INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 19, 1998

• 1532

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order, pursuant to Standing Order 108(2), a study on information technology and preparedness for the year 2000.

We're continuing our discussion today on the year 2000 and how ready small and medium-sized businesses across Canada are and what effect that will have on consumers.

We have two witnesses before us today: from the Retail Council of Canada, Diane Brisebois, president and CEO; and from the Alliance of Manufacturers and Exporters of Canada, Brian Collinson, the director of commercial policy.

What I propose is that both witnesses give an opening brief and from there we'll go to questions.

Ms. Brisebois, please.

Ms. Diane J. Brisebois (President and Chief Executive Officer, Retail Council of Canada): Thank you.

[Translation]

I have to apologize for not being able to provide today a French version of our report. Getting ready for this meeting turned out to be a greater challenge than getting ready for the year 2000, so to speak. We will make sure to provide all the information in French after this meeting.

[English]

The Retail Council of Canada appreciates the opportunity to present the views of retailers regarding preparedness for the year 2000.

Let me stop here, since I know that you've received a copy of our report. I think it might be a bit more useful to highlight what is in the report versus reading the report as such. Then I'll add a few comments and wait for the second presentation. And then maybe we can spend more time on specific questions of concern for the committee.

Let me just begin by saying that the Retail Council of Canada represents 6,500 retailers across the country as well as 100 sectoral associations. It employs over 1,200,000 Canadians and total sales for 1997 were over $225 billion.

In mid-1997, the Retail Council of Canada surveyed the industry—small, medium and large retailers—to identify the level of readiness for the year 2000.

There was something that we found interesting when we asked a specific question. Basically, retailers were asked, in mid-1997, to rank their company's preparedness for the year 2000 on a scale of one to ten, with ten being “ready”. Most initially picked four as the right number, and after discussing the issue in more detail with them over the phone and during focus group meetings, the score was closer to two.

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It was even more frightening that it was the same situation with vendors, meaning consumer product manufacturers as well as vendors of software and hardware who would be providing assistance in regard to readiness for year 2000.

As of last month the survey was repeated, and we are pleased to say it has gone from a low of two to about five and a half, with large members closer to seven and small members closer to four.

[Translation]

There is no doubt that the issue is especially critical at the level of small and medium retailers. Large businesses are much better prepared than the majority of those operated by our members. However, large retailers make up a major chunk of the industry, although their number does not exceed approximately one hundred. We represent over 6,500 small and medium businesses. So this is a very big issue.

[English]

On page three of the report, we've taken the time to give you a better description of some of the very specific issues retailers need to address in regard to year 2000 readiness, or year 2000 compliance—there are certainly a lot of terms that are being used within the sector. As you can see, the compliance program is a very complex one for the sector, simply because of the types of operations they run and the exercises they need to go through to provide the product at the point of sale.

One of the biggest challenges for retailers in Canada, and one that is important to point out in regard to the report, is that about 70% of our retailers depend on imports. They buy from Asia and third world countries. In doing some research through the trade missions, the response we're receiving from most of these countries is that it's not a problem. I think the committee is very well aware that when that answer is given, it is indeed a very major problem.

While we are very concerned about the lack of readiness in Canada, we can certainly state that we are ahead of our partners in Asia, with very few exceptions, and certainly in third world countries.

In order to give you a better understanding of how we reacted to year 2000 readiness as an association, we've added on page four of the report some of the steps we've taken to assist the retail sector in trying to comply with year 2000 readiness and start their conversion programs.

We have been, like most large trade associations, very active. However, our biggest challenge is to try to have our smaller members—small and mid-size retailers—comprehend that this is not going to disappear.

At the top of page three of the report I added something I thought you'd find interesting. When we received the results of the survey, the majority of our members representing small to mid-size firms had basically three comments to make: this won't affect me or my business, and even if it does it won't be a problem until January 1, 2000; the silver bullet solution is out there and someone will discover it; and the year 2000 problem is over-exaggerated.

This was done in the summer and fall of 1997, but unfortunately we found these responses were still common in 1998, when they should be in the process of testing with their partners. So they're way behind in that area.

To keep this fairly short so we can have more time for questions, I'd bring your attention to page six, which includes our recommendations. They are very short. They seem general, but please give me a few moments to explain.

Obviously the first recommendation is to state that we support the recommendations of the task force on year 2000.

Second, the Retail Council urges this committee to consider small-business solutions through education, the identification of affordable resources, and financial assistance programs.

Third, the Retail Council believes this committee and the Government of Canada can assist all retailers, and specifically small businesses, by developing a program to ensure that software and hardware products available for sale in Canada are century-compliant.

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Let me close by saying this is our biggest concern and our biggest challenge. A lot of our small to mid-sized companies are being held hostage because of the cost of the software and because they need to rely on third-party consultants to provide the assistance as required. I can assure you that has become a major problem in our sector.

For approximately 70% of our members, their number one concern is the fact that they were quoted in the past, for example, $1,000 for a software package, and they are now being quoted $20,000 for the same software package. So it is of great concern, because not only do they need to comply, but they also need to ensure they can survive past the year 2000, providing the products and services their customers require.

Those are my comments, Madam Chair. I'll be pleased to answer more questions in English and in French.

The Chair: Thank you very much, Ms. Brisebois.

I'd now like to turn to Mr. Brian Collinson from the Alliance of Manufacturers and Exporters Canada.

Mr. Brian W. Collinson (Director, Commercial Policy, Alliance of Manufacturers and Exporters Canada): Thank you very much.

Madam Chairman and members of the committee, the Alliance of Manufacturers and Exporters Canada thanks you for the opportunity to appear before you on this issue, which is one of cardinal concern to our membership at this point in time.

Just to briefly introduce the association, the Alliance of Manufacturers and Exporters Canada is the voice of the Canadian manufacturing and exporting sectors as a whole. Our members together account for more than 75% of the total manufactured output of Canada, and manufacturing itself accounts for roughly 80% of Canadian exports.

Our membership includes every size and type of manufacturer and processor in every part of the country as well as a very wide range of Canadian exporting enterprises. Given our diverse membership, we have what we feel is a unique perspective on the year 2000 issue and have become sensitized to some particular dimensions of it that are rather unique to our sectors as compared with some others.

For the manufacturing sector in particular, the year 2000 problem has at least five business dimensions. One is the PC and mainframe business dimension, which has been described at some length in the media by Task Force 2000 and is generally known and is often what is referred to as the year 2000 problem.

In addition to that, our members are confronted with specific issues that are unique to the factory floor; specific issues relative to supply chain, which some associations and other sectors share—certainly the retail sector shares these concerns, but not every sector does; issues with regard to connectivity, network, and telecommunications; and, again in common with the retail sector, concern about conditions in other countries and other parts of the world, in our case from the perspective of certainly import but also very much export as well.

The general PC and mainframe issues have been well described, and they have essentially the same character for the manufacturing and exporting sectors as they do for business in general. So I'd like to not dwell on that and perhaps spend a little time just describing the situation with respect to factory floor technology.

The manufacturing sector has only relatively recently come to realize the full dimensions of the factory floor situation. Manufacturing enterprises employ a range of specialized equipment on the factory floor, such as programmable logic controllers, dedicated PCs, and embedded systems. If such equipment is working effectively, it often does not need to be replaced. Unlike other business environments, where the technology will roll over frequently, in many cases on the factory floor, once technology works, you leave it in place and it does its job.

As a consequence, factory floors are full of equipment that is not year 2000-ready. Estimates from some of our key members indicate that well over half of shop floor technology is not year 2000-ready, and these organizations estimate that the cost of fixing this factory floor problem will be roughly twice that of the cost of the fix for the PC and mainframe problem that these organizations face.

For much of this technology there is no automated or factory means of making the fix, nor is there any means of altering code that is embedded into chips that control factory floor technology. The factory floor must be audited, and where a unit is questionable it must simply be replaced. As many factories are continuously operating entities, the fix must take place as an additional element of already crowded maintenance schedules. For our membership the full dimensions of this issue have begun to unfold, and what had seemed like not a straightforward issue but certainly a smaller issue than it is has come to our membership to appear to be a much larger one.

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In conjunction with that, there are also issues with respect to supply chain. The alliance has particular concerns with respect to maintaining the integrity of networks of suppliers that form the structure of Canadian industry. While some industries are putting a great deal of effort into ensuring the year 2000 readiness of the network of suppliers, it is not at all evident at this point in time that it will really be possible for all enterprises to ensure that their third and fourth-tier suppliers—that is, the suppliers to the suppliers to the suppliers and so on—will really be year 2000 ready and that there really are mechanisms in place to guarantee that at this point in time.

Given that a strategic failure by a supplier can grind an entire industry to a halt, the alliance is concerned with the need to establish effective mechanisms to ensure that all suppliers to manufacturers are year 2000 ready.

With respect to issues of connectivity, networking and communication, these issues are complex and varied. I certainly would invite and welcome any questions from members of the committee with regard to that aspect of the problem, but I would simply stress that these dimensions of the problem add greatly to the complexity of the year 2000 solution that manufacturers have to realize.

With regard to export-related issues, one of the gravest dimensions of the year 2000 problem pertains to the level of preparedness in other parts of the world. Many of our trading partners are at a much lower level of year 2000 readiness than North America, and it seems likely that the year 2000 problem will result in serious disruption of trading relationships. This is particularly true of Asia, where there are unique problems even in advanced countries such as Japan. These problems pertain to the kanji character system that is used in computers and the fact that technology that's developed in North America is not readily transferable to the Japanese character system. It's also particularly true of less-developed nations that are using older technology.

Unfortunately, it would not appear from the information we receive from the IT sector that Canada's in a position to offer much direct assistance with regard to this problem beyond strenuous encouragement to address the issue.

There seems to be little doubt that the year 2000 problem will have a negative economic effect on Canadian, North American, and world economies. Economists vary in their estimate of the size of this negative impact, but one common estimate forsees perhaps a half percent loss to GDP but with a 40% chance of the year 2000 problem leading to a substantial economic downturn.

While dollar estimates of the impact are risky, a frequently quoted number for the worldwide fix is in the vicinity of some $600 billion U.S. However, some experts are beginning to argue that this estimate does not encompass all the actual costs because of issues related to languages that cannot be converted in an automated manner and also because of the cost of factory floor and embedded systems that have been underestimated in previous estimates.

There are substantial legal and litigation issues that are of concern to small and medium business and to the manufacturing and exporting sectors in general. The year 2000 problem may well end up being one of the most litigated issues in history. Directors' and officers' liability, malpractice suits, product liability and non-performance suits for year 2000 remediation may all be expected. Such legal costs could well result in further damage to the economy and delay an immense diversion of resources away from economic productivity. The alliance urges the Government of Canada to do all in its power to develop alternate routes for dispute resolution between businesses concerning the year 2000 issue.

Of equal concern to our membership are issues pertaining to the readiness of Canadian infrastructure and the Canadian government. On the basis of the report of the Auditor General and Task Force 2000, the alliance has great concerns about the year 2000 readiness of government at all levels in Canada and urges the federal government and other governments to move rapidly to secure their own year 2000 preparedness and readiness, as this has an immense impact on a wide range of activities that business carries out.

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I'll now move quickly to our recommendations. As I've already stated, for the ongoing health of business and industry in Canada we believe that the government should do all in its power to emphasize the gravity of the year 2000 problems to the Canadian business community, and to small business in particular. It should seek for opportunities to both educate the business community on all aspects of the problem and also to assist small and medium-sized businesses in developing appropriate in-house strategies to address the problem.

Secondly, we believe that the Government of Canada should use every means at its disposal to ensure that governmental and quasi-governmental infrastructure essential to business and industry has attained the necessary level of year 2000 readiness and to ensure that a transparent government-wide strategy for year 2000 readiness is put in place.

Thirdly, the alliance would recommend that the government should take any and all human resources and immigration actions available to it to increase the available pool of labour with respect to the necessary technical skills to assist in the solution of the problem.

Measures perhaps to encourage those over 65 with relevant programming and technical skills to return to the workforce should be considered.

Fourthly, in conjunction with the provincial governments, the provincial law societies and relevant trade associations, the alliance recommends that the government should undertake a thorough investigation of channels of alternative dispute resolution that may be available to stem the coming tide of year-2000-related litigation, which we believe may be equally disruptive in its dimensions to the actual problem itself.

In addition, we would just state, as I know our friends from the Retail Council have done, that we are in support of the recommendations of Task Force 2000.

Madam Chairman, thank you very much for the opportunity to address the committee.

The Chair: Thank you very much for your opening comments, Mr. Collinson.

I'm now going to begin with questions and I'll start with Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you very much for appearing before us. You represent probably one of the most far-reaching associations in terms of the people you represent and who report to each of you respectively in the various fields, and what you say has to be taken with a lot of weight because it's rather significant. You represent thousands of businesses in this country.

I was particularly taken, Madam Brisebois, when you said that the people who say this is not a problem were the first indication that, yes, indeed there is a problem—the fact they didn't recognize that there was a problem when there really is one. I think it's this awareness that has been the bugbear of this committee and a lot of other areas. I noticed that Global Television was here at the beginning of this session....

Other than the kinds of surveys you've done, are there some specific suggestions you would make aside from the recommendations you have here as to how we could light the fire in the minds of these business executives and small-businessmen in particular that this is indeed a real problem and that they are part of the problem for not recognizing the problem?

How can we put something together? I realize the recommendation that Mr. Collinson made is that we should do everything in our power. That's precisely why this committee is here. That is precisely what we're trying to do, but I think there is a singular inertia, non-action, that is happening.

Mr. Eric Lowther (Calgary Centre, Ref.): Could I add to this question? Is that breaking the rules or could I just add to it?

The Chair: You can take up his time.

Mr. Eric Lowther: Looking at your four recommendations, they all call for the Government of Canada to do stuff, but there's no recommendation around calling for business to do things along the lines of Mr. Schmidt's question.

Mr. Werner Schmidt: Yes, so can you hit both of them?

Ms. Diane Brisebois: The Retail Council supports your recommendations as well, so I'll jump in first and respond to that.

I think that by just simply saying we are supporting the call-for-action document shows that we're not just recommending that government act on this issue. In fact, there are a lot of responsibilities within the document that are directed to industry, to associations, and to the service sector. However, if you put all these trade associations in one room, the one common element is they feel that the government has treated year 2000 preparedness with a very low profile.

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There seems to be very little that has been in the media. Certainly, I must tell you, as I represent a lot of independent businesses, that while this is great and while the thick book is great, for our members, long-range planning is tomorrow. So if you have a very urgent message to give them, it has to be simple. It has to be on one or two pages.

There has to be some support behind it, or else it's not going to happen. The reality is that it's a competitive environment, and small business are the ones facing, I think, the biggest challenges. That's right across the country.

So in that sense, those are the issues I think we're addressing here in our recommendation.

Mr. Brian Collinson: If I could just add to the comments of Madame Brisebois, I think we're fully in agreement with everything she said.

We're fully supportive of the recommendations of Task Force 2000, including particularly the recommendations of Task Force 2000 with regard to insurers and lenders taking the necessary measures to ensure that business is in compliance.

We recognize that business has an obligation to communicate the importance and gravity of this issue and that associations have a mission to communicate the gravity of this issue to their membership. We are attempting to do that strenuously.

But just to echo one of the comments of Mr. Schmidt, there's almost an eerie quality about this whole issue in the way that the message seems to meet with a lack of receptiveness and an element of denial. I think if I had not seen that before, I would have found it hard to credit. There's the fact that people who are rational, hard-headed business people seem to be turning away from the issue. I certainly think it's incumbent upon us as an association, all associations, and on the Government of Canada to do everything we can to shake that complacency.

Mr. Werner Schmidt: The thing that really intrigues me here is a discussion I had with some of our leading financial institutions in this country, as well as the comment that appears at the bottom of.... I'm not sure what page number it is, but it has to do with the economics of the year 2000, Mr. Collinson.

I wonder, Madam Chair, if one of the concerns and one of the reasons why there's a denial is that there's the potential of a panic arising very quickly. If banking institutions or insurance institutions recognize it, this is very serious. Maybe your deposit will disappear overnight on the night of December 31.

Say we go up there to give this thing a big profile and say to be careful because these are the potentials, such as the elevators may not run, or a whole bunch of other stuff may not happen. If you indicate here that there's as much as a 40% chance of the year 2000 leading to an economic downturn, my heavenly days if that isn't reason to start panicking a little bit, what would be?

Is that perhaps one of the reasons why these so-called hard businessmen are simply saying that they'll be darned if they're going to be responsible for the panic. We want to create this awareness and this willingness to do something and at the same time avoid a panic.

How do you bring those two things together? You're both extremely well-qualified executives. Can you help them and us figure out how you do this?

Mr. Brian Collinson: We find ourselves somewhat in the position of the doctor who has to deliver the message to the patient that he has a severe heart condition and the slightest shock may kill him. I'm not being overly facetious about that by any means.

But I think the question is whether risking the panic and the uncertainty now is not preferable to what will occur if this problem goes unaddressed and people will face a situation on January 1, 2000, that could be very messy.

My understanding, just for your information, is that, at this point in time—there may be others who are working on it—two hospitals in the province of Ontario have well-developed year 2000 plans. There's an enormous of embedded systems technology in hospitals.

Mr. Werner Schmidt: That's right.

Mr. Brian Collinson: I hear fully what you're saying about panic, certainly, but if we don't shake people's complacency now, I think we're going to be looking at a situation on the eve of 2000 that will be much more messy and socially disruptive.

The Chair: Thank you, Mr. Schmidt.

Mr. Werner Schmidt: Thank you very much.

The Chair: I just want to let everyone know that what was handed out was page two. When we were photocopying the Retail Council of Canada's report, page two was missing. It's now there. I apologize for that.

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I will now turn to Monsieur Bellemare.

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Madam Brisebois, your message essentially seems to be that the retail industry is not ready for the year 2000 and that we should expect enormous problems especially of the financial kind. Everybody recognizes that those who are not ready will be exposed to extraordinary litigation costs.

The members of the Bankers Association, the bank vice- presidents and representatives of the high-tech sector who appeared before us seemed to shudder when hearing the word litigation. The very large players in the Canadian economy look extremely concerned. I find it scary that retailers and manufacturers have not taken action to solve the problem and are waiting for others to do it for them. You said, like the representatives of the manufacturers, that the responsibility to inform people belongs to the government.

Since you are leaders, I would like to ask first of all if you have read the minutes of our previous meetings, madam Brisebois.

Ms. Diane Brisebois: I have had some information on your meetings but I must say that most of what we have seen holds nothing new for us. We have already started discussions with the banking sector and companies like IBM and Stentor.

I would like to correct one of your statements. We are not waiting for the government to come up with a miracle pill. In fact, I believe this would be a bad solution. The Canadian Retail Council has been looking into the issue of preparedness for the year 2000 for over a year and half. It is not the whole retail industry from one end of Canada to the other that faces big problems. It is mainly small and medium businesses, whether they are in retail, in the services industry or the manufacturing industry who are confronted with this universal issue.

It is easy to discuss the year 2000 problem with the likes of Stentor, Ford or Chrysler, who are very large businesses, but in fact the problem is not at this level but rather at the level of small and medium businesses who are just finding out that there is a serious problem and that they cannot wait until December 31st 1999 to tackle it

I would add that we are aware that we have a very heavy responsibility. This is why the Canadian Retail Council invited 45 trade associations representing those who supply our retailers to take part in an educational conference that we will be holding in May. We will organize round tables where we will discuss not the problems of Sears, Canadian Tire, Ford or Chrysler, but solutions applicable to small and medium businesses. In my view, these are very pro-active initiatives. We are encouraging all other industries and trade associations to do likewise.

The view we express on the last page of our report is sort of a message telling the government it is time to press the alarm button and to start panicking somewhat.

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We know that at the level of small and medium businesses panic is much more productive than calm. Panic makes things move faster. Since small businesses are usually family businesses, they are much more worried about the next day than about the year 2000. They do not always have time to manage their business with a focus on the year 2000 or 2001. So we need to scare them a little bit to make them realize they need to act. I hope this answers your question.

[English]

Mr. Eugène Bellemare: Mr. Collinson, do you think the government should pass laws that could penalize companies or retailers or manufacturers that are not up to snuff by say January 1, 1999?

Mr. Brian Collinson: My opinion would be that is going to be penalization enough.

I think there is already in place a commitment on the part of a sector such as the banking sector, the financial sector, to require a demonstrated plan for year 2000 readiness—the same with insurance, the same with securities commissions across this country, now dealing with public companies, but also in terms of those companies that are involved in supplier networks. Increasingly, too, they are going to have to demonstrate to their customers that they are year 2000 ready.

I don't think laws that penalize firms would be an appropriate approach, because I think there will be penalties enough out there. But I'm inclined to agree with Madame Brisebois that there needs to be something that, for the smaller player, shakes the tree.

There is a bit of a foxhole mentality on the part of small business. Small-business people are people for whom our association has the utmost respect, but they are very often involved in the immediate crisis. I think there needs to be an awareness that the crisis is bigger than that, and one of the most effective ways we've found, talking about that so far, is just to explain to people the extent to which the legal profession is gearing up for the coming wave of year 2000 litigation.

Our folks sometimes feel very uncomfortable when they hear about litigators—

An hon. member: As do we all.

The Chair: Now, now.

Mr. Brian Collinson: As do we all. Nonetheless, we have been able to identify some very effective communicators around the year 2000 problem, who are litigators, who are beginning to communicate and get the message through to our members that this is serious; lawyers are taking this seriously and people are getting ready for this, so you should too.

The Chair: Thank you, Mr. Bellemare.

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé (Lévis, BQ): I would just like to ask two preliminary questions. I would like to ask the representatives of the Alliance, Mr. Collinson, if there are any members from Quebec in his organization.

[English]

Mr. Brian Collinson: Absolutely. Now somewhere between 25% and 30% of our membership is in the province of Quebec, members of a wide range of sizes, from the very largest to the smallest.

[Translation]

Mr. Antoine Dubé: I will ask the same question of Madam Brisebois: do you have members in Quebec?

Ms. Diane Brisebois: Yes, indeed, there is even an affiliate of the Canadian Council which is called Conseil québécois du commerce de détail. I believe we now have over 500 members.

Mr. Antoine Dubé: I ask this question because I am somewhat surprised by this situation. I am even more surprised by Madam Brisebois, who is a Francophone and chief executive officer. You are handing out texts which are in English only. We are talking about the year 2000, but this problem has existed for at least 200 years. I was surprised and disappointed to be presented a text in English only because you are not small organizations. You are large organizations with lots of resources and, on top of that, Madam Brisebois speaks French. As for the year 2000 issue, did you communicate in French with your members to raise their awareness?

Ms. Diane Brisebois: Yes, absolutely. I am sorry to have provided the document in English only, but as I mentioned earlier, the report in front of you has been prepared in the last 24 hours and we did not have time to get a translation. But I can give you assurance that most of the releases we are sending our members are sent through the Conseil québécois and are translated into French.

Mr. Antoine Dubé: By you or by the Conseil québécois?

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Ms. Diane Brisebois: Usually by the Conseil québécois, but sometimes the translation is made in Toronto. Our office is in Toronto and the Conseil québécois is in Montreal.

Mr. Antoine Dubé: I have another question. There are Francophones in Acadie and throughout Canada. Are these communications translated by other organizations?

Ms. Diane Brisebois: Yes. To ensure we are dealing with the year 2000 and not with the subject of francophonie and languages in Canada, I will answer by saying that on our Internet site we tell our members that the documents are available in both languages. Even if a document on the year 2000 is in English only, we translate it if it is requested in French. I say this because these documents are in our library but do not belong to us. Some were published in the United States, for example.

Mr. Antoine Dubé: Let me tell you why this is relevant. I checked in my riding with the Chamber of Commerce, which represents small businesses, and I found that the figures are even lower in my area. In fact, they told me that they are not aware of any of your work and they were surprised by what I told them. I also checked with some MPs from Quebec and they told me that they had barely heard anything about the issue. I think this is a problem.

We should communicate with businesses in their language. We should also make an effort in dealing with aboriginal businesses. This is what the year 2000 problem seems to be and it concerns me. I would like this message to be heard and understood. The federal government makes an effort to communicate and I appreciate it. It does not have a choice, because of the Official Languages Act but other organizations at the national level should do the same.

Ms. Diane Brisebois: We fully agree with you. There is no excuse for presenting a report that is not in French and in English. But I must say that it was prepared only yesterday and that we did not have time to have it translated. But it is very important to educate people in both languages.

[English]

The Chair: Do you have a point of order, Mr. Schmidt?

Mr. Werner Schmidt: Yes, I have a point of order. We've now spent the better part of five minutes talking about language. The issue here is the year 2000, not language.

The Chair: Mr. Schmidt, your point is taken.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Madam Chair, with due respect to the witness, maybe Mr. Dubé did not hear at the beginning, but the witness did explain at the beginning of her presentation the language, and I don't think we needed to go over it again.

The Chair: Thank you.

Mr. Walt Lastewka: You were busy, Mr. Dubé, and the witness did explain that.

The Chair: She explained it in French, as a matter of fact, Monsieur Dubé.

Mr. Werner Schmidt: Let's carry on.

Mr. Antoine Dubé:

[Inaudible—Editor].

The Chair: No, your five minutes are up. You chose to talk about language.

Madam Jennings.

[Translation]

Mr. Antoine Dubé: Point of order.

[English]

The Chair: Mr. Dubé.

[Translation]

Mr. Antoine Dubé: When people raise a point of order, it is customary to listen to the answer. I will not raise it here, but I would like to be respected as a Francophone. It is a rule of the committee. I will just take a minute of your time. I want to say that I wish to discuss this in another meeting. I do not want to unduly blame these people because they should have been given sufficient notice to translate these documents so that we could have them in French. The gentleman next to me would have been the first to remark on it if he got the document in French only.

[English]

The Chair: Mr. Dubé, we've explained this several times when either you or Madame Lalonde have raised this. Witnesses have the right to appear before the committee in either official language.

A voice: Exactly.

The Chair: They're under no obligation whatsoever to prepare briefs in both official languages. If we receive them in time, we can try to have them translated. However, there is no guarantee, even if we receive them a week ahead of time, that we'll have them translated. Because of the way hearings are scheduled and because of the way those are sent to this committee, we don't always have time.

Our witnesses do take the time to prepare these reports to us, at their own time and expense, and we appreciate that. When they can be translated, we do try to fulfil that, and we will continue to try to do that. But they're under no obligation whatsoever to provide them in two official languages.

That being said, we will move back to our topic today, which is the year 2000. Madam Jennings.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you.

[Translation]

Madam Brisebois, if I understood you correctly, you said that 70% of your retailers and vendors rely on imports. And if I understood correctly your presentation, as well as that of Mr. Collinson and others previously, developing countries are not prepared at all and are not aware of the problem.

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Therefore, even if we in Canada were ready for the year 2000, since a large part of our economy depends on imports, there would still be an economic impact.

Let us return to your suggestions. The Alliance recommends, among other things, that the government take any immigration actions available to it to increase the pool of labour with the necessary technical skills to assist in the solution of the problem in Canada. But by doing so, we would leave these countries even less able to face this issue, since a good number of these trained people would come from developing countries. These are people who have been trained and who do not have many job opportunities because their countries have not yet become aware of the problem. But once they will be aware, their workers will be here in Canada, assuming that they are indeed available.

[English]

Mr. Brian Collinson: I understand your point and I agree that there are some key moral sensitivities around that particular issue.

In referring to immigration, we did not have the less developed parts of the world necessarily in mind, as much as we did perhaps the more developed parts of the world and trying to make it attractive from that point of view.

The tragedy of the situation is that there are not sufficient resources anywhere to address the issue. There's a tension here between what is good for Canada per se and what is good for other nations.

I understand the point you're making, and I take it that there are sensitivities there that would have to be paid attention to. Nonetheless, I would like to stress that with regard to that point, there are many Canadian citizens over the age of 65 who happen to be among the best experts in the world at COBOL programming. I'm very aware of one very interesting anecdote of one such individual, who actually wasn't a Canadian but was one of the authors of ANSI COBOL, and he had very large and very financially attractive offers to come out of his retirement and work on the problem.

So perhaps that avenue is one where we feel much less morally conflicted and one where we could perhaps turn to older Canadians and ask for their help in a situation that they're uniquely qualified to address in some cases.

Ms. Marlene Jennings: You answered my next question, so I don't have to ask it. It was precisely on whether or not we do in fact have a readily available pool of qualified people who are over 65 and could be induced into coming back into the labour market.

It is an excellent recommendation, in my view, when you say the federal government should attempt to bring together the provincial governments and the provincial law societies, relevant trade associations, etc., in order to attempt to develop alternate dispute resolution mechanisms to deal with potential litigation.

To my knowledge, this is the first time that recommendation has been made to our committee. Other organizations and business and industry sectors have said litigation is definitely a problem and one that's going to be addressed, without necessarily talking about alternate dispute resolution.

Has your alliance thought any further than that? Do you have specific recommendations or sub-recommendations? Or is it simply that you think the federal government should take leadership in that?

• 1620

Mr. Brian Collinson: With regard to that, I am not sure I could come to you with a slate of concrete recommendations at this point. But we have started to engage the bar, particularly in the province of Ontario, and we're very concerned to determine what would be within the realm of the feasible in terms of this.

We think, particularly with issues within a supply chain, that alternative dispute resolution ought to be a very readily available option. It may well be that particular mechanisms for mediation can be set up within a trade association, or between trade associations, and that we might have some active role in participating in the process. We're still fleshing out the details of that, but we think it's an option that could alleviate a lot of the waste and genuine misfortune that may result as a sort of collateral damage in this situation.

Ms. Marlene Jennings: Do you see a role for the federal government there? You're talking about the Ontario law society, but there are ten provinces and two territories.

Mr. Brian Collinson: Certainly, and with a number of the areas of law you're concerned with—for instance directors' and officers' liability—there are dimensions that pertain to individual provincial legislation, such as the Ontario Business Corporations Act, and also pertain to the federal legislation, the Canada Business Corporations Act. So there may be opportunities for discussion in that area and for looking at mechanisms that would be appropriate.

The Chair: Thank you, Ms. Jennings.

I should let you know, Mr. Collinson and Ms. Brisebois, that we are going to have the Canadian Bar Association before the committee. They're presently doing a report and having consultations on legal liability and where they believe it falls. If they can conclude that in any way, shape, or form by.... We expect that report will be done sometime towards the end of April, and after that we'll meet with the Bar Association as well as the insurers. The insurers want to see what they have to say before they come before us.

That being said.... Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you. It is kind of disappointing that the small businesses and the medium-sized businesses are not recognizing this as a problem.

As Mr. Bellemare said, should we have a law out there for people who are not going to be ready, forcing them to be ready? What about some of your manufacturers, are they building products today that are being used by other people who are not 2000 ready? If there should be a law, maybe there should be a law that no products from a certain date should be able to go out any manufacturing door if they're not 2000 ready.

Mr. Brian Collinson: In terms of our association, we certainly understand the intent behind that sort of legislation, and I think we would find ourselves very much in the position of the Ontario Trucking Association talking about loose truck wheels. We would find it very hard to fault that kind of an approach.

Whether it's practicable is another issue. And the economic consequences would have to be carefully thought through. It seems to me you might simply advance the job-loss consequences of the year 2000 problem by bringing it forward by legislation if you were not particularly circumspect in the way it was done. I can't say that we would oppose in principle that type of an approach, but I think it would require a great deal of care.

Mr. Jim Jones: Has your association proposed anything to your manufacturers on that—sort of a recommendation saying something like as of a certain date all your products should be compliant?

Mr. Brian Collinson: As far as we're concerned, the position is—and we've communicated this to our membership—that insofar as possible, all products should be year 2000 compliant from this point forward.

Ms. Diane Brisebois: If I can add, on page five of our report you will see in italics a statement of principles that our retailers are sending to their suppliers. Specifically, in that statement it asks them to ensure that the products, specifically software and hardward products, are century-compliant. What we're trying to do with the sub-associations, the sub-councils representing other retailers, is to ask them to do the same.

I would have to agree with the alliance of manufacturers: I don't believe that having legislation to penalize those that produce non-compliant products would be effective. I think that in fact the market takes care of those who are complaint and those who are not. Retailers are already setting some very strict guidelines with their manufacturers. They're making it very clear that they will no longer be suppliers if they cannot provide proof that their products, regardless if they're consumer products or service-related products, are compliant. So the market itself is taking care of that issue. I think our concern, as well as the alliance's concern, is how we should deal with smaller businesses.

• 1625

Mr. Jim Jones: I was going to ask that question. Yes, that's good for the bigger companies who can make sure they've got that written into the contracts, but the small business probably doesn't even have the idea that he should be even asking for this. So we should be policing it somehow. If we don't police it with a law, then your organization should be policing it.

I know the banks and the insurance companies probably from April onward will not be insuring after a certain day, and the banks are not going to give bank loans unless they see a year 2000 plan. I think if enough of these things get put into the process, then people are going to wake up and realize they have a problem.

Ms. Diane Brisebois: I think an important point to make here is that large manufacturers are now putting pressure on the smaller retailers and telling them that they're not going to sell them merchandise if they're not year 2000 compliant. The large retailer is putting pressure on the small supplier by saying that you won't do business with us unless you're complying. The financial institutions and insurance companies are doing the same.

So I think we are seeing that happen. I think that because of where we sit, we tend to panic a bit. We tend to go in on the shop floor in a distribution centre and realize that year 2000 is much closer than year 2000, because in fact, in some cases, mid-1998 is going to affect some industries negatively because of dates on products, and so on and so forth. I think we tend to be alarmist a tiny bit more, but that will work itself out in the marketplace.

I think the issue we wanted to bring up to the committee and discuss with the alliance prior to this meeting is this whole issue of smaller businesses having less information and assistance now being faced with buying products and services that are not year 2000 compliant. It's specifically software, or being held hostage because the cost of that software has become totally outrageous.

How we deal with that, I'm not sure, but we believe that bringing it up to this committee and discussing it with other associations might help us come up with a solution. It's a big problem.

The Chair: Thank you. The last question, Mr. Jones, please.

Mr. Jim Jones: You're saying that there's a lot of unreadiness on the shop floor. These people definitely should be made aware or something should be done here. I don't know what has to be done here.

Most of the equipment, if it's not year 2000 compliant already, is normally new equipment, right? It's not EPROMS or micro-code changes or things like that. You're going to have to buy new. All of a sudden, there will be huge backlogs with the vendors who are supplying these devices or equipment. So we're going to see a lot of hurt here.

Mr. Brian Collinson: That's very true. It certainly is true that if you can't acquire.... It's like everything else around this problem: the longer you wait, the greater the cost. If it's a piece of hardware you need, then the closer it gets to the year 2000, the more expensive that hardware is going to be and the more it's going to hurt your business to acquire that.

So we're doing everything we can particularly to bring home this message to the shop floor. The whole problem is a very serious one, but the shop floor, for our membership, is the most expensive part. We're working very actively to make sure that our members do have plans in place for changing over their technology, but it's a message we can't let up on.

Mr. Jim Jones: Is there any incentive they can be given? I don't know if the government has come out with.... In the Monty report, they were recommending that 150% of costs in 1998 and 1999 could be written off. So if you had to buy equipment, you could almost write it off over the next year or so, instead of over the normal eight to ten years of depreciation. Is that the type of thing that has to be out there to force them to be able to do this?

• 1630

Mr. Brian Collinson: I think that kind of measure might be of some assistance, although there's a certain sensitivity around that, too. That is, if the quantity of whatever it is that's being produced is a relatively fixed number, then by freeing up the financial resources to acquire that, all you're going to do is send more money in search of the same quantity of hardware, services, or whatever. There's a danger of driving up the cost, and I think there has to be some sensitivity around that. As far as we're concerned, the biggest incentive around this whole issue is, if you do it right, you get to survive.

The Chair: Thank you, Mr. Jones. Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I want to pick up on this issue about diminishing supply, I suppose, of the software itself. You seem to be intimating that there's a certain market position here, almost a monopoly, the way I'm listening to you, that people ratchet up these prices because suddenly there's a big demand for them and there's a small supply. But we know that it must be very simple to copy software. What are you saying, that there's not a competitive market in this product line, or...?

Mr. Brian Collinson: With the shop floor side of this issue, unfortunately it's not a situation where you can just copy the software on a floppy disk. The way it works is that the programming is encoded on a silicon chip. It's written right into the chip, so that if you have a chip and it needs to be replaced with a chip that's year 2000 ready, you can't make changes to the old chip; you have to pull out the old chip and plug in a new one that is correct, that has the right code in it. So there's a manufacturing process there that has to go on. It's carried out by someone, probably someone in the United States, to produce that particular component.

Mr. Alex Shepherd: Having said that, though, we know that as we increase demand, usually in the technology industry in fact prices go down. So you seem to be talking about reverse economics, which would lead me to the conclusion that it's not a perfect market, or something. Both of you have touched on this issue.

Mr. Brian Collinson: I'm well aware of Moore's law, which says that as time goes by, the capability of technology goes up and cost goes down logarithmically. But you're dealing with a situation here where there's a very serious blip in Moore's law.

Ms. Diane Brisebois: Let me also add that it's not a question, as we mentioned earlier on, of just getting a new diskette. The biggest problem that exists right now is that in most cases, most of the software that needs to be upgraded or made compliant has to be replaced. So there is a demand for the product.

In most cases, the product is there. The problem occurs not as much with the software as with the provider of the technical service, to be able to make sure that all the systems within the corporation are compliant. That's what we're seeing in a lot of retailers, as well as manufacturers, I'm sure, because they have specific proprietary programs and functions within their firm, where they've bought what we would call semi-off-the-shelf product and where there has been some proprietary work done on the system.

So they're very reliant on the technical service that's outside the firm, because in most cases small and mid-size companies don't have the expertise in-house, so they contract out. That's where we have seen it become extremely expensive, because there has been a brain drain, and now in fact our large members are losing all their IT people because the IT people have now all become freelancers. So that has escalated into increasing costs, especially for small and mid-size people who don't have a strong IT department to deal with conversion issues.

Mr. Alex Shepherd: Okay. The one area that interests me—and Mr. Jones touched on it—is a rapid write-off, or what I look at more as capital cost allowance, the hardware side as opposed to the software side. You people would know, when the government got involved in metrication, we gave a 100% write-off in putting in new cash registers, and so forth, a similar kind of program.

• 1635

Getting back to the economics of this, you talked about a software programming kind of problem, and you said that was what was in short supply. If we leave that to one side and just look at pure hardware, chips and so forth, the granting of the government of a rapid write-off would not necessarily increase the cost. Would that flow from what you're saying?

Mr. Brian Collinson: I would agree; there's more of a danger of it where you're dealing with software and services. In terms of an overall approach, our association would certainly favour a more rapid write-off for hardware advances than currently exists, and I would have to say that's true not just with this issue but generally across the board.

The Chair: This is your last question, Mr. Shepherd.

Mr. Alex Shepherd: Would that give this issue a push for those small business operators, that there's a window of opportunity: to get a 100% write-off, you have to make the acquisition by June 30, 1999?

Mr. Brian Collinson: If they were aware and if they were responsive, that might help. I can see that being an incentive. Right now we're dealing with a situation where the incentive is one of viability: you get to stay in business, and not only that, but maybe you get to do better than your competitors. But nobody's picking up on that either.

The Chair: Thank you, Mr. Shepherd.

Mr. Collinson, this issue has come up several times before the committee. You may wish to know that some of the witnesses have suggested it would be a reward for those who have waited and a penalty for those who have got themselves ready as well. So there's the other side of the coin to that argument or that line of questioning. So you may want to take that back to your members before you give us a definitive answer on where you stand on that.

Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

Thank you very much, witnesses, for being so straightforward in some of your answers. I've been rather impressed with the realism with which you've approached the questions.

I have a question with regard to the embedded chips, and I'll focus at this particular point on the embedded chips in medical devices. We had the Ontario Hospital Association representatives here, and they said they have been requesting the suppliers of medical devices to indicate to them which of these devices have an embedded chip in them that might be time-specific or might be affected by the year 2000. They've been singularly unsuccessful in getting a reply from these suppliers and manufacturers in some cases.

I'm wondering if this has been given to you as a problem heretofore. If it has been, what are you doing about it, and it hasn't been, what are you prepared to do about it now?

Mr. Brian Collinson: I'm aware of that specific problem, and the problem has also been presented to us as the more general question of which chips are year 2000 compliant and which are not.

We are working very actively with a number of firms we're aware of out there that have databases of information on these chips to encourage them to make that information readily available. We're working on that avenue right now. I don't have anything I can deliver at this point, but what I'd very much like to do, with your permission, is take that message back to my constituency and underline the crucial importance, particularly in dealing with medical technology, for that information to be made available.

Mr. Werner Schmidt: Yes, it is critical, and I really would encourage you to do that.

If I might, I'd like to build on the other question about dispute resolution mechanisms that you alluded to here, and also on the government programs that I think Madame Brisebois was referring to. They're two different questions, but they could be related.

Particularly, I'd like to know how you would set up this dispute resolution mechanism that you're referring to here. I like the concept. It sounds really nice. But it has to have teeth in it and it has to have a resolution that works. If it doesn't work, it's useless. To just sit around and talk for a while doesn't help much.

How can this be done? You must have thought about it or you wouldn't have written it down here.

Mr. Brian Collinson: Yes, we have thought about it and we've looked at some of the models for dispute resolution that have been developed recently in most provinces across Canada, but particularly, as it happens, in Ontario.

• 1640

Very often in the province of Ontario, because of the length of time in seeking resolutions, there's a great desire to move dispute in general outside of the courts. So one possible model is to have the parties agree and to sign a contract to be bound by the results of a dispute resolution process or by mediation. That requires a fairly high level of trust in the process, but there are many examples now of that occurring in a private court context, for instance, or in the mediation context within the province of Ontario. And there seems to be no inherent reason why that model, appropriately tweaked, could not be applied to disputes that have to do with the year 2000 problem.

Mr. Werner Schmidt: Would that go all the way to an arbitration where a particular person who is agreed to by both parties who are in contest would agree that this person could select one or the other position? Would it go that far?

Mr. Brian Collinson: Certainly that might be one model. Another model would be a mediation approach where you would—

Mr. Werner Schmidt: You're talking of a third step, I think. After the mediation broke down it looks like it could happen.

Could I ask Madam Brisebois to explain in a little more detail perhaps what you meant by recommendation three, I believe it is, which has to do with government programs of some kind? What form might these programs take? Are they monetary programs? Are they incentive programs that are not monetary? What sorts of programs were you thinking about here?

Ms. Diane Brisebois: Prior to answering your question, if you don't mind, for the record I'd like to correct something I said earlier. Mr. Bellemare had asked me if I was aware of some of the discussions that had occurred at this level, and in fact we were not.

That brings me to your question, which is that there's been very little discussion about basically what the government is doing in year 2000 readiness except for the fact that there was certainly some media attention given to the task force because it was very high profile. But it's difficult to say if it's been effective in the sense of really targeting the right people who need to hear the message of getting ready for year 2000.

One of the reasons we've added this to our recommendation is that we believe that.... We're not saying that the government should be developing educational programs as such. What we are suggesting here is that the government work with a large number of associations representing large constituencies and develop, based on the recommendations presented by the task force, programs to cater to small and mid-sized businesses to ensure that the message gets to the right people.

Also, we're suggesting at this point that we have been getting mixed messages from different levels of the government as well as different departments and there doesn't seem to be cohesiveness. And I think that the alliance will agree with that. We're very concerned about that, and it's sending mixed messages. So I think that associations and government need to work together to move forward with a similar message, and also industry needs to be able to look at government and feel it's practising what it's preaching.

Mr. Werner Schmidt: That's a pretty serious accusation, Madam Chair. It scares me a lot.

Did you really mean to say that the federal government's various departments are giving you different messages as to readiness for Y2K?

Ms. Diane Brisebois: I'll respond by saying that this unfortunately mirrors what's happening in our large corporations. In different departments, the plant floor thinks one way and the corporate offices think another way. In a large retail company we have the merchandising department and we have the marketing department who think they're singing from the same book and they are not. And we're suggesting that this might very well be happening with government. In fact I am saying that it is happening within government and pointing out that this is common within large sectors, including the public sector.

Mr. Werner Schmidt: So that's one of the programs: straighten your message out.

Ms. Diane Brisebois: Work together. Make sure you communicate well.

The Chair: Mr. Murray please.

• 1645

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you.

Mr. Collinson, you were mentioning this eerie feeling earlier on about panic, and I just had this image of all of us being on the Titanic, essentially, on about day two of a four-day voyage, and that some of us are going to end up in lifeboats—some countries, some companies, some people—and others are going down with the ship.

Looking at this as more of a year 2000 problem, it seems it's going to stretch out for a number of years after that. It could be five, ten, fifteen years. You're talking about all this embedded technology on the shop floor, for example. We'll be at the mercy of all of our trading partners and their readiness, I would think, for years to come, as well.

I really only have one question, and it's about human resources. It's partly because I was talking to somebody who runs a business school, and they're training people on this, training young people in COBOL. He was telling me that they could have, at a price, a large number of graduates ready. I would like to know from both or either of you if you think it would be practical for the federal government to try to train a cadre of young people, accepting that perhaps those jobs could go on for some years, and also accepting that it can be drudge work, where you're just going over line after line of code in some industries, and maybe would burn out after a while doing that.

We have a program where we send young people out to small businesses to get them involved with and to train them on the Internet. I do realize that's a much simpler task than trying to fix this Y2K problem.

Would you see a need, and would it be practical to train large numbers of graduates to go out and help work out this problem? Is that just a band-aid solution, or would that be helpful?

Mr. Brian Collinson: There's undoubtedly a shortage of skilled human resources to deal with the problem, if you look at the forces of the market operating on the salary of a graduate coming out of a technical college with a COBOL background and what has happened with the salaries of those people. Some of them are doing very respectably. As a matter of fact as a profession they're doing very respectably at this point.

It may well be that not just with COBOL, but with the other languages that people don't talk about, the other really 30% to 40% of coding that can't be addressed by automated systems—you can address COBOL to some extent with automated systems. With other languages, there's also a shortage.

It may well be that this would be a good avenue for young people to come into the workforce, if they could be trained in a timely enough manner to be ready to deal with the issue. That would be the only other constraint. I recognize the problem's going to go on for some number of years, and I think you're right, it will be with us in 2005, certainly, but whether those people could be out and active and functioning in the workforce and assisting workplaces before the year 2000—that would be ideal. It might well be an option the government might want to consider very carefully.

Mr. Ian Murray: I was told it's a matter of months for the training. It's a crash course.

Mr. Brian Collinson: Well, certainly we would be very eager to dialogue with any agency of the government that was considering that, and would be very eager to do everything in our power to assist the graduates of such programs to find employment, and I don't think it would be difficult.

Ms. Diane Brisebois: We certainly would support that as well.

Mr. Ian Murray: We've been talking about this problem in this committee for I guess a few months now, and I do sense the temperature rising. I think the sense of panic is becoming more evident every time new witnesses come forward. There's also more of it in the press. There are more articles, at least in the local Ottawa media lately, that highlight this as a serious problem. So I think the message is slowly getting out.

It becomes a question of whether you panic and run around in circles trying to solve the problem, or if you have a deliberate plan. I guess I've come to the conclusion that if anybody's going to take a leadership role in this, it may have to be the federal government, at least in the human resource area. We can't obviously solve everybody's problem, but I think it's a fact that....

There's a newspaper article this morning saying how all government new programs will be essentially put on hold until this problem is solved, and that indicates that people have come to realize it's a real problem. That can only help in terms of educating those in business, hospitals, and whoever is facing this problem.

• 1650

Mr. Brian Collinson: It's certainly true that this problem brings home an issue that I know a number of different groups have been bringing before government for some time. It dramatically brings home the issue of skills shortage in Canada in a very acute way.

Mr. Ian Murray: Thanks. That's all I had, Madam Chair.

The Chair: Thank you. Mr. Jones, do you have more questions?

Mr. Jim Jones: Yes. First, I would like to comment on Mr. Murray's analogy there of the Titanic. The difference between the year 2000 problem and the Titanic is that the people on the Titanic didn't know what was going to happen; the people with the year 2000 know what's going to happen. There's a little difference there. They're not the same.

The other thing is this. When I talked about the accelerated write-off or the same thing we did with the conversion of the metric system, you said that the people who are already ready are not going to feel like they have a benefit.

How many people in your organization...? Where is the bulk of their dollars going to be spent? Is it going to be in 1998 and 1999, or did they spend it in 1995 and 1996? I think the bulk of the dollars is going to be spent in 1998, 1999, and possibly 2000. There's no sense worrying about trying to collect taxes from somebody in 2000 if they're out of business.

One of the roles we should be trying to fill is to make sure that we can help the industry and help the businesses survive the year 2000.

What about incentives? They're estimating that 10% of all businesses will go bankrupt or out of business. Well, if we can drive that figure down to 2%, or even less than that, then I think that we have to put some of those types of incentives out there. I think the comment in the paper today helps. Some laws will help, and all of that, because this is serious. I heard figures as high as 15%, 16% of GDP that could be lost if things go wrong in the year 2000 for Canada.

I know we're not an island with the rest of the country, but where is the bulk of the dollars going to be spent in trying to rectify this problem? Will it be this year and next year, or have they already spent it?

Mr. Brian Collinson: My sense, from our membership, is that there's going to be a very substantial sum spent between now and 2000 particularly, but not exclusively, on the factory floor issue. The dimensions of that have become more apparent, and there's a strong sense that you don't want to be in the position of having to make those expenditures after January 1, 2000, unless you absolutely have to.

Now, unquestionably, there's going to be a triage approach. Difficult decisions will have to be made about what systems are going to survive and what systems are going to go down, but certainly, firms want to minimize the amount of systems that go down, because trying to fix an organization when it's in a lame duck state after January 1, 2000, is going to be that much more difficult and expensive, particularly if you're shut down and you're not having any revenue coming in.

Ms. Diane Brisebois: I would just add that our members are in a similar situation. I just would like to point out that I don't think our members are spending more than they would have. What they have done, though, is that they have delayed the development of other technologies and improvements within their business. So they have not invested in those so as to be able to invest the money in the year 2000 issue.

For example, in our survey, we found out that a lot of our mid- to large-sized retailers had decided to slow down their expansion of new stores, for example, or new formats, simply because the money that was set aside to deal with that has now been rerouted to the year 2000 issue.

Those who have similar problems to those of the alliance members are those retailers who have large distribution centres and those are what we call integrated retailers, like Roots, for example, which manufactures its products as well as distributing and selling them.

So we have a variety of them. I would say that most of our members, being small to mid-sized, primarily the small members, will be spending the bulk of their money this year and next year.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: Thank you, Madam Chair. And I would like to thank the witnesses for their presentation.

• 1655

I'd first ask Madam Brisebois a few questions. I'd like to have a little bit more dialogue on the confusing or different communication from departments of the government. Would you have some examples, or could this be something you could table with the committee at a later date? I'd like to understand that a little bit better.

Ms. Diane Brisebois: I can give you some general examples, and I will be pleased to follow up with more specific examples, because a lot of that information is now coming back from our members sitting on our task force, the year 2000 task force. But based on discussion with our large members, including Sears, Canadian Tire, Hudson's Bay, when they approached customs, for example, or Revenue Canada, or any other department they were dealing with, they were surprised to see that the readiness level was different from one department to another and that there seemed to be more knowledge in one versus another. I cannot be more specific, but I can assure you that it has been mentioned often enough by those people who would have nothing to gain by providing that kind of information. They were providing it because they were quite concerned.

Mr. Walt Lastewka: My understanding when you were making your remarks was that the different departments were giving different information on the year 2000. What you're really talking about is that each department is at a different stage of readiness and so forth.

Ms. Diane Brisebois: Not giving information out to the sector on year 2000, but dealing specifically with year 2000 readiness within those departments. And by the information sharing I meant that one department did not seem to know where the other department was; there didn't seem to be communication from within the government.

As I said earlier, this is not a criticism of the government; it is something we also have to deal with among our members, especially the very large members, where they need to work closely between departments. It is something that was of concern to us. We will be pleased to provide you with more details.

Mr. Walt Lastewka: We've been looking for examples, and I'll give you the example we had a week or so ago. We had Health Canada here and we had the hospital associations. We knew that the hospital association group needed to get information from Health Canada first before they could go to the next level of implementation. So as a committee we are looking to see if there are any other areas in government from which you need information first before you can go and do your work. If any of you from your associations have that type of information, it needs to be highlighted very quickly. We'd welcome your report on that, because it helps us to go after those departments and go after the chief information officer to make sure this is being done. We've asked the chief information officer for the government to come back early in the fall for that reason.

Ms. Diane Brisebois: We have a meeting of our task force as well as a meeting of our major members next week, and we will pose that question in regard to whether there are any elements of the compliance program where they are still waiting for the government to get back to them so they can then go to step two. And certainly if there are some situations that reflect the case in point, we will make sure we respond immediately.

Mr. Walt Lastewka: I'm glad, Mr. Collinson, you brought forward the item on the manufacturing floor, since I know a little bit about that area. My concern has been—and I've talked about it in the Department of Industry—the importance of quality certification, safety standards, those things that require ongoing documentation for recall and so forth. To me, that's been taken a bit too lightly by people, the fact that they can't produce in the manufacturing centre if they don't have that documentation program. You highlighted it a little bit. Could you tell me what additional things you're doing as an organization to get that message to manufacturers?

Mr. Brian Collinson: Certainly there are at least two or three different initiatives we're taking with regard to this. One is certainly an education program we have ongoing that is concerned to address the factory floor issue. Another is we're building strategic alliances with engineering firms that have a particular focus on factory floor issues and we're using those engineering firms to get the message out to our membership about methodology for solving the problem.

• 1700

We're also attempting to publicize relevant standards for year 2000 readiness, such as the PD2000-1 standard of the British Standards Institute, and attempting, in general, to get that message out. Now there's a regular feature in our newsletters and our magazines. It goes out every month and addresses factory floor and related year 2000 issues. We'll be stepping that up into a program of year 2000 project management, on which we will be cooperating with a major business school in the near future.

Mr. Walt Lastewka: I would hope we would not get into discussion about trying to get temporary exception permits because of not being ready for the year 2000. I hope that type of discussion is not going on in your sector.

Mr. Brian Collinson: To the best of my knowledge it is not. I certainly am not aware of that. I think our association as a whole and the key members of our association would certainly not want to see that kind of route pursued.

Mr. Walt Lastewka: That's when the retailers come into play, because they are the ones who would have to be part of that exception.

Mr. Brian Collinson: Yes.

Mr. Walt Lastewka: To me all that does is delay the problem and give somebody an excuse not to be ready. I personally am very strong on that, that there should be no temporary exception permits on documentation as a result of not being ready for the year 2000.

Mr. Brian Collinson: I certainly understand the point. Particularly where you're dealing with health and safety issues or issues of that level of importance, there can't be any compromise, and we as an association would not advocate any compromise on that whatsoever.

Mr. Walt Lastewka: One of the things I believe we as a group have learned strongly here as we get more and more associations before this committee is the importance that you as an association, in either field, play in getting the message to the government and whoever can do the publicizing. So often business will say, well, what does the government know about my business; get government out of business. I saw a number of examples like that and I have been sharing them with the committee as I audit my own firms in our area. All of a sudden the following week they come back for information and help. I can't emphasize enough that you play a very key role in getting that message out and reporting back.

You talked about where you were, really at phase two, and then some moved up. I didn't hear that from the manufacturing and export side. Of all your association, where are you in your implementation of full year 2000 compliance?

Mr. Brian Collinson: We estimate that at this point among our major manufacturers, the ones we would consider to be in the top 20% of membership in size...our estimate is that those members are on average somewhere between 55% and 60% complete on their programs.

We are a little more sketchy in impact as you move down in size. We know the rate is much lower. We're currently in the process of designing a survey the results of which we'll be very happy to share with this committee. We should have those results within the next month and a half.

Mr. Walt Lastewka: The committee would appreciate that as we start to gather more and more information on where each association is on this. If you could provide the data to the committee and table the data with the clerk, we would all appreciate it.

Mr. Brian Collinson: I'll make a commitment to do that.

The Chair: Mr. Schmidt.

Mr. Werner Schmidt: Thank you.

I have an organizational kind of question for you. As an association of manufacturers, do you include electronic manufacturing concerns?

Mr. Brian Collinson: We have just about every type of manufacturing concern you could mention. Certainly many electronic manufacturers are members.

Mr. Werner Schmidt: These are the people who are perhaps more aware on an immediate basis, because they supply some of the equipment to the Retail Council and its members to be year 2000 ready. Also, within your own organization, they supply other manufacturers for the shop floor type of material.

Mr. Brian Collinson: Yes.

Mr. Werner Schmidt: Is there some kind of mechanism within your own association which can bring these in some cases conflicting and in other cases complementing services together, so this can happen outside of government? Within your own association I'm sure you have some tensions resulting from this whole Y2K thing.

Mr. Brian Collinson: Certainly people are in very different positions on this issue. There are people who are net consumers of the technology and people who are net producers of the technology.

Mr. Werner Schmidt: Within your own association.

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Mr. Brian Collinson: Yes. Certainly we have been working very hard to foster dialogue with those people. We also have a number of people who are solution-providers to the manufacturing sector. We've been attempting to foster dialogue between them and the consumers of their products. What is obvious is that the dialogue has to widen. We're very eager to look at mechanisms to make that happen, first within our own association, then in cooperation with other associations, although at this point it has been mostly within our own association.

Mr. Werner Schmidt: Is there cross-membership between the Alliance of Manufacturers and the Retail Council of Canada?

Ms. Diane Brisebois: I suspect most of their members are members of other manufacturing associations but not of the Retail Council. We do have some affiliate members within the Retail Council who represent the consumer product manufacturing sector, but very few. We're mostly retail.

Mr. Werner Schmidt: The reason I'm asking that question is that we were told on Tuesday by Nortel and Bell...when we asked for assurances of certain kinds, they said it was impossible for them to provide us with any assurances that certain questions we asked them could be answered at this time. That creates a real dilemma. You've given certain commitments, which is wonderful and I commend you for that, but....

Is Bell a member of your organization?

Mr. Brian Collinson: Yes.

Mr. Werner Schmidt: They are. So here's a member of your association, asked to make certain commitments, and it's not prepared to do so. It obviously won't make those commitments to you either—at least not if it's consistent it won't. Yet with the stuff they manufacture and sell to the retail people....

Ms. Brisebois, I think some of the retailers, some of your people, do in fact resell some of this other stuff. For sure, they do sell other services that are provided by your manufacturing people.

Maybe there is not a direct cross-membership, but there sure is a cross-communication situation that exists between the associations. So I'm very pleased you're here together, because I think as we become more and more aware of the problem there is an interrelationship which people said didn't exist before but we're discovering really does exist. I'm really concerned that we become aware of where it is that we need to establish interfaces between associations and between manufacture and retail; that's only one example, but between the electronic and information technology types of things and the hard-core manufacturing stuff which actually moves things around and creates new things with materials and supplies.

The concern I have is that perhaps this kind of discussion ought to move well beyond where we are today, so this next level of discussions with your members will alert them to a whole series of problems we haven't even asked about. That seemed to be the outcome of the Bell situation. At first they seemed to say yes, we have that problem solved, we have that problem solved. Then when we asked if that means they could provide an assurance, they said they couldn't, because that has to be done on an individual resolution basis.

If that's the case, it seems to me to be very necessary for an association like yours as manufacturers and yours as retailers to apply certain kinds of tests so it can be identified now and they will give a clear indication of the degree of readiness. Perhaps it won't assure readiness, but at least a degree of readiness, and it will say this is what yet needs to be done in order for them to be fully ready.

Mr. Brian Collinson: The situation we're aware of now, and one dimension we're particularly concerned about in supply chain issues within our organization, is you have a situation where there are literally thousands of letters flying back and forth between customers and suppliers who are looking for assurance around the year 2000 issue. There's a tension going on.

Clearly the people who are sending out the letters want the maximum amount of information possible. I've seen some questionnaires that go to 130 or 140 questions, some of them very, very detailed.

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Ms. Diane Brisebois: Some from our members, unfortunately.

Mr. Brian Collinson: Some from our members, too.

Mr. Werner Schmidt: There has to be—absolutely. This is not a you-against-me thing. This is look, we have a problem.

Ms. Diane Brisebois: Let me add just this comment. What the alliance is facing.... We had a presentation from AT&T on their readiness report. Their problem is similar to that of retailers. They are also depending on offshore products, and these offshore manufacturers are not ready.

The other interesting thing, and it certainly needs to be at least recorded, is if you ask manufacturers and retailers to define what year 2000 compliant is, you will have a lot of people saying the horse looks like the elephant looks like the giraffe looks like.... No one agrees. It's a very complex issue. For anyone to stand before this committee and say they are year 2000 compliant and they have checked everything.... I would suggest to you they may be doing some new Olympic sport and their medal will be held for a while. That's as much as I would say, simply that they are lying or they are taking some medication and they think they are doing very well.

Mr. Werner Schmidt: I think many of us on the committee have already come to that conclusion.

Ms. Diane Brisebois: Yes, but it is the reality. Unfortunately it's a big challenge for our industry, as it is for this committee, because it's nearly like a black hole. We're going towards a year 2000 deadline, but we're not too sure how prepared we should be, and the chain goes on. We rely on such a vast community that I think this is a problem we're going to have to deal with for a long, long time.

Mr. Brian Collinson: Certainly no one has ever done year 2000 before. That's the problem.

I think the point about what year 2000 compliant is is a very good one. There's a wide number of definitions out there. There has to be some shared understanding and there has to be more dialogue about that, and more getting concrete about that.

There's this other phenomenon going on, which is this tremendous degree of litigation chill. People are willing to share information, but when it comes down to the commitment, they have been told not to. I know within our own membership documents go out and there's a paragraph for what you say to suppliers, there's a paragraph for what you say to customers, there's a paragraph for what you say to the general public. This has all involved a lot of very expensive legal time in working it out.

To some extent that's why we feel the need to try to move the tension away from the litigation focus towards other types of resolution. We are all in it together, in a sense, and if we can't find a meaningful way to talk about it, if we can't find a way to exchange meaningful information, then we really are going to pay.

Mr. Werner Schmidt: To me this abstract conceptualization is all very interesting, but when I ask about all this stuff I ask myself, okay, will it work? Isn't that ultimately the issue? Will the information come from here to here?

Ms. Diane Brisebois: Certainly from our point of view and from our members' points of view we don't have the answer to that question. The only thing we are doing is preparing as best we can, hoping everything will come together and it will work as best it can.

The Chair: I think, Ms. Brisebois, you've probably said it best. One of our other witnesses compared it to getting ready for a hurricane that may never come. If you don't get ready, it's your fault if you're not prepared. It may not come, but it could come.

That takes us back to the whole issue of a faster write-off just for the year 2000. Or it technology in general that requires a faster write-off, so we don't run into another year 2000 problem in the future?

As I said before, it's not my statement. It was one of the witnesses'. I asked Mr. Collinson to take into consideration that one of the witnesses before had said we would be rewarding those who waited and penalizing those who have already got ready if some are already year 2000 compliant.

• 1715

I relate it to the floods last year in Manitoba: those who put sandbags around their homes at great expense received no compensation, and those who didn't received compensation. So it brings in a really interesting question of how you deal with these things.

Maybe the overall question is this. As technology changes so rapidly, as a committee maybe we should look at a recommendation that goes further than the year 2000, because some companies, as they get ready for the year 2000, are not doing other things they should be doing technology-wise and are going to incur larger expenses after January 1, 2000. So maybe, as Mr. Jones said, it could be a write-off in general, a faster write-off for technology that may be a better solution and a longer-term solution.

We do appreciate your comments here today. They have been of great value. We hope you'll do what you can to get the message out to your membership that the year 2000 is an issue and that you want your membership to deal with it as much as we do, because we want all Canadians to be as prepared and as ready as possible. We know there are no absolute guarantees for the year 2000 issue.

We thank you for taking the time to be with us today in this snowy weather and for the difficulty you may have had in getting here. We appreciate your time.

The meeting is going to be adjourned very shortly. I just want to remind members that we now do have Bill C-20 referred to the committee, which is the Competition Act. The clerk has circulated a list of potential witnesses. We'd appreciate your comments on those witnesses. Please get back to the clerk or me on who you'd like to see as witnesses so we can start to schedule those hearings.

Again, thank you very much.

The meeting is adjourned.