Industry Committee on Nov. 29th, 2007

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

Thank you for being here this morning, Ms. Reynolds.

I would like to speak to you about the GST, because the comment you've made is actually quite remarkable and flies in the face of virtually every economist's, every expert's opinion on the GST.

As a matter of fact, the majority of countries in the industrialized world, including Europe, are reducing corporate taxes, personal taxes, and are increasing their value-added taxes to 15%, 17%, and 18%. That is the reality of what's happening out there. Actually, when you say it's a regressive tax, I disagree with you. For lower-income Canadians there are rebates. There are GST rebates and tax credits to look after them.

So would you comment on that? Can all those experts and all those countries be wrong and you be right?

[Joyce Reynolds]

One of the things we have to look at is, are we comparing apples to apples? Are we talking about true value-added taxes, or are we talking about taxes where there are significant exemptions and inequities? For instance, if it really was a true value-added tax, the rate would actually be lower and it would be much less expensive to administer.

So let's look at what these taxes are over in Europe. And of course, the U.S., which is our closest competitor, doesn't have any national tax at all. We compete directly with the U.S., particularly with regard to tourism, so--

[Raymond Simard, Liberal, Saint Boniface, MB]

But as Madam Brisebois was saying, there's a premium that you pay when you're Canadian. When you go to the hospital, you don't pay a million dollars to get surgery. Those are the offsets there. You have to raise so much revenue to cover the expenditures. Any country has to do that.

In fact, every expert seems to say as well that reducing corporate or personal taxes will provide greater growth. In the end, your industry would benefit more from greater growth than by cutting the GST. So in the end, I think, probably the other taxes being cut is preferable.

[Joyce Reynolds]

My key point is that we should fix the flaws in the GST. That's what we would like to see. We would like to see the same food, purchased at different establishments, not treated differently. That's our main point on the GST. Let's fix the flaws in the GST.

We are the one industry that's truly disadvantaged, because our closest competitors have a tax advantage.

[Raymond Simard, Liberal, Saint Boniface, MB]

You said earlier, Ms. Brisebois, that people had to pay a premium to be Canadian. For example, I thinking of the tariffs that have to be paid in Canada, but not in the United States. I agree with you. There is also a price to be paid for our health care system.

How much is this premium? On average is it 5% or 10%? The price difference on a given product in the United States can be 30%, 40% or 50%. How much is the real premium?

When the dollar was worth 63 ¢, we thought the Canadian manufacturers were making a profit nonetheless. Perhaps it was more competitive. But today, the dollar they get is worth a dollar. How high is the premium? Can Canadians expect to pay 5%, 10% or 15% more?

[Diane Brisebois]

I do not think there is a specific percentage that could... In our industry, there is probably a percentage, but even there, it probably depends on the category of product.

Let me explain what I mean. An effort must be made to eliminate tariffs, particularly import duties, particularly if they are not protecting industries that are supposed to be protected in Canada. In comparison, we could say that—

It's not a level playing field.

Our industry certainly agrees that people must pay a premium, and we are very proud to do so. However, as regards taxes on imports, that makes no sense.

There is an interesting point about prices. It should be understood that—and consumers do not understand this—most retailers in Canada, even the largest ones, do their purchasing through distributors in Canada. That means that if you want to buy Nike running shoes, even if you are the largest retailer in Canada—without mentioning any names—you have to go through Nike Canada, not Nike U.S. The same is true of all our retailers.

As retailers, we would like to be able to eliminate import duties and to negotiate with manufacturers located mainly in the United States and with their distributors in Canada to ensure that if there is a rise in the Canadian dollar, we will be able to benefit from the savings and pass them on to consumers. But that is not what happened.

A preliminary study shows that the percentage attributable to the cost of living in Canada compared to that in the United States is about 15%, assuming we eliminate unnecessary import duties.

[The Chair, Conservative, James Rajotte]

Okay, that's it.

[Diane Brisebois]

The chairman is having a problem with me.

[The Chair, Conservative, James Rajotte]

The second round is five minutes. It is one minute shorter. There may be another opportunity, Mr. Simard.

We'll go now to Mr. Stanton, please.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair, and thank you to our witnesses for joining us today.

I appreciate the time you've taken to enlighten us on some of the policy issues that confront your industry sectors. In fact, the purpose of our looking at the service sector is to help us, as parliamentarians, understand better the complexities of the service industry, how this sector strengthens Canada's economy, and how it provides opportunity for Canadians. So I'd like to shift slightly to that line of questioning.

I have many questions, actually, so I hope there'll be sufficient time.

Both of you in your presentations mentioned the degree to which your industries, through the course of your sales, are in fact purchasing commodities other than goods for sale. You're in fact engaging information systems. In other words, the indirect benefits that come to the communities in which your members operate are spinoffs.

Joyce, I think you mentioned, for example, that for a new restaurant in a local economy there is some $5.2 million in spinoff spending. I don't know what the gross was for that particular restaurant.

I'd ask you both to comment on two things. First, what is the degree to which this multiplier effect occurs in your communities? How many other businesses do you employ and support?

The second is with regard to training. How much are you actually spending on training to improve things like average wages, and how much have you been asked, as an industry, to address those issues to advance better, higher-paid occupations for your workers?

So my questions are on those two fronts. Take a minute or two each, if there's time. I'll ask Joyce first, or whatever you decide.

[Diane Brisebois]

We've calculated that for general merchandise retailers, the investment made in the community through retrofitting stores, opening new stores, training employees, and using trades was last year close to $10 billion, so it's huge. The point I'd like to make is that we have to start looking as a country at the service sector, certainly retail, as being an important part of the success of manufacturing. I think we have looked at the economy here and separated both, but certainly when you look at the investments that the service sector makes within the community, it's extremely important.

As for training, unfortunately I can't provide specific percentages. All I can say, though, is that our members have reported that in the last five years they've more than doubled their budgets in training, and we are now in the field to get a sense of how much money they are investing.

[Joyce Reynolds]

I'm going to have to check with our economist on the exact percentage, but we do have some numbers in terms of, for every dollar that the food service generates, how many additional dollars are generated within the economy. I can't remember the exact number, so instead of providing you with an inaccurate number, I'm going to go back and find it and provide it for you.

[Bruce Stanton, Conservative, Simcoe North, ON]

That would be great.

[Joyce Reynolds]

In terms of training, again I don't have a percentage, but I can reinforce what Diane is saying in terms of the emphasis and the importance of it.

For our members out in western Canada, where the labour shortage is critical, one of the huge frustrations is the amount of time that has been taken away from training because they're so pressed just to keep their operations open. They're having to close parts of their business. They're having to reduce their hours. They're having to spend so much time doing the work that employees normally do that they're very frustrated, because they're not even able to provide the type of training that they traditionally provide and they would like to be able to provide.

So I'd like to say that it's increasing, but I have to say, because of some of the labour shortage problems our industry is facing, it's becoming more of a challenge.

[Bruce Stanton, Conservative, Simcoe North, ON]

Just before I finish up, because I know we're tight for time, I wonder if you could—

[The Chair, Conservative, James Rajotte]

You're at the end of your time. You will have another spot, actually.

[Bruce Stanton, Conservative, Simcoe North, ON]

Okay, next time.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Stanton.

It's not that I like to do this; it's that I'm given a mandate by the committee for time.

We'll go now to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you. My first question is to Ms. Brisebois.

I would like to know why there are no signs in stores or elsewhere advertising Quebec products, products from other provinces or Canadian products? Why is there no special signage so that we can see which products are produced here and buy them?

[Diane Brisebois]

I want my answer to be good because I agree with you entirely. I think that the sector needs to develop a better relationship with our Quebec and Canadian manufacturers, but the fact of the matter is, every survey indicates only a small proportion of consumers buy products because they are made locally. There's a long way to go, and I think that a parliamentary committee like this one will be a big help. Canada and Quebec's manufacturing and service sectors, and especially retailers, should have an agreement for the development of a long-term program of this sort.

[Robert Vincent, Bloc, Shefford, QC]

Do you know where products were made when you buy them? It might be a good idea to put "Product of Canada" or "Product of Quebec" on the label. You said that only 1% of buyers care. I know that the current trend in Quebec is to buy local. But it's always tougher—

[Diane Brisebois]

It would suit me, Mr. Vincent, to agree with you, but when you look at the figures on cross-border shopping in Quebec, you'll see that they're just as high as in Ontario and British Columbia. The fact is that consumers don't have as much money in their hip pockets. If they need three loafs of bread, three mattresses, and can save 20%, well then it doesn't matter whether the product was made in Quebec or Canada, it doesn't mean much, unfortunately.

The important thing here—and you referred to this challenge a few moments ago—is the import tax situation. If you want to make sure that Canadian and Quebec merchants are able to promote and sell their local products, then you also need to ensure that there's no import tax on the sale of brand names. This will keep these businesses competitive, and they'll do a better job keeping local consumers. It will also mean that they'll be making enough money to be able to develop a relationship with local manufacturers and sell their products.

[Robert Vincent, Bloc, Shefford, QC]

Thank you.

Mr. Reaman, could you tell me a bit about your background and what allows you to determine what is outdated, such as supply management, for example? What about your knowledge of agriculture tells you that supply management is an outdated tool for farmers?

[Ron Reaman]

I am currently the vice-president of federal government affairs for the Canadian Restaurant and Foodservices Association. Previously I was the vice-president of food supply, which specifically had a mandate to work within the agricultural commodities sector. So I have a fairly extensive interaction with, in particular, the Dairy Farmers of Canada, the Canadian Dairy Commission--

[Robert Vincent, Bloc, Shefford, QC]

Could you elaborate on your role as vice-president of food supply?

You don't work on the agriculture side, if I've understood correctly. In Quebec, there's Mr. Groleau, for the UPA. Could you tell me a little bit more about your position at the time?