Industry Committee on Jan. 29th, 2008

[The Chair, Conservative, James Rajotte]

I want to welcome everyone back after their parliamentary break.

We are continuing with our study of the service sector here in Canada. This is the 14th meeting of the Standing Committee on Industry, Science and Technology. Pursuant to Standing Order 108(2), we are doing a review of Canada's service sector.

We have with us today five organizations. From the first organization, the Canadian Council of Chief Executives, we have the executive vice-president, Mr. David Stewart-Patterson, and the vice-president of economics and international trade, Mr. Sam Boutziouvis.

The second organization is the Canadian Co-operative Association. We have the executive director, Ms. Carol Hunter, and we have the director of government affairs and public policy, Mr. John Anderson.

The third organization we have is the Canadian Services Coalition. We have the Honourable Sergio Marchi, the chair. Welcome.

The fourth organization is the Conseil canadien de la coopération. We have Madame Brigitte Gagné, the executive director.

Last, from the Toronto Association of Business Improvement Areas, we have the vice-president, Mr. Michael Comstock.

Because of the number of witnesses we have today, we are limiting the opening statements to five minutes from each organization. We'll go in the order in which I have outlined them, so we will start with Mr. Stewart-Patterson.

You can start with your presentation. You have up to five minutes.

[David Stewart-Patterson, Executive Vice-President, Canadian Council of Chief Executives]

Thank you, Mr. Chair. I appreciate the opportunity to appear this morning.

When we talk about the service sector, we're covering a vast range of work, three-quarters of the jobs in the economy. With your permission, I'm going to focus my initial remarks on two areas in which we've done specific research into what it takes to compete for highly skilled and well-paid work, two specific kinds of service jobs, if I can put it that way: those involved in head offices and those involved in research and development.

The head office subject came to the fore last year with the highly publicized foreign takeovers of major enterprises, which led to fears in some quarters of the hollowing out of Canada's head offices. Obviously—we're a CEO-based organization—what happens to head offices matters a great deal to us as well as to the well-being of all Canadians, and we decided to dig a little deeper into the specific issue of head office jobs.

The first point I'd make on this front is that where a company's shares are owned doesn't necessarily determine where it decides to set up centres of high-level decision-making. Many Canadian subsidiaries of foreign-based multinationals function as centres of leadership for North American and global responsibilities. By the same token, Canadian-based companies, as they expand abroad, tend to set up centres of expertise in other countries and recruit talent globally. In other words, Canada has to compete to be a preferred location for these kinds of jobs, within Canadian and foreign firms alike.

We did a detailed survey of our CEO members last year and particularly looked at how companies decide where to set up head-office-type operations. The responses indicated two dominant drivers in this respect.

First is tax policy. The economic evidence on corporate tax policy has been clear for years: high corporate taxes in a global economy don't pay. This is a critical issue for companies in the service sector, because Canada's current corporate tax structure is heavily biased against services. Given the current crisis in manufacturing, it's obviously understandable that we want to focus in the short term on how to retain jobs in that sector. But we are going to be counting on services, moving forward, to provide the bulk of our future job growth, and our tax system actively discourages investment in this area.

I think the C.D. Howe Institute has noted that Canada has the second-highest marginal effective tax rate in the world on business investment in the service sector, behind only the United States. It's important to note that even higher-tax jurisdictions, countries such as Sweden, understand the importance of this. Even though Sweden has an overall tax burden that's much higher than Canada's, its effective tax rate on business investment is 42% lower than Canada's and its effective tax rate on investment in services is less than half of Canada's current rate.

When it comes to attracting head office jobs, personal tax rates also matter. Individuals think about a lot of things when they're deciding where to move and where to live with their families. But the fact is that people with high incomes who can earn high incomes anywhere in the world have a lot of choice and certainly focus on what their money buys after taxes.

The C.D. Howe Institute, in its submission to the Competition Policy Review Panel, noted that policies that enable companies to pay high gross incomes, and personal income taxes that leave a larger share of those gross incomes in the pockets of the people who earn them, are a key source of competitive advantage for a jurisdiction that seeks high-value business activities.

There is a second, very different issue that also has a huge impact on where to locate head office jobs. The fact is that senior executives at large companies have to travel a lot. They have to manage their operations; they have to build relationships with customers; they have to deal with investors. The reality for growing Canadian companies is that many of those employees, customers, and investors don't live in Canada; they live in the United States and beyond. Basically, the time it takes to travel to see those people has a major role in determining where a given executive wants to be located.

At one level, that reinforces the importance of basic infrastructure, such as good airports. But the broader issue for Canada is the efficiency of the Canada-U.S. border. We've been working hard since September 11, 2001, to ensure that our neighbour's understandable focus on its own security doesn't impede legitimate traffic across the border for people or goods, and our organization has been actively involved in the work of the North American Competitiveness Council to try to make the border less of a barrier.

We are concerned that the border is getting more difficult to cross, rather than easier. We're particularly worried about the implementation of the western hemisphere travel initiative, which of course is scheduled to include a requirement for a passport at land crossings by mid-2009. That seems likely to make border delays worse.

The fact is, a Canada-U.S. border that creates regular delays for business travellers provides a powerful incentive for top executives to live on the same side of the border as the bulk of their customers, their investors, their operations. For expanding Canadian companies, that increasingly means, when looking at where to set up shop for North America, that this basically provides a powerful incentive to locate south of the border rather than north of the border for key head office functions.

Before I close, Mr. Chair, let me address the other source of high-value work that I mentioned at the outset: research and innovation.

We know that business investment in innovation is a fundamental driver of a more competitive and prosperous economy, but by at least one key indicator, business expenditure on research and development, our record is mediocre at best. We therefore launched, last year, a joint project with Industry Canada to dig deeper into this issue. We started with a CEO-level survey that essentially asked what it is that enables and encourages companies to do as much research and innovation as they do and what discourages them from doing more. We also asked what matters most when their company is deciding whether to do research in Canada or somewhere else and how Canada stacks up on those factors.

The survey confirmed that intense competition is the key driver of innovation. But its evaluation of Canada's strengths and weaknesses was rather sobering. The CEOs who responded applauded Canada's strong pool of talented people and its high quality of life, but it pointed to two key weaknesses: the regulatory environment and the treatment of intellectual property, which effectively is the true currency of the knowledge economy. They also rated these two factors as the ones that matter most when companies decide whether to invest here or somewhere else.

The result is stark. When they were asked about their company's intentions for investment and innovation over the next three years, most said their investment would remain flat in Canada, and for companies that were planning to increase investment in innovation substantially, the bulk of that innovation expenditure is going to take place outside Canada.

[The Chair, Conservative, James Rajotte]

Okay.

[David Stewart-Patterson]

I think that does actually conclude my remarks, Mr. Chair. Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Stewart-Patterson.

We'll now go to Ms. Hunter.

[Carol Hunter, Executive Director, Canadian Co-operative Association]

First of all, I would like to thank you very much for this opportunity to present before the committee.

The Canadian Co-operative Association is one of two umbrella or apex organizations that represent cooperatives and credit unions across Canada. Our sister francophone organization is the Conseil Canadien de la Coopération, which is presenting here today.

The cooperative sector in Canada today is made up of over 9,000 cooperatives, both financial and non-financial. It employs over 170,000 people and has assets of over $260 billion. The sector has some $18 million individual memberships, representing at least $13 million Canadians. This means that four in ten Canadians are members of a cooperative.

The cooperative model is one of economic democracy. Each co-op is owned by its members and is governed by the principle of one member, one vote. The Canadian Co-operative Association represents 34 member organizations, including the provincial credit union centrals, the cooperative insurance sector, the consumer cooperative sector, as well as the agricultural, housing, health, and worker cooperative sectors. In 2009, we will be celebrating our 100th anniversary.

It is particularly appropriate that we are here today as most of the more than 9 million cooperative memberships that CCA represents are found in the service sector. While there are some 10.8 million credit union memberships across Canada, over 5 million are part of the credit union network represented by provincial credit union centrals and the Credit Union Central of Canada. The assets of these credit unions have risen 10.8%, year over year, to reach $102.4 billion as at the third quarter of 2007. Another of our members, the Co-operators Group, is the largest multi-product, Canadian-owned insurance company, with assets of over $7 billion and over 4,100 employees.

We have several members in the consumer cooperative sector, including Co-op Atlantic, the United Farmers of Alberta, and GROWMARK. Our largest member, Federated Co-operatives Limited, is owned by 275 individual cooperatives and had sales in the order of $5.8 billion in 2007. Mountain Equipment Co-op, with some 2.7 million members, is now the fourth largest polity democratic voting entity in the country after Canada, Ontario, and Quebec.

The Canadian housing cooperative federation represents some 2,200 housing co-ops and some 250,000 people who live in cooperative housing across Canada. There are more than 500 co-op child care centres run by some 35,000 parents. In Saskatchewan, cooperative community health clinics have existed since the 1960s, and they provide a community-run alternative to medical services delivered by the state or the private sector.

In the service sector, the cooperative model already provides opportunities in terms of jobs and business solutions to many Canadian communities. We believe that starting and encouraging new cooperatives to deal with many of our most important economic and social issues is a policy tool that is underused by the federal government and by many provincial governments.

In our campaign to renew our major partnership program with the federal government, the cooperative development initiative, we have outlined eight possible areas where the cooperative model could help the federal government deal with policy issues, from economic development in challenged communities to the integration of immigrants in Canadian society. We also believe, as we have indicated in two presentations last year to the Senate committees on urban and rural poverty, that the cooperative model is an excellent tool in helping us to make poverty history in our very rich country.

Over the last years we have had a spate of major foreign takeovers of national economic icons. Cooperatives have a major positive advantage in dealing with this issue because they are directly owned by the residents of these communities. In many inner cities, and also in rural communities, cooperative stores still remain while other supermarket stores have left. Credit unions are now the only financial institution in some 900 communities in Canada.

Cooperative ownership assures that the profits are transferred right back to the members in the form of patronage dividends. This year alone, federated cooperatives will be returning over $450 million in patronage dividends to local member retail cooperatives.

As part of the co-op principles, concern for community means that co-ops also contribute back to their communities in other investments. Credit unions gave back some $34.7 million in 2006 in the form of donations and contributions to community economic development; the Co-operators Group allocated $3.5 million in 2006 into community projects; and Mountain Equipment Co-op put 1% of its sales, or $2.4 million, into climate change projects in Canada.

A study by the Quebec government showed that cooperative businesses tend to last longer than other businesses in the private sector. More than six out of ten cooperatives survive more than five years compared with almost four businesses out of ten for the private sector. Close to 100,000 individuals volunteer their time in helping manage the co-ops by sitting on boards and committees.

In closing, there are two areas in which cooperatives particularly need government assistance. The first one is assistance in getting started. Once they are up and running, co-ops can fend for themselves and do not require ongoing regular government support. Small help, in the form of renewing and expanding the cooperative development initiative, which we have mentioned and which is a five-year program that ends March 31, 2008, is one important way.

The second need is for capital. As cooperatives often have more difficulty raising capital in their initial development phases compared with investor-owned businesses, we would like the federal government to bring in a cooperative investment plan, such as exists in Quebec, which gives tax credits to members who invest in agricultural or worker co-ops.

Both of these programs can help the co-op model play an even larger and more important role in delivering services to Canadian people.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Hunter.

We will now go to the Canadian Services Coalition.

Before I ask Mr. Marchi to begin, I should introduce Shirley-Ann George from the coalition. I forgot to do so. Welcome.

Now, Mr. Marchi, we'll have your presentation, please.

[Sergio Marchi, Chair, Canadian Services Coalition]

Thank you, Mr. Chairman.

The Canadian Services Coalition would like to thank you and members of the committee for their invitation this morning. In that regard, we have submitted a brief paper for the committee. I'll be speaking in terms of some overview remarks. I'm joined, as you noted, by Shirley-Ann George, who is the executive director of the coalition.

We also applaud the committee for its efforts and leadership in reviewing the vital importance of the service sector to the Canadian economy. We're confident that your final report will be as thorough and play as key a role as did your reference and report on Canada's manufacturing sector.

The coalition is a relatively new membership-based organization with a mandate to provide a strong and cohesive voice for the Canadian services industry. Our mission, in essence, is to seek the liberalization of service markets across the world as well as the removal of trade and investment barriers within our country itself.

As the committee is acutely aware, the Canadian economy is in the midst of a major transition, generally from one of production and manufacturing to one of services and ideas. To be sure, manufacturing will continue to be a pivotal source of economic opportunities in our national economy, but at the same time we have to also take hold and note of the recent trends, not only in our country but in economies around the globe.

A few statistics really paint the tale. Services are responsible for almost 70% of our national GDP. As of last January, they represent roughly 76% of all jobs in Canada. For the last 15 years, or thereabouts, almost 80% of new jobs were created in the service sector. At the same time, services account for only 13% of Canada's exports, with 60% of those flowing to the United States.

The economy will continue its transition, and therefore it's important for the Government of Canada to develop a service sector strategy. Given the vast scope of the service sector, something that was mentioned previously, a multifaceted approach would provide the best framework.

Among other things, a coherent service strategy would seek to develop skilled human resources, open markets that trade in investment and services, create innovation policies for the service economy, promote entrepreneurship, adopt flexible labour laws, and create a tax environment to support the service sector.

Given the diverse nature of the service industry, many of the benefits that flow from that sector are difficult to quantify and measure. However, many services bring with them a host of intangible benefits that often escape typical statistical measure. For instance, telecommunications ensure that information and knowledge are efficiently and economically disseminated; transportation enables the efficient distribution of goods; and business services, such as accounting and legal services, are essential in reducing transaction costs.

It's also noteworthy to add that services have a positive impact on the competitiveness of the manufacturing sector. Just last year, the OECD put out a report that essentially confirmed that fact. They found that the availability and quality of producer services, defined as services that enter directly into manufacturing firms as production and cost functions, can form the basis of comparative advantages in service-intensive manufacturing sectors and facilitate manufacturing firms to move up the value-added chain.

In terms of Canada's economy, it's clear that services are playing an increasingly important role. At the same time, they reflect and impact on the competitiveness of our economy. I would also suggest that the development of a service sector also impinges directly on the quality of life citizens have, not only in our country but in countries around the globe.

In the paper we submitted we offered seven recommendations for the consideration of the committee, and because of time I'm not going to go through them all. If I can, I'd like to quickly highlight three of them.

The first is the need to reduce barriers. In short, the key for Canadian services export growth is ensuring that our offerings are world-class through open and fair competition. By working to assist emerging market economies to reduce their barriers, Canadian service providers will be given new opportunities. Therefore, the Government of Canada, through its multilateral and bilateral negotiations, should endeavour to eliminate the non-tariff barriers that are currently inhibiting the trade of services to ensure that new opportunities arise and that all countries can take advantage of the benefits that are attributed to services.

This also applies to our internal trade barriers within provinces. The point here, Mr. Chairman, is that the government will hopefully continue, and redouble, its efforts to bring down the barriers between our jurisdictions that inhibit economic activity.

The second recommendation is in statistics gathering. Clearly services are much tougher to trace and document than goods. A truck of widgets crossing the Windsor-Detroit border is one thing; legal services crossing that border are something else. We hope your committee can encourage Statistics Canada to try to collect and disseminate better service-related data so that government will have a better foundation with which to cement future policy and trade negotiation strategies.

Our sister organization to the south, for example, has put out a report, which we provided to the chairman, that allows a breakdown state by state and by congressional district of services, by company, sector, and GDP, which I think can be a very, very useful legislative and government tool.

I see that my time is coming to an end, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Unfortunately, it is, Mr. Marchi, but you will have time during question and answer session to—

[Sergio Marchi]

The third recommendation would be to try to facilitate a good WTO outcome. But I'll wait for the question and answer period to get into that.

[The Chair, Conservative, James Rajotte]

I'm sure someone will ask you about that.

Thank you very much, Mr. Marchi.

We'll go now to Madame Gagné.

[Brigitte Gagné, Executive Director, , Conseil canadien de la coopération]

To begin with, I'd like to thank the members of the committee for having invited the Conseil canadien de la coopération to come and present on the impact of French-language cooperatives on the services sector in Canada.

The Conseil canadien de la coopération is a tier-four national organization representing cooperatives. For the past 62 years it has focused on representing French-language cooperatives in Canada. It is comprised of eight regular members which are provincial councils representing 3,500 French-language cooperatives and membership organizations, has a turnover of $19 billion, comprises 8,860,000 individual members and creates over 100,000 jobs throughout Canada.

I should point out that cooperatives are member-owned enterprises, which stimulate and protect the local and Canadian economies. In fact, one out of every three people in Canada is a member of a cooperative. The cooperative model may be found across all of Canada's economic sectors.

What is the concrete impact of service sector cooperatives on Canada's economy? I've tried to find examples to give you a clearer appreciation of this impact.

For example, Desjardins is the largest cooperative financial group in Canada. It comprises 5.8 million shareholding members; has 40,000 employees; is Quebec's top private sector employer and one of the top 20 in Canada; has assets to this day totalling $147 billion and surpluses, before dividends, totalling $988 million. In 2006, Desjardins paid out over 547 million dollars' worth of dividends to its members.

There are over 90 French-language health services sector cooperatives in Canada. This is a completely new market niche which is being developed. These cooperatives specialize mainly in prevention, i.e. home care services and service delivery. Twenty-one of these cooperatives provide services in traditional or alternative medicine. For example, there is the Aylmer Health Care Cooperative located in Gatineau, right near here, which opened in 2001. Over 8,500 Gatineau residents are members of this cooperative.

Child care services are also a burgeoning sector. There are over 500 French-language cooperatives providing services to more than 140,000 members in Quebec alone.

There are about 30 funeral services sector cooperatives with approximately 100 branches, which provide assistance to families in mourning, regardless of their budget. I should point out that in areas where this service is available, cooperatives handle over 90% of deaths. They hold a 13.7% market share and assets of over $125 million.

There are approximately 250,000 individuals living in 2,100 housing cooperatives, and occupying 91,266 cooperative housing units Canada-wide. Housing cooperatives provide housing services in a community-based democratic environment.

The sector is strengthened by our collaboration on many files with our anglophone wing, the CCA—whose demands this morning I will not repeat—but also the fact that cooperatives belong to their members, Canadians. Cooperatives cannot be sold off to foreign interests in the way our major corporations have been lately. One only has to think of Alcan and the Hudson Bay Company.

Cooperatives empower communities to find their own solutions to their own problems, whether in relation to economic development, the environment, health care services, new arrivals, and aboriginal persons. Cooperatives are a viable, resilient, flexible, and adaptable instrument in the face of the diversity which characterizes the communities they serve.

The cooperative sector is facing many challenges with regard to coordinating and strengthening many aspects of its work, not the least of which is compiling statistics for individual sectors and populations. This is a major challenge for the cooperative sector. We believe that Statistics Canada could be of much assistance in this regard.

There are other challenges including demographic changes, business succession plans, and youth. Cooperatives often step in when businesses are failing but they're also an important tool for our youth enabling them to build a future in their own image. Developing members' sense of belonging, finding ways to meet the needs of an aging population, finding creative ways of becoming more open to difference, these are all challenges when it comes to raising awareness.

Capacity development and developing and fostering cooperative attitudes is another challenge. Capacity development is a daily challenge: it involves building knowledge and experience on the ground in order to better meet challenges, including globalization.

Moreover, for the CCC, the francophone cooperative sectors' identity is one of its key preoccupations. Cooperatives have traditionally been institutions which have helped, and which still help today, several French-language minority communities to live and to work in their mother tongue. The lack of support for these cooperatives has a serious impact on the decline of these francophone communities outside Quebec.

Funding these cooperatives is also a major challenge. In a market characterized by competition world-wide, funding is crucial, especially for labour cooperatives and small cooperatives of producers. A cooperatives development fund would be of great assistance in this regard.

Another form of assistance would be a cooperative investment system like Quebec's, offering tax credits for workers who choose to invest in their cooperatives. Since 1984, $393 million has been invested in cooperatives in Quebec. We estimate that this would cost roughly $20 million if such a measure were to be implemented nation-wide.

Research and innovation are also, of course, challenges faced by cooperatives, as is cooperation and partnership.

I'll now turn to what we expect or to what the federal government could do to assist cooperatives. I don't want to repeat the demands made by Carol earlier. I would add, however, that the government must explicitly recognize the importance of the cooperative movement in the economic development of communities. It must do this by getting involved in the work of cooperatives, by compiling new statistics on the impact of the sector and by transferring responsibility for the cooperative sector from the Department of Agriculture to another department, which may be in a better position to more adequately represent the great diversity of cooperatives' interests.

[The Chair, Conservative, James Rajotte]

Madame Gagné, merci beaucoup.

We will now go to Mr. Comstock, please.

[Michael Comstock, Vice-President, Toronto Association of Business Improvement Areas]

Thank you very much, Mr. Chairman.

As the only non-national-based organization to speak today, the Toronto Association of Business Improvement Areas is pleased to bring you our perspective. TABIA represents 25,000 small businesses—main street businesses, mom-and-pop stores—in over 63 neighbourhoods, BIAs, within Toronto. There are three topics for consideration: the change in main street retail; marginal stores and McJobs; and supporting the cities.

Toronto is a city of many neighbourhoods. The condition of our main street retailers reflects the health of the residential streets around them. The neighbourhood merchant offers a green alternative to driving to power centres with acres of free parking. We are resilient, thrifty, and creative, so there are many successes. Neighbourhood BIAs try to recruit certain types of retail that provide the diversity needed to protect their marketplace, and small retailers are quick to adopt environmental and energy-saving technologies.

Successful retail neighbourhoods include a clustering of stores of similar items, such as boutiques and hand-crafted or specialty items; professional services, which used to be located upstairs and are now in storefronts; and local family restaurants or coffee shops. These form the typical successful retail strips, and I hope you live near a successful neighbourhood retail strip.

I'm sure you all understand “Wal-Martization” and the massive change in retailing this has brought. I worked with others in the downtown to halt the construction of a big-box retail store on the waterfront in 1999, and this gave me an insight into the impact of change that big-box retail has brought to our city. 75% of the retail dollars are now spent in big-box power centres, malls, and chain stores.

Mom-and-pop stores and the boutique neighbourhood merchants are under colossal pressure. The massive change in retail has left the main street businesses with a whole lot of outmoded, old-style, commercial architecture. In a number of cities we are over-stored. We're locked into an architectural structure that is not well suited to compete in today's retail, large-scale format with small profit margins.

So here we are with some successful strips and a lot of old storefront architecture no longer suited for retail. We'd like to see the federal government look at this issue. There doesn't seem to be acknowledgement of this displacement—no urban planning schemes, no programs to consolidate property, and no property tax breaks for the little guys. If you survive long enough to sell the shop—the merchant's dream retirement—the sale is capital taxed to death. We understand there is some difference with farm sales. There's no unemployment insurance if you go out of business, and you've already lost your investment. I don't know of any retraining programs for self-employed merchants.

In Toronto we're experiencing punishing tax bills. A small commercial store assessed at $300,000—that's under 900 square feet—must pay $14,000 just in annual property taxes. To make $14,000 you have to sell a lot of sushi just to pay the rent. We feel the city is reducing its own tax base in this switch of retail format. It's our impression that the new retail format pays less property tax per square foot, employs fewer people per dollar sale, and rarely becomes involved in the local social issues or marketing efforts.

Marginal stores and McJobs are the not-so-pleasant side. Store vacancies, chain stores, and other marginal businesses fill in storefronts in poorer retail strips. Many storefronts are more valuable for residential use than business. Marginal stores provide just wages to those who work in them, and they're fragile.

Many marginal stores are often chains earning the employees wages and a few dollars more for the owner of the chain. So if you have 10 marginal stores you might make a success of it. Each of these marginal stores, however, offers little payback or involvement in the neighbourhood. On the other hand, an owner-operated neighbourhood business is often personally involved in the social life of the area.

In supporting cities, strong cities make a strong country. One of the reasons tax bills are so high is the poor funding of cities where most Canadians now live. The municipality is a child of the province, but the child is living in poverty. We must look at the federal government to develop direct ties to our cities.

Maybe equalization and other transfers could be directed to urban infrastructure. Toronto's social services are mandated by the province but not funded. The city is awash in people begging and sleeping on the streets, which crushes tourism and the people's own self-respect. It would be very helpful if the government would explain how the Charter of Rights and Freedoms prevents us from intervening, even with medical and social assessments, when people choose to sleep on our public sidewalks.

Looking at this problem, which is killing tourism in the downtown, we find there are no job programs for these homeless people and the poor or elderly, and no housing initiatives. I have recently heard of a homeless partnering strategy that was announced last spring, but I haven't seen a sign of it.

Employing a shelter person or any poor person in local retail could be freed from the added cost of workmen's compensation, EI payments, and the paperwork that implies to the mom-and-pop store. Many low-income urban residents have no alternative but to work under the table or beg. Youth with parents on welfare must hide their income under the table or they see their mother's cheque reduced. These people should be supported with specific government employment programs.

Lastly, many of our merchants talk about GST as a problem every day at the till—its visibility, I guess.

These are some of the main street problems the federal government might address. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Comstock.

I thank all of you for your presentations. We'll now go to questions from members. The first round will be six minutes. The second round and all rounds subsequently will be five minutes. So members do have a very short period of time to ask questions. Typically they direct them to one individual. If anyone else on the panel would like to respond, please indicate that to me and I will ensure that you get an opportunity, but I ask you to please keep your answers very brief so that they can get in as many questions as possible.

We'll start with Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair, and thank you for being here this morning.

My first question will be addressed to Mr. Patterson, but if anybody else would like to add to it, that would be fine as well.

Almost every group that has come here, Mr. Patterson, has indicated its concerns about the future labour shortage. I know you mentioned it as well.

I believe we had some witnesses here from IBM and Microsoft who indicated that within the next short period of time, they will need 25,000 employees, and all they can see in the pipeline is 8,000 people coming up. I know you spoke of tax cuts or a different tax structure. That's maybe one solution, but it's certainly not the only solution. It doesn't work in every case.

When we're competing for this qualified labour with India and other countries now, how do you see the government's role in ensuring an adequate supply of labour, and what do you see as the corporate role in ensuring an adequate supply of labour?

[David Stewart-Patterson]

I think on the government side, what it indicates is that we need to focus in two areas. First of all, we have to do everything we can to enable every single Canadian to achieve his or her full potential, and that takes us into areas like education, like training, issues that are not just federal in jurisdiction but that are a national problem. I think this is an area where we've always felt that government has a moral responsibility to make sure that no Canadian is left behind. This is becoming an economic imperative as well.

So developing the talent we have in this country already is the first line of policy priority.

I think the other one is that we've always been a country that depends on immigration as a source of talent, as a source of labour, as a source of citizens, and the fact is we can't count on attracting the degree of immigration we've had in the past, even though we need it more. So I think we have to be much more aggressive at the government level in terms of marketing to potential immigrants, encouraging people to come here, and certainly enabling employers to recruit and bring people into this country more easily when there are jobs to be filled that we can't find people for. And we need to do a much better job of helping people when they get here. Once they have moved into our communities, we need to make sure they are able to integrate into the economic mainstream as quickly as possible. This includes a whole range of community-based as well as national and provincial policies.

[Raymond Simard, Liberal, Saint Boniface, MB]

And the corporate responsibility?

[David Stewart-Patterson]

Well, I think on the corporate side the market has its impact. The fact is, as labour becomes harder to find, as you can't find the people with the skills you need, you do whatever you have to do in order to recruit the people you need to train them. So as we move into a chronically labour-short economy, you're going to see business investment on the training side, in particular, increase correspondingly.

[Raymond Simard, Liberal, Saint Boniface, MB]

I'll make my remarks to the representatives from the cooperative sector. I, just like many people, really appreciate the fact that small villages in Manitoba, like the village in which I was born, for example, still have a credit union, despite the departure of the Royal Bank and the Banque de Montréal.

Recently, the issue of major bank mergers has come to the fore. Do you have an official position on mergers between major banks?

[Brigitte Gagné]

The Conseil canadien de la coopération has no official stance regarding that type of business practice. However, I think you should ask the people from Desjardins what they think.

In the case of Desjardins, the problem isn't really what you call mergers in English, but rather the ability to provide services to communities which are deteriorating because of a lack of services in French.

[Carol Hunter]

I would add to the point about the role of companies and making labour in communities.... The aboriginal population is our fastest growing population here in Canada. I would cite the example of Arctic co-ops in the north. Many of the leaders in the Nunavut government got their first experience in skills training and in democratic decision-making in their local co-op in a local, remote community. For that particular population in Canada, the cooperative model is very relevant.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you. I appreciate that. I'm from Winnipeg, so it's very relevant.

Ms. Gagné, you mentioned that cooperatives should perhaps be the responsibility of another department other than the Department of Agriculture. That's an interesting idea. Years ago, when one thought of cooperatives, one immediately thought of agriculture, but nowadays, there are credit unions, and very important financial institutions. In light of this, wouldn't Industry Canada be a good choice?

[Brigitte Gagné]

That's possible, but clearly we're looking for a department which is able to represent the current diversity among cooperatives. We're not only limited to agriculture: we represent every sector. You need to understand that if you're talking about health care cooperatives with people from the Department of Agriculture, given that department's mandate, the reception is not going to be nearly as warm as in another department.

[Raymond Simard, Liberal, Saint Boniface, MB]

Doesn't it seem logical that Industry Canada would play that role?