Industry Committee on June 13th, 2006

[The Chair, Conservative, James Rajotte]

We'll start the meeting at about 11:01. We like to start our meetings on time. There might be something going on in the House that's delaying some of the members. It'll just allow the three of us a lot more question time.

We have here a number of witnesses from various departments in the Government of Canada, and we thank you all for being here today.

I'll read the witness list. We allow generally up to 10 minutes for a presentation. I think because we have four different presentations today, we'll ask that you try to shorten it to, say, five to seven minutes. If you do want to take the 10, we would allow that.

We have, first of all, from the Department of Industry, Sara Filbee, the director general, manufacturing industries branch. We have Renée St-Jacques, chief economist and director general, micro-economic policy analysis branch. We have Robert Lamy, the coordinator of economic analysis, micro-economic policy analysis branch.

From the Department of Human Resources and Social Development we have Martin Green, acting director general, program policy planning and analysis. We have Cliff Halliwell, director general, policy research and coordination. We have Eric Parisien, director of the sector council program division.

From the Department of Natural Resources we have Howard Brown, assistant deputy minister of the energy policy sector. We have Margaret McCuaig-Johnston, assistant deputy minister, energy technology and programs sector.

And from the Canadian Tourism Commission, we have Michele McKenzie, the president and chief executive officer.

Thank you all for coming here today.

As you know, we are studying the manufacturing sector--its importance, its challenges, and some of the concerns the sector is facing relating specifically to the appreciation of the Canadian dollar, increased labour costs or labour availability, and energy as a feedstock into the sector. Regulation has been brought up, as well as responding to increased global competition from countries such as China, India, Brazil, etc.

That's the mandate of the committee, our first study. We welcome you all here.

I think we'll start with the Department of Industry's presentation.

Madam St-Jacques.

[Renée St-Jacques, Chief Economist and Director General, Micro-Economic Policy Analysis Branch, Department of Industry]

Thank you, Mr. Chair, and thanks to the committee for the invitation to appear before you to discuss manufacturing in Canada.

The committee is undertaking a very important and timely examination of the Canadian manufacturing sector.

We've prepared a document that was distributed to you, I believe. That document presents what we think are the essential statistics on recent developments in the Canadian manufacturing sector.

Since our reading is consistent with that of a number of witnesses you've heard in recent weeks, I'll be brief.

Essentially, as Mr. Chair was saying, the manufacturing sector has faced three major challenges: the sharp depreciation of the dollar that began over three years ago, an increase in commodity prices, particularly in energy and metals--and the two are not unrelated, as you've heard from previous witnesses--and finally, more competition from emerging economies, notably China.

Overall, it's fair to say that the sector has shown remarkable resilience in the face of these challenges. Total manufacturing output has continued to grow, thanks to very strong growth in world demand, and particularly strong U.S. demand. This said, manufacturing output has been growing more slowly than the rest of the economy and more slowly than its historical average.

Manufacturing employment, as you've heard before as well, has fallen by some 8% since December 2002, with a net loss of some 187,000 jobs. And losing one's job can be one of life's most disruptive and upsetting experiences. The only silver lining we can point to is that the economy has been creating employment in other sectors at quite a fast pace. Well over 900,000 new jobs have appeared since December 2002. That was about the point when the dollar started taking off. The majority of these jobs are in sectors such as construction, financial services, and resource industries, which pay wages that are just as high, or even higher, than manufacturing wages.

Having the right training and skills is vital for those who have lost manufacturing jobs and are looking for employment in these expanding sectors. I'm sure our colleagues from Human Resources and Social Development will have more to say to you about this critical ingredient on the people side of adjustment.

Some manufacturing industries have faced challenges on all three fronts: the higher dollar, higher energy costs, and competition from emerging economies. The pulp and paper sector is a case in point. Its production is priced in U.S. dollars, the market for pulp and paper is global, and the sector uses lots of energy and faces competition from Brazil and Indonesia, where wood fibre is fast-growing and thus cheaper.

Competition from emerging economies, notably China, has been the major long-term challenge for other industries. This is illustrated on the chart that you have on page 6 of the handout in front of you. Among the most exposed among those are textiles and clothing, leather, computers, and appliances.

Now, an indicator of financial health is profit margins, which we show on page 7 of the handout. Again, exposure to international trade seems to be the deciding factor in whether profit margins are normal or lower than normal, and the manufacturing industries most exposed to trade have experienced lower than normal profitability. In some cases, it has been much lower than historical norms. For their part, industries less exposed to international competition have fared quite well on the profit front.

Manufacturers have been adjusting to remain competitive, as other witnesses have pointed out to you. They have boosted their investments in machinery and equipment, and that is true across the manufacturing sector, with both trade- and domestic-oriented industries having increased their investments. That's shown on page 8 of your handout.

Manufacturing industries are leaders in labour productivity growth in Canada, as shown on page 9 of your handout. These two developments, investments and productivity growth, bode well for the competitiveness of Canadian manufacturers in the future.

So to sum up, manufacturing is undergoing a transformation and a very significant adjustment. Overall, it is demonstrating remarkable resilience and capacity to adapt. But some industries and manufacturers are faring less well, and we recognize that, and those are mostly industries that are facing competition from emerging markets, both in Canada and in their traditional export markets.

Finally, adjustment for workers has been eased somewhat by strong employment growth in other areas of the economy, and these new jobs, more often than not, are paying wages that are as high or higher than manufacturing wages.

I will stop here, thank you, and my colleague Sara and I will be happy to answer any questions you may have.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. St-Jacques. That was our shortest presentation. Thank you very much for being within the time.

I think we're going to Mr. Green. Are you presenting on behalf of Human Resources and Social Development?

[Martin Green, Acting Director General, Program Policy Planning and Analysis, Department of Human Resources and Social Development]

Yes.

We thank you for the opportunity to be here today. Along with me are Cliff Halliwell, who is our director general of policy research and coordination, and Éric Parisien, who is the director of the sector council program division.

First of all, I would like to say that we're very pleased to have contributed to discussion on this issue by assisting the Canadian manufacturers and exporters initiative, which led to the excellent Manufacturing 20/20 campaign, which provides an overview of many ideas for moving forward. Manufacturing 20/20 stresses the necessity of nurturing a skilled manufacturing workforce in light of changing demographics, increased international competition, rapid technological change, rising costs, and a strong Canadian dollar.

Canadian industry benefits from having access to one of the world's most highly skilled and well-educated labour forces. Canada's skilled and educated population, combined with an efficient labour market, have helped labour participation to climb to 67.4% overall, an historic high. At the same time, that employment growth has been stronger than in other G-8 countries over the last decade. Yet as we know, that workforce growth cannot continue to grow at the same rate, because, like all developed countries, our population is aging. This aging effect could lead to shortages of skilled workers and is one of the foremost concerns expressed by Manufacturing 20/20.

Manufacturing needs to attract new workers to replace retiring workers, but it also needs to focus on updating the skills of its existing workers to permit raises in productivity that will drive economic growth and ensure competitiveness. HRSDC believes that raising the skills of our workforce even further and in an ongoing fashion is a key means to improve productivity.

However, Canada is lagging behind other countries when it comes to investment in skills development in the workplace. In fact, only about 35% of the adult workforce participate in job-related formal training. Internationally, Canada slipped from twelfth place in 2002 to twentieth place in 2004.

We also need to ensure that the skilled workers we do have are matched with the jobs that are out there. Our analysis shows that we are not confronting a generalized skilled labour shortage in the economy, but we have problems of specific regional and sectoral shortages, described as mismatching, which are becoming more evident as the labour market tightens. For example, 42% of manufacturers surveyed in Alberta are facing production difficulties due to labour shortages, compared to only 4% in Ontario.

We are confronting paradoxical employment tendencies in manufacturing. We have skills shortages in some regions and industries, but net job losses overall. As you've already heard, manufacturing has lost about 200,000 net jobs since 2002. At the same time, there are critical shortages in a number of skilled trades that are essential for manufacturing. These changes in labour demand from employers and manufacturing are part of the ongoing healthy and productive process of adjustment. Government's role is to facilitate adjustment as it permits long-term growth, while hindering it would lead to economic stagnation.

On the labour side, we need to ensure that the economic union functions properly and that we have a mobile workforce with transferable skills. With respect to our department and skills initiatives, we coordinate certain initiatives to address workplace skills issues, lever more investment in skills development, and address labour market efficiency. One of our tools for addressing skills issues is the sector council program, which brings together stakeholders, industry, labour, skills providers such as colleges and training firms, and government. A sector council maps out the skills profile of a sector and then engages in planning, coordinating, and developing a supply of skilled people in response to sector needs.

So far we have established a network of 32 sector councils, including 10 sector councils that are active in important manufacturing sectors such as biotechnology, aviation, plastics, steels, automobiles, textiles, and wood products, covering around one-third of the manufacturing workforce.

The Textiles Human Resources Council, for example, shows us that skills development issues are important even when there has been an overall decline in textile employment. Textiles are transforming into a sector producing specialized products with greater added value, but this takes a new breed of highly skilled textile worker. The Textiles Human Resources Council is helping workers to upgrade their skills to meet this new reality, and it is the only body doing so, because there are no specialized post-secondary education courses in textiles.

The Canadian Steel Trade and Employment Congress provides another illustration of invaluable sector council work. This council completed a human resource study last year that provides a strong basis for moving ahead on a workforce development plan to deal with the need to replace trade skills in an aging industry.

Our department also helps manufacturing meet its labour requirements in a variety of other ways. Working with Citizenship and Immigration Canada, we play a vital role in better integrating and employing the labour skills of migrants and foreign workers. Announced in budget 2006 was the development of a new Canadian agency for the assessment and recognition of foreign credentials, which will directly benefit manufacturers by improving the supply and integration of immigrant skilled labour.

HRSDC is also working to improve the foreign worker program, which facilitates the hiring of temporary foreign workers. Nearly 100,000 applications from employers were submitted through our department in 2004.

Apprenticeship programs are also crucial for skills development, and they need to be more accessible and flexible, as Manufacturing 20/20 pointed out. HRSDC's interprovincial standards red seal program supports the mobility of journey persons, covering approximately 80% of registered apprenticeships in 45 regulated trades.

On top of that, the government has announced the new apprenticeship incentive grant, which will benefit 100,000 first- and second-year apprentices, as well as two new tax measures: an apprenticeship job creation tax credit for employers to hire new apprentices, and a new tools tax reduction for employee trades people to help with tool costs.

These are some of the ways HRSDC is helping the labour market supply skilled workers for the manufacturing industry. The full range of our efforts from employment insurance skills development measures through to the workplace partner panel is too long to list here. But we must also keep in mind that the federal government alone is not responsible for developing a skilled workforce to meet the needs of the manufacturing sector.

For example, most training is best provided locally, rather than centrally, by manufacturing firms themselves or by skills providers such as colleges or training firms. That is why our principal role is one of leadership and coordination. Our department's aim is to continue to move forward while engaging other governments, industry, labour, and educational institutions, and working in partnership to find new ways to creatively address pressing skills issues.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Green.

We will now go to the Department of Natural Resources. I believe, Mr. Brown, you'll be presenting.

[Howard Brown, Assistant Deputy Minister, Energy Policy Sector, Department of Natural Resources]

Thank you very much, Mr. Chairman.

I tabled a statement, which I hope got to you in time to distribute to the members. That being the case, I'll give you the Cole's Notes version of the presentation.

I guess the starting point for what I want to say, Mr. Chairman, is the observation that in a very real sense, Canadian industry, and Canadian manufacturing in particular, has been built on a foundation of reliable and relatively affordable energy. It's certainly true if you look around the Ottawa Valley, even going back to the 19th century, given the number of mill towns that relied on affordable, reliable energy. It was true in the industrialization of Ontario through the middle parts of this century, and in other provinces as well. And, I guess, of most relevance to this discussion, it was true in the 1980s and 1990s in Canada, when Canadian industry enjoyed a real advantage in the prices of many energy commodities, including natural gas and fuel oil. That advantage was due, in some measure, to regulation of energy products like ethane.

It's always difficult to be definitive about causation in economics, but one would expect that given this cost advantage in energy commodities, Canadian industry and Canadian manufacturing would tend to specialize in energy-intensive industries. And that, indeed, is what the evidence seems to suggest.

If you look at the G-7 in the year 2002—and I apologize for the lack of timely data, but it's often the case with international comparisons that you have to work with data that aren't completely up to date—Canada certainly had a manufacturing structure that tended to concentrate on energy-intensive industries just slightly below that of the U.S. and the United Kingdom. Moreover, within sectors like pulp and paper, the evidence suggests that Canada specialized in the really energy intensive kinds of production, like pulp, and had less production in the more energy-efficient kinds of activities, like paper. And there's similar evidence for the metals and petroleum refining industries as well.

I think we all understand that the reality today is that Canadian companies, and indeed their competitors in other industrialized countries, face very strong competition from countries that are producers of low-cost fossil fuels, which plays out in a number of dimensions. Natural gas is a particular case, because we do not yet have an integrated world market for natural gas. In that situation, new petrochemical plants are likely to invest in places like the Far East, Trinidad, and North Africa, where they have access to that low-cost feedstock, rather than in North America. But more generally, the increased costs in energy are going to be a challenge for us and other industrialized countries.

Electricity is a little bit different. Provincial utilities continue to provide Canadian industrial users with some of the cheapest electricity in the world, but there are questions about how long that can be sustained, and there are prospects of price increases in some provinces.

Throughout the advanced economies—the G-7, G-10, Europe, North America, Japan—all of our manufacturing industries are going to face these competitive pressures, but these will of course be most difficult for those countries, like Canada, that tend to specialize in energy-intensive activity. There has been a movement in Canadian industry to adapt to this trend towards higher prices. Pulp and paper, for example, is starting to use waste from its own production processes to meet over half of its energy needs, and there are other opportunities. Cement, for example, can use waste like tires to meet its energy needs, rather than buying expensive oil.

A key measure of our ability to adapt to higher energy prices is the rate at which our energy efficiency improves. So the question arises, how have we done on this measure? In the 12-year period ending in 2002, the energy efficiency of Canadian manufacturing improved faster than in any other G-7 country except France. And in this regard, it may be instructive to compare our performance with that of the United States. Between 1990 and 2002, energy use in manufacturing increased at almost exactly the same rate in the two countries—14% in Canada versus 12% in the United States. However, energy intensity in Canada—that is, energy per unit of output—improved by almost 30% in Canada versus only 8% in the United States.

So how do you reconcile this rate of improvement in energy efficiency—almost four times better in Canada than in the United States—with an increase in energy use that was almost exactly the same?

The fact is that our output in manufacturing grew much more rapidly than did that of the United States. There was also some shift here toward more energy-intensive output. This comparison suggests that Canadian industry can adapt and compete, but the reality is that very real competitive pressures are going to remain.

The manufacturing industry is keenly aware of this. My colleague from HRSDC has already referred to Manufacturing 20/20, which identified rising energy costs and a reliable supply of cost-competitive energy as among the top challenges facing Canadian manufacturers.

Since the national energy program was dismantled in 1984 by the government of Mr. Mulroney, it has been a fundamental and enduring principle of Canadian energy policy, but the federal government does not intervene in energy markets to control prices. I'll go out on a limb and suggest it's very unlikely that this government would choose to do that. So directly controlling energy prices and subsidizing energy prices are probably not tools in the toolkit for government to help industry.

We can, however--and do--work with industry to improve the energy efficiency of Canadian manufacturers. We think it's critical to engage industry in taking ownership and responsibility for the management of their energy use. To this end, Natural Resources Canada's industry program for energy conservation, or CIPEC, focuses on voluntary energy intensity improvement targets. My colleague Margaret McCuaig-Johnston, the assistant deputy minister of energy technology programs, is responsible for that and not me, so I'm stealing her thunder a little bit. But I did want to give a plug to this program.

The rate of improvement in energy efficiency in Canadian mining and manufacturing has been almost 2% over the last decade. Energy use per unit of output has fallen by almost 2% a year over the last decade, which is pretty remarkable progress by anybody's standards, and double the target that industry set for itself in 2000. Margaret and CIPEC can't take all the credit for that, but it is certainly the case that CIPEC and other Natural Resources Canada programs contributed to that rate of improvement.

I've been told by people in industry that CIPEC is the only useful thing that the Government of Canada does. I'm not sure I'd agree with that, but I would say it's certainly among the useful things that the Government of Canada does.

I think I'll stop at that point, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brown.

We'll have Ms. McKenzie on behalf of the Canadian Tourism Commission.

[Michele McKenzie, President and Chief Executive Officer, Canadian Tourism Commission]

Thank you.

I'd just like to review the deck that I circulated, just to share with you some of the challenges and opportunities we are facing in developing tourism for Canada.

The Canadian Tourism Commission is a crown corporation. Our head office is in Vancouver. We're responsible to Parliament through the Minister of Industry.

Our focus is to develop the Canadian economy through growing export revenues from tourism source countries. In order to do that, we focus on countries with the highest rate of return. I've listed the countries in the presentation today. In Europe and Latin America, we're in the U.K., France, Germany, and Mexico. In Asia-Pacific, we're in Japan, South Korea, Australia, and China. And of course, we're heavily invested in the U.S. market, which is our largest international market.

Much has been changing in the tourism landscape for Canada. World demand for tourism is very strong. Tourism is the fastest growing industry in the world, and Canada is a dream destination. It's the type of destination that for people from most countries, when they dream about travelling somewhere in their lifetime, is in their list of top three destinations.

Tourism revenue was up in 2005, but the specifics of that tell a difficult story. Domestic travel is up almost 9% in terms of revenue. The U.S. is down almost 9% in terms of revenue. Our overseas revenue is up about 6.3%.

Our overseas market performance, in fact, has been very strong for the last number of years. We've been working on a refreshed tourism brand for Canada and have rolled that out now, especially in the U.S. market, where we're fighting a fierce competitive battle. We've gained a competitive edge by being the country that leverages the web better than any other country in the world for tourism promotional purposes.

We have a new team in Vancouver and our partner investment is strong, meaning that Canadian industry partners in tourism invest at least a dollar for every dollar that is invested through CRTC.

The bad news, however, is that our primary market of reliance with 70% of receipts is in sharp decline, and that, of course, is the U.S. In addition to that, Canada's travel deficit is ballooning. By that I mean that Canadians are spending far more money outside of Canada in international travel than international travellers are spending in Canada. That travel deficit number hit a record last year and is likely to hit another record this year.

Competition in the world is fiercer than ever, and largely because of our performance drop in the U.S., Canada has slipped from seventh to twelfth in terms of international rivals worldwide, and from tenth to twelfth in terms of international receipts since 2002.

The CRTC marketing budget is in decline. An additional cut was assigned to the CRTC this year, and our share of voice, meaning the number of dollars that we spend in our key markets compared to our closest competitors, is weaker.

I've included a chart that shows what we're expecting for tourism growth. I mentioned that tourism is the fastest growing industry in the world, and you can see through to 2020 the very steep growth curve that we continue to anticipate.

In terms of U.S. outbound travel to Canada specifically since 1990, you can see from the growth curve I've included that Canada has not seen any real growth in the U.S. market for nearly half a decade.

A Conference Board of Canada survey of U.S. travel intentions reveals that a greater proportion of Americans will in fact travel outside of the U.S. over the next six months--this was taken in February of this year--but they're quoted as saying that Canada will not be their destination.

In fact, U.S. travel intentions were up about 2.8% in February of this year for outbound travel generally, but the portion that Canada would share of that is expected to decline from 2.2% to 1.7%--the percentage of the U.S. population planning a trip to Canada this year.

Many factors are contributing to this decline. One of the key factors, as I've mentioned, is the fact that the U.S. is the most fierce market for competition of outbound tourists internationally.

The U.S. awareness of Canada as a travel destination is also weak. We have about a 4% share of voice, meaning our investment in the U.S. market is 4% of the overall marketing effort of all destinations combined. In the U.S. market they are much more aware of what destinations offer in Europe, Mexico, and the Caribbean.

Border-crossing difficulties continue to challenge our sector, and those difficulties are in the language of the customer. They perceive delays at the border and they perceive that crossing into Canada is becoming more and more difficult. That is being confused by the western hemisphere travel initiative, which we know has very specific aspects to it that will require new secure documents, or secure documents that have not yet been defined, but certainly passports as one of those documents for U.S. citizens, or for anyone, to cross back into the U.S. from Canada, or from any other location. In our research, we're finding U.S. consumers are confused about what they need when they travel outside the U.S., especially into Canada.

Higher gas prices and the decline in the purchasing power of the U.S. dollar in Canada have also contributed to this decline over the last few years, and certainly are a drag on demand this year.

I've included a chart that shows the impact of exchange rates and overall travel demand from the U.S. to Canada. You can see those two elements generally follow a similar curve.

Similarly, crude oil and gasoline prices, of course, also impact visitation from the U.S. to Canada, especially in the border markets where people are more likely to be driving.

Speaking specifically to the WHTI, the western hemisphere travel initiative, the Canadian Tourism Commission commissioned a study from the Conference Board of Canada or the Canadian Tourism Research Institute, which is an arm of the Conference Board, in May 2005. Our analysis was based on the April 5, 2005, WHTI proposal, which remains a proposal today although amendments have been proposed.

That proposal suggests passports will be required to enter or re-enter the U.S. from Canada by air and sea on December 31, 2006, and by air, sea, and land on December 31, 2007. As I mentioned, there are proposals now that may see those deadlines extended.

In terms of the approach we used to do that research, we surveyed Canadian-U.S. households to determine how many people possessed passports and the anticipated reaction to the legislation. We assessed the impact compared to a baseline. We assessed the decision-making process of travellers that varied by purpose of trip and length of stay. And also we discovered that confusion is playing a major part in perception.

I've included the findings in this report that show the rate of passport ownership in U.S. households, in the general population, and in travellers to Canada--same-day travellers, overnight auto travellers, and overnight air travellers. And you will see that the most challenging area we are facing is same-day travellers to Canada. The area where we're in the best shape is overnight air travellers to Canada.

When you accumulate the findings, between 2006 and 2008 a cumulative impact of more than $1.6 billion is predicted to be lost to the Canadian tourism industry through the implementation of WHTI, as proposed in 2005. We believe WHTI will add another layer of restrictions to an already declining market, and that a careful balance needs to be sought between security and tourism concerns. Its implementation, as it stands, will hinder our competitive edge even further.

The tourism industry, through the Tourism Industry Association of Canada, the hotel associations, and other leaders in the tourism industry, is advocating the following changes to WHTI: a single implementation date for air, sea, and land to help resolve some of the confusing issues we're currently facing; accessible, affordable passport substitutes; an exemption for travellers 16 years of age and under; a U.S. awareness campaign, so that people in the U.S. become a lot more aware of the requirements to travel to Canada; and the expansion of both the NEXUS and FAST programs so that we're not creating more documents, but rather building on the documents that currently exist.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. McKenzie.

We will go into our first round of questioning. Each member has up to seven minutes. If the members could be brief in their questions and the witnesses brief in their responses, that would be very helpful.

We'll start with Mr. Fontana, for seven minutes.

[Joe Fontana, Liberal, London North Centre, ON]

Thank you, Mr. Chairman.

Welcome, all.

I have had the pleasure of working with some of you over the past number of years, and I know that you do some incredible work.

Some of the questions might be more about policy than about administration, but let me try to connect the dots, as I've heard a lot of material here about industry, natural resources, and human resources. Tourism obviously is something we might want to talk about.

This country has had it pretty good over the past number of years, with low energy costs, low dollar, and low interest rates, but everybody so far who has come before our committee, including the Governor of the Bank of Canada, has indicated that there are some pretty dark clouds looming out there in the form of high energy costs, high dollar, increases in interest rates, and a whole bunch of other factors, including competition.

But everyone also talked about the even graver situation in which our country finds itself, in the form of our demographic challenges. I want to talk a little bit about the human resources side of things, but I need to understand. There's no doubt that government can't do it. Labour obviously wants to do it. Industry and all the CEOs believe that their biggest challenge, regardless of all those other macro issues that they have to deal with, is meeting the human resources needs of this country sector by sector. Meeting these is absolutely crucial if in fact we're going to continue to have an economy, and even a competitive one.

Two hundred thousand jobs have been lost in the manufacturing sector. We understand that in fact, in the coming year, another 200,000 jobs may be shed, all because of things...and yet there are 250,000 jobs going wanting somewhere in this country. That mismatch between the jobs that are required and the skills that are not there was spoken about, and I want to know what you're doing.

I know we have the sectoral councils, but between the three levels of administration, from human resources to industry to natural resources, what degree of cooperation is there, not only between us in government and other levels of government, but between educators, labour, and business, to do exactly the same thing we've just talked about? There are all kinds of mobility, and the internal barriers, and the regulatory stuff that come into play. How is it that we're going to be able to fix this big nut, to make sure we attract and retain the kinds of skills and human resources that this country's going to need in the next 10 or 15 years in order to continue to have a strong economy?

If I could have your comments on that, I would appreciate it.

[Cliff Halliwell, Director General, Policy Research and Coordination, Department of Human Resources and Social Development]

I'll take it first because I'm in the labour market forecasting business.

The member has raised a very important issue. We should never forget the cost to the economy of finding yourself in a situation in which there are what I describe as people without jobs at the same time as there are jobs without people, or in which you have people in jobs that don't match their skills. Then, you end up with either lost output or lost productivity. It's important to try to improve that matching of the economy and facilitate that matching.

Clearly, there are a number of programs and activities of the department that are aimed at that. Labour market information programs and good labour market data are essential for people to understand where the outlook is best and where the opportunities are best. Programs that provide specific information on job openings are essential. The Internet helps a lot.

I think the other thing we should think about--and it's something we tend not to in this area--is whether or not production needs to be more mobile.

We have an instinctive reaction in human resources to think that workers need to be mobile, but production can be equally mobile. To the extent that there are workers without jobs in particular parts of the economy, a firm seeking workers should consider the possibility of exploiting those opportunities. It takes a lot of movement back and forth and a lot of good information to help to reduce this mismatch. You can't ever make it go away in a very complicated economy, because in the end even a moving decision for a worker is a major decision to make.

[Joe Fontana, Liberal, London North Centre, ON]

Along with what business and labour and everybody's talking about, is there a concerted federal government plan amongst all the various departments? I know I could direct that to my colleagues, and perhaps I will, because I don't see that plan coming together. Perhaps it's more a function of the resources and who is actually responsible for training and making sure the skills are available and so on. One might say that giving a few dollars for someone to deduct mechanics' tools from their taxes is going to incent a heck of a lot of people to fill those jobs, or maybe it's education and so on.

But is there a 10- or 15-year plan somewhere that talks about the human resources requirements to meet the needs of industry in all sectors in this country?

[The Chair, Conservative, James Rajotte]

Mr. Green.

[Martin Green]

I don't think there is a seamless 10- to 15-year plan. I think a number of the building blocks have been put in place as the economy has shifted from one where we're really focusing on skill shortages. We've had the benefit of such a strong economy for a long time. There's the recognition of a number of issues out there--older workers, the need for hybrid skills. Some of the building blocks have been put in place.

In the last couple of years, our department has announced the workplace skills strategy, which has various components to it.

There is the workplace skills initiative, which is not a big program, but it is one that's very much focused on recognizing what you were talking about with respect to the various partners who are involved. We need to get the educational institutions and all levels of governments playing together. As I say, the workplace skills initiative was announced a little more than a year ago. We're just in the throes of looking at different pilot projects that would come together to say, here's the province, a firm, and an educational institute working together. So we're starting to look at that.

Also, there is the workplace partners panel, which is facilitated through the Canadian Labour and Business Centre. That is an attempt at the federal level to basically address what you're talking about, that there is no federal, provincial, or educational institution answer to these problems. These players have to come together. What we're talking about is probably a degree of unprecedented collaboration. I think that is also true, within the federal government, with respect to the three departments that are here today.

It's probably not typical in the last decade that departments have come together to address these issues, but in fact there's an awful lot going on right now. I know that we've been working with NRCan to look at the oils sands issues. The provincial government is at the table. The educational institutions are coming together.

So in terms of a 15-year plan, no, I don't think it's there, but I think it's coming.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Green.

I will go to Mr. Crête, for seven minutes.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chairman.

You're giving us the same test as the manufacturing industry people. It's very educational. You table a pile of documents, and we have to adapt that reality in five minutes. We even have a department that doesn't have a document, for lack of time to prepare one. You're plunging us into the situation of people who work in plants, but we can still move a little.

The table on the tourism industry and the table on page 2 of Industry Canada's presentation, entitled "Average Growth in Real GDP by Industrial Sector", subtly shows the influence of the price of oil on U.S. tourists who come to Canada. The table is well disguised, but you quickly understand that the long-term growth in natural resources will increase, whereas that of the manufacturing sector will decline.

I'd like you to produce this table for comparison purposes. We could see that the price of oil is rising and the number of manufacturing jobs is falling. Last weekend, La Presse reported that 71,000 jobs in the Canadian manufacturing sector have been lost since last year.

In his notes, Mr. Brown states:

While we cannot intervene in energy markets to ensure cheap energy, we can work to improve the energy efficiency of Canadian manufacturers.

I'm not saying control prices, but wouldn't it be important to conduct studies in your departments to determine how we could reduce the effect of energy price increases? As regards gasoline, we know that, if refinery profit margins were reasonable, the consequences wouldn't be as great. We're currently experiencing the biggest increase in the value of the dollar in 28 years. The way things are going, energy price increases and the boom in the energy sector will over in five years, but there'll be no more manufacturing sector.

What are you doing in your departments to offset that effect? I apologize to the tourism industry, but we may not have the time to talk today. We'll have to have another meeting, if necessary, because your tables are very significant and very well done.

Mr. Brown could begin and tell us what his department is doing to ensure that energy prices are as low as possible. The idea isn't to control them, but to find a way to reduce the negative impact of price increases, as was done in the case of oil sands development.

[Margaret McCuaig-Johnston, Assistant Deputy Minister, Energy Technology and Programs Sector, Department of Natural Resources]

Could I respond to that? We have, as Mr. Brown indicated, a program called the Canadian industry program for energy conservation. It has been in place for 30 years and it's supported by all sectors of the economy.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

That's not my question, madam. I'm not questioning what you're doing for energy conservation. I'm asking you what you're doing so that energy prices are lower and that growth improves from the present catastrophic situation.

[Margaret McCuaig-Johnston]

You're talking about the impact of prices on plants and companies, not price control.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'm not talking about controlling prices, but, for a given industrial sector, there are ways to avoid the negative impact we're currently seeing.

[Margaret McCuaig-Johnston]

Right. The program of which I'm speaking has audits available for companies; you can have an audit come in and review a number of days in your plant to identify cost savings for the company in their energy and water use. It can reduce the cost of energy in an individual plant by as much as 30%.

This is looking at new equipment that could be purchased for the plant or looking at something called process integration, which looks at the entire scheme and system of how the plant operates and where one can find energy savings. Companies--and I can give you examples if you're interested in them--can save over $1 million per year in their energy costs, which is a significant amount of money, or up to 30% of their energy costs in a single factory in a single company.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I understand that the department doesn't have a program. Can the Department of Industry tell us what effect the current trend will have on employment in the manufacturing sector in two years? Will current market trends continue? Over the next few years, will we be losing 71,000 jobs a year until there aren't any more?

[Renée St-Jacques]

That's a very tough question.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Yes, but it's the one voters in my riding ask themselves every day.

[Renée St-Jacques]

First, the rise in the dollar isn't over. The economic models are telling us that we'll have to wait roughly two years before the impact of a significant change in exchange rates is reflected in production and employment. The impact is felt sooner on production and on employment.