Industry Committee on Dec. 9th, 2009

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

My first question is for Mr. Landry. You stated that the coalition had produced a report on the value or state of services in each province. Was Quebec included? Do you express an opinion in this report? What does it include? For example, are you talking about government policies or about constraints the service companies face? I'd like to hear your views on this subject.

[Michael Landry]

I hope I understood the question.

Yes, we have broken it down by province—we have the information here that we'll table with the committee—in order for us to try to get a better understanding of the activity within each province. As we've mentioned, other jurisdictions have drilled down to much deeper levels on the activity and the value that services bring in their jurisdictions, and Canada needs to do the same.

Fortunately, because of the work and recommendations and direction of this committee, some of that work through Statistics Canada is beginning, and the Department of Industry is also paying greater attention to it. Our argument is that for the sector that, broadly speaking, represents 70% of the economy, it is important to know about it—what its constituent parts are, what its issues are—so that policy can be properly formulated to help support it and to continue to build towards it.

In terms of constraints, I can speak more to my sector. There are some—the ones that are talked about and are being addressed, hopefully. The need for a national securities commission is well documented and understood.

We find that for our exports, if you will, our activities to grow abroad, the support we get is very strong in this country. Our governments are very well attuned to the need and the importance of support for industry, which we have had over the years from prime ministers and premiers and in the most recent trips—the Premier of Ontario is in India. Those kinds of things are very important and certainly could be enhanced, but beyond those kinds of things, we are very well supervised here in Canada. At least in our industry, we have managed to find ourselves in the position we do because of both the quality of our system and the companies that occupy it.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Are Quebec service companies also part of your coalition? Is Quebec also part of your coalition?

[Shirley-Ann George]

Thank you for that question.

We do have some members who have offices in Quebec, and we would definitely welcome more participation from Quebec. As well, the Canadian Chamber of Commerce has representatives from every province and every region and we rely on them as well to help us with our services work.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

My second question is for Mr. Burt from the Conference Board of Canada.

You stated that labour was or would become a problem. You talked about a shortage of labour and about staff turnover. Is staff turnover due to a management problem? Is the supply of business jobs greater than the demand? Putting it another way, are there not enough workers to meet the high demand from businesses?

[Michael Burt]

Basically, if you talk about high-skilled workers, more often it is a problem of supply and demand. Just to use the Quebec example, we have done some work with Bell and CGI in Quebec, looking at IT workers. After the tech bust, at the beginning of this decade, we saw a large decline in enrollment in IT-related programs across Canada. Obviously, businesses that employ IT workers are very concerned about that and they have been trying to address that.

When you talk about issues of turnover, that tends to be more of a problem in some of the lower-skilled industries, things like food services and accommodations. Part of it there is seasonality. There are places where the tourist season is only really a few months, so employees are only hired temporarily for a few months, because there is no business during the off season.

Part of it is around skill levels. Once a person comes into the workforce and gains a certain level of skills, they move on to other occupations.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

You also stated that the services sector had managed to weather the crisis—I'm not sure whether it was Mr. Landry or Mr. Burt who said that, but I think it was the Conference Board of Canada representative—that industry had also managed to pull through, or at least that there appeared to be no major negative effects and that the situation remained stable. To what do you attribute this outcome?

[Michael Landry]

There are a number of factors, and it's certainly a question that people are asking even within the sector.

Certainly, as I've mentioned, the supervision of our companies here is of a very high quality and recognized worldwide as such. You'll notice even anecdotally how Canada, in the G-20, has taken on a leadership role in looking forward at what the global architecture is going to look like. I think some of that leadership has come from the country's record and the record of its institutions as getting through the financial crisis. It may be the Canadian nature that sometimes people perhaps consider us somewhat conservative, say, in our lending practices with banks, but that, at this time, may have served us quite well in getting through this crisis and other things. Our companies certainly are international. Therefore, they're diversified across geographies, across continents, and that has helped them to get through very serious issues. I think the companies are well managed; they're well governed.

So it's a combination of many factors that have led to this situation. It's one of those things that we actually do very, very well here in Canada and across a number of provinces that have strong financial services representation, including yours.

[The Chair, Conservative, Michael Chong]

Thank you very much.

We'll now go to Mr. Van Kesteren. Go ahead.

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

Thank you, Mr. Chair.

Thank you for appearing before us, and thank you for waiting for us, as well.

We have been talking in the past about our desire as a government to expand our free trade. Mr. Landry, you brought up the importance of free trade. In the service sector, and in previous studies, it was pretty evident pretty quickly that a lot of the successes we've had come as a result of free trade. I wonder if you could tell this committee how important the free trade arrangement with Colombia is and why that is so important.

[Michael Landry]

Well, if you could indulge me, Colombia specifically is not an area I'm familiar with, but I could speak somewhat more broadly about trade and financial services.

Being able to enter a market is a first start. If you can't enter, you can't start to play. Once there, being able to operate on an equal footing with domestic competitors or to help develop the market in the way that you can are very important. So in terms of those things, to have free trade agreements--or in Canada's case, having a World Trade Organization that's effective and bilateral--and regional agreements are very important in that way. They provide certainty for entering markets, and then, once there, to be able to operate so that we can conduct our business. That is true, in our case, whether it's the United States or China.

[Shirley-Ann George]

If I could be permitted to add to that question, Mr. Chair, the Colombia agreement is indeed important for services. There are a number of Canadian firms, service companies, that are working in Colombia, especially the services industry around the mining sector and the extractive sector more generally. Whether you are an organization that provides helicopter services or you're doing specialty financing for the mining sector, there's a great number of companies, many of them quite small but specialized in that area, that have been active in Colombia. They are looking for more certainty. They're looking for more investment certainty, and the Canadian Chamber of Commerce has been a strong proponent of moving forward with the Colombia free trade agreement.

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

So if I understand this correctly, our multinationals—and we are big in mining, Canadians are one of the biggest groups of miners out there—need those free trade agreements to piggyback on. Obviously they can gain entry, but for us to be competitive in that all-important.... And I didn't think of helicopters. Can you give us more examples of other industries that would benefit as a result? I mean examples besides helicopters, such as mining or on the service side of things.

[Shirley-Ann George]

Is that for Colombia or in general?

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

That's in general.

[Shirley-Ann George]

Any area where we have some expertise in manufacturing there's always a service component that goes around that. As well, we have a number of companies that are Canadian-based that are services experts in the infrastructure area. There's SNC-Lavalin, for example, which is a global company, world-class, and well recognized around the world.

I apologize that I don't remember the name off the top of my head, but there is an engineering company out of the Toronto area that actually has far more engineers in India than they do in Canada.

[The Chair, Conservative, Michael Chong]

Is that Hatch Engineering?

[Shirley-Ann George]

Hatch is one, but that wasn't the one I was thinking of. However, Hatch is another one.

The whole engineering services area is one in which Canada has some global expertise. We're well respected, and these types of free trade agreements help ensure their continued access.

With the agreement we are working on right now with the European Union, it's very important that we remove some of the non-tariff barriers so that not only companies that want to get into Europe today but also companies that will go into Europe in ten years will have an open and fair trade agreement that will ensure them access.

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

How are we doing in comparison to the U.S.? Are we lagging behind?

[Shirley-Ann George]

If you give me one second I can look that up.

[Michael Burt]

I can say that the U.S. is the world's largest trader in services. In the numbers we've recorded--and it depends on how you look at it--basically 12% to 15% of our total exports and imports are service-related. In the U.S. it's more like one-third, if I remember correctly. They're very much ahead of us in terms of how big a share services are of their trading activity.

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

So we have a long way to go yet.

You touched on some of the labour shortages, and I know right now we're all involved in this worldwide recession, so we're seeing.... But your numbers are remarkable. I was looking at your numbers, and we'll talk about that in just a second.

This question is for anybody, but what are your predictions as to when we will move out of that situation and get back into what we had previously studied, a looming labour shortage? How soon do you think that's going to affect us?

[Michael Burt]

Broadly speaking, if you look at the unemployment rate, which is kind of your best basic measure of the labour force tightness, we expect the unemployment rate to continue to rise through the early part of next year, but it will quickly fall thereafter. Part of that comes from job creation, but the other big factor is that there just aren't going to be as many people coming in for a net increase in the labour force.

As people retire we're going to have increasing difficulty replacing retirees. So within a couple of years we're going to see the unemployment rate back below 7% and back into the range of what we were experiencing in 2007 or so. We do think it will become an issue again, and fairly quickly: not in a span of five or six years, more like two or three.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Burt.

Madam George, did you have something to add to that?

[Shirley-Ann George]

I would add that we are facing a demographic cliff in Canada. It's coming up far faster than what we would be able to properly prepare for if we were paying the attention to it that it deserves.

Yes, there will be a labour shortage, and it's one that will be prolonged and severe for Canada and very difficult to manage because of the number of employees we will have versus those who are retired.