Industry Committee on Nov. 20th, 2006

[Ann Janega]

I think we're very much at the concept level. The approach of CME is to look at this as an initiative that would be part of a national strategy. So it would not be, at least from my organization's point of view, just Nova Scotia or just Atlantic for the sake of Atlantic. It would only work if it's part of a national initiative. Locally, many people are involved in maximizing the advantages here on the east coast.

The discussions are just starting, and I think we're still at the consensus-building stage. In Nova Scotia there has been a senior provincial government official designated as a gateway officer. I believe that there's been an important study commissioned to address some of the issues related to logistics and cooperation.

At this point, the position of the CME is that we see it as a huge opportunity, and to the extent that we can, we're going to try to lead discussion on this and try to build consensus so we can present a nice sensible package that others can sign on to.

[Jean Lapierre, Liberal, Outremont, QC]

Thank you.

Mr. Cirtwill, I was surprised by your statement that immigration is not the solution. When we talk about the Quebec measures to increase the birth rate, the only group in Quebec society that has an increased birth rate is the immigrants.

I happen to believe it's part of the solution; it's not the only solution. But how else are we going to provide for the number of people we need in such a huge country? I don't see any measures that could transform that except opening our doors to immigration. Other than that, I don't see how we're going to fight the aging population. Where are we going to get people who are going to help us keep our niveau de vie?

[Charles Cirtwill]

First off, I'd point out that Quebec's immigration profile is significantly different from the national profile. In fact they are younger, they are a bit more entrepreneurial, and as you noted, they are more prolific in their birth rate. I think that is an example the rest of the nation should be following.

The key point to recognize, though, is that there are a lot of societies that are aging--and aging quite gracefully. It's not urgent that we open our doors and bring in everybody. Quite frankly, we have hundreds of thousands of people in our society who are already here and who are underemployed, unemployed, and unproductive. There are all kinds of steps--and I listed some of them in my comments--we could take that would allow those people to contribute to society in a manner that's going to allow us to sustain the quality of life we've created.

[Jean Lapierre, Liberal, Outremont, QC]

I was listening to your statements on having fewer public servants and having those people useful in the private sector and all of that. You know, all administrations are probably hoping to have fewer public servants. It would be very hard to take the ones we have now and make them competitive tomorrow. They have a security that the private sector doesn't give.

So with those challenges now, what are the measures we could take, other than opening the doors to immigration, that could change this? The fundamental changes you're asking for are for the next generation, in my opinion.

[Charles Cirtwill]

If you're talking about immediately addressing low-skilled worker needs, you have all kinds of guest workers in Mexico with nothing to do. We could access a labour pool tomorrow if we put the rules in place.

The other piece of the puzzle is to remember that production and economic development don't just require labour. You can substitute capital for labour. Right now, we have rules that keep us from doing substitution on the necessary scale.

Those are two changes we could make within the next hour and a half to start responding to that need. And again, it's not just that we have a bunch of public servants who could be shifted to the private sector. In fact, as someone just mentioned, many of them are shifting now. When they retire, or are getting close to retirement and getting their buy-out packages, they're going off to the private sector. They're not getting on the yacht and just sailing around the Canso Strait.

We have a lot of people who are underemployed. We need to get the barriers out of their way and bring them into the workforce.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you for being here today.

Ms. Janega and Mr. Durdan, in your presentations, you said that the value of the Canadian dollar, rising energy and raw material costs, and the shortage of labour were causing you difficulties. You also talked about free trade with China and Mexico. I'm happy to hear your comments, because I myself am at a lost in the face of all of this. It is difficult to find solutions, with all those unexpected situations. Yesterday, we could read in the newspapers that commercial trade with Mexico is currently worth $33 billion and that it will be $70 billion by 2010. I don't know how you're going to deal with this. Please enlighten me and tell me what you can do. You said that it could take 10 years before we get something concrete. If we go from $33 billion to $70 billion, the number of products coming from China will also double. I would like to hear your comments on this.

[Robert Durdan]

At Maritime Steel we recognize that there are certain products that, because of our infrastructure and our capital equipment, are more difficult for us to make than third world countries or other world countries. We have, in the microcosm of the foundry industry and of Maritime Steel, decided that some of the smaller product we would actually source from China. I suggest to you that's not a cop-out; it's the only reasonable means we can take to satisfy our customers and customer needs as a complete supplier in the industry that makes any sense. That allows us to dedicate our capital equipment, our people, and our product to areas where we do best, and thus as an organization we're able to survive despite the onslaught from other countries that have a competitive advantage when it comes to low-cost labour.

[Ann Janega]

If I may add to that, I think the answer to each of those challenges is different for each one. The manufacturers, at least here in the east, are very enterprising, tackling every single one. With regard to production costs, for example, we're seeing increased attention to lean productivity techniques, where manufacturers are studying virtually every aspect of their value-added and supply chain, trying to identify cost savings there. There's renewed interest in that, and that's a program that CME is helping with. It's also an area, by the way, that my counterparts in Quebec have been very successful in focusing on, especially with small manufacturers.

We are trying to emphasize the opportunity offered by export markets. Some manufacturers, believe it or not, have still not focused on the opportunity of exporting. So we're trying to assist in that regard.

In terms of my organization, we are tackling the energy issue head-on by launching a very significant energy study for manufacturers that will, in the end, demonstrate to our utility company how they can help manufacturers reduce their costs and also even provide energy credits. We're trying to tackle every one of these issues.

[Robert Vincent, Bloc, Shefford, QC]

Do you believe that the government should do otherwise? There is for example China. More and more products are entering Canada. We believe it is a market economy. Therefore, shouldn't Chinese products be subject to a surtax? Shouldn't we take direct action to counter this invasive influx of products? China's market economy is equivalent to ours. If their wages are only one fortieth of Canadian wages, I don't believe that Canada can compete with China, and that we are all doing business in the same market.

Do you believe that one solution would be to apply a surtax on all products coming from China, in order to remain competitive with that country?

[Ann Janega]

Speaking on behalf of CME, I haven't heard that particular recommendation. I am fairly new in the organization, so I'll give you a disclaimer. I can comment that one of the areas that CME is examining is the opportunity offered by the empty containers that are accumulating in Canada, which provide a great opportunity for our manufacturers to take advantage of an instant trade pattern and an opportunity to go back east and send our products to China. That's one aspect in particular that we're examining.

[Charles Cirtwill]

If I could just add to that...?

[The Chair, Conservative, James Rajotte]

Sure, Mr. Cirtwill.

[Charles Cirtwill]

I would just make two points in response to that. The first is that I'd be worried about placing a surtax on products coming from China, recognizing that that's going to translate into higher costs at Wal-Mart and Superstore and Sobey's, the places where your constituents all go to buy their goods and to ensure their quality of life. I mean VCRs, televisions, basic food stuffs, and that kind of thing. We'd be seeing all that, and suddenly the cost of living would go up.

The second thing, of course, is to recognize that if we're talking about developing a reciprocal trade, and we're going to put those barriers in place on this end, we had better be prepared for them to put the barriers on the other side.

[Robert Durdan]

Our response to that Chinese issue was to partner with them rather than try to compete directly with them. A surcharge levied against our import of Chinese castings that we resell into the North American market would mean that we would in fact not be able to do that any more. That would take us out of the game.

If you identified China as the only issue, I think that would be an error. It's really the rest of the world. It's Indonesia, it's Mexico, it's India. India is one of the great emerging steel-casting manufacturers of the world, and they will be competing directly with China in the next few years in terms of building castings.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you all for coming here. It was very interesting, a great presentation. I'm seeing a pattern develop here.

Mr. Cirtwill, I'm very much intrigued by your presentation. I'd heard about this labour shortage. Is this something that's looming, or do you have it now?

[Charles Cirtwill]

It's today.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You say one of the solutions for unskilled labour would be Mexican guest workers. What's stopping that?

[Charles Cirtwill]

I think we have some barriers around visas and visa processes and limitations we've put in place due to security concerns and that kind of exercise. I also think it's a mindset. We haven't really seriously thought about that labour pool as a way to access it. We've had labourers from that part of the region coming to Upper Canada, for example, in the farm industries for a good long time, and even that's not functioning as smoothly as it could.

All I'm suggesting is that we need to take a look at that evidence and expand it to other industries that could take advantage of it.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm also hearing that you have a strong entrepreneurial spirit in this region of the country. In the past, has the federal government hindered that by policies that put in place maybe what we'll just call government jobs or poor unemployment policies? Would you concur with that?

[Charles Cirtwill]

My institute has done a lot of work in this area, looking at the natural rate of what's called closure between thriving economies and lagging economies. Basically what our resource has shown over the last 25 years or so is that the introduction of multiple layers of federal assistance to Atlantic Canada has basically kept us from achieving the level of closure that we would have if you'd just left us alone.

So I think the evidence is quite clear that some of these things are certainly slowing down the natural transitions and trade-offs that would have seen us respond much more aggressively to the realities of our situation. That said, I don't think there's any question that Atlantic Canadian entrepreneurs such as Maritime Steel have found a way to be successful and productive in the modern global environment despite some of the things we've put in their road.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You mentioned something that had to do with R and D, that the U.S. private sector was three times ours, or two to one, or something. Are you familiar with Picarn and CFI, and do you feel that they're moving in the right direction? Are they doing the right things, or is that part of the problem? I guess I'm leading the witness here, but are they putting money in the wrong areas? Is that what it boils down to?

[Charles Cirtwill]

Unfortunately I'm not sufficiently familiar with either one of those program details to respond to that question.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That would be the research and development arm of the federal government and the money that is spent--$3.2 billion, I think, since 1997. Are we spending it in the right spot?