in our economic prosperity and diversity. In Yukon, that is absolutely no different. Since 2004, Yukon has enjoyed significant economic growth, as measured by real gross domestic product. Between 2004 and 2013, Yukon experienced 10 consecutive years of real GDP growth. The real GDP grew by over 50% to $2.3 billion. A steadily growing population was experienced, as well as unemployment rates that were generally lower than the Canadian averages, a relatively strong labour market, and income growth. Supported by strong commodity prices, Yukon was largely insulated from the financial crisis of 2008, unlike southern Canada.

In recent years, however, that picture has changed. Both 2014 and 2015 saw significant contractions in Yukon's economy. There was a 0.2% contraction in 2014, and a 6% contraction in 2015. The underlying cause of these contractions can be most easily explained by a decrease in mineral prices, leading to a decrease in mining exports and the suspension of large-scale mining projects. While we enjoy economic benefits associated with access to minerals and resource deposits not found in some other jurisdictions, we also face challenges not present elsewhere in Canada. I will speak to that more in a minute.

I want to draw the committee's attention to the fact that GDP may not actually be a perfect measure of growth for the territories. In most jurisdictions, gains in real GDP are closely tied to gains in other variables, such as employment, population, and retail sales. Under normal circumstances, an increase in real GDP is generally interpreted as a sign that the economy is doing well, while a decrease indicates that the economy is not necessarily working to its full capacity.

In Yukon, the correlation between GDP changes and other indicators has often not been so strong. This is related to the small size of the territory's economy. One large mining project, for example, has the potential to significantly impact the GDP from one year to the next but may have less of an impact on other key indicators, such as employment, labour force participation, and income. For example, the significant 6% decrease in real GDP from the previous year that was experienced in Yukon in 2015 had no effect on the size of the labour force in the territory. During that time, the total retail trade in Yukon actually grew by almost 5%, with the contraction of the real GDP. Therefore, we must consider numerous additional factors when assessing growth. Yukon must work to diversify its economy in order to ensure that the growth is sustainable year to year and to protect it from the volatility of the resource production industry.

While we recognize the long and rich history associated with mining, we must also rely on economic drivers beyond a strong resource sector. Left unchecked, Yukon's economy may be destined for some rough times ahead.

With the expected suspension of mineral production at Yukon's only current active mine, now more than ever Yukon needs to get its house in order.

While Yukon is encourage by forecast growth in its retail and construction sectors, volatility of the mining crisis reaffirms the need for it to diversify its economy.

There are encouraging signs of expansion in other industries as we look at the forecast into the next few years, but we need to ensure that the foundation is in place for businesses to grow and to expand. Reliable Internet, better public infrastructure, energy security—these are the fundamentals.

So, where do we go from here? For Yukon to be seen as having sustainable growth now and into the future, we must take action in the following ways.

First, Yukon imports the majority of its necessities from the south. In 2015, for example, this translated to about $1.8 billion in imports. This is a significant drag in GDP and makes Yukoners more vulnerable to disruptions in the global supply. Increasing Yukoners' ability to produce what they need in the territory will help to mitigate this risk.

Next, Yukon requires strong connectivity with the rest of the world. Access to fast and reliable Internet would be a significant boost to making Yukon a more attractive place for businesses and would allow those businesses that are already there to succeed. Now more than ever, mining is a technology play as much as it is a natural resource play. With better access, Yukon would be better able to build its natural resources and knowledge economy, and to position itself to be a leader in northern innovation. With better connectivity to the global economy there are opportunities to grow industry that isn't dependent upon physical location. A lack of speed and redundancy undermines the reliability of our Internet in Yukon, and it significantly constrains businesses and the economic growth and diversification.

As you can see, these items go hand in hand. To succeed in one is to succeed in the other.

Government sees itself playing a role in this endeavour. We are taking steps towards exploring the feasibility of a second fibre optic line in the territory. We also recognize and support businesses already established in the territory. The most fundamental component of our future growth and prosperity is the recognition and the enhancement of the roles of indigenous governments, development corporations, and businesses and of how they play in the Canadian and in the Yukon economy, particularly in the the rural community. Yukon first nations development corporations and businesses are rising stars in Yukon's economy. First nations governments are a major employer and economic driver in all of our communities.

An example of how Yukon first nations are leading the way in developing local economy is the success of Air North, Yukon's airline. The airline is now half-owned by the Vuntut Development Corporation of the Vuntut Gwitchin people of Old Crow.

Another example is the success of the Carcross Commons, a retail village that was developed by the Carcross/Tagish First Nation's development corporation. Also with the Carcross/Tagish First Nation was a tiny homes project, an employment and skills development project.

Truth and reconciliation means that we advance a vision for diversifying our economy, and that vision must be inclusive of the development and collaboration of Yukon first nations, governments, and economic development corporations. Yukon first nations governments are both leaders and partners in Yukon's economic prosperity.

One of the central commitments of my government is to work collaboratively and respectfully with first nations governments to build strong, intergovernmental relations and a strong, diverse economy that brings benefits to all Yukoners. We recognize the essential role that first nations, Yukon first nations governments, and businesses play in the development and prosperity of a shared Yukon.

The modern treaties and self-government agreements in Yukon have opened many economic development opportunities. As the members of the committee are aware, 11 of Canada's 29 modern treaties and self-government agreements are located in Yukon. These agreements increase collaboration between our governments, reduce conflict, bring certainty that is attractive to investors, and have made first nations governments significant and savvy investors in local economies.

These agreements outline a shared vision for economic self-reliance and ways of sharing the benefits and economic development across our territory.

A critical role of all governments is to work actively and continuously to implement these modern treaties. Addressing the physical relationship with self-governing first nations is critical to the implementation of these agreements. It ensures that first nations are meaningful partners in the economy of Yukon, as was envisioned by these agreements.

Yukon first nations governments and the Government of Yukon have committed to working collaboratively to identify and to take actions for our shared priorities. We meet regularly at leadership forums to advance these priorities. As a recent example, the Government of Yukon and self-governing Yukon first nations have signed a memorandum of understanding, agreeing to work together to improve the management of mineral resources in Yukon. I firmly believe that this type of collaboration will make Yukon a more attractive jurisdiction for investment and will result in real and lasting benefits to Yukon's economy.

Members of the committee, the path ahead is not easy, as you can understand. In addition to the well-known challenges that I've raised, we are also set to experience greater challenges than we've ever faced before. Climate change is known to affect the north on a disproportionate basis, and we are already seeing the impact on our infrastructure as permafrost begins to thaw.

The Yukon government is proud to have signed the Pan-Canadian Framework on Clean Growth and Climate Change, and Yukon agrees with the framework's assertion that carbon pricing will encourage innovation and develop the foundation for a low-carbon and resilient economy. However, Yukon will need clarity from Canada, prior to designing a rebate program, on how Canada will adhere to the following principle related to carbon pricing that was used in the framework:

Carbon pricing policies should minimize competitiveness impacts and carbon leakage, particularly for emissions-intensive, trade-exposed sectors.

People of the committee, in Yukon, that is mining. This includes plaster mining, which is a key driver of the territory's local economy.

How Canada intends to fulfill this promise is very critical to the future of Yukon's economic success. However, we do recognize that some communities are still reliant on diesel power and that investment in alternative energies is difficult in smaller jurisdictions. It's very difficult for them to afford these initiatives.

This means that we must recognize and find a balance between reducing our greenhouse gas emissions and meeting the unique needs of the north, recognizing that support is needed to help Yukon develop alternatives to lessen its own carbon footprint.

We must also understand the economic impact associated with Yukon's lack of scale to provide similar services at the same costs as southern jurisdictions. Yukon must find ways to close the gap in order to maintain a robust and diverse economy.

Members of the committee, while sustainable economic growth is the goal of all jurisdictions, of course it's not without its own challenges. Yukon is working hard to start conversations and to address the challenges as it develops solutions that benefit all Canadians. It is through the co-operative and collaborative methods of the territorial government, and in working with provincial, federal, and first nations governments, that we will be able to make real and lasting improvements that benefit industry, the economy, all Yukoners, and of course, all Canadians as well. By strengthening Yukon's economy, we strengthen and solidify Canada's sovereignty in the north.

I would like to thank you all for the opportunity to speak with you today. I invite you to ask questions at this time.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Premier, for your opening remarks. My apologies; we were late starting because we were in votes in the House.

We'll go to five-minute rounds. The first round of questions goes to Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

I appreciate the opportunity to ask a couple of questions on the premier's comments. It was a very good presentation. We heard the Premier of the Northwest Territories this morning talk about a number of the barriers that the Northwest Territories is facing.

I have a number of questions.

First, I find it very interesting that Yukon, with its history in mining, really is moving to low interest in that sector. Could you explain to us why it is that you're not getting the same type of interest we have had historically in Yukon for mining?

[Sandy Silver]

I guess you mean the interest in the international community and definitely not the interest of the government. We're extremely interested in our resource industry as a government.

I think what we're seeing, Mr. McLeod, is a change in direction. We've had some concerns over the last couple of years about the variables we can control. You can't control commodity prices, but what you can control is relations with first nations governments. What we're seeing in Yukon right now, with the new government approach, is a modernization of what it means to do business in Yukon with the mining industries.

For example, we signed a memorandum of understanding with the Yukon first nations governments. We went down to the Cordilleran Roundup in Vancouver, we went to PDAC in Toronto, and we went government to government. We went arm in arm, Grand Chief Peter Johnston and I, and also the other chiefs. We're presenting a united front, a joint approach when it comes to the resource industry.

What we're seeing is on two fronts. One is the economic front. The companies that are interested in Yukon like this approach. They consider it as one-stop shopping. They know that the conversation they're having with the territorial government is the same conversation they're having with the affected first nations whose traditional territories are being affected, because we're in the same room.

What we're also seeing on the social side of things is more trust from the general population. If you're involving the first nations governments in this sector, which is the resource industry, with these modern treaties, through having them at the table where they are supposed to be—basically implementing these modern treaties as they're supposed to be implemented—the public is seeing a trust factor: that we will be taking into consideration the environmental considerations. The regulatory certainty piece is there as well. Industry gets the certainty they need and the general population sees that this isn't a one-sided conversation.

I think that we're going to see the fruits of that labour.

[Michael McLeod, Liberal, Northwest Territories, NT]

I certainly recognize and see the partnership arrangement that has happened in the last while with the Yukon government. From talking with some of your chiefs I know they appreciate it and are breathing a sigh of relief.

I think everybody has to recognize that as we talk about reconciliation we also have to talk about economic reconciliation and about not leaving the aboriginal people sitting on the sidelines watching everybody else move forward. I think you're doing a very good job, and everybody seems to be of the same mindset now

If you were able to provide us recommendations on where the government should invest to help Yukon, what would your top priorities be?

[Sandy Silver]

Do you mean in the mineral industry or outside of it?

[Michael McLeod, Liberal, Northwest Territories, NT]

I mean for economic growth.

[Sandy Silver]

I think our economic growth is part and parcel. We definitely want to make sure that we're moving forward in a sustainable manner with respect to our resource industry, but we also need to diversify. In tourism, for example, we need to do a better job of making sure we diversify our investment to the private sector's ability to provide a tourism industry.

There are also issues involving technologies. Right now we're talking with the Northwest Territories government. We're looking at a couple of different routes for redundancy of Internet connections. When you build a railroad east to west in Canada, you've opened the western part of the nation to prosperity. Building a redundant fibre line into Yukon and into the Northwest Territories is going to be the determining factor that decides our economic future as we move further into the 21st century.

Diversification of our technologies is very important, then; our tourism industry is important as well. Also, when you look at the mining industry, development is about the subsidiary jobs around the industry too. We need to do a better job to make sure that, if and when another mine comes on, we maximize the potential for local jobs in considering it.

[The Chair, Liberal, Wayne Easter]

We have to cut it there.

Mr. Deltell, you have five minutes.

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

Thank you, Mr. Chair.

Mr. Premier, it's a great honour for me to speak to you.

I want to tell you that when I was elected a member a year and a half ago, one of my dreams was to go to your territory. I did it a few months ago, in September, with the electoral reform committee. We were there just a few days or even, I would say, a few hours before the royal couple, and we were exactly at the same hotel. I was very pleased to open the door for them.

The first thing I learned when I went to your city was this. They said to me, “When you're in Whitehorse, don't talk about Yellowknife, and when you're in Yellowknife, don't talk about Whitehorse.”

[Voices]

Oh, oh!

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

I want to continue the conversation that you had with my colleague Mr. McLeod. Speaking about mining, we all know and we all recognize that wherever it is, whether it's new or in the northern part of my province of Quebec, it's cyclical. Sometimes it's good, sometimes it's wrong; sometimes it's good, sometimes it's bad. Usually it follows a cycle of around seven years.

As a political decision-maker, what do you think we should do to address this issue? Do we need to have a long-term plan? Do we have to invest in huge infrastructure near the mine?

What do you think?

[Sandy Silver]

Both for sure. I will say next time you come to Yukon, make sure you come up to Dawson City. It's my riding, so I believe that it's the true heart and soul of Yukon. Next time, make sure you let me know when you're in town.

You hit the nail on the head. Boom does turn to bust in the mining industry. In my riding, being Klondike, we lived through that. The first nations, the Tr'ondëk Hwëch'in of that area have been living alongside the mining community for over 100 years. Part of the reason it's such an effective community is because of the Athabascan principles of sharing and getting along with the folks who live in this community.

We have an ability to sit down at the table, government to government, Yukoner to Yukoner, and discuss when boom turns to bust. The best thing that we can do is make sure that when we're training our citizens, when we're training our students, when we start looking at how we're going to fill those jobs, we have to make sure that we take a focused lens on technologies and trades that aren't specific just to the industries in our backyard.

When things are going well and when the jobs are in the backyard, then we'll have folks not just with air brake licences but with actual red seal certifications in trades, and also the ability, when boom turns to bust, to be able to go and participate in the rest of Canada and be competitive. We need to do a better job in our school system, in my opinion, to focus on technology and trades, and have dual credits so that if you're going towards a certain direction in a certain trade and you change your mind—because you're young and you do that when you're young—that's not going to affect your ability to graduate from high school and to move on into another area. Again, it's about that diversification of the industry.

One of the best things that we can do in the mining sector is put a lot more attention towards working with first nations governments and the economic development branches therein on reclamation. If you take a look at all the economic development branches that are represented by the different first nations governments in Yukon, there are hundreds of millions of dollars of potential development in this industry waiting to happen. When you're mining, it's nice to have Yukoners in those jobs. The more we keep that money local, the more it affects our GDP in a positive way. When boom turns to bust, we have to make sure that in the reclamation industry, we're also leading the way with local solutions.

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

Let's talk about another issue in economic development, which is tourism. Do you think we should place more emphasis on foreign countries, in Europe or in Asia, to go to your territory instead of local or, can I say, Canadian tourism? What is your main target, Canada or foreign?

[Sandy Silver]

It's definitely a balance. We, as a territorial government, go to Germany, Japan; we try to invest in the international community based upon the statistics that we take. When you take a look at the Canadian dollar, you really want to make sure that Canadians are travelling to these distinct areas. I take a look at the tourism efforts of Newfoundland and Labrador, and I'd like to take a page from their book. They're a unique destination in Canada. People who go to Newfoundland, they're not going somewhere else, they're going to Newfoundland.

Right now, a lot of our tourism is based on people who are going to Alaska. I don't know if you know the geography very well, but Skagway is a small community with large ports. You go there in the summertime, and there are thousands of people coming off the cruise ships. If you ask them when they're down there if they're planning on going to the Klondike to see where the gold rush happened, most of them believe they're already in the Klondike and witnessing it. I think we need to do a better job of educating the road traffic, the RVers, and the cruise ship folks. We have a great opportunity to work in partnership with Seattle, as well. It would be nice to see some direct flights coming from Seattle up to Yukon.

To answer your question, it's not about putting all your eggs in one basket. It's about taking a look at the American market. You take a look at the RVs that are coming up the road. It's Texas, it's Arizona, it's folks who want to come up and take a look—they come into our tourism branches and they ask where the guys they see on the TV show are. They want to see the people who are on the Gold Rush TV show. A lot of people are doing bucket list types of trips, the RV crowd. They're coming up to see this spectacular gold rush concept that has happened. Most people who come up to Yukon and were on their way to Alaska say two things, they can't believe how beautiful it is here—and they mean the people as much as the actual geography—but also that this was the best part of their trip. I think we need to do a better job of focusing in on what the north has to offer and sharing that secret with the rest of the world.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Dusseault, you are next, please.

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

Thank you, Mr. Chair.

I thank the Premier for his statement before the committee. The territories, and especially the relationship the federal government has with them, are an extremely important matter.

In a conversation I had this morning with Mr. McLeod, the Premier of the Northwest Territories, my first comments were about the evolution and independence of their legislative assembly. He felt that their powers over territories, resources, fisheries and environmental issues were priorities. I'll put the same question to you. From the Yukon's perspective, in the context of your objective to gain more independence and powers from the federal government, what would your priorities be?

[Sandy Silver]

Thank you very much.

Here in the north, we're very different as well. Devolution transfers happened in Yukon over a decade ago. We're ahead as far as land use planning and implementation of our land use planning process. That answers your questions a bit.

Land use planning gives us a certainty. Land use planning allows us to make decisions from a northern perspective when it comes to our resources, and I can tell you it's a great time to be involved in politics in Yukon. This government is committed to getting back on track with modern treaties and with the land use planning process.

Concerning Arctic sovereignty, we've been watching a ban on offshore drilling. These bans affect my counterparts in the Northwest Territories and in Nunavut much more than they do Yukon. As you can imagine, on the one hand, Ottawa has engaged in communications as to how to do the devolution transfer and how to take a look at own-source revenue at the same time. It's the opinion of the other premiers that one of their hands is being held behind their back as they talk about own-source revenues.

This is not so much the case in Yukon, but at the same time we want to make sure that the decisions being made on Arctic issues involve the leadership in the north—the aboriginal leaders as well as the premiers. We want to make sure that the conversations on issues that affect Canadian interests, specifically in the north, take into consideration the unique differences between all the different jurisdictions.

Again, for Yukon, as far as our differences go, I would say that land use planning provides the certainty that industry is looking for. It is also the certainty for our environment, moving forward.

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

Thank you.

I will continue with the issue you raised regarding revenues, where you would like to have more independence.

All of this is related to taxation. According to the figures provided to us by the Library of Parliament, about 20% of your workforce is made up of interprovincial and interterritorial employees. So those employees come from other provinces or other territories.

What is the situation in the Yukon with regard to tax collection? What could be improved to allow you to have more independent revenues, bearing in mind that revenue will also be generated by development and what is happening in your territory?

[Sandy Silver]

That's a great question. When we started our devolution transfers, the intention was to give us the ability to make decisions for ourselves and to create more industry by having local solutions to local problems. We need to have a little more self-reliance there. We're no more or less dependent now than we were at the beginning of the federal transfers.

How do we get own-source revenue is the question, really, because that's the crux of the conversation. If we can create an economy, then we have more opportunity to tax. How do we do that? We're competing right now with a lot of the provinces when it comes to tendering contracts. Our goal is to make sure that these companies come to Yukon and live in our communities. A lot of companies do that right now in Whitehorse, so we're seeing success stories in there, but we want to diversify and make this more of a community-by-community aspect. When companies come up and see the amazing beauty of the area and see how rich we are in resources, but also in our human resources, we need to better incentivize these companies to actually grow roots in our communities. We need to have better lots available. We need to work with the private sector to make sure that our housing prices are competitive to give that incentive to companies to come and do business in Yukon. We need to make sure that our corporate tax base is at a comparable rate to other jurisdictions, as well as our small tax rate.

The whole key is growing our private sector. As a government that, basically, has taken the devolution control from Ottawa and has taken it into Yukon, our job now is to diversify that responsibility, and to diversify and make sure that our private sector thrives and that we create not monopolies, but healthy, competitive communities in all the areas.

We have had relative success in Whitehorse, and now we're turning to the communities. Part of that success is working with the first nations that have the modern land use treaties. There are chapters dedicated to the umbrella final agreement that the self-governing arrangements are based upon that allows us to be very creative in finding ways to keep our economies whole.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Sorbara.

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

Thank you, Mr. Chair.

I'd like to allocate my time to the member from Yukon, please.