Finance Committee on May 18th, 2017

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order, as we continue this afternoon with our further panels. Pursuant to the order of reference of Tuesday, May 9, on Bill C-44, an act to implement certain provisions of the budget tabled in Parliament on March 22, we have two panels this afternoon for the next hour and a half. We will start with the Business Council of Canada.

I understand, Mr. Berthold, there is something you want to say before we start the panel.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Mr. Chair.

Thank you, fellow members.

I'd like to talk about something that happened in the Standing Committee on Transport, Infrastructure and Communities.

This week, we had the pleasure of hearing from witnesses on Bill C-44. We spent two hours discussing the bill. My fellow members on the committee did not think that was anywhere near long enough.

When the Standing Committee on Transport, Infrastructure and Communities met this morning, we were shocked to learn that the chair of the committee had sent a letter to the chair of the Standing Committee on Finance yesterday. We didn't even know about the letter. As you probably know, Mr. Chair, the letter is dated tomorrow. I'm not sure what that mistake might mean. It may have something to do with the chair's haste to respond without the consent of the Standing Committee on Transport, Infrastructure and Communities.

We discussed the matter at length this morning. The members of the Standing Committee on Transport, Infrastructure and Communities asked for more time to study Bill C-44 in order to make recommendations to the Standing Committee on Finance.

I wanted to make everyone aware of the situation. The letter was sent to the Standing Committee on Finance without the knowledge of the members of the Standing Committee on Transport, Infrastructure and Communities.

What's more, we never even got the letter. I had to ask the chair of the Standing Committee on Transport, Infrastructure and Communities to give us a copy. None of my colleagues in the opposition, the NDP, or even the government party had received the letter.

For me, that raises questions about the procedure used and about what the Standing Committee on Finance intends to do with the letter, knowing that the committee it came from did not have the opportunity to discuss it.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Berthold.

The letter may have come in this morning. I am just now reading it. As you're well aware from the letter I wrote to your chair on behalf of this committee, we farmed out certain sections of Bill C-44, the budget implementation act, to other committees. This one that went to the transportation committee was, I believe, dealing with the infrastructure bank. It was our intention that this committee....

We had meetings this morning with those witnesses, or was it yesterday?

[A voice]

This morning.

[The Chair, Liberal, Wayne Easter]

This morning. We've had so many meetings. We had witnesses this morning from the department on the infrastructure bank, and witnesses yesterday from various interest groups on the infrastructure bank. It was our thought that the transport committee would look at infrastructure in terms of the kinds of projects that would be funded, etc., and that this committee would look at the infrastructure bank from the aspect of its financing and financial matters.

All I can say at this time is thank you for that information. I will talk to the chair of the permanent committee on transportation. At this point, I'm unsure where to go, but I don't believe that the aspect you folks were looking at will have a lot of implications for the bill. We will be meeting again on May 29. If we have to do something on the morning of May 29, we will.

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

In the discussion with that chair, I think it would be appropriate to ask why members of the committee, after hearing from the various witnesses, weren't even given an opportunity to present recommendations or some guidance to us.

I mean, what the heck was the point of dragging all those witnesses before the committee and then basically just throwing it in the trash? I think it's incumbent upon you to impress upon that particular chair that there should be some outcome, based on all of those witnesses who took the time to testify before the committee. We have no idea what was said.

[The Chair, Liberal, Wayne Easter]

I should make note that at the conclusion of the letter, Ms. Sgro, the chair of that committee, said: “Please note, I invited Committee Members to contact the Parliamentary Counsel and Legislative Clerk assigned to Bill C-44 should Members wish to draft amendments on their own initiative and to submit them directly to the Clerk of the Standing Committee of Finance before Friday, May 19, 2017 at 5 p.m.”

I assume you've seen that, Luc.

I have Mr. Dusseault and then Mr. Albas.

Mr. Dusseault.

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

I think there's a lesson to learn from that. Probably the next time, we should cc the vice-chair on the letters that we send to the chair. It seems that the problem is that other members of the committee weren't aware because the chair kept that for herself.

[The Chair, Liberal, Wayne Easter]

I don't think so.

I think the clerks were also informed that the letters were coming, so it wouldn't be just the chair. The clerks of each committee were informed as well.

Mr. Albas.

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

Briefly, Mr. Chair, I think the whole purpose of our sending that invitation to participate in the process is obviously that the members of that committee have some expertise in the area of infrastructure and whatnot.

As you said, those witnesses they heard were very specific on the subject. To have a process in place at one end but then to not complete the loop by involving members, I think is a disappointment to my colleague. I just hope that when you have a discussion with the chair, you point out that the whole purpose of the matter was....

We could have had the witnesses here, but we were hoping that the members of that comment, both from the government and opposition parties, would make use of their ability and experience to draw out those witnesses.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you all, and we will follow up with the chair of the transportation and infrastructure committee.

With that, we will turn to witnesses related to the budget implementation act.

Welcome all.

We will start with the Business Council of Canada, and Brian Kingston, the vice-president policy, international and fiscal issues.

[Brian Kingston, Vice-President, Policy, International and Fiscal Issues, Business Council of Canada]

Thank you.

Mr. Chair, and committee members, thank you for the invitation to take part in your consultations on Bill C-44. I have some very short opening remarks. I will give you the general overview from the Business Council's perspective on the budget, and then I'll specifically talk about infrastructure and investment.

The Business Council of Canada represents the chief executives and entrepreneurs of 150 leading Canadian companies in all sectors and regions of the country. Our member companies employ 1.7 million Canadians; account for more than half the value of the Toronto Stock Exchange; contribute the largest share of federal corporate taxes; and are responsible for most of Canada's exports, corporate philanthropy, and private sector investments in R and D.

In the council's pre-budget submission, we urged the government to adopt a laser-like focus on competitiveness as the key to generating long-term economic growth and ensuring a better life for all citizens. We believe that Canada needs a focused strategy to encourage new business investment, attract international capital, and enhance Canada's ability to compete in a global economy.

Among other recommendations, we called on the government to streamline the approval process for private sector infrastructure projects, develop a comprehensive plan to broaden the tax base and bring down rates, and set out in detail a fiscally sustainable path to balanced budgets with a commitment to an explicit debt-to-GDP target. Acting on these recommendations would, among other things, help position Canada as a global trade and investment hub, and we believe this is increasingly important in the face of protectionist and competitiveness threats.

So, we welcome the government's efforts to establish the Canada infrastructure bank to attract private sector and institutional investment to new revenue-generating infrastructure projects. Targeted spending on productivity and trade-enhancing infrastructure projects would bolster Canada's long-term competitiveness. In our view, the infrastructure bank should be designed to stimulate, through open and competitive bidding, the development of infrastructure projects that would not otherwise be pursued by federal, provincial, or municipal authorities.

But importantly, injecting new capital alone will not improve infrastructure. The federal government can lay the groundwork for new, major infrastructure projects by ensuring the regulatory approval processes are transparent, predictable, fact-based, and capable of rendering decisions in a very timely manner.

Turning to foreign investment, another important element of Bill C-44, the Business Council has long called for the creation of a single window to attract major investments to Canada, and for that reason we welcome the proposed invest in Canada hub. Canada's ability to attract foreign investment has diminished. In the early 1980s, the stock of inward foreign direct investment, FDI, as a share of GDP was higher in Canada than in countries such as Australia, Norway, Sweden, and the U.K. Today the situation is reversed. Canada lags behind all four of those countries as a destination for foreign investment, and over the same period our country's share of the global FDI stock has fallen from 8% to just below 3%. According to the “World Investment Report 2016”, compiled by UNCTAD, the United Nations Conference on Trade and Development, Canada does not even rank among the top 15 prospective host economies for multinational investment in the 2016-18 period. That's a drop from the 11th destination last year. This is based on a survey of multinational executives, and we find that quite a worrying ranking.

We believe that the proposed investment hub will help Canada reverse these worrying trends and bring new investment into Canada. Finally, we believe that foreign investment is beneficial to Canada, except in very unique circumstances. For that reason, we support raising the Investment Canada Act review threshold to $1 billion in Bill C-44.

With that, I conclude my remarks and look forward to questions.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Turning to the Canadian Steel Producers Association, we have Mr. Wegiel, vice-chair, trade and public policy committee; and Mr. Young-Steinberg, director.

The floor is yours, Mr. Wegiel.

[Henry Wegiel, Vice-Chair, Trade and Public Policy Committee, Canadian Steel Producers Association]

Thank you.

Good afternoon, honourable members of the committee, and thank you for the opportunity to present today on behalf of the Canadian Steel Producers Association, or CSPA, as regards Bill C-44, an act to implement certain provisions of the budget tabled in Parliament on March 22, 2017.

The CSPA is the national voice of Canada's $14-billion primary steel production industry. Canadian steel producers are integral to the automotive, energy, construction, and other demanding industrial supply chains. CSPA seeks to work with governments and industry partners to advance policies that enable a globally competitive business environment for its member companies and various supply chain stakeholders.

As committee members are aware, the global steel industry is at an inflection point as the result of growing overcapacity and direct state intervention in the sector. Canadian producers are not immune to or sheltered from the truly unprecedented international challenges that currently face the sector. The steel industry has, on a worldwide basis, seen a significant increase in market distorting dumping and circumvention practices, both from China directly and from a host of other global producers whose home markets have also, in many cases, suffered because of unfair Chinese competition.

To put that in perspective, the root cause of our issue is that there is 700 million tonnes of global excess capacity in a steel market of 1.6 billion tonnes. Out of that 700 million tonnes of excess capacity, over 400 million tonnes is in China.

Simply put, that steel has to go somewhere. The price deterioration and the market instability associated with the illegal steel trade have contributed significantly to our industry's challenges and are hurting middle-class Canadian families. As a direct result, investment in Canadian facilities, capacity utilization, and employment are under threat throughout Canada's steel production and manufacturing sectors.

With that in mind, the CSPA welcomes the Government of Canada's budget 2017 commitments to improve its ability to remedy dumped and subsidized imports by implementing measures that effectively modernize the Canadian trade remedy system.

Specifically, the CSPA appreciates the amendments in budget 2017 to the Special Import Measures Act, or SEMA. These four major amendments provide for the following: first, the ability to expand a trade remedy measure to address circumvention of dumping duties; second, more transparent and predictable enforcement of trade remedy measures; third, the ability to address market distortions in the country of export when establishing dumping margins; and last, the ability for unions to now participate in trade remedy proceedings.

With these changes, taken in conjunction with the changes that were implemented in budget 2016, the Canadian government has taken meaningful, substantiative, and timely steps to modernize Canada's trade remedy system.

Almost as importantly, these trade defence mechanisms also send an important signal to our closest trading partner, the United States, that Canada remains a partner equally committed to battling and addressing unfair trade.

In this regard, in 2015 and 2016, the U.S. implemented their own trade remedy modernization via their trade enforcement act and the Leveling the Playing Field Act. Now Canada and the United States are on equal footing from a trade remedy standpoint.

However, recently the U.S. has initiated processes such as the ongoing section 232 investigation on the effect of imports of steel on U.S. national security, and a consultation concerning construction of pipelines using domestic—that is, U.S.—steel and iron.

As we work to seek exclusions from future U.S. findings or actions, it will be essential to remind the U.S. administration of both our existing joint efforts on steel enforcement and our renewed legislative commitments to combatting unfair steel trade in North America.

In closing, I would remind this committee that unfairly traded goods pose a clear and present threat to the livelihoods of over 22,000 middle-class Canadians, together with their families, employed directly in steel production and the additional 100,000 Canadians whose employment is indirectly impacted by the sector.

Steel production in Canada involves significantly advanced manufacturing processes, and Canada's steel workers are well educated, highly skilled, and trained throughout their careers.

With this in mind, I urge this committee to recommend the passage of the amendments in Bill C-44 related to strengthening Canada's response to unfair trade and to encourage the government's quick implementation of the related regulations. This will allow our industry to take advantage of these new legislative tools to defend against the well-documented and corrosive impacts of global overcapacity and unfair trade in steel.

I thank you for your time, and I'm happy to take any questions that members may have.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Wegiel.

The Consider Canada City Alliance, Mr. Darch, president, and Mr. Patacairk, the floor is yours.

[Mike Darch, President, Consider Canada City Alliance]

It is my pleasure to address you today to give the support of the Consider Canada City Alliance to the Invest in Canada Act and its implementation. My name is Michael Darch. I am the president of the Consider Canada City Alliance. With me is Blair Patacairk, who is the chair of our government relations committee, as well as the managing director for investment and trade here at Invest Ottawa.

I intend to address three points today: the support of the CCCA and its members for the investment hub to be established by Bill C-44, the benefits and relationships that would be established between our members and the hub, and activity already under way to ensure that the economic opportunities presented by the establishment of the hub are quickly and effectively achieved.

First, I will give you a short introduction to the CCCA. Seven of Canada's large cities came together in Calgary in 2007 to explore common challenges in attracting foreign investment to Canada. That collaboration continued with the invest in Canada bureau within Foreign Affairs. In 2012, we incorporated as a not-for-profit organization. Today, the CCCA includes 13 of Canada's largest municipal investment promotion agencies, stretching from Halifax to Vancouver. Together, the economic influence zones of the members encompass all or part of 14 of Canada's census metropolitan areas that represent 59.6% of Canada's population, 65.1% of Canada's GDP, and 83.4 % of Canada's GDP growth between 2011 and 2016.

The mission of the Consider Canada City Alliance is to contribute to a sustainable and globally competitive national economy built on the collective strength of the ecosystems in each member region.

The members of the CCCA were therefore delighted with the announcement in the fall economic statement in 2016 of the intent to create the invest in Canada hub. The members of the CCCA view the creation of the hub as a significant commitment by the Government of Canada to the importance of foreign direct investment as a generator of wealth and to the creation of jobs across all demographics. It will be an essential stimulant to the innovation economy in Canada. The proposed invest in Canada act contained in Bill C-44 translates that intent into reality.

The members of the CCCA welcome the opportunity to contribute to the success of the investment hub and to assist in optimizing the overall effectiveness of both the hub and municipal efforts to attract investors to Canada. We do not minimize the complexity and challenge of the endeavour to create the hub. We would offer whatever assistance we can to ensure the success of the project.

We agree with the following assertion in the fall economic statement:

Around the world, leading companies are looking for stable places to invest and grow their businesses. Smart countries are mobilizing to take advantage of the opportunities and jobs that go hand in hand with global investment. Canada cannot afford to be left behind.

We look forward to the hub's becoming the single window for investors looking to invest in Canada. It is our hope that the hub will become the single access point for municipalities to the Canadian government for matters relating to investment attraction.

Therefore, it is our aspiration that the hub would have the capacity to assist, advise, and champion on matters such as immigration policy and processes, federal incentive programs, federal economic development strategies, policies with respect to investment promotion, the development and marketing of the Canada brand, and lead generation and client servicing.

Similarly, the municipalities will ensure that each designates a contact for the hub on matters related to investment attraction matters within their jurisdiction. Furthermore, should the decision be made to place hub officers in locations across Canada, we strongly recommend that the officer be co-located with our respective member.

Finally, we would welcome the role of the hub in coordinating team Canada missions in support of trade and investment.

It is our hope that the operating relationship be founded on the principles of collaboration, complementarity, and consistency.

Already the CCCA and its members are working to make the hub a success. Each member already has a concierge service for incoming and existing foreign investors, which will be available to the hub. A close working relationship has been established with the hub implementation team, and meetings are held regularly. All members participated in the KPMG outreach, led by the Privy Council Office, on attracting foreign direct investment to Canada. All members have been invited to be referral partners for the new, dedicated service channel being established by Immigration, Refugees and Citizenship Canada. The CCCA chair participated in a deputy minister level consultation round table on the development of the hub. We are working with the Trade Commissioner Service to ensure that the 15 new investment officers expected to be hired this year under the hub program are fully aware of the services, capabilities, and value propositions represented by each of our members.

In summary, the CCCA, one, fully supports the invest in Canada hub and the legislation contained in Bill C-44 to bring it to reality; two, is fully committed to the economic advantages to be gained by Canada through the provision of a single service window for foreign investors, which integrates the resources of all levels of government; and three, is actively working with the hub implementation team and its federal partners to ensure that Canada reaps the maximum economic benefit from the global opportunities available today.

I thank you for your time. I look forward to any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Darch.

We'll turn to InterMedia Partners and Mr. Hindery.

First of all, thank you, Mr. Hindery, for making the special effort to get here. I know there was some juggling of time. I think your home base is New York. For committee members, by way of explanation, I do know that Mr. Hindery spoke to the National Governors Association on the thinking behind having an infrastructure bank in the United States. Your experience might be helpful to members here as we look at going down this road. Thank you very much for making the effort to come to Canada.

[Leo Hindery Jr., Managing Partner, InterMedia Partners]

Mr. Chairman, it was not that much of an effort. It's a privilege to be with you and your members this afternoon.

The issue of large-scale infrastructure investment, as we all know, is foremost about stewardship, but sadly, in most of the developed countries, our eyes, so to speak, have always been larger than our stomachs. We all want lots of it, but only a few governments, particularly the Government of Germany, have been sufficiently responsive in trying to pay for the trillions of dollars worth of investment that we need.

Public investments, whether in surface transportation projects, electricity transmission projects, and broadband especially, and airports, and wastewater projects, are at some of their lowest levels since records have been kept. We know these massive deficits persist despite the fact that infrastructure investment is perfectly poised to take advantage of the growth sectors in energy, driverless vehicles, and clean tech, which are now starting to wash over all of manufacturing. It's especially despite the fact that a nationwide decade-long program of infrastructure investment, with its massive multiplier effects throughout the whole of an economy, is best positioned to close persistent real unemployment gaps—which in the United States are in the order of an additional 5%, even though we have had nominal full employment as of the last month.

America's overall deficit in revenue-generating infrastructure is estimated by the American Society of Civil Engineers to be $3.3 trillion, of which a trillion and a half dollars is clearly outside the capabilities of our state and municipal budgets. This is why the infrastructure issue was one of the four main platform pillars of our November 2016 national election. President Trump, Secretary Clinton, and Senator Bernie Sanders each called for spending in excess of $1 trillion on public infrastructure, but at the time of the election, only Secretary Clinton had begun to settle on how to best pay for such massive investments, using perhaps the structure we will discuss this afternoon, which I advised her on.

To address investment shortfalls, there are usually only three meaningful infrastructure funding alternatives in the developed countries. In my opinion, two of them immediately fail, because they are each too small and too politicized. The first of the two alternatives that fail are smallish block grants, whether they're authorized by our Congress or your Parliament, of the sort we've seen for decades. The second alternative is a so-called budgetary cap, devoted exclusively to investments in infrastructure, since budgetary caps in the developed countries, whether for defence or non-defence spending, typically do not provide opportunities to allocate funds for infrastructure. In my opinion, however, it's practically impossible under appropriations bills to depoliticize, and especially to fairly prioritize, infrastructure projects spread over the myriad of states, provinces, or municipalities. Most importantly, neither alternative comes anywhere close to meeting the massive needs figures of our respective countries.

In short, we believe that only sensitively developed national infrastructure banks address the limitations and obstacles that exist. The bank we are proposing for the United States would be a wholly-owned government corporation with non-partisan directors appointed by the President and confirmed by our Senate. By law, the bank's investment decisions would be made in a transparent, non-partisan manner. In order to make the bank as responsive as possible to different infrastructure needs across our country, it would, like our Federal Reserve, be regionalized into operating districts. Notably, the bulk of the bank's capital structure—fully 90% of the total—would come from relatively low-interest rate loans to the bank by our nation's large state and municipal pension plans, and by certain sovereign wealth funds such as Norway's and Kuwait's. Only the remaining 10% would be appropriated by Congress, and that would be in the form of shared first-dollar-of-loss guarantees of the bank's loans to infrastructure projects.

In specific terms, $1.35 trillion of the bank's capitalization would come from large fiduciaries, and the first $300 billion of loss—if any—on the bank's project loans would be shared fifty-fifty between the bank and the U.S. Treasury. It is the fiduciary plans' relatively low expectations of the rates of return on their fixed income portfolios of just 2% to 3% that match up best, Mr. Chairman, with the vital objective of achieving for the bank the lowest possible cost of capital—which, unfortunately, has never been the case with so-called P3s, as we can elaborate.

Of course, the plans will be induced to invest in the bank by the support available to them from the shared federal guarantee. In considering this particular bank structure, it's especially important to note that, because the financial default rate on public infrastructure projects is consistently de minimis—in the order of just 1% or less—our particular Office of Management and Budget, what we refer to as the OMB, should be based both on precedent and on the very low risk profile of the shared federal guarantees...“score” for Congress only the cost of any actual drawn down federal guarantee payments—and then only if and when these support payments are made.

The major reason that the federal guarantee would score so little, or not at all, is that the borrowers would typically pay a very small guarantee fee that is set over time to cover anticipated costs of defaults. Since well-run credit programs usually run at "zero subsidy", this should mean in the specific case of our proposed U.S. national infrastructure bank little or zero actual cost to American taxpayers.

Almost 10 years ago this month, we started out with the non-partisan objectives of best financing the more than $1 trillion of needed infrastructure projects while minimizing the federal government's contribution, and also of fairly prioritizing projects given the broad array of projects in our very physically large country. We believe that our suggested national infrastructure bank would meet these goals.

It will be a privilege, Mr. Chairman, to hear from you and your members on some of this work in the Q and A.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Hindery.

From the Tourism Industry Association of Canada, we have Ms. Charlotte Bell.

The floor is yours, Charlotte.

[Charlotte Bell, President and Chief Executive Officer, Tourism Industry Association of Canada]

Thank you very much.

Mr. Chair, committee members, on behalf of the Tourism Industry Association of Canada, I am very pleased to be here today as part of the committee's study on Bill C-44.

TIAC is the only national voice representing the interests of all sectors of the tourism industry in Canada. This includes accommodations, transportation, destinations, and attractions. Our members range in size from small businesses, including many tour operators, to some of Canada's largest hotel chains, national airlines, rail services, destinations, and iconic tourist attractions from coast to coast to coast.

Tourism is a top economic driver for Canada, which last year generated $91.6 billion in revenues, surpassing forestry, agriculture, and fisheries combined. It also employs in excess of 627,000 Canadians and is considered a top employer of Canadian youth.

The first thing I'd like to do is reiterate our gratitude for the support received by the Minister of Small Business and Tourism, as well as the Minister of Finance concerning a number of positive commitments in the last budget. Specifically, we were pleased with news that Destination Canada, Statistics Canada, and indigenous tourism will receive much-needed funding to support tourism marketing, data collection, and indigenous tourism development. These are important initiatives that will reap significant benefits for the Canadian economy and job creation in the long term, and will help strengthen one of the primary growth industries in this country.

This said, changes to the foreign visitor tax rebate program, the FCTIP, and their proposed implementation have created a wave of concern and alarm within the tourism industry. As we try to obtain an interpretation from CRA as to how the changes will be implemented, there continues to be anxiety. While the stated goal of this proposed repeal is to eliminate inefficient tax measures, it may very well create financial hardship for a number of small tourism businesses across the country and will also make Canada even less cost competitive than it is today.

While tourism has seen important gains in international arrivals in the last couple of years, and especially last year, it's important to recognize that, globally, Canada is in 18th position in terms of international arrivals, falling behind countries like Saudi Arabia. For perspective, in 2000 Canada ranked eighth in the world, so we've lost some ground.

In terms of our cost competitiveness relative to other countries, Canada now ranks 97th out of 141 countries measured annually by the World Economic Forum. While the $50 million per year savings outlined in the supplementary budget documents may seem small and inconsequential, in reality the change is cause for concern. While the GST/HST rebate may have appeared to be underutilized, it was widely used as a competitive tool to attract international travellers to Canada by lowering the cost of tour packages to make them more affordable.

In the absence of this rebate, many businesses, including significant numbers of small and medium-sized tourism operators, will be left absorbing significant additional cost and in some cases eliminating their profits. Further, tour operators are also impacted, as travel packages can be pre-sold up to two years in advance and sometimes even longer. The rebate is usually built into the price of packages offered internationally, but actual payment doesn't occur until well after the travel has occurred. In fact sometimes it can be as late as three months later.

We understand that the proposed repeal is meant to apply in respect of supplies of tour packages or accommodations made after budget day. This implies that contracts made prior to budget day would still be eligible for the rebate. Given that the business cycle operates up to two years in advance, many contracts have been solidified well into 2018, with secondary agreements made under this umbrella. The fact that we don't yet know whether those secondary agreements will benefit from the current rebate is cause for concern.

The Minister of Small Business and Tourism unveiled a new tourism vision last week during Canada's largest travel trade show in Canada, which is Rendez-vous Canada. The minister set out bold goals for tourism growth in the coming years and recognized the importance of this sector to Canada's economy and to its job creation.

So do we. We fully support and embrace growth and intend to work closely with the minister and others to see those goals become a reality, but in order to get there, Canada must address its cost competitiveness. Every new tax, every new levy, every new additional fee chips away at our ability to compete internationally and grow the sector. Tourism remains the only export sector in Canada that's not zero rated. The GST/HST rebate, while perhaps imperfect, was at least one very small way of lowering costs, but now that, too, will be gone.

As I said at the opening, Canada's tourism is a $91.6-billion sector, and we want to see that grow to $125 billion, but we need to address our cost competitiveness if we're going to increase overall tourism numbers by 30% in the next few years. Otherwise the numbers may very well go in a different direction.

Thank you very much for your attention.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Bell.

Thanks to all of you for your presentations on a number of different subject areas today.

Starting the seven-minute rounds is Ms. O'Connell.

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

Thank you, Mr. Chair.

Thank you all for being here today.

Mr. Hindery, thank you for your presentation. We had a lot of talk earlier today on the proposed infrastructure bank. You outlined a few unique initiatives, one being, for example, the guarantee fee to help any cost of default or whatnot. That's interesting. You also talked about the low interest rates. We've heard testimony suggesting that for an infrastructure bank to be attractive to private investors, it would require a higher interest rate.

In the proposal that you are putting forward in your country, what is the attraction for businesses? Is it that stable 2% in their portfolios that they're looking for, or what is it that would attract that private industry?

[Leo Hindery Jr.]

When I say “national infrastructure bank”, ma'am, I never mean Goldman Sachs or Morgan Stanley. The fault in our own country has been what are called P3s, the public-private partnerships. The cost of capital on the private side is usurious for the user community. Notably in the state of Pennsylvania, where great efforts were made to upgrade infrastructure, we ended up with roads and bridges that became unaffordable to the middle class because of the user fees.

We had to find three things happening concurrently. We had to believe that the decision would be made professionally and in a non-partisan fashion. I had the privilege of meeting the chairman at the National Governors Association. The governors are the stewards and fiduciaries of infrastructure, not our Congress. It's our mayors and governors. In our particular case, they want to know that all 50 governors have an equal opportunity to see their projects prioritized and funded.

The second objective was to make it very large, which is why block grants have historically been just whistling in the wind, so to speak. Even in what we call President Obama's “stim” package, his stimulus package after the crisis of 2007-08, he received $25 billion for his infrastructure bank, which was nothing but a block grant to the Department of Transportation. Our need—and you have a relatively similarly large number—is $1.5 trillion. If you don't do something approximating that, in my opinion, don't do it; wait for a better day.

The third thing is to make sure that the rate is affordable to the ultimate user. We, very proudly, have tremendous fiduciary organizations, as does Canada. If you talk to your colleagues on that side of this economy, a 2% to 3% return on their fixed-income portfolios with a high certainty of repayment is more than satisfactory. It would never satisfy Goldman Sachs. Indeed, in the White House today, we have a new adviser to our recently elected President, who comes from Goldman Sachs and is suggesting rates of return from the bank of 10% to 11%. That would crush the middle class and every user.

We have travelled for years among the fiduciary community asking what it would take to get them to commit in a very large way to the bank that we're suggesting. We've been to Kuwait, Norway, Japan, and to our large state fiduciaries, and the answer is that there would have to be some degree of federal support. Where it got particularly clever is that we then added a fourth aspect to the equation. The guarantee will never be drawn. The default rate on public infrastructure projects of the sort we're talking about, such as surface transportation, airports, and especially broadband, Mr. Chairman, is around 1% if fairly priced. The guarantee will never be “scored” in our system. I would suggest, from what little I know of your rules and behaviours, it won't be scored here either. It will be scored if ever drawn.

There was no way, coming out of the election, whether it had been Senator Sanders, Senator Clinton, or Mr. Trump, that anybody in our Congress was going to give them a trillion plus dollars. It's inconceivable. Even $40 billion would be a stretch. Our commercial banks have said that we should come their way. My answer to that is, “No way am I coming your way.” We've spent several years, as I've said, trying to find an alternative. Collectively, that is the alternative, and I think it works particularly well here. The reason I'm comfortable saying so is that it works similarly well in Germany.

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

Thank you.

It's interesting to hear you say that. I attended a conference in Europe some time ago about the almost desperate need of investors—and in this case they might have been commercial banks—to obtain even 2% or 3% stability. There was considerable fluctuation in the price of commodities and the long-term payback, even though it's small, of traditional investments like oil and gas, or nuclear. Traditionally one might assume that private industry would only invest if it were a 10% payback, but investors are actually looking for something stable, with a much shorter payback.

You are the first person who has testified to what I heard previously, probably almost a year ago, that the other factor was not only stability in returns, even if it was 2% or 3%, but also stability in government policy and direction, in particular with respect to policies that matched the various types of infrastructure. For example, if climate change is a priority for government, together with investment in infrastructure, this would be a key indicator for private investment.

Is that something you would say as well?

[Leo Hindery Jr.]

Madam, it's music to my ears.

Your new Prime Minister and Mr. Wegiel have talked on the issue of your domestic steel producers. Prime Minister Trudeau has talked about real unemployment in this country mirroring ours, which is roughly twice the nominal rates. Nothing in the world addresses infrastructure spending in steel, or jobs, better than an infrastructure bank. It's the panacea for resuscitating manufacturing, but it's also a tremendous boost to the real unemployment challenges our countries face.

With conviction, I can tell you that what you learned in Europe and your reactions today are in conflict. The private sector does need double-digit returns. The public sector, the fiduciary community, is very comfortable, particularly with the sort of guarantee that we have suggested might be imposed on the top. We all struggle with budget crises, and we score pitifully on this point in our country. We think we have found a way that might be advantageous to our needs as well as yours.