Mr. Speaker, it gives me great pleasure to enter this debate on the Speech from the Throne.
I want to talk to the House and those people listening out there today about capital markets. Some people will ask what that has to do with the Speech from the Throne. This is an area of the Speech from the Throne that possibly has not been talked about a lot in the House, although we have had a few questions from the Bloc on this issue.
A very interesting aspect of the Speech from the Throne talked about Canada's fragmented securities regulatory structure being “inadequate and an obstacle to growth”. I think that is a very bold statement, because I can well remember when I first came to this place back in 1993 that I was very concerned about having a very fragmented registration system for securities across this country. I thought it was very much an impediment to our growth as a nation. I did some initial research and discovered a humongous roadblock called federal-provincial relations.
As most of us know, our country was founded in Confederation by the British North America Act back in 1867, which was a very long time ago. Some of the innovation occurring in our marketplaces today moves at the speed of light. In this city, as a matter of fact, we have a huge high tech industry that is doing some tremendously interesting and innovative things. Most of us are aware of Canada's investment in the space program. In fact my own son is involved in some of these things, so I am particularly interested in what Canadians can do and in the opportunities that are available to them.
When I look at this whole issue of capital markets in Canada, to me it is a statement about our inability as a country to work together for the best interests of all the people of Canada. When we talk about capital markets, the stock exchanges and so forth, some people have an aversion to it and think we are just making some kind of intellectual or economic comment, but in reality the movement of capital and the concept of innovation are very much part and parcel of the same thing. If we have capital and innovation, we can create great things in this country. We have done that in the past.
Up to the 1970s, Canadians were great savers. That was historically what Canadians did. We had a conservative approach to things. We put things in banks and for that reason our banks and our banking structure were very important to us. We spent a lot of time in this place and in others ensuring that our banks were solid, had a good regulatory framework and were national in scope, that they had the ability to protect people's savings. People had some confidence in putting capital into those banks. Of course banks then were able to do things like loaning mortgages and so forth, basically creating an alchemy of innovation and capital for the benefit of all the people of Canada.
Since 1970 Canadians have gradually moved from being savers to being investors. Indeed, one out of two people in Canada today has some form of investment, whether it is in pension systems or in direct investments in the stock markets, teachers' pensions, et cetera. Indeed, I am a member of the baby boom generation. I am very much at the forefront of that. I was born in 1946. The baby boomers are now talking about retiring. Retirement plans are very much related to their ability to invest so that those investments will return cash flow in their retirement. Canadians are now investors, but the reality is that in Canada we have a tremendously fractured capital market. What I mean by this is that because it is a provincial domain each province and territory has its own regulatory framework for controlling investments for stock markets.
The result is a tremendous amount of overlap and duplication. Canada is a very small country when it comes to the whole aspect of a capital market. We only represent something like 2.07% of the world's capital market. Therefore, in some ways we are a small player but having said that, the Toronto Stock Exchange is the third largest stock exchange in North America.
On a comparative basis, we can look at what other countries have done. Canada is one of the very few countries in the world that does not have a national securities administration. When I say that, I think of countries like Australia. It has recently realized that with only about 1% of the world's capital market, it was unable to have a fractionalized capital system and still provide the opportunities for investment, to attract investment capital and to create jobs in that country with a fractionalized system. Australia had the wherewithal to think ahead and create a national securities commission.
We all know that the United States has a national securities administration. The European Union is going through a consolidation in many of its industrial areas, not the least of which is the fact that it has come to the recognition that it must have a national securities administration. In Europe there is a two tier system; one is a national security administrator, but it allows the individual states to still do the enforcement and so forth.
I would suggest that is not a bad framework for Canada. Imagine at the same time that Canada is dragging up the rear with 13 different regulatory environments and with politicians getting involved in the process. We do not want the big, bad federal government getting involved in the regulatory framework and so forth. That may not be the model we are looking at, but it is clear we need to move forward on this file.
People talk about the regulatory framework in Canada. For instance, I believe a member of the Alberta Stock Exchange said it takes 17 months to change one regulation. That is the average in the province of Alberta and it is probably the same in every other province. The Toronto Stock Exchange just went through a changeover to a different trading system. It took four years to implement that.
Different provinces are all going off on different tangents on this. Of course, the province of Quebec does not want to be part of anything that looks national in scope. It wants to have a regulatory regime that includes all financial sectors under one umbrella. The capital markets of Canada are simply too small to fractionalize. The countries that do fractionalize, in the final analysis, are not thinking of the best interests of their own people. They are not thinking of the ability to innovate and create opportunities for their own people. They are putting their politics in front of the best interests of their people.
National governments do national things. In all the time we have spent debating in this country there has been a great theory of devolution of power from the federal government to the provinces. The fact of the matter is this is one particular file where it is time that everyone in the country came to the recognition that there is a purpose for a national regulatory system.
I am going to digress for a moment to talk about some of the things that have really had a tremendous negative impact on investor confidence. I was visited recently by people in my own profession, chartered accountants. They were telling me they have to react to some of the very negative things that have happened in the United States and other capital markets, the Enrons, the WorldComs and so forth.
As we look at the stock markets today, people are fleeing from them. They do not trust the institutions that exist there today. This is going to have a negative impact eventually because small entrepreneurial companies are starting up in a very difficult time to raise capital.
Once again I think of the infrastructure that exists in this city and in Quebec, Vancouver, Calgary and other parts. I think Saskatoon has a tremendous emerging high tech sector. The government is going to make it more and more difficult for people to get access to capital, to turn those good ideas into commercial products, to turn those good ideas into something that not only the local people but all the people in the country can take advantage of. We can export that kind of technology.
To diverge a bit once more, we have been talking about the importance of Kyoto. One of the important aspects of Kyoto is that Canada be a leader, that we take advantage of some of the technology that we can evolve if we are there first. If industry is going to be there last, the person who is into this game last will pay the highest price and will be the least competitive. Many of our corporations realize that.
Suncor and others in Alberta and other parts of Canada realize the importance of being there first. I heard DuPont Chemicals say the other day, “We subscribe to Kyoto. We are going to be there first because our production costs will be lower than anybody else's dragging up the rear taking their time to get there”.
Any benefits that we could get from the technology sector in Kyoto will be mitigated if we do not find a better way to raise capital and if we do not find a better way to harmonize and modernize our capital system.
I said it was costly. There is an example of a company that wanted to raise $600,000 for a mining operation in Alberta. The cost to that company to raise $600,000 by going through the capital markets was $300,000. That was partly for registration and so forth in the various security exchanges, but it was also for all the legal work, the lawyers and accountants and so forth. In other words, the bottom line is it is prohibitive. Nobody is going to do it for small amounts of money. Even for larger amounts of money it is questionable whether a person would go to the Canadian capital markets today.
I have heard many people in the corporate sector say that if they are serious about raising money, they go to the United States. The U.S. has a robust system. It is possible to get things registered there. It is quicker to get on the securities market and it is possible to raise more money and do it faster.
There is a problem with that philosophy and it is possible to study the history of this file. If the company's stock is being issued on the U.S. stock exchange, inevitably the company will become an American company. The control of the company will be in the United States. The people making the decisions will be in the United States and Canadians will simply be working for those other people who are calling the shots. That has been somewhat the history of our country; we have let other people call the shots because we did not have the capital to do it.
But Canadians do have the capital. We have to unlock that key to our capital markets by creating a robust system. That is why I was very happy to see in the Speech from the Throne that the government was very interested in finding a way of doing this. Discussions have gone on with some of the provincial governments on this. I say discussions because since 1993 I have been interested in this file and those discussions have been going on all that time.
It is time to act. It is time to put some meat on the bone. The people in the provincial capitals should park their baggage for a bit. They should stop worrying about how to devolve power from the federal government and start saying “This is an issue that requires a national regulatory regime and we are prepared to stand up to the plate and do that and work with the government”.
It does not mean we would have some huge regulatory regime or governmental regime here in Ottawa or Toronto. Different models could be used where this two tier system of regulatory framework could be achieved and which everyone could agree on. The enforcement could be taken on by the provincial administration. The object of the exercise is to reduce costs to make this an efficient, vibrant, securities administration.
Earlier I used the example of Australia, but imagine that the Nordic states, all of Scandinavia, have come together to create one stock exchange. I am talking about Norway, Sweden and Denmark. These are independent countries that have come together to make an arrangement. They realize that without that ability, without the opportunity of scale that they will not be able to attract capital and they will not have the opportunities that other capital markets will have.
Those countries have realized that, yet here in Canada we continue to lag behind them. We continue to not be a part of the solution, but part of the problem. We continue to argue back and forth between provincial capitals about who should be on side and who should not.
As a matter of fact, we have had supporters go in and out on this file. The CEO of the Toronto Stock Exchange, Mrs. Stymiest, has been a great advocate. I have been a follower of her career to some extent. She has been a great promoter because she realizes this is something that is mitigating Canadians from realizing their potential.
Without this we are going to continue to subjugate Canada as a junior market and a junior business environment. We are going to ensure that Canada's productivity will decline. We have to catch up. People talk about our productivity deficit. We have to catch up to the United States.
The mathematics is we have to be 1.6% more productive than the United States every year to catch up and to make ourselves competitive. The only way we are going to do that is by squeezing that last ounce of efficiency out of our business system. The only way we are going to do that in this area is to stop the duplication, create greater harmonization and have a single focus as we go out to parade a national securities administration.
I have talked at long length on this issue, but if we were sitting at home today looking at the stock market pages, we would see that the stock markets continue to ratchet downward. Some say a lot of people are not affected by that and too bad for those who are, but the reality is we have a significant lack of confidence in our capital system in North America today.
This is not about the rich and the famous. It is about the workers of the country who have their money invested in their own companies. The workers have their money invested in pension funds. It is somewhat of a disconnect and a lot of people cannot relate the connection between those capital markets and the best interests of their families, but the reality is that we are all impacted by this. Without the opportunity for capital formation effectively, without the ability to instil that capital in new burgeoning innovative technologies, Canada and those families are being put at risk.
We have to work together as a federal government with our counterparts in the provinces to park the baggage of where we are going on this issue. We have to do away with the rhetoric that has occurred in the past.
The people who run the Vancouver Stock Exchange see it as quite a different stock exchange from some of the others in the country, but some people will have to park their baggage. We have to have a regulatory framework.
The accounting bodies are trying to get voluntary compliance to ensure there are ethical standards. We are big on ethical standards around here, but the problem is the business sector has a huge ethical problem itself right now. We need to find a way to do that. I do not think voluntary compliance is going to work. We need a regulatory environment that works. Canada has a great opportunity to do that. I am very much in favour of the throne speech which talks about moving in this general direction. I hope all of us will support that when whatever legislative framework comes up in the future.