Industry Committee on June 13th, 2006

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Brown asked me a question. I just want to get it clarified for him, if you don't mind.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Do you want Ms. McKenzie to respond on that?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

If you wouldn't mind, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Could you be very brief, then, on a response on WHTI?

[Michele McKenzie]

I tabled what the tourism sector believes would be a good remedy to WHTI. As the national marketing organization, we've indicated to the minister that our position is one of increased investments to fight the competitive battle more effectively in the U.S. market. As I said, I'm not privy to the broader recommendations that Industry Canada may be making in the breadth of the broader mandate.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chairman.

Basically I want to shift to the tourism part. It was brought up and caught my attention.

Ms. McKenzie mentioned the team has been renewed under the Canadian Tourism Commission, but you told us about all the declines, the downsides of it. You haven't talked very much about the upside and what you're actually going to do about it. You described how, over the last decade, there has been very little growth, and yet it was at a time when there was a low dollar, low fuel costs, and low interest rates.

In the presentation you talked about Canada as a dream destination, so we have a bit of a conflict here. We believe it's true--it is a dream destination; Canada is the greatest place in the world. That would be agreed on by everyone here. But we have this conflict. I wonder how you're dealing with that, because it would seem to me that some sort of business plan would have been in order, and maybe that's what has been put out.

I'm wondering what you're doing to change that around. Some time ago everything was low; now we're moving to a time when there's a higher dollar and higher fuel costs, with pretty low interest rates. We still have those issues out there. It was easier when we had the competitiveness, and now we don't. How are you going to counter it?

[Michele McKenzie]

It was easier in many ways. I presume that your question is speaking specifically to the U.S. market, because there has been strong--

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

It is mainly the U.S. because, as you had mentioned, most of our tourism is with the States. I forget the percentage--

[Michele McKenzie]

Therefore it's a huge issue for us.

You point to factors that have been weighing in our favour in the last five years, but I would add that significant factors have also weighed against us. The events of 9/11 had a dampening effect on outbound U.S. travel generally, and the effects of the SARS crisis in 2003 profoundly affected tourism demand from the U.S. into Canada. In fact, if you take the meetings and convention sectors specifically, Canada won very few bids for U.S. association meeting business coming into Canada in the year 2003. That is starting to impact us this year, in 2006, and will impact us for another five years, because bids are won for business that is three to eight years out in the future. So we are seeing some lingering impact of world events that happened in the U.S. still affecting Canada.

Other structural issues have happened in the U.S. market. The introduction of low-cost carriers can make it cheaper to fly from New York to L.A. than to drive from New York to Toronto. Those were never the types of competitive factors we faced in the past.

We do indeed have a strategy. We have a tourism development strategy; we have a tourism marketing strategy. Our overall position has been that we are underinvested relative to our competitors to fight this battle.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Actually, I look at that graph on page 8 that shows the growth that's happened--and it goes back to 1990--and actually it's fairly stagnant. So all those things you talked about, we're in a time now when we still have those issues.

You brought up the issue of SARS and 9/11, and I'm wondering what strategies you've put in place to deal with those. What amendments have you make to your plan? Even in this last week, we've had arrests around the issue of terrorism in Toronto. I'm wondering what you're doing to counter that, in terms of Canada being a safe place.

The Prime Minister and Minister Day have met with people in the United States and other places about Canada being safe, and obviously that has turned out to be true. How are you marketing Canada as a friendly place, so we can not decline, but work with our dollar?

I know what you're saying in terms of the dollars. It may be underfunded. I guess it's always as important to know how the dollars are handled at the bottom as it is to know how many dollars are going in at the top.

[Michele McKenzie]

Absolutely. I'll just talk about the strategy in a broad sense, and I'd be happy to provide you with a copy of the detailed strategy.

Generally, the shift that has been made over the last few years to address this issue has been to shift investment to markets where we're getting better returns. Those markets have been Boston, New York, and Los Angeles. So there is less investment in the border regions, where we have not been getting the returns, and more focus on going where the messages seem to resonate more strongly and people come and spend more money.

There is that, plus there's the fact that we've shifted from a mass advertising approach to much more of a media and public relations approach in the U.S., so we get our messages out much more clearly.

Those are the two features in terms of what we've changed in marketing, and I'd be happy to provide you with the detailed plan.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I think my time is up.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Shipley.

Mr. Vincent.

[Robert Vincent, Bloc, Shefford, QC]

I also want to thank you for being here today.

I'm going to continue in the same vein as Mr. Crête. What is the impact of 1¢ to 10¢ increase in the value of the dollar?

We have to understand three things: the increase in the dollar, the ensuing rise in interest rates and the increase in the price of gasoline. What impact does each increase, even a small one, have on the manufacturing industry? Are you aware of those figures?

[Renée St-Jacques]

It's important to bear in mind that a number of variables are interrelated. When the dollar rises, interest rates don't necessarily increase, contrary to what you said earlier. That's not a hard and fast rule. So it's important not to engage in too much speculation or projection.

Models show that these adjustments can generally take two years, whether it's a change in the exchange rate or a change in input prices.

[Robert Vincent, Bloc, Shefford, QC]

I understand, but, not so long ago, the value of the dollar rose sharply. We expect—

[Renée St-Jacques]

It's increased another 5 per cent in the last six months.

Pardon me, I interrupted you.

[Robert Vincent, Bloc, Shefford, QC]

Go ahead.

[Renée St-Jacques]

It rose another 5%, but that's nothing compared to what happened in the past two years, when the changes were even more significant. The Canadian dollar has risen approximately 35% in total since early 2003.

[Robert Vincent, Bloc, Shefford, QC]

Ten cents is already a lot. Industries have closed their doors when the dollar rose from 80¢ to 90¢. If there are further increases, other industries will close theirs. Do you have a study on the impact of each one-cent increase in the dollar on plant and other closings?

[Renée St-Jacques]

We largely rely on studies that have been conducted by specialists in the field, but we don't do this kind of study ourselves.

[Robert Vincent, Bloc, Shefford, QC]

Don't you inform the Minister of Industry that, every time there's an increase in the dollar, there's an increase in the price of gas, and that an increase in interest rates would be catastrophic for the manufacturing industry? Are you aware of that state of affairs?

[Renée St-Jacques]

Absolutely.

[Robert Vincent, Bloc, Shefford, QC]

Do we have any studies? Are people aware of the situation? There's currently nothing making us aware of the impact of these increases.