Industry Committee on Nov. 22nd, 2007

[The Chair, Conservative, James Rajotte]

Ms. Barnes.

[Colleen Barnes]

I think it's the same story for the financial services sector. We're heavily in the United States, so even though we may not have been directly affected by the subprime events in the United States, we rely on that economy.

Now, the forecasters are still saying there will be growth in the United States. They're not yet predicting a recession. So we'll be watching that closely.

It's not just the entities in the United States that it matters for. Scotiabank, for example, is in Mexico. Mexico is even more integrated with the U.S. economy. So if there's a problem in the U.S. that would drag even Scotiabank's operations in Mexico, it would be a challenge for them because the Mexican economy suffers.

So it's something that everybody is watching. Right now the dire predictions still aren't on the table, but....

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Mr. Chair.

There was some inference that high-paying manufacturing jobs are getting transferred to low-paying service jobs. But I note the last year-to-year increase in average wages was up 4.1%, and with inflation and consumer prices at a 2.5% increase, it appears to me in that our overall wages, Canadians are actually getting richer. Would that make sense to you?

[Tom Wright]

The Canadian economy is healthy, yes.

[Colin Carrie, Conservative, Oshawa, ON]

It seems to be.

How do you think the government's economic policy of cutting corporate and small business taxes is going to affect this sector?

[Tom Wright]

Between the government's policies, the fiscal update budget, and the S and T statements that the government has made, they will effectively be freeing up money within the one sector, which will unambiguously go to parts of the service sector.

Again, my thesis has been that a lot of the determinants of success, the comparative advantage, emanates from elements of the service sector, be that on the design and the engineering that we talked about earlier, or be that on things like logistics. So with regard to the cash that's made available within a corporation, one would fully expect it to get reinvested into some of these areas and to ultimately result in a healthier situation.

[Colin Carrie, Conservative, Oshawa, ON]

You brought up the government's S and T strategy. One thing that was heard from this committee last year in our manufacturing report was that we should be investing more in research and development. The government responded with record amounts for R and D; I think we put $9.2 billion into our S and T strategy.

I'm curious, do you have any statistics about who invests more in R and D and equipment? Is it the manufacturing sector or the service sector?

[Tom Wright]

I'd have to check the numbers--I don't have them here--but you'll find that the service sector makes healthy investments as well. When you start looking at informatics and the role played there, think of something as simple as buying your groceries. That element of the service sector has invested in technology; you can now do the checkout yourself.

So investments are made and technology has a place even within the service sector.

[Colin Carrie, Conservative, Oshawa, ON]

Dr. King, did you have something to add?

[Dr. Janet King]

No, I was just going to say that we can get that information for you.

[Colin Carrie, Conservative, Oshawa, ON]

Okay, good.

Do you have an idea of Canada's best corporation? Are the best performers, the healthiest corporations, actually in the service sector? Do you keep stats in that regard?

[Tom Wright]

If you were to take a look at some of the published data, you could find about eight of the top ten. If go to the special report on the “Global 2000”, the Forbes list, you'll find most of the ones named earlier by my colleague from Finance--Royal Bank, Manulife, TD, down to and including BCE. They are all part of the top ten.

If you go through that list, you see that Canada has quite a number of large, active corporations. We do well on that scale, with eight out of the ten.

[Colin Carrie, Conservative, Oshawa, ON]

You commented a bit earlier about how we're doing internationally. Are there countries out there that are actually doing better than us in service sector strength?

[Tom Wright]

I think it goes back to one of the earlier questions, where we wanted to do a little bit of comparison with the G7 and the G-8 and I had to apologize for not having it in the deck. It was actually one of the questions that I had.

But if we start taking a look at, say, the export of services as an area of interest, I think some of the other countries—i.e., the U.S., Australia—are doing better than we are. So there is opportunity for us to improve there.

I have made an undertaking to get back to the committee with some more of the comparisons on that score.

So I think we do have some successes; we also have some opportunities to move forward.

[Colin Carrie, Conservative, Oshawa, ON]

Do you think there's enough competition in the banking and service sector in Canada?

[Tom Wright]

Oh, I would let the Commissioner of Competition deal with that one.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie.

We'll go to Mr. Eyking, please.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chairman.

I thank the presenters for coming here today.

My question is on small and independent businesses. I know they're in amongst all these service sector companies. There are many statistics out there stating that small independent businesses are a driver in our economy, and many times when the economy goes through swings, they seem to keep us stable or to keep things on track.

Do you see in the near future, with the changes we may face, any challenges for the small business sector? How can we as government continue to foster that sector and even enhance it? Because it's a stable factor when we go through these swings.

[Tom Wright]

Again, my apologies for not having data I could use to respond to your question. I think there is data to affirm your starting point, which is that small- and medium-sized enterprises of this country account for a huge amount of economic employment activity and as such constitute a solid base. One can explore that. I have a colleague in our department who works in that area constantly.

In terms of what's going to make the lives of those people easier and what's going to facilitate their growth, one constantly hears about issues of paper burden. They find that the government is there all too frequently to help them. There's a bit of a challenge on that front. So I think paper burden is one of the areas.

CFIB reviews the irritants with their membership on a regular basis. Financing seems to be one of the challenges; I'd have to update myself on their current top three.

S and T is an area that starts to affect that sector. Even small businesses have to deal with, or take advantage of, technology to get their comparative advantage going in the marketplace.

Certainly the government has had small business loans in place. It has made some steps forward in terms of how to deal with paper burden.

It's a bit of a roundabout answer to your question. Sorry, I don't have the data.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Do I have a few more minutes?

As some of our sectors go through these changes--for instance, a forestry mill in northern Ontario goes through a collapse and there are 200 to 300 people laid off--many regions of this country have regional development agencies. Sometimes when that industry is taken away, those development agencies try to foster growth. A lot of times it's with small businesses. If there was a forestry sector, for instance, maybe we could have a tourism sector in that region. Sometimes you can't just bring a call centre in to some of these regions.

How important are these regional development agencies in helping us through the changes in our economy?

[Tom Wright]

In my experience, one area in which they are quite helpful is in the instance of single-industry communities. Take a look at that scenario you were describing. In those areas of the country where they're having a lot of hardship, and those single-plant communities, the degree of freedom they have to respond to that crisis if a plant is going down is pretty limited compared to the larger communities.

It strikes me that this is where regional development agencies have knowledge, awareness, and programs where they can bring together the key players to, as you say, take a look at alternatives, whether it's tourism or something else for the community. You end up having government programs that look at the individual, and a regional agency that's able to work with the community.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Just to sum up, with our economy changing as much as it is, it's going to be critical for those development agencies to be proactive and to connect the dots to help the communities get through.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Monsieur Arthur.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chairman.

Good morning, Mr. Wright and Ms. Barnes.

In the area of services, where is Canada the best in the world?