International Trade Committee on Feb. 15th, 2007

[Serge Cardin, Bloc, Sherbrooke, QC]

Since I don't have much time, perhaps you could include a response to what I'm about to say in your answer. A moment ago, you said that we need to sacrifice something. Could you tell us what we should be sacrificing?

[Gilles Rhéaume]

There are always sacrifices to be made. Thomas L. Friedman, in his book entitled The world is flat, says that we are more or less on an equal footing when it comes to innovation and human capital, as you've mentioned. At the Conference Board of Canada, they're thinking that the inequalities this may create should be taken into consideration and they're looking at what can be done in this regard. To address these inequalities, you said that there will be sacrifices. Obviously there'll be people who will not be able to adapt and who will have lower incomes, as Mr. Julian pointed out. We have to look at how we can make sure we're prosperous enough to be able to meet the needs of those people who aren't able to adapt.

That's a question we'll have to ask ourselves again, because we really haven't gone through the whole exercise of determining what the next steps are. What we've looked at is how we can ensure we're prosperous enough to generate revenue to fund, for example, social programs.

[The Chair, Conservative, Leon Benoit]

You have about a minute.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I'll be brief. I think that by and large the public is skeptical. I'm not referring to businessmen, but to workers, the middle-class and low-income earners. Why is the public skeptical about globalization? It's because of job losses. All throughout Quebec and Canada, you see food banks, breakfasts being served. Poverty is on the rise, and people are being left out in the cold. There's no social policy to deal with these job losses. That's the problem. The general public, our middle class and everyday workers are skeptical. Cutbacks have been made to literacy programs, social programs and social welfare. The people are being left by the wayside. So the public is very skeptical.

I don't think that we have any choice: We have to make sure the public is in a position to put its faith in this move towards globalization. In order to instill this confidence, the public needs to be made to fell safe and social support must be given to people who lose their job. Currently, that's not done. I'd like to hear what you have to say about that.

Furthermore, you said that we are lagging behind and that we haven't done this analysis. Who hasn't? Are you talking about the public service? Who hasn't done what needs to be done?

[The Chair, Conservative, Leon Benoit]

Gentlemen, you have to have fairly short answers. We're over time.

[Gilles Rhéaume]

You referred to social policy. For some time there has been talk about the social and economic spheres coming together. We don't even have an economic policy today to address workers' issues. Regulations, barriers and duplication between departments are major contributing factors. If we could address this, we'd be able to create an economic environment which would be conducive to doing a lot more than what we are currently doing.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Menzies for five minutes.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

It's good to have a second opportunity.

I would like to go back to some of the inaccurate statements that have been put on the record, somehow, about this human index. If we're to believe Mr. Julian, we should all just pack our bags and go home. I can't believe that. In fact, the leader of the NDP at a speech at the Economic Club of Ottawa just recently touted the benefits of trade, how important it is to Canada, how we should be expanding, and how it can provide opportunities in the auto industry. For once I can't help but agree with him; I think there are great opportunities there.

How do we balance how Stats Canada's numbers are being misconstrued by some individuals to say that the world is bad, with, yes, Canada is not doing as well as we could in trade, but not everybody is poorer in this country? Are we misinterpreting Stats Canada's numbers? Can you give us a reflection of how those numbers are accurate and how Canadians, in your integrated trade strategy, are going to do better?

[Glen Hodgson]

You've really gone back to the fundamental issue at the heart of economics. This is why I studied economics when I was 19 years old at the University of Manitoba, a long time ago. How do you balance the production issue with the distribution issue? Our emphasis, and we'll be very clear in saying it, has really been on the issue of production, but there are thoughts embedded on how to improve distribution of the proceeds as well.

Our focus was really on the incredible array of barriers we've created to minimize the competitiveness of our industry. Gilles' volume and my volume point to repeatedly all the little picky barriers we've done in the design of our economic interventions, which we think are incredibly inefficient, frankly, so our focus has been there. But—and Gilles was pointing to this—the Conference Board for a long time now has worried about distribution and the social impact of our economy as well, which is why we give advice. For example, I think it's about page 60 where we're giving advice on tax reform for productivity.

The first thing we mention, which is actually something I told Greg Sorbara last week when giving him advice for his budget in Ontario, is to act upon the municipal task force on how to deal with the working poor and reduce the incredibly onerous marginal tax rate on the working poor through something like a working income tax credit. But at the same time, we also said get rid of the taxes on capital, because that's actually discouraging firms from investing in capital expansion. We also say we've got to give taxing powers to our cities, too, and that's very much Conference Board advice. We're not trying to be everything for everyone, but we are trying to wrap this into an integrated whole and understand that there are distributional impacts from changes in our economy.

But our principal message was really around trying to improve the productivity and competiveness of our national economy, because Canada is clearly slipping, and the numbers are there. You will not be able to address the distribution issue unless you're creating wealth at the same time.

[Gilles Rhéaume]

Our premise with respect to that is to permit our pie to grow. Later we can figure out how we distribute it, how we cut it up. If we just have the same pie and we start arguing about how we're going to cut it up, there's going to be a lot of fighting with little benefit.

[A voice]

We're down to crumbs.

[Glen Hodgson]

There's social tension. If you don't have growth, and if you don't have productivity growth, the social tension only rises, and you're fighting over a fixed pie. So we'd like to see the pie grow, and then we could have a much more interesting debate about how to really divide the positive spoils.

[Ted Menzies, Conservative, Macleod, AB]

Going back to foreign direct investment, EDC, Investment Canada, and CCC—Glen, having just come from EDC not that long ago, I'm sure you won't be too critical—what do we, as a government, need to do as far as providing latitude and advice to these organizations, very specifically, to increase foreign direct investment?

[Glen Hodgson]

Well, I can point explicitly to the recommendation. It's on page 97 of volume 1, recommendation number 13:

The federal government facilitate outward Canadian FDI where there are material benefits to Canada through actions that reduce the risk of investing outside Canada, like Foreign Investment Protection Agreements—

I would put what are called FIPAs near the top of the list—and this goes back to Mr. Lemieux's question—as you're looking to deepen your economic relationship with other markets, like China and India, because that gives investors comfort going there. It says, “and by strengthening facilitation of outward FDI through agencies like EDC”, and by that I mean EDC has the legal authority. The Export Development Act has allowed EDC to do outward investment itself, as a partner, let's say, since about 1993, I believe, but it was controlled by a regulation that I unfortunately put in place when I was an official at the Department of Finance.

I think it's time for the government to realize that you've got to empower the institutions you have. A lot of this is not about changing law; it's about changing attitude, and about the boards of directors not being shy about supporting outbound investment as part of the suite of products that EDC or CCC or anybody should have.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Thank you, Mr. Menzies.

Our time for this meeting is up. I thank you both very much for being here three times in the last month or so. I do appreciate that. I'm sure your document will be referred to as a reference source by people on various sides of arguments.

Thank you very much again.

The meeting is adjourned.