Industry Committee on June 13th, 2006

[Michele McKenzie]

When I was speaking about confusion, I was talking about confusion among travellers in the U.S., not confusion in Canada. You're right, there's good clarity in Canada that this is a big issue we need to face.

As a marketing agency, we can advocate to federal government departments and agencies what we believe will improve the situation. We believe the types of recommendations that the tourism sector at large has recommended would be a big help.

[Brian Masse, NDP, Windsor West, ON]

Have you tabled recommendations to either minister?

I have it right here, on the paperwork burden. I have recommendations from a department on what to do with paperwork. Has your department tabled specific recommendations to either of those ministers on what to do?

[Michele McKenzie]

We have had that discussion with our minister, Minister Bernier. The Tourism Industry Association has tabled these recommendations with a number of ministers.

[Brian Masse, NDP, Windsor West, ON]

I'm not looking at the association. I'm looking at your department; a department should have specific responses.

We're talking about a $1.7 billion problem at the very minimum. This is prior to the escalation of the Canadian dollar, as well to the heightened natural resource issue on gas pricing that further compounds this. We now have terrorism charges as well, which are getting profound attention in the United States. I'm looking to your department on whether or not in the past you tabled something to either minister on what to do specifically about this.

[Michele McKenzie]

I think that question would have to be directed to Industry Canada, to the department. As a marketing agency, we have tabled the impacts relative to marketing and we have advised the minister in that regard, but in terms of the overall policy direction, that would be for Industry Canada to lead.

[Sara Filbee, Director General, Manufacturing Industries Branch, Department of Industry]

We're from Industry Canada, but I can promise to get back to you on further details on that. I'm more in the manufacturing sector, and that was the basis upon which I had been invited. So I'm afraid I can't give you further details.

[Brian Masse, NDP, Windsor West, ON]

That's fair, getting back to me.

I'm just looking for specifics, and if I have to use other means, I will. We have this as a regular occurrence. It happens in departments. They make recommendations to the minister.

Maybe I can move quickly, then, with my remaining time, to the chart that you provided here on page 6, with regard to manufacturing, import penetration from China. Interestingly, not on here--because it hasn't happened yet--are the effects of auto, which will be subsequent years coming on, as they have auto manufacturing that may potentially penetrate the North American market, depending upon some lawsuits in the United States.

In a briefing from your department, one of the slides in the deck indicated that our assembly surplus had dropped from $40 billion to $25 billion from 1991 to 2005, a $15 billion slide during that period of time.

My specific question relates to your department and manufacturing in auto. Have you done calculations on the effect of the Korea deal that is currently being negotiated and the effects of auto manufacturing, and what are the results of that analysis?

[Sara Filbee]

It's obviously a very good question, but one that really the folks from International Trade Canada are better positioned to answer.

[Brian Masse, NDP, Windsor West, ON]

I understand your department has done a study. Is that not correct?

[Sara Filbee]

We may have. I can certainly talk to my colleague in the area of autos. I haven't seen it personally, but I can certainly look, and if we're able to share it, I'll be pleased to do so.

[Brian Masse, NDP, Windsor West, ON]

Do I still have time, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have 40 seconds.

[Brian Masse, NDP, Windsor West, ON]

Thanks.

I just find this very frustrating.

Maybe I'll go to Mr. Green.

One of the suggestions that have been discussed by workers is having some type of tax abatement system for the ability to travel to other destinations to work--for example, plane tickets to return to visit family. So if you are working in one region of the country for a short period of time, you are able to have some deductions to do so, which would offset some of the costs that are associated.

Other business travel receives that. In fact, you can even claim everything from entertainment to sports and leisure. But if you're a person who works in a field where you want to travel to, say, Alberta, but you're from the east coast, you can't deduct any of those expenses.

Has your department considered any personal deduction expenses to allow travel mobility for skilled trades?

[Martin Green]

We've looked at a number of things with respect to mobility of workers. There doesn't seem to be a silver bullet in terms of an incentive to get workers.

We know firms right now are doing it. There are amazing things going on with the oil sands in terms of construction workers from, I think, Newfoundland flying to the oil sands, but it's all being done at the firm level.

One of the issues is that when you get into government trying to do that kind of incentive for workers, it becomes a bit of a double-edged sword. You could say there are all these skills shortages in Alberta and you might have high unemployment in another region of the country; therefore, why are you not providing incentives for them to move? Well, some of those other regions of the country get pretty upset when there is an active encouragement to lose skilled workers they would like to maintain.

So while we have been looking at a variety of incentives, there hasn't been a real inclination to put them in place at this point, because a lot of people think it would probably be too much fettering in the labour marketplace.

[The Chair, Conservative, James Rajotte]

Okay. You'll have another chance, Mr. Masse.

We'll go now to Mr. McTeague.

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

Thank you, Chair.

I have a few questions, perhaps first to Natural Resources.

I'm looking at the deck you provided. About the one with the windmills and hydroelectric projects, there's a discrepancy in terms of the history of fuel oil prices. You pointed to 1980 to 1984, the period of the national energy program. It would appear to me that oil prices at that time were competitively better in Canada than they were in the United States. Since that time, our price of oil or feedstock has been consistently higher than that in the United States, with the exception of the Iraq War in 1991, which I find interesting, given that we are a net exporter of oil. Could you explain a bit what hindrance this would be, regarding cheaper oil versus the United States, for Canadian manufacturing?

At that same time, could you also explain a bit about the five-year averages of natural gas, which have been very high until very recently, notwithstanding the fact that inventory levels have always been consistent and demand has been pretty stable? What impact would that have overall in manufacturing?

Could I please turn to a comment from either you or the Department of Industry on the prospect in the mid-term from BP's analyst in Europe, who suggested new findings yesterday, indicating somewhere near a $40-a-barrel situation? Are we staring down the possibility of a slowdown in the economy in western Canada, with this double whammy of a slowdown in manufacturing jobs in central Canada?

Finally, I have a comment on the WHTI. It would appear that Congressman Hostettler, who chairs the House of Representatives' subcommittee on immigration and border security, will recommend to Congressman Sensenbrenner that we move immediately on this, notwithstanding the fact that there may be an absence of a NEXUS or FAST system. What will this mean for Canada's conclusion of the security and prosperity partnership?

I realize those are pretty heady questions, but they're extremely important in terms of knowing where we're going to be in about six months from now, as it affects the manufacturing sector most indelibly.

[Howard Brown]

Let me start with the question about the $40-a-barrel oil.

I think we all realize that predicting where oil prices are going to be next month, let alone five or ten years from now, is a pretty difficult challenge. The oil companies, not just in Canada but internationally, have been pretty conservative in the kinds of price assumptions they've made in deciding to go ahead with investment decisions. Of course, on any particular project that would be proprietary information.

I think you'd find that most oil companies in Canada and abroad assume that the price is going to be $30 or $35 a barrel, so my guess would be that if in fact prices fall to $40 a barrel, it's unlikely to have a major impact on the expansion of conventional Canadian supply in western Canada.

It's in the nature of markets to overshoot on both the upside and the downside. You can even have prices going below that for a period of time, without significantly affecting investment. Where I think you'd have a problem is if prices fell well below the levels that companies are assuming and they start having cashflow impacts. But I think we're a long way from that situation.

I'm not entirely sure that I followed the question about gas and oil prices.

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

On your report on the national energy agency, I believe it shows under the Canadian and the U.S. tracking that since 1984-85—ironically perhaps, since it's the period in which the NEP was abandoned—oil prices have been more lucrative in the United States than in Canada, although they have followed. It would appear that prices for oil are indeed cheaper in the United States than in Canada. It's something I find rather interesting, because obviously we are concerned about the costs of inputs to manufacturing. If you look at the red and the blue graphs—the blue representing the United States, and the red representing Canada—it would appear that oil prices in Canada are indeed higher than the United States.

So the traditional arguments trotted out by the industry—taxes, lack of competitiveness, etc.—seem to be borne out in the fact that the price of oil over the past 15 to 20 years, with few exceptions, has always favoured the United States, a net importer of oil.

[Howard Brown]

I don't in any way mean to be argumentative, but I'd take something a little different away from the chart. If you look at the period up until 1984, the 1981, 1982, and 1983 prices were noticeably lower than those in the United States. The Canadian prices are shown by the red boxes below the corresponding diamond figures for the United States.

After 1984, after the national energy program was dismantled by the government of Brian Mulroney, the two track almost indistinguishably. I appreciate that they don't exactly lie on top of each other, but if you break it down to a litre, we'd be talking about differences of a cent or two. Certainly the movements are that when one goes up the other goes up, and when one goes down the other goes down. The correlation between those two time series would be exceptionally high, and that surely is exactly what you'd expect in a market-oriented system.

My inference from the data is a little bit different from yours.

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

My data are exactly what you supplied, sir. They demonstrate that whether it's one or two pennies, when you're dealing with billions of litres every year sold to manufacturers, Canadians are indeed paying a premium, and our manufacturers in particular do not have the competitive advantage that they should have from a nation that is supposedly self-sufficient in energy. I just wanted to point out that you have acknowledged the discrepancy. I understand that they do track each other, as they do in the rest of the world, but I find it a little ironic that this doesn't stand out as a glaring concern to your department.

[The Chair, Conservative, James Rajotte]

We've gone way over time.

Mr. Brown, do you want to respond to that?

[Howard Brown]

I'd be happy to respond if Mr. McTeague wants to ask a question.

[The Chair, Conservative, James Rajotte]

Okay. We'll move on, then, to Mr. Shipley.

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

Mr. Chair, I haven't heard from the others on WHTI.

[The Chair, Conservative, James Rajotte]

I'm sorry. I'm just trying to respect each member's time.