Industry Committee on Dec. 13th, 2007

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

Thinking services for a second--real estate, banking, accounting, and so on--if the situation in the United States with respect to credit becomes....

Let's say there's wider recognition—I've been saying this for several weeks now, and I think colleagues are starting to pick up on it—that Canada's lending institutions had a little bit more of an indelible role, shall we say, in partaking; these writedowns continue; and we have a day of reckoning where all lending institutions can say yes, we did a little bit more than we've actually been able to say. What impacts do you think that will have for commercial lending for Canadian consumers?

[Glen Hodgson]

There are basically two transmission mechanisms right now from the U.S. subprime mess. One is through in demand, which we talked about earlier, but the other, as I think you're rightly pointing out, is through the financial system.

The fact that financial institutions around the world have been hit by this, some hit very hard, has probably led many boards and many management teams to rethink credit standards and whether there should be a bit of a pulling back of credit availability, even though, at the other end, the quality of borrower hasn't changed in the slightest.

There is a very legitimate fear right now for all people who need to access financial markets and financial services that they're going to lose some degree of access, either pay a higher price...which has already happened in certain markets, where people are paying 25, 50, 100 basis points more for the same thing they'd been getting from the banks back in August, but probably more on the volume of credit available.

So you might have to pay a higher price when you can only get two-thirds of what you could access in terms of working capital three or four months ago. That is a legitimate concern, and of course it really flows from all the problems in the financial sector, then rippling out to the rest of the economy.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

I'm going to take the next Conservative spot.

To the management consultants, you talked about barriers north-south with the U.S. You talked about a high standard of professional conduct. You may have answered this already, but I just wanted to clarify, are there discussions going on between the provinces, or with your association with the provinces, the federal government, or even between Canada and the U.S. in terms of establishing some common standards with respect to consultants?

Mr. McCulloch, I don't know how you phrased it, but I believe you said anybody can put a shingle out and call themselves a consultant. Are there standards being discussed, and if so, have you recommended a list of standards that provinces, the federal government, and Canada-U.S. should adopt?

[Heather Osler]

First of all, Canada has national standards right across the board. They are the same in every province. If you're a CMC in one province you will have reciprocity across the country. We also have reciprocity with 25 countries around the world.

As Bob mentioned, the only thing we do challenge is around the code of conduct, because we all know that there are different ways of practising around the world and we want to ensure that when people come to Canada they understand the way we do business. That's an accepted exception at the international table.

I think it's important for you to know that Canada has 2,400 certified management consultants. The United States has fewer than 1,000 today. It was larger at one point, but it's never really gotten off the ground. It doesn't do us any benefit to have a weak American organization on the other side.

[The Chair, Conservative, James Rajotte]

Did I mishear you, Mr. McCulloch, with respect to the idea that anybody could call themselves a consultant? Were you describing the U.S. situation? I thought you were describing the situation here in Canada.

[Bob McCulloch]

That's correct. I mentioned 13%.

[The Chair, Conservative, James Rajotte]

I'm hearing that anyone can call themselves a consultant, and then I'm hearing that we have national standards.

[Heather Osler]

For the certified. We represent the certified management consultants. That's where the standard is.

[Bob McCulloch]

That's the standard, and approximately 13% of practising management consultants in Canada are bound by that standard. All the rest are not.

[The Chair, Conservative, James Rajotte]

Are you asking that the rest be bound by them? The standards are good, but are you saying all consultants should be bound by them?

[Bob McCulloch]

Ideally. It would be useful for the protection of the public, the customer, and the consultants.

[Heather Osler]

It's the code of conduct, really, at the base of it all.

[The Chair, Conservative, James Rajotte]

Thank you very much for that.

Mr. Hodgson, I have a lot of questions. It's been a fascinating discussion from all members. A lot of your points are essential in the sense of trade as an integrated process. We tend to describe ourselves in silos in this country in terms of resource extraction, agriculture, manufacturing, and then services. Yet there's much more interplay between them. I think, as Mr. Arthur said, services are unfortunately seen as the poorer cousin, when they shouldn't be.

If you look at ICT or other service sectors, you see the way they transform every other sector--the resource sector, the manufacturing sector. Do we need a different way of actually examining the economy? I know that's a big question, but I'm sure the Conference Board is looking at not siloing things, where we would actually describe the various economic sectors in different ways.

[Glen Hodgson]

Part of the reason I enjoy being the chief economist of the Conference Board is that I think I have a platform to try to help people understand the modern world from a new perspective. That's why we do so much work on cities. Cities really are the forgotten partner in Confederation. We have starved them of resources. We put a report out yesterday--a report card on Canada's cities. You'll see something very soon on how to give tax capacity to cities. It's exactly the same concept as you're talking about, Mr. Chairman, around services, seeing them as part of the integrated whole within our national economy.

You're absolutely right, we have a kind of old “rocks and logs and maybe a little manufacturing” view of Canada, because that's what we all grew up with, that's what we understood. That's actually quite easy to understand. You can look at the GM line in Oshawa and see how cars are put together--the car pops out the other end.

Management consulting services are sophisticated. You actually have to train yourself for a long period of time to be very good at it. You have to know the literature and have a past history of experience. The same story would apply across most sophisticated service sectors.

You're absolutely right, they are an integral part of everything we do in our national economy. So yes, we need a new paradigm, understanding that all the pieces fit together and you can't really separate them out and assume this will stand on its own or that will stand on its own.

[The Chair, Conservative, James Rajotte]

Thank you.

I have many more questions, but my time is up. I'll apply to myself the same rules as I apply to everyone else.

I have Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Am I starting?

I'll be sharing the time allotted to me with Mr. Vincent.

Good morning, Mr. Hodgson. I'd like to talk to you specifically about the environment and reducing greenhouse gases. You know that in that regard, Canada's track record is not very good. It's been criticized by many countries, including France. France is threatening Canada with economic retaliation and threatening not to do business with Canadian companies because we're not respecting the Kyoto Protocol. The current government is lagging behind significantly in the reduction of greenhouse gases. Like it or not, we will have to achieve this at some point. You said earlier that we should start as early as possible, rather than delaying the deadline.

Recently, I was reading that companies or states, such as California, which have very strict environmental measures, have seen a growth in their economy, contrary to what we hear from those who say that it's not good for economy to respect the environment.

As a structural engineer, I also remember that in Quebec, in the 1960s, we lacked schools and highways. There was a boom in investment, which led to the development of the economy.

Has your organization set out a position on the development of new technologies that may be beneficial to both our economy and the environment, and where a lot of work still needs to be done? It would be interesting to hear a summary of your opinion.

[Glen Hodgson]

We've had research on the environment for a long time at the Conference Board. We have a series of networks where we bring experts together to talk about good practice.

Our view is as follows, and I'll fall back to a brief I did in the spring for our membership.

First of all, the Conference Board is not a great supporter of Kyoto. We don't think it was a good deal because it was not inclusive. It did not include all the creators of greenhouse gases around the world. There were free riders. The United States didn't ratify, but China and India were also left out. China's level of greenhouse gas production is almost as high as that of the United States now, and it's going to get higher very soon. So an agreement that is not global in nature and that allows free riders is not a particularly good one.

In my career I've had a chance to negotiate, on behalf of the Government of Canada, a series of international agreements and comprehensive matters. So I actually see big flaws in Kyoto, and I'm not particularly concerned that Canada has not acted on Kyoto.

That being said, what do we need? We need a global agreement now. We clearly need to make progress and have all parties that are major emitters of greenhouse gases be part of an international agreement.

The second element is that we need attainable targets. There's really no point in going back to 1990. We have to look ahead. I think there is a scientific consensus that we need to find a way to reduce greenhouse gases by between 50% and 80% by 2050. So that's the end state. Then we have to establish mileposts along the way.

I would turn to an American organization that I find quite interesting, called United States Climate Action Partnership, or USCAP. It is a totally private sector affiliation with the environmental groups in the United States. Those radical firms like GE, GM, and DuPont are part of the USCAP, and they're now working with Congress trying to set out the elements of a U.S. plan going forward.

Thirdly—and this is a point Mr. Brison made—the price of carbon has to be established around those credible targets.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I'm sorry to interrupt you, but we're pressed for time.

Do you think that postponing the repair of environmental damage is a good thing?

[Glen Hodgson]

No, I think we have to understand that as we create wealth in any economy we're doing bad things to our environment. We have to factor that in explicitly.

Our view is that we need to put a price on all of the negative things we do as part of creating wealth, and greenhouse gases are at the top of the list.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Fine.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Robert Vincent, Bloc, Shefford, QC]

So in your opinion, the best thing is to create wealth, destroy the planet [Editor's Note: Technical Difficulties] the other countries that do not sign on to the Kyoto Protocol.

That's as if your neighbour's house was on fire, and you had a small hose but you didn't spray the house because the two fire trucks weren't there. I think that your view—let's create wealth but destroy the planet—is your specialty...

[Glen Hodgson]

I think you've completely misinterpreted what I said.

The first principle in economics—

[Robert Vincent, Bloc, Shefford, QC]

That's what I understood.