Debates of Feb. 3rd, 1999

Tax On Financial Transactions

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am pleased to participate in the debate today on the motion put forward by the member for Regina—Qu'Appelle, a very thoughtful and considered individual. I had the opportunity to participate in a debate with him not too long ago on our caucus task force report on financial institutions. We dealt with the bank merger. It was supposed to be a debate but it turned out to be more like a love-in. I was a little concerned given our different political stripe but most political parties were in favour of the recommendations we made, although we never did hear much from the Reform Party on bank mergers. I guess it was in a difficult spot on that issue.

The motion by the member for Regina—Qu'Appelle calls on our government to show leadership and enact a tax on financial transactions in concert with the OECD countries. The Bloc Quebecois has proposed an amendment that enlarges it to the international community in lieu of the OECD. This is one of those rare occasions where I find myself in agreement with the Bloc Quebecois. I would support enlarging it to the international financial community if we are to consider it as a motion.

In principle I support the motion in general terms but we need to clarify a number of issues. Given the events over the past year or so, I do not think many Canadians would argue with the fact that global financial markets are interconnected. There does not seem to be any doubt about that. The financial meltdown in Asia started in Thailand over a year ago. It was followed by the financial crisis in Russia and more recently the events in Brazil. They have had an enormous ripple effect throughout all the economies and financial markets of world.

Although our Canadian dollar has shown some improvement recently, it has been taking a beating. This is for reasons I believe are largely unrelated to the underlying factors of the Canadian economy. While some might argue that the markets are always right, in some circumstances they are somewhat irrational. In this case they seem to be acting irrationally. One has to wonder what is going on behind this apparent irrationality.

Our finance minister is pushing for an international agency that would monitor financial institutions worldwide. I gather its purpose would be to identify emerging problems and develop more time sensitive and co-ordinated solutions. The proposal is a good one and one that I support.

Other solutions have been proposed to address the destabilizing effect of currency traders and speculators like the Tobin tax which has been much mentioned here today. The Tobin tax would be a tax on individual financial transactions. However, unless all countries agree to such a tax it would not be workable.

Imagine 27, 28 or 40 countries around the world enacting a Tobin tax and a number of countries not. It would not be a surprise if suddenly the financial transactions migrated to those jurisdictions where they did not incur the Tobin tax or financial transactions tax. Unless all countries are in harmony with such a tax it is just not workable.

The member opposite talked about the finance minister saying he thought it was a good idea. The finance minister realizes that there are a lot of good ideas out there. The question is which ones are feasible and which ones would he implement. I think his approach in pushing for an international agency to monitor financial institutions worldwide is a more workable solution.

It is important to acknowledge that the issue of global financial market speculation and its impacts on global and domestic economies is one that deserves the attention of world leaders and deserves the attention of the House.

Our government is showing leadership on this issue in the G-7 and other international fora. There are solutions to the downward pressure on the Canadian dollar that can be found right here at home. Statistics Canada recently reported that Canadians are investing abroad in stocks, bonds and bank accounts at record levels. This is a result in part of changes the previous Conservative government made in 1990 to the foreign content rule of RRSPs. The limit at that time was increased from 10% to 20%. Perhaps that should be revisited given the effect it is having on the Canadian dollar.

I am sure there are people in this Chamber who would disagree and perhaps argue that the limit should go the other way. However, I am of the view that we should be very cautious in that area and perhaps consider moving it back. If Canadians want to have foreign investments in their RRSPs no one would debate or argue that but why should the Canadian taxpayer support that, particularly when it could be having a detrimental effect on the Canadian dollar?

I am offended as I am sure all Canadians are when the international financial markets are disturbed profoundly by speculators.

Let us examine a tax on financial transactions. Presumably such a tax would be targeted on foreign currency transactions. The targets hopefully would be short term capital movements because investors should really not be penalized or inhibited from moving capital from one currency to another based on long term decision making or structural decision making.

I throw out a word of caution. We often hear Thailand cited where huge capital outflows caused a crisis. Was the movement of capital a symptom of some deeper underlying problems? In other words, where was the chicken and where was the egg? The answer to that in the case of Thailand is a categorical yes, there were some underlying fundamental problems.

Some good Canadian friends of mine who have lived in Thailand for many years described to me recently the financial devastation in that country. Did the migration of capital from Thailand precipitate the financial crisis there or vice versa? This is an important question.

I am told by my colleagues in Thailand that the banking system collapsed as a result of three major issues. There were some very bad investments by the banks, a lot of cronyism in the banking system and a lot of corruption in the banking system. So foreign investors in Thailand perhaps could see this coming and decided to relocate their capital. I think the causal chain of events is important here and we should not be just looking at speculative movements. There are often some underlying reasons for the movement of capital.

I do applaud the Minister of Finance in pursuing the establishment of an international agency, perhaps created from within the resources of the existing international agencies, that would track the fundamental financial stability issues in countries around the world and proactively develop strategies and actions required to prevent problems, not respond to events after the fact.

Coming back to Canada and the downward pressure on the Canadian dollar vis-a-vis the U.S. dollar that we have experienced over the last year, we are told we experienced a flight of capital to so-called safe havens. I find this curious when the economic fundamentals in Canada are so strong, if not the best among the developed countries.

In Canada we still suffer with the prospect of another referendum in Quebec. This creates uncertainty in financial markets. I am sure this had some bearing on the fate of our Canadian dollar. Our colleagues opposite in the Bloc Quebecois and the Parti Quebecois in Quebec should be held accountable for this.

I applaud the member for Regina—Qu'Appelle for his interest in this important topic. I think it is very worthy of debate and discussion in the House and indeed around the world in the various international fora. I think it is a very important issue. I support the motion in principle and the concept, but we do need more discussion and debate. The main thrust of the motion is that our government should show leadership. We are showing leadership.

[Wayne Easter, Liberal, Parliamentary Secretary to Minister of Fisheries and Oceans]

Mr. Speaker, I appreciate the opportunity to enter into this debate.

The motion is that the government should show leadership and enact a tax on financial transaction in concert with the international community. I certainly applaud the member for Regina—Qu'Appelle on that motion and I very strongly support it.

Of course we need an international agreement and we know that will certainly not happen unless somebody takes leadership. It only makes sense to me in the kind of government we have. We show leadership in a lot of areas. We certainly could show leadership in the international community in this area.

I am told that Canada has explored the idea during the Halifax summit, at which time it became apparent that a number of G-7 countries were very strongly opposed to the idea. I recognize their positions have not changed. But they will never change unless we provide the evidence to them on why it should change. We have to enter into that debate at a global level and go out there and make the arguments for putting in place a Tobin tax.

I realize that even if we had all the industrial on side it would not be sufficient for the proposal to work. But we have to start somewhere. I suggest we can start here, that we need strong political will on the part of the Government of Canada and on the few allies that we can achieve in the beginning and exercise that political will so that we can institute a Tobin tax some time down the road.

We are not talking about a big percentage tax here. It would be a very small percentage tax. But imagine on the amount of speculation of money in this world what that small percentage tax would do in terms of benefiting and improving the lives of people around the world, in Canada, in Nicaragua, in Honduras, in Central America. All around the world it would improve the lives of people and those are the kinds of things that we should be doing.

I heard the member from the Conservative Party speak earlier. He used the example of someone in the community who did a lot of volunteer work. I respect what that individual did. I applaud what that individual did. But the member tried to leave the impression that this was a tax that would hurt that individual. It would not. I doubt that individual was a money speculator. He was not a financial money speculator. Who are these people?

I am a primary producer and I know about speculation in terms of the hog market, the grain industry and the beef industry. I know very well that those people that play those markets make huge profits many times by shuffling a little paper around and playing with the futures market and so on. The primary producer who does all the work, who takes all the risks, who creates the investment and puts his family to work and works himself, ends up many times loosing money. The speculators make money.

It is even worse when we get to the financial speculators, the money speculators. They play games, not only with countries, and with the new technology that is available today millions even billions of dollars can be moved in the flash of a second.

There was a rumour in New York where someone said that Canada was a basket case. Of course when we became the government we changed that and the government is no longer a basket case. Remember what happened? One trade, a supposedly respected trader, said internationally that Canada was a basket case. Suddenly our dollar started to go down. That was the financial money speculators playing games and they are not playing games only with countries, they are playing games with people's lives.

[The Deputy Speaker]

I am sorry to interrupt the hon. member.

The time provided for the consideration of Private Members' Business has now expired and the order is dropped to the bottom of the order of precedence on the Order Paper.

I can assure the hon. parliamentary secretary that he will have five minutes remaining in his remarks the next time this item is called for debate.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Mr. Speaker, on September 29, 1998, I asked a question in the House on employment insurance.

I asked the Prime Minister the following question:

—when he was Leader of the Opposition, the Prime Minister wrote—

—and I quote: “By lowering premiums and increasing the penalties for those who voluntarily leave their job, it is obvious that the government is not very concerned about the victims of the economic crisis. Instead of getting at the root of the problem, it targets the unemployed”.

This is from a letter written by the then leader of the opposition and now Prime Minister.

Today in the House we talked about a letter that was sent to the Department of Human Resources Development. Let me now quote this letter from the government of this former leader of the opposition who is now the head of this government, whose praises the Liberal member from P.E.I. was singing. This letter is addressed to the director of an HRDC employment centre in P.E.I. and reads as follows:

“The P.E.I. region has shown some improvement in performance this year but it still appears likely that the regional savings objective will not be met. In order for the target to be met, considerable improvement will have to be made in clerical and ICO performance as they are both significantly below national averages”.

The federal government imposes quotas on HRDC offices and forces people to do an inhuman job.

The employees themselves phone to tell me that the job they have to do is awful. Even the UN has condemned Canada because of its changes to the employment insurance program. It went to the trouble of condemning our wonderful country, while the government brags about doing a good job from a human point of view, at a time when 800,000 Canadian workers cannot qualify for EI benefits because of the cuts. In the riding of the Minister of Human Resources Development, lost benefits amount to $38 million per year. I wonder what his constituents think of him.

In my own riding, these lost benefits total $69 million. It is ordinary people who have been deprived of that money, people who have lost their jobs.

What about the number of children who leave for school in the morning without having had breakfast, this because of the government? These same Liberals were opposed to the changes made to the EI program by the Conservatives in 1993, on the grounds that those changes were inhuman.

I personally toured the country and I heard horror stories. Some people, including women, related how they were treated by the Department of Human Resources Development, and how their families are suffering as a result.

I hope the federal government will soon make changes to employment insurance, so as to help Canadian families.

[Bonnie Brown, Liberal, Parliamentary Secretary to Minister of Human Resources Development]

Mr. Speaker, the previous speaker is always talking about fewer people being on unemployment insurance. He always interprets this as being bad news because in his riding there seems to be fewer people on it and therefore fewer benefits. He interprets that to mean there are fewer dollars being spent in the economy of his constituency.

Take a piece of news and the NDP will make it bad news. As a Liberal, I prefer to make it good news.

There are fewer people on employment insurance, that is true. However, does anyone think that maybe that has something to do with the fact that there is a lower unemployment rate in the country and more people are working? I think that is good news. It is good news that more people are working and have actual salaries and wages to spend in the constituencies and they are not dependent on employment insurance.

The member speaks as if employment insurance is the only industry in his riding and that the benefits are the salaries his people are making. Nothing could be further from the truth.

He also accuses the government and the administration of this department as having quotas to try to catch people. Nothing could be further from the truth in that case as well.

It is obvious he does not know a great deal about the skills of management. Every manager has to make a prediction about the coming year. He has to predict how many workers he is going to need, what kind of production they are going to have, et cetera. That is good management. This government is trying to follow that model.

The officials within the HRDC department who are charged with the very serious responsibility of identifying fraud are also asked to predict. That does not mean they are trying to reach that number. It simply means that they are managing and taking care of the assets of Canadians as best they can and catching people who are fraudulently using the system.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, I must say what an honour it is to be in your humble presence again.

The rural route mail contractors are not considered to be employees according to the provisions of the Canada Labour Code because they are specifically prohibited those rights under the Canada Post Corporation Act, section 13.5. This means that RRMCs do not enjoy the rights and protections that the vast majority of workers take for granted. This includes things like minimum wages, health and safety protections, workers compensation, employee insurance benefits, vacation leave, maternity leave, severance pay and so on. RRMCs are also denied the right to negotiate improvements to their wages and working conditions.

Why does the government continue to allow these conditions to exist? The RRMCs have now formed an association called the Organization of Rural Route Mail Couriers in a serious attempt to get the government to change their working conditions. There are now over 3,400 signed members who are dedicated to improving their lifestyles. These members deliver mail to several million householders across rural Canada. They virtually do the same work as their urban counterparts. How can this government deny these dedicated workers the opportunity to receive the same wages and benefit as their urban counterparts?

This is very similar to what the regional rates of pay do to the lowest paid workers in the public service. They get a different salary depending on what part of the country they live in and that is straight discrimination.

The solution to both these is to remove section 13.5 from the Canada Post Act, which this government could do, and replace it with section 1 of the Canada Labour Code, a very simple and easy thing that can be done to improve the lives of thousands of people in this country.

It is important to point out that people who do similar work have these rights, private sector workers who deliver mail in rural areas, public service workers who deliver mail for Canada Post in urban areas, rural route mail carriers who work for the United States postal office. Even rural postal workers in Mexico have a collective agreement.

The RRMCs strongly believe that it is wrong to deny them rights accorded to so many workers. They are determined to change their conditions but they need the government's help. Will the government remove section 13.5 of the Canada Post Act and replace it with section 1 of the Canada Labour Code now?

In the 1998 budget the federal government promised people that it would look at new ways to deliver information and programs so that rural Canadians are full participants in Canada's future prosperity. Was the government's promise to look at new ways of delivering information programs just another way of saying it will find cheaper ways of exploiting rural Canadians who deliver information and programs? Rural Canadians would like assurances that this is definitely not the case. Recently it introduced restructuring the stamp sales which will definitely hurt thousands of rural route post offices.

Speaking on behalf of the riding of Sackville—Eastern Shore I find this government's approach to rural route mail carriers absolutely despicable, as with the way it treats the bottom lower salaried people who work for the public service in terms of 11,000 workers across this country, different regional rates of pay which this government has said it would eliminate in its 1993 promises in the red book.

[Carolyn Parrish, Liberal, Parliamentary Secretary to Minister of Public Works and Government Services]

Mr. Speaker, this will indeed be an interesting experience for both the member for Sackville—Eastern Shore and me because the question I was given is entirely different from the question he just asked.

As far as labour negotiations, Canada Post is an arm's length corporation functioning quite separately from the government and has very little government regulation at this time. It operates within our framework.

I must apologize to the member and agree to meet with him again and respond more fully to his question.

As far as the small franchisees he alluded to, the difficulty we had over the last couple of months in negotiating with many of these small postal service outlets is Canada Post is charged with providing Canadians access to postal service. The changes have been fought through committee. Multiple changes have been put in place. The small postal outlets are being given a fee to operate with much assistance. The rural postal services or franchisees have had absolutely no changes to their revenue. That has been guaranteed at the 1997-98 levels. As far as the large services are concerned they are being given a flat rate of $25,000 a year to operate.

What we have tried to do is get rid of the gentlemen who go around with large suitcases full of stamps and sell in the small areas. I think we have done that well with this change to the postal services.

Again I come back to my abject apology of not having a prepared answer for the first part which is the most extensive part of the hon. member's question. We will meet again here sometime as dictated by the hon. Speaker.

[The Deputy Speaker]

The hon. Speaker would not presume to dictate.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Mr. Speaker, I am pleased to take part in the adjournment proceedings on a question I asked on September 30, 1998, stressing that the government has two things to do with respect to the employment insurance: significantly lower premiums and improve the program.

In December, after the EI surplus scandal was exposed and the Minister of Finance was forced to backtrack on his plans for a bill to make the misappropriation of funds legal, EI premiums were cut by 15 cents for every $100 of income. While we were asking for a more substantial reduction, it nevertheless represents a major victory. Even more ground was won on the other, more important priority, that is reasonable eligibility requirements for the unemployed.

Today, another scandal was unveiled. The human resources development minister was caught red handed. He claimed that no quotas were imposed on his officials to achieve reduction targets in his department. Well, we in the Bloc tabled a document showing that there are indeed quotas at employment centres, which have a disastrous impact.

The New Democratic Party tabled a document providing further evidence of the fact that there are indeed individuals at Human Resources Development Canada who are put in front of a harsh reality: them must fill the required quotas or there will be no jobs left. There were 150 jobs at stake.

I hope that the unveiling of this scandal will help produce the kind of results achieved with respect to the lowering of EI premiums, that similar results can be achieved in this case and that the government will finally see the light, eliminate the intensity rule and change eligibility requirements to make them acceptable again to women and young people entering the labour force.

It is terribly discriminatory to expect a woman or young person re-entering the labour market to have worked 910 hours to qualify, when the rules are much less stringent for someone who goes on EI only occasionally. There is no reason for this sort of discrimination.

Seasonal workers are the worst off. Every time they use up 20 weeks of EI, their benefits go down 1%. Instead of getting 55% of their average earnings, they get 54% after 20 weeks of benefits, 53% after 40 weeks, and so on up to 50%. The result will be that, in two years' time, all regions with seasonal industries will have people who get 50% of their average earnings rather than 55%. This is treating people like economic guinea pigs.

It is clear that everyone wants to work. When a company advertises a job, several people apply.

Faced with all these facts, will the Minister of Human Resources Development, or the Minister of Finance, who is really in charge, do what is necessary in the coming weeks to put the EI scheme back on its rightful track, with sensible premiums and benefits that go on for a reasonable period, rather than building up surpluses to bring down the deficit at the expense of individuals and regions who have paid too high a price?

The federal government's policy, at a time when the impact of globalization is being felt, has weakened rather than stabilized regional economies.

I await an answer from the government.

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, in essence the hon. member was talking about the employment insurance fund. He often makes reference to the fact that the moneys in the employment insurance fund are being used for other purposes and how the government must take measures to stop that.

Again I remind the member that the auditor general in 1986 advised the government that any revenue which comes in from employment insurance premiums must flow into the consolidated revenue fund because the government stands behind the program.

In 10 of the last 17 years where the fund was in deficit it was the taxes of taxpayers who may not have paid any employment insurance premiums that went to prop up that account so that those individuals who were on benefits could receive those benefits. It is not just about the fact that those individuals who pay receive benefits. It is also about the fact that those premiums flow into consolidated revenues. In fact it is government that stands behind the program.

While the hon. member talks about the employment insurance program and how it is very necessary, we as a government believe that employment insurance provides a very effective and useful role for Canadians who find themselves temporarily out of work.

The actions taken by the government are directed toward ensuring that our economy performs in a way that small business and large business are able to create employment opportunities for Canadians.

Let us look at the record. Since October 1993 private sector jobs are up almost 1.6 million. Full time jobs are up over 1.2 million. During 1998 alone roughly 450,000 jobs were created and almost all of those were in the private sector.

Along with the employment insurance program, there are other measures that the government has taken to ensure the economy performs to its fullest. We will continue to do that so that Canadians who want to work have the opportunity to be employed.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, I am pleased to have the opportunity to remind the House that, on October 1, 1998, I asked a question of the Minister of Industry concerning the dramatic layoff of 900 workers at Pratt & Whitney, 500 of them engineers in its R&D units. The other employees involved were also high-ranking employees.

Why was this? Because of federal government underfunding of its Technology Partnerships Canada program. I asked the minister whether he understood that this situation affects not only high-ranking employees, but also the lead role of Quebec and Canada in the aerospace industry.

Speaking after colleagues who showed just how drastic the unemployment situation is, I know that when I say that the government must fund the Technology Partnerships Canada program—as I said in another question—at least to the $100 million level, this is because high-level jobs are a guarantee for the future, for the economy. These are jobs which will get the economy moving.

The government is getting criticism from both sides. Its strategy is the opposite of what it should be. It makes no sense to penalize the unemployed and make workers earning up to $39,000 and especially the SMBs employing them pay, as it does, through excessive contributions. The big companies pay less.

On the other hand, however, it makes no sense not to give big business, including the aerospace industry, the instruments they need to be competitive, if there are to be high level jobs.

Technology Partnerships Canada is not a funding program. It funds itself from the return. When research and development has become a cost effective product, it funds itself out of royalties. That is why we support it. It is not a funding program.

This program provides for the financing of research and development in strategic areas like aerospace, where Quebec has a small lead, followed by Ontario. This is an area that creates many jobs, one which is growing three times faster than this country's GDP, and where the industry, Pratt & Whitney in particular, goes significantly further than many businesses, not only in this area but also in others, investing 20% of its turnover. This cannot last.

But the competition is heavily subsidized, directly or indirectly, through DND contracts among other things. The same is true of the United States, which has resulted in engineering positions moving south of the border. This is to say that we are very concerned with the drop in the share of added income in sales.

Canada is facing a productivity crisis. This is not the way to go about resolving it. Let us not forget the unemployed in all this.

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, let me say that the government has made a substantial commitment to aerospace and other high tech, high growth sectors especially in the Montreal area and across the country. An example of this commitment is Technology Partners of Canada whose budget was increased from $150 million two years ago to $250 million this year.

The Montreal area, where much of Canada's aerospace industry is located, and all of Canada stand to benefit greatly from TPC. There have already been investments in several world class aerospace projects. There have been other investments in the biotechnology, environmental technology and telecommunications sector.

The success of the federal government strategy for promoting partnership for innovation, economic growth and job creation is evident across Canada.

With respect to Pratt & Whitney Canada our commitment has been substantial. Today TPC has invested in two Pratt & Whitney Canada projects totalling $147 million. We are continuing to work closely with Pratt & Whitney Canada to explore all reasonable options that can be pursued to support the company's future development.

The minister recently met with Pratt & Whitney Canada executives to this end. We believe Pratt & Whitney Canada is committed to its Montreal operation and elsewhere in Canada. The Government of Canada is committed to continuing partnership with Pratt & Whitney.

With respect to employment, the impacts are not as immediate or as dramatic as one might be led to believe. Not until the end of 1999 would there be a significant reduction of jobs. This is a normal phenomenon for a cyclical industry like aerospace and largely the result of the completion of earlier research and development projects. As well the company has indicated this will mostly be implemented through early retirement and normal attrition.

Let me say that the aerospace industry is growing at a very favourable 14% rate annually. Although some jobs will be lost at Pratt & Whitney, other local aerospace firms such as Bombardier and Bell Helicopter are still expanding.

[The Deputy Speaker]

The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 6.57 p.m.)