Industry Committee on May 16th, 2006

[Garth Whyte]

Slide 17 of our presentation talked about the burdensome federal regulations that could be looked at, and we are working closely with the Canada Revenue Agency, with Agriculture Canada, and the Border Services Agency, and there are a lot of good things.... I'll give you the report on the regulatory side.

Yes, insurance is an issue that is here to say. If you want to talk about manufacturing, one of the issues we haven't talked about is export insurance—and liability insurance is very difficult—but it's the case for all sectors and it's not the insurance community's fault. There are some international issues at play. But we need to understand this better, because the problem is not being alleviated. If you ask who's responsible, the common answer we get, whether from the provincial or federal levels, is, “It's not me.” Yet it's hitting the entire economy.

We have 25% of our members say that if they can't get financing, it's an issue, but 100% of our members will have a problem if they can't get insurance. If you want to expand and you can't get insurance, it's a problem. If you want to build a building...it used to be the case in Manitoba that you could get five different insurers who would cover 20% of the costs. Now they can only get three to cover 20% of the costs. What's happening? I don't even think the community knows what's happening, and I think this committee could really look at this issue.

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

Is this insurance a Canadian issue?

[Garth Whyte]

Property and casualty is a Canadian issue, in particular—but, yes, it's a worldwide issue.

[The Chair, Conservative, James Rajotte]

Mr. Stewart-Patterson, you wanted to make a comment.

[David Stewart-Patterson]

I wanted to address your question about regulation, because Mr. Fontana raised it as well. I want to come back to the example of the Netherlands, because this is not a matter of deregulation; it's not a matter of taking away, or reducing standards, or anything like that. It's simply reducing what it takes to comply with the regulations.

Garth talked about measurement. That's what's important. What the Netherlands did is come up with a basic methodology. How many people, at what wage rates, have to fill out how many forms, for how long, how often? That gave them a number to start with. Once they had that number, they said: we want to reduce that paper burden by 25% over four years. That's scheduled to be up next year, in 2007.

The estimated savings to the economy of the Netherlands is 4 billion euros for businesses, a 1.7% increase in labour productivity, and a 1.5% rise in GDP. That's saying that measuring what you're making people do, finding out ways to make it simpler for them to do it, and then bringing that burden down over time can have a really meaningful impact on competitiveness and on economic growth.

[The Chair, Conservative, James Rajotte]

Mr. Myers.

[Dr. Jayson Myers]

This is on the trading issue, because I think it is really very important. There are three issues here: there's access to labour, there is training, and there is the type of curriculum that's being offered in our training establishments, in our schools. I think there are things to say on each of these.

On access to labour, there's the immigration process, the selection of the types of skills that are actually needed by industry, and speeding up the process for bringing those people in and making sure immigrants are integrated into the workforce. Manufacturing has a big stake in this; 30% of manufacturing workers are recent immigrants. This is the sector that is the most integrative of all of the sectors.

There's the aboriginal community—making sure that aboriginal workers are well integrated in the industrial workforce. The major problem there is not the ability to integrate well-skilled aboriginal people into the industrial workforce. The major issue is the communities young people come from and the whole aboriginal community base. That is an issue that is very important, if we're looking at how to bring aboriginal workers into industry.

There are the issues around accreditation and the recognition of credits across educational training establishments. Institutional issues are one of the biggest barriers to labour mobility. But there may be ways of tying funding to the institutions.

On the training side, the onus for making these adjustments rests on entrepreneurs. It rests on business; it rests on manufacturers. At the end of the day, government is not going to solve these problems for manufacturers if manufacturers themselves aren't world-class in their management. But with training.... If cashflow is under pressure, training budgets are the first to be cut. Maybe there are some ways companies that are providing training for employees can offset some of that against other payroll taxes, such as EI. There's a possibility there.

On the education system, we have to make sure we have the best business and technical education in the world in this country. We don't now. In colleges and universities we are not training or educating people to the requirements of modern manufacturing. We have to make sure, for instance, that our research projects go into research into the types of facilities that are actually required by the future, by modern manufacturing and modern business going forward, and not into the research agendas and the types of education that perhaps thesis supervisors and professors were looking at 20 years ago. We have to make sure this is a very forward-looking curriculum that actually responds to the needs of industry.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Myers.

We will go to Monsieur Vincent, pour cinq minutes.

[Robert Vincent, Bloc, Shefford, QC]

Thank you for having made yourself available on such short notice.

We understand that the cost of energy is a very serious issue. Do you think it would be a good idea to create a gasoline prices review board? It may serve to explain why there are or are not price increases. That is my first question.

Second, industry representatives often say that emerging countries in Asia or elsewhere flood our markets with counterfeit products. I don't think you mentioned that problem. Industries carry out research and development to create new market niches here and elsewhere, but there is industrial espionage going on and our technology is being stolen from us, which means that quasi-identical copies of our own products are flooding our markets, but they come from other countries.

I'd like to hear your opinion on these two issues.

[Dr. Jayson Myers]

Mr. Chair, may I respond to Monsieur Vincent's second question about counterfeit product and intellectual protection?

This is a major challenge. For Canadian companies, it means having adequate surveillance and security systems in place. For our security systems, it means we're ready to challenge any industrial espionage that's taking place. But it also means we need much more effective implementation of our trade rules at the border. In 2004, the United States customs agency made 65,000 seizures of counterfeit product coming into the United States; we made six coming into Canada.

The fact that we are not policing the border and effectively implementing the trade regulations that are there, not to protect Canadian industry but simply to provide the adequate IP protection that is necessary for any business to run—including Chinese businesses, by the way—has meant that Canada has been placed on the watch list of the U.S. Trade Representative's office as one of the major exporters of counterfeit product into the United States. We export more automotive castings to the United States marked “Made in Canada” than we manufacture in Canada, and that's raised some red flags in the U.S. trade administration.

If we don't get this right, we're not only.... And we are losing. It's a health and safety issue; it's a consumer protection issue; it's an issue for business. It's losing business to counterfeit product, but what's going to happen is that our major trading partner is going to close the border to certain products that they cannot trust coming in to the United States via Canada, because they think they're counterfeit product. That is a priority I think our trade and our customs administration has to respond to at the border.

[Robert Vincent, Bloc, Shefford, QC]

If I understand correctly, we here in Canada are not doing everything we can to stop counterfeit production. Meanwhile, the Canadian International Trade Tribunal is another poorly managed or improperly used tool when it comes to ensuring the protection of Canadian industry.

[David Stewart-Patterson]

I agree. The rules are there, both multilateral rules and Canadian rules. It's a question of how rigorously we try to enforce them.

Another point that flows from Mr. Myers' comments is that it reinforces the importance of our not only protecting, as Canadians, our own borders and the health and safety of Canadians by enforcing our own standards, but also doing so in the context of our North American relationship. The fact is we want trade to flow freely north-south, Canada to the U.S., which is where so much of our business comes from and so many of our customers are based. We have to make sure they have confidence in the integrity of our borders and of our intellectual property protection, as well as that Canadians have confidence in it.

[Robert Vincent, Bloc, Shefford, QC]

I'd like to know what you think of the possible creation of a gasoline prices review board.

[David Stewart-Patterson]

I've lost count of how many inquiries there have been into the competitiveness of gasoline pricing in this country. Not one of them has ever come up with a suggestion that there's a problem, at the end of the day, so I don't see much point.

[Dr. Jayson Myers]

I think one inquiry—and it's a part of what you're looking at here—that would be very useful is an inquiry into why we're not seeing more investment in the supply of refined petroleum products in Canada, and perhaps in North America. Part of the problem in the North American market is that demand is high and there are lots of uncertainties around supply, particularly during hurricane season in the United States. The fact that we have not seen investment in modern manufacturing and petroleum refining facilities is I think one of the major reasons we're seeing some of these spikes in prices.

That would be a very useful inquiry, I think, because it would raise a number of issues not only about that industry but about the state of investment in manufacturing and processing in general.

[The Chair, Conservative, James Rajotte]

Mr. Van Kesteren.

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

Thank you for your excellent presentation. I want to tell you, too, that I have been a member of your organization for many years, and I've filled these things out.

My first question was about which government agencies are the most burdensome. I see you've pretty much answered my question in number 17.

For the second part, I want to get your feelings on.... You've spoken to us about entrepreneurship and the lack thereof in our country today. I have a sneaking suspicion I know the answer, but I want to have your input into this, and I'm going to give you a little bit of a leading question here. Is there a healthy relationship, and has your organization determined this, between the private and the public sector?

[Garth Whyte]

Is there are healthy relationship between us and the private sector?

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

Yes, and is there a ratio? Have we gone beyond that? As we attract people into the public sector, have we...?

[Garth Whyte]

We have another presentation; it's not based on our research, but a Leger public opinion poll on where people want to work in the future. And it's flipped from when I graduated many years ago. It used to be that you'd work in government or in big business. Today, 41% say they want to own their own firm and be self-employed; another 28% say they want to be in the professions or in the trades, which means 70% in terms of our membership. So we have these young people saying they want to own their own business and we have these older folks who say they want to sell their business. How to bring them together is one of the big challenges.

There are two things that came out of that, though. One was disconcerting, and that is that there's a succession problem in the public sector. I'm very concerned about this. I worked with the Canada Revenue Agency for many years, but the corporate memory has diminished to the point that the experience level in the CRA—I'm in big trouble again—is about three or four years at the deputy commissioner level. All of the old guard have moved on; even the people who set up the registry have moved on, and that's just one case. I've seen it in other departments. If you look at Industry Canada, you'll see the rotation of the senior levels, so all of this corporate memory is moving on. We find ourselves being the corporate memory. So I'm concerned about that side of it.

I don't know if I'm fully answering your question, but the succession issue is not just one for our members, but also for the public sector and large firms. It's a big issue that we have to address.

[Dr. Jayson Myers]

I think that answers part of your first question, too, because where the problems arise in the interface between business and government is usually where you have regulators who really don't understand the business. What we've lost I think as part of that corporate memory is a tremendous amount of technical expertise in the public sector, the people with business experience in the public sector. You don't find as many of those people, or as many people who are knowledgeable about what the impact of regulation, or the impact of regulatory compliance requirements, might be on industry. I think that is a challenge for good public policy, as well as for industry, of course.

[Garth Whyte]

That's another thing we've discovered. We'll work together and develop a great policy and walk away, but it's the implementation of that policy that's important. Often the people implementing it aren't involved with the policy development, and as a result you run into problems, because it's the compliance with the policies, not their development, that's the problem.

[The Chair, Conservative, James Rajotte]

Mr. Stewart-Patterson, you had a brief comment.

[David Stewart-Patterson]

Mr. Chairman, I have a brief comment in terms of entrepreneurship. I want to make a point that entrepreneurship isn't just a career that's in private sector; I think entrepreneurship is an attitude, and it's just as important for Canada to have creative or innovative entrepreneurial people working in public services as it is for them to be out running businesses.

[Garth Whyte]

And in government.