Roy Cullen

[Supply, February 24th, 2004]

Madam Speaker, I congratulate the member for Winnipeg Centre for bringing this opposition day motion forward to the House of Commons. It is a good discussion to have.

What we are talking about is ethical or social investing as it relates to the Canada Pension Plan Investment Board. The motion basically says that the board should be guided by ethical investment policies which would ensure that our pension investments are socially responsible.

We need to go back some years. If we look at the mid-1990s there was a lot of concern that the Canada pension plan was not viable, not actuarially sound, and our government undertook a whole series of consultations. As a result of that, a program was put in place to put the Canada pension plan on a much sounder footing. That included: changing the contribution rates; adjusting, to some extent, the benefits; and allowing the Canada Pension Plan Investment Board to invest, not only in fixed income securities but also to invest in equity investments.

What has been the result of all that? If we look at the actuarial report of December 2000, the actuary concluded that the legislative contribution rates, which were 9.4% in 2002 and 9.9% in 2003 and thereafter, were sufficient to pay for future expenditures and to accumulate assets of $142 billion by 2010. In 2050 the assets are projected to be $1.578 trillion, or 5.9 times the annual expenditures.

The actuary went on to say that under the current schedule of contribution rates, the funding level is expected to increase significantly over the next 20 years with a ratio of assets to the following years' expenditures growing from 2.4% in 2002 to 5.3% in 2020.

When Canadians approach me, and perhaps other members of the chamber, and ask if the Canada pension plan will be there for them and their children, because of the actions of our government in 1997, the actuary is saying yes, the Canada pension plan will be there for them. That is after taking into account the demographics where a much more elderly population will be emerging in Canada over the next few decades, but our Canada pension plan will be on a sound footing. To those who have worried about that, I think this gives a lot of relief.

The Canada Pension Plan Investment Board is a board that manages, on behalf of contributors, the portfolio of assets under its administration. It is also comprised of representation from the provincial finance ministers, so it is a joint board that effectively is in the fiduciary capacity of managing these investments.

In the last session, Bill C-3, which was passed by the House, will allow the fixed income securities to be transferred from the federal government and put under the control of the Canada Pension Plan Investment Board.

What have the results been of allowing the Canada Pension Plan Investment Board to get into managing both equities and fixed income securities? We do know that the equity markets went into the doldrums a few years ago and that the Canada Pension Plan Investment Board's portfolio was hit by the same sort of bad news on the stock markets. However if we look at the nine months ending December 31, 2003, we see that assets available to the Canada pension plan earned $8 billion, producing a rate of return of 13.9%. That is all CPP assets, including the $35 billion in fixed income securities currently administered by the government and subject to Bill C-3, which will transfer those securities under the control of the Canada Pension Plan Investment Board.

During that same time period, the portfolio managed by the Canadian Pension Plan Investment Board earned a return of 26%. If we look at the benchmarks against which the plan compares its performance against some of the standards in the industry, in 2003 we see that Canadian equities earned 17.3% and the benchmark was 17.5%. It was slightly lower there. In terms of non-Canadian equities, the benchmark was 28% and the actual was 27.6%. In real estate the benchmark was 9.2% and the investment fund actually had a rate of return of 50.7%. Overall, against the benchmarks, the performance exceeded the benchmarks of 20.3% return and it achieved a return of 21.1%.

Why is this relevant? Why is this important? This is important because this board has under its administration some $55 billion that is there earning income and providing benefits to Canadians, now and into the future. It is important the pension fund be sound and that it achieve a good return.

If the CPP is not there for Canadian citizens who retire in the future, they will be looking to the government for other types of support. This is a pension plan funded by employees and employers, so it is important that these trustee funds are managed in an optimal way.

I understand the point of the motion and I know the member for Winnipeg Centre has done some excellent work on this but I do have some difficulty with it.

First, we need to understand that the Canada Pension Plan Investment Board is mindful of ethical investing. It is guided by some of those principles and, from its experience, it knows that those companies that are committed to good labour relations, to a good, strong performance in human rights and to sustainable management in terms of the environment, will be the best investments to make in any case.

The problem I have with the specifics of the motion is when it states:

...investments are socially responsible and do not support companies or enterprises that manufacture or trade in military arms and weapons, have records of poor labour practices, contribute to environmental degradation, or whose conduct, practices or activities are similarly contrary to Canadian values.

Let us just look at the first part of that. That part of the motion says that any company that manufactures military equipment would not be eligible. I question that in the sense that we do know in this world, unfortunately, there is conflict. We do know that there are weapons produced. We do know that companies manufacture weapons. Is it not somewhat naive to say that an investment plan should not invest in companies that manufacture this type of equipment? However abhorrent we find war and conflict to be, this is the reality.

The motion goes on to state that companies with records of poor labour practices should also be excluded. I ask hon. members: Who will decide whether the labour practices are good or bad?

While it would be fair to say that some companies might have a reputation for having bad labour practices, if we could actually measure that, it is very much a judgmental thing. We have certain companies in certain sectors which have very strong unions and some very militant unions, and some companies have very militant management. We have sectors where the margins and profitability are very low so that management takes a very tough stance. We have unions with very strong membership and leadership that produce some very difficult demands in terms of allowing for the enterprise to be economic. Who decides that the company has a history of bad labour practices?

Who decides, when the motion talks about those companies contributing to environmental degradation, that a company has crossed a certain Rubicon, that they are not environmentally responsible?

Perhaps if we looked at every company in Canada or around the world, every company would be guilty at some point in time of having some slip-ups in the area of environmental management. Does that mean that they are contributing to environmental degradation? I suppose by strict definition it would.

Finally, the motion states that those companies should be excluded “whose conduct, practices or activities are...contrary to Canadian values”. Again, who decides that? I think it is very judgmental.

As I said, the board itself is guided by this type of thinking. For example, if a company is a clear violator of human rights and clearly has unfair employee practices, then in the obvious cases I think the board would be guided by that. When we get into this grey area where it would be open to debate and subjectivity, this is where I think the problems with this motion emerge.

There has been discussion about Talisman Energy Inc. and its work in Africa. Presumably Talisman would not be an ethical investment. Perhaps we in the House could all agree on that; I do not know. With the change of time, though, I would point out that what is good today might not have been good yesterday or vice versa. At one point in time, Nelson Mandela of South Africa was considered a terrorist. Now he is considered a hero.

Too, we have the question about tobacco. Should the Canada Pension Plan Investment Board invest in companies that produce tobacco? Again, we have this hypocritical notion, I might say, and I think we are all guilty of it: we tax tobacco very heavily, which we should do, but then we also allow tobacco to be produced, which gives Canadian citizens the right to choose freely. Could we actually say, then, that companies which produce tobacco---and we are saying in Canada that it is not a prohibited substance, so companies can produce it--would be unethical companies to invest in? It seems somewhat hypocritical to me. If we are going to say it is unethical and contrary to public values in Canada, then maybe we should outlaw tobacco, which I am not necessarily espousing here in the House.

These are the kinds of questions we have. Would we allow, then, the Canada Pension Plan Investment Board to invest in companies that produce liquor? We know that alcohol produces a problem if used to excess.

What about those companies that manufacture birth control products or contraceptive products?

What about those companies that actually cut down trees? Maybe that would be unethical according to some.

Who decides these things?

What about the mining companies? They mine ore and provide jobs and are companies that act in a very responsible way.

While I understand the intent of the motion from the hon. member for Winnipeg Centre and the NDP, I think the motion is flawed.

I recall that some years ago when I worked in the forest sector we were trying to get the forest industry and the forest unions to invest in silviculture. The government then was facing deficits and there was not enough money to replant, so we embarked on an initiative to work with the companies in the industry and with the labour unions.

When we went to the labour unions, we said, “If everyone puts a little water into this vessel we can replant trees, with the industry putting in its share, the government putting in its share and the unions putting in their share”. What we ran up against was the fact that the unions rightly said, “We cannot accept a rate of return that would be less than an optimal rate of return. We owe it to the people. We are entrusted with these funds to earn the optimal return”.

I think that on behalf of Canadians this board is entrusted to earn an optimal return so that we can safeguard our future and our children's future and so that we can have a pension scheme and a retirement income scheme that Canadians can call upon when they retire.

While I believe the motion is well intentioned, I think it would be contrary to the best interests of Canadians who are contributing to the Canada pension plan. By taking this action, we would end up with returns that are less than optimal. It seems to me that all of us in the House should be fighting for those principles and those policies which will ensure that all Canadians have a decent retirement income scheme when that day comes for them. On that basis, I will be voting against the motion.

[Committees of the House, February 20th, 2004]

Mr. Speaker, as the new chair of the House of Commons Standing Committee on Finance, I have the honour to present, in both official languages, the first report by the Standing Committee on Finance on Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health.

It was agreed on Thursday, February 19, 2004, to report it without amendment.

[Veterans Affairs, February 20th, 2004]

Mr. Speaker, yesterday the Minister of National Defence and the Minister of Veterans Affairs announced a long overdue $50 million recognition program for Canadian veterans who were treated as human guinea pigs in the testing of chemical warfare agents by their own government.

Why after 50 years of silence has the Government of Canada now decided to recognize these brave Canadian veterans?

[Hoops Unlimited, February 19th, 2004]

Mr. Speaker, I am very pleased to report that this evening in my riding of Etobicoke North we are celebrating an organization called Hoops Unlimited.

Hoops Unlimited is a program that has young people playing basketball: young people who might otherwise be attracted to gangs, violence and drugs. This program is working very effectively to give young people an alternative to those types of activities, an alternative where they get together, where they have healthy minds and healthy bodies, and where they stay away from those other alternatives that are destabilizing our community and causing a lot of grief for our citizens.

We want to have safer streets. We want to have citizens feeling that they can walk around safely in the city of Toronto, and this program is helping to achieve that objective. I applaud their efforts and wish to congratulate them for their event this evening.

[Softwood Lumber, February 10th, 2004]

Mr. Speaker, in answer to my colleague from the Winnipeg area, net subsidies is not a new concept. It has been around for some time. It has been on the table at Doha and during other rounds of trade talks. However, the member is right. The problem is getting the Americans to agree to it, which is why I think that if we were to try to deal with that one issue exclusively we would not make any progress. We have to deal with it comprehensively. We have to deal with it as part of a new deal with our American neighbours, where we would look at energy policy, at our border differences, at the issues as a result of 9/11, at our military capacities and at how we could work collaboratively with the Americans.

However, on its own, no, we have no chance. It has been on the table and the Americans have rejected it, which is why we need a new deal. We need to put it among a whole basket of issues with the Americans where perhaps we could be doing certain things better or they could be doing things better, one of those being alternatives to countervailing duties, the way the process is struck today.

However it will require the will of U.S. congressmen and women and senators, which is why more dialogue between people in this House and in the Senate with our colleagues in the United States is absolutely critical to breaking break down some of the barriers that are causing a lot of frustration and harm in our relationship.

[Softwood Lumber, February 10th, 2004]

moved:

That, in the opinion of this House, the government, in the context of the softwood lumber dispute with the United States, should: (a) negotiate an end to the United States' countervailing duty process by replacing this United States trade remedy with one which either focuses on net subsidies--taking into account tax-free bonds, sales tax abatements, property tax reductions, investment tax credits and energy co-generation agreements--which are available in the United States at the state and local government levels, or that focuses exclusively on whether or not policies in Canada and elsewhere are anti-competitive in nature; and (b) that, in addition to the foregoing, the government should launch negotiations with the United States' government with a view to eliminating tax competition, in particular manufacturing subsidies, which is ongoing between Canada and the United States.

Mr. Speaker, I apologize for the long, rambling motion, but the rules of the House say it has to be in one sentence, so I tried to be as creative as I could be.

I am very pleased to speak to my motion today. Motion No. 397 is motivated by an extreme frustration with the U.S. countervailing duty process, particularly in the context of the continuing softwood lumber dispute. The motion also arises from my conviction that there is a certain hypocrisy and irrationality associated with the current U.S. countervailing duty process and my conviction that there must be a better way.

The sad irony is that the current softwood lumber tariff of 27% has caused sawmills in Canada to increase their production in an effort to lower unit costs. This has resulted in an oversupply situation and lower prices for everyone.

For almost 25 years softwood lumber producers in the United States have sought action by the U.S. government to restrict trade in softwood lumber from Canada. It seems to me that this dispute has less to do with subsidies and more to do with market share. I do not accept the notion that Canada's softwood lumber industry is subsidized.

Lumber I, as it is now affectionately referred to, was launched in 1982 and ended in 1983 with the U.S. Department of Commerce concluding that stumpage did not confer a countervailable subsidy. Lumber II began in 1986 and ended with a memorandum of understanding between Canada and the United States which provided for the levy of a 15% lumber export tax by Canada. This charge was eliminated for British Columbia and reduced in stages for Quebec from 15% to 3.1%. In 1991 Lumber III began, leading to a ruling by the U.S. Department of Commerce in 1992 that stumpage and log export restrictions were not countervailable subsidies.

In 1996, in the search for trade peace, Canada and the United States finalized an agreement on softwood lumber covering the five year period to March 31, 2001.

Essentially, this agreement called for managed trade in softwood lumber, limiting exports from Canada through quotas.

Here we are again in lumber IV, to which has been added an anti-dumping duty petition.

The reality is that should Canada succeed in its arguments, a new countervailing duty process could be launched the very next day producing lumber V and an unlimited number beyond that.

Naturally, elected officials on both sides of the border are concerned about forest industry competitiveness and jobs in their respective communities, and so we should be. I remember talking to a U.S. senator who said that there would be ways in which the U.S. government or state governments could help forest workers in the United States who had to change from logging and sawmilling to other types of industries. That has happened in Canada and in the United States. It happened in Pittsburgh, Pennsylvania, when it changed from commodity steel mills to information technology.

However we know who the big winners are in a continuing softwood lumber dispute; none other than the trade lawyers and lobbyists in Washington, D.C., in Vancouver and in Ottawa. Who are the losers? First time homebuyers in the United States lose out because the cost of a typical new home increases by some $1,000 U.S. to $1,500 U.S. Sawmilling communities in Canada suffer as a result of layoffs, mill closures and the uncertainty that surrounds these disputes. In addition, many jobs in urban Canada that are there because of jobs in the resource economy across Canada.

The most negative impact of these softwood lumber disputes, however, is, in my judgment, on Canada-U.S. relations. We consider ourselves good friends and neighbours with the U.S.A., but most Canadians view the softwood lumber process as unfair and biased in favour of the United States. How many times do we have to win the argument in front of an objective panel that we do not subsidize our lumber before the issue goes away? We want a fair process and we do not have one now.

Trade in lumber as well as other major trade irritants in areas such as agriculture, cloud our otherwise very positive relationship. As Canada's former ambassador to the U.S.A., Allan Gotlieb, noted recently:

While trade between [Canada and the United States] has now more than doubled thanks to the Free Trade Agreement and most of it is non-contentious, the number and seriousness of trade disputes has nevertheless remained high, the mode of settling them relatively primitive and the cost to the relationship substantial.

At the heart of this misunderstanding between Canada and the United States on softwood lumber are four major factors: First, the structural differences between the forestry industry in Canada and that in the U.S.A.; second, a certain hypocrisy perhaps on both sides on the role and nature of subsidies; three, different perspectives on the efficiency of markets; and four, flaws in the countervailing duty process, certainly from a Canadian perspective.

First, let us briefly look at the structural differences.

The U.S. forest industry derives the majority of its raw log material from private lands. In Canada the reverse is true in that most timber is held and managed on public lands.

Could more timber be auctioned under our system? Of course it could. What would the impact on timber prices be? We might very well find that timber prices will decrease for reasons I would be pleased to elaborate on. How would U.S. producers react if that happens? They will have achieved the exact opposite result from that which was intended. Another countervailing duty process will undoubtedly follow.

Let me turn now to the hypocrisy of subsidies. First, earlier I mentioned agricultural subsidies. Canada's grain and oilseed farmers are currently getting mauled as a result of escalating agricultural subsidies in the U.S.A. and Europe which amount to some $350 billion U.S. each year. It would appear that there are some subsidies in the U.S.A. that our American friends believe are a good thing.

Second, a forest products company in Canada today can build a sawmill, a panel board mill or a pulp mill in the U.S.A. at a 20% to 30% discount when compared with the capital costs of a similar mill in Canada, even after taking into account our current exchange rate.

How can this be, one might well ask. The answer is very simple. It boils down to a whole array of incentives that are available at the state and local government level in the United States that are not available in Canada. These are incentives, or subsidies, like sales tax abatements, property tax reductions, tax free bonds, investment tax credits, cheap industrial land, favourable energy cogeneration agreements, and the list goes on.

I know from experience, having worked in the forest sector and having travelled to states like Tennessee, Mississippi and Georgia, that they will offer the kitchen sink for someone to set up their plant there.

These packages are not limited to the forest products sector. A recently announced greenfield automotive plant in the state of Georgia attracted $320 million in government assistance out of a total plant investment of $750 million. This represents over 42% of the total plant investment in subsidies.

A December 2002 Industry Canada report highlights many other such examples: in 2002, a Ford plant in Ohio, 48% of its capital costs were subsidized at the state and local government level; in 2002 a Ford plant in Michigan, 20% of the plant investment was subsidized at the state and local government level; in 2002, a Hyundai plant in Alabama, 25% subsidized; in 2002, a Honda plant in Alabama, 21% subsidized. In 2001, a Toyota plant in Alabama was 13% subsidized; in 2000, a Ford plant in Michigan, 11% subsidized; in 2000, a GM plant in Michigan, 28% subsidized. The list goes on with over 20 other examples going back to 1980, with subsidies reaching, in one case in Alabama, 67% of the total plant investment. These are the people who are talking about our alleged subsidies in softwood lumber.

This harmful tax competition creates a rush to the bottom and should be the subject of a discussion between Canada and the United States. These practices should be phased out because government revenues are being eroded as different jurisdictions try to give away more than the other in the hope of attracting investment and jobs. This negotiation is what part (b) of Motion No. 397 calls for.

Under U.S. countervailing duty law, all that we can do in Canada is defend our system. The way the countervailing duty law is structured, we are not permitted the opportunity to highlight subsidies in the U.S.A. Besides, the U.S. administration in Washington argues that it has no control over states and local governments. Is that not convenient?

Now to the issue of the power of markets. We are told in Canada that our pricing system is artificial. We should let the markets decide by moving to a system under which a much greater volume of timber is subject to auction. On this point, let me be the devil's advocate for a moment.

While I am a great believer in the markets, was it not these very same markets that caused the high tech NASDAQ bubble to build and then burst not too long ago, primarily because stock prices in many cases bore no relationship to economic reality? Now we are being told that the market is going to determine the perfect price for softwood lumber or for logs in Canada.

Could it be that the prices bid for timber in states like Washington and Oregon are higher than they should be from the perspective of sound economics as a result of speculative pricing induced by environmental pressures, for example, large tracts of land being set aside to create habitat areas for endangered species like the spotted owl?

Could it be that Canada has a comparative advantage in softwood lumber? Heaven forbid. We have some of the most productive and efficient mills in the world, a resource of logs and energy second to none and a worldclass workforce. Would it be too much to ask our American neighbours, that while we may not be able to beat them in sectors like defence systems and IT, we might have an advantage over them in products like softwood lumber? Would that be too hard for them to grasp?

I would like to turn my attention briefly to the countervailing duty process. U.S. trade laws are skewed in favour of U.S. interests. This perhaps should not be surprising. Following the losses by the U.S. lumber producers in 1983 and again in 1992, I was told, on very good authority, that U.S. trade laws were tweaked to achieve a better result the next time around. So they are going to keep trying and trying.

As I said before, the countervailing duty process, as it relates to softwood lumber, is flawed in that only alleged subsidies in Canada come under the microscope, and do they ever come under the microscope. Boxloads are sent to the U.S. department of commerce. What about U.S. subsidies at the state and local government level, like the ones I spoke of earlier? Why should we only be permitted to defend our system and not take into account practices in the U.S.A., like the low cost sales by the U.S. forest service, by auction sales in the United States where the buyers have been let off the hook when they realize the price is not economic?

Are there alternatives to the current countervailing duty process? Yes, there are, but it will take political will, particularly from U.S. congressmen and women and U.S. senators.

Part (a) of Motion No. 397 calls upon our government to negotiate an end to the U.S. countervailing duty process. Members in the House and in the other place could assist with such an initiative.

For starters, the process could be changed such that a countervailing duty process could not be re-launched repeatedly. The principle of “three strikes and you're out” should become the norm.

More far-reaching solutions offer the greatest potential however.

First, concepts, like net subsidy, would allow a countervailing duty process to be launched if it was reasonably alleged that there was a net subsidy difference that exceeded a prescribed de minimis . With this approach, any applicable U.S. industry subsidies would be scrutinized also.

Second, the countervailing duty process could be scrapped altogether and all trade disputes examined from the sole perspective of competition policy. In other words, if price collusion, price fixing or cartel-like behaviour was involved they could launch their countervailing duty process.

A third approach would be to have all Canada-U.S.A. trade disputes automatically fast-tracked through an independent and objective agency, an organization like the International Joint Commission.

I believe that Canada and the United States need to work together along the lines suggested by former Ambassador Gotlieb, one that reflects today's realities and that respects our differences as well as our common interests and cultures, a bargain that covers important bilateral public policies like defence, border security, energy and trade.

I am confident we can leave behind many of the irritants and move forward positively with our neighbours to the south.

[Reinstatement of Government Bills, February 9th, 2004]

Mr. Speaker, I thank the member for Yukon for a very good question. Frankly, I have not heard so far in this debate any good reasons for not supporting this motion. I find this passing strange from the party opposite, the Conservative Party, which was always concerned, and rightly so, about managing things wisely and spending the taxpayers' dollars very frugally, and so it should be. People on this side of the floor agree with that. However, to bring people back to debate the very same bills that the House has unanimously supported is not wise management. It is not as though the bills are different. The Clerk and the Speaker can only accept those bills that are the same as those that had been debated before. We would be asking the House of Commons to come back and debate the same matter over and over again.

To answer, I think it would be a waste of taxpayers' money, and I agree with the member for Yukon that there have not been any convincing arguments, apart perhaps from a partisan need to put forward this notion that it is a whole new government so we need all new legislation, which patently does not make any sense.

[Reinstatement of Government Bills, February 9th, 2004]

Mr. Speaker, I will try but we have gotten so far off topic that it is going to be difficult so please bear with me.

The member opposite needs to be clear on what happens with an election. Again let me say that it is the Governor General who makes the decision about an election call. It is true that the prime minister of the day might go to the Governor General and say, “Madam Governor General, Your Excellency, I think it's time for a general election in Canada”. The Governor General could turn around and say, “Mr. Prime Minister, I don't think so. I don't think we'll have an election right now”. So again we need to come back to accountabilities and the Canadian Constitution.

These boundary changes will be good for the member's province and I urge her to support the motion so we can get on to this legislation and have an election, and she will have more members from Alberta in the House if the bill goes through.

[Reinstatement of Government Bills, February 9th, 2004]

Yes, Mr. Speaker, I tried to patch together the linkage there with what we are debating today. I think what we need to be clear on here is terms of accountability. It is true that the Prime Minister might go to the Governor General and request a prorogation, but the Governor General decides whether there is going to be a prorogation or not. This is clear.

The member opposite should study the Constitution. The Governor General has the accountability for deciding on prorogation or not. In this particular case, I think she made an excellent decision. That is totally her prerogative. It is not the prerogative of the government. The government can recommend, but that is where the member needs to understand the difference between recommending and decision making and the accountabilities that flow from that.

[Reinstatement of Government Bills, February 9th, 2004]

Mr. Speaker, I thank the member for Sackville—Musquodoboit Valley—Eastern Shore for his comments. I know that the member is a very valuable member of the parliamentary hockey team, a very good goaltender who we miss from time to time.

Nonetheless, just to clarify one point first, it is the Governor General who really calls for the prorogation. It is not the government. It is the Governor General. I think we need to make that point just so that Canadians understand completely.

Second, the member knows full well, unless he was not reading the papers, that in our Liberal Party we just had a leadership convention. We just elected a new leader. Would the new leader not want to bring in his own imprint, his own stamp, with a throne speech and with the flexibility to deal with some legislation that has already been debated in the House? That was the reason for the prorogation. The member implies that the reason for the prorogation is to get rid of some ugly bits of legislation. He knows full well that the new government wants the chance to come out with a throne speech to set the direction and the vision moving forward. That is why we prorogue. That is why we have a throne speech. I am surprised that the member opposite does not know that. He should have studied that in poli-sci 101. It is clear that this is the reason for the prorogation.