INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 28, 1997

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'd like to call the meeting to order. With us today is the Minister of Industry, the Hon. John Manley, who will give us a presentation. With that, Minister, you may begin.

Hon. John Manley (Minister of Industry, Lib.): Thank you very much, Madam Chair. Just at the outset, I'll explain what I want to do here, which is certainly a little different from what I've done in the past. By coming early to the committee, I'd like to really set out for you what I see as kind of the economic problématique we've been dealing with, not just over the course of the summer—certainly the summer brought time to focus on it—but over the last couple of years. It's an indication of how we're trying to address some of the challenges that I see out there, and I'll give you some indication of what I see as my priorities as we go forward from here.

If the technology permits, I'm going to take you through some slides. I'll distribute copies of the slide deck at the conclusion of the presentation, but I'd like to encourage you to follow me through because there's a logical sequence.

I first want to say that I welcome the opportunity to meet with the committee, albeit in this sort of peculiar arrangement. I'm glad at least Walt is willing to sit beside me.

In terms of the advice it offers to us as we go forward and the input it can have, I think this committee can do a lot in the sessions it holds. Just in case, though, they have prepared me to answer questions. You'll excuse me if I need some help to find the answers during the course of this, but I hope we're not talking about the past, because to at a certain extent I want to talk about the future.

[Translation]

I am familiar with recommendations made by a group of Committee chairs at the end of the last parliament which encourage Ministers to refer legislation to committees before second reading, and to encourage increased contact between Ministers and committees, contact that is not limited to formal appearances before the committee. I certainly hope that this will be one of many opportunities for us to meet and discuss the issues facing this committee and our country.

Madam Chair, as the Committee is well aware, Canadians now live in a global, knowledge economy. As the most trade-reliant nation in the G-7, global economic developments, and how we respond to them, play a key role in our prosperity.

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What does this mean?

It means that trade barriers are falling in virtually every country of the world.

It means that foreign investment is growing rapidly -<- almost twice as fast as the growth in global output.

It means a business from the other side of the world competes for the sale on the other side of your street.

[English]

Knowledge-intensive industries are now dominating trade and employment growth. This is part of the whole global, knowledge-based economy—and you're going to hear me use that expression frequently. The knowledge revolution, led by rapid advancements in information and communications technologies, is becoming the key to economic success for individuals, businesses, regions, and countries. Output is expanding fastest in the high-knowledge part of manufacturing, and knowledge-intensive industries are creating the most jobs.

What does this mean to Canada in concrete terms? All thirteen of the fastest growing industries are classified as high knowledge or medium knowledge. Of the fastest growing employment industries over the last decade, ten were high knowledge or medium knowledge. It means that today, 50,000 computers are sold every 24 hours. There were only 50,000 computers in the world 25 years ago.

Innovation creates jobs and wealth for all sectors of the economy, from primary resources to service industries, from manufacturing to high technology. Increasingly, success is based on products and services that are knowledge intensive, not resource intensive. People and innovation have become the keys to jobs and growth.

Canada is poised to be a leader in the new economy. We've gotten our fiscal house in order. Interest rates are at historic lows. Our inflation rate is among the lowest in the industrialized world. From a trade standpoint, we are one of the most open economies on earth. We have an opportunity to build upon this economic foundation in order to create a knowledge economy for the 21st century. We have the people, the institutions, and the research excellence, but having these assets is not enough. We have to mobilize our resources towards a clear objective of being the best in the knowledge economy.

I want to come back to this point in a few minutes, but first I want to spend some time on the record of the last four years.

After more than a decade of high deficits, a balanced fiscal situation is in sight in Canada. We have achieved this by sticking to a rigorous deficit reduction plan that relied upon the help and support of all Canadians. By 1996-97 our financial requirements, roughly equivalent to OECD measures of the deficit, were in surplus for the first time in almost thirty years. Canada was the only G-7 country to be in surplus on a financial requirements basis in 1996-97. At the total government level—federal, provincial, and local deficit on a national accounts basis—the deficit in 1997 is expected to be well under 1%.

In the last four years, Canada's inflation rate has gone from one of the highest among G-7 economies to one of the lowest in the world. With 1.5% annual inflation over the last four years, we have outperformed the United States.

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As one of the most open economies in the world, we have secured access to most major markets. Through the North American Free Trade Agreement we offer a competitive gateway to the largest trading region in the world, a market of almost 400 million people, which accounts for 30% of the world's GDP. Our participation in the World Trade Organization and the Asia-Pacific Economic Cooperation forum gives us access to other key markets. We participated in the development of major international agreements to open up sectoral markets, such as information technology and telecommunications services.

Our commitment to sound economic fundamentals has been an important factor in our increasing international competitiveness. Since 1994 we've moved from twentieth place to fourth place in competitiveness, according to the World Economic Forum. For those of you who aren't familiar with their survey, this gives us an indication not in absolute terms or in objective analysis but really in a subjective analysis by the world's business leaders of how competitive our economy is. That is a fairly rapid improvement in a very short time.

The Economist Intelligence Unit places Canada's business environment third among the environments of 58 countries over the next five years. The Organization for Economic Cooperation and Development, or OECD, and the International Monetary Fund see Canada as the growth leader among the G-7 countries this year and next year.

But there are also some significant challenges we must address to build long-term growth and job creation. These challenges in productivity, innovation, human resources, trade, and investment are issues all industrialized nations are dealing with. When I said I want to set out for you the problématique, this is really the nuts of what we need to crack if we're going to build the kind of micro-economic environment that will enable Canada to succeed in the 21st century.

Productivity growth is the key to long-term competitiveness and rising incomes. It has been very slow in Canada for some time. Canada has had the lowest rate of growth in productivity among G-7 countries over the last 15 years. This is a result of which we cannot be proud.

The innovation gap. This committee did very useful work on the innovation gap before the election, work that I don't think was fully completed and that you may wish to return to. We have a smaller share of high-tech manufacturing than any other G-7 country: 14% compared with 24% in the U.S., for example. This is an example of some of the things that give the OECD reason to say Canada suffers an innovation gap.

In Canada R and D spending is low as a percentage of GDP, particularly spending by the private sector, despite our very generous R and D tax incentive system.

We have weak technology diffusion and adoption, particularly among small- and medium-sized enterprises.

These are the elements of the innovation gap.

[Translation]

A quality work force is key to creating competitive edges in a knowledge-based economy. The need for knowledge workers means that Canada will have to attract and retain skilled workers and put more emphasis on continuing education and training to upgrade existing workforce skills.

Canada is a trading nation, but we are not yet a nation of traders. Large firms account for a disproportionate share of our export activity—the top five exporters account for 22 per cent of Canadian exports. They are General Motors, Ford, Chrysler, IBM and Noranda. The three large carmakers are the three largest exporters in Canada.

Less than 10 per cent of SMEs now take advantage or globalization. Trade success is concentrated in too few sectors, and our trade shares have slipped in Asia Pacific Region, and in Europe.

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[English]

Foreign-direct investment provides a powerful stimulus to economic growth and job creation. A $1 billion increase in foreign-direct investment creates about 45,000 new jobs and increases GDP by about $4.5 billion over a five-year period. FDI in Canada has doubled between 1985 and 1995 to $168 billion. That's the good news. The bad news is that we have lost our global share of foreign-direct investment. Our share of global FDI has halved over the last ten years.

It's obvious that the challenges and gaps did not develop overnight, and they require long-term solutions. Our work in this mandate to address these challenges will build upon the momentum gained during the last mandate.

Let me highlight a few examples of how Industry Canada and the industry portfolio have worked together to provide Canadian businesses, particularly small- and medium-sized businesses, with the support and tools they need to innovate, grow, and create jobs.

Under our trade and investment agenda, in co-operation with the Department of Foreign Affairs and International Trade and other key federal departments, we developed Canada's international business strategy to take a Team Canada approach to international business development. In investment, we've adopted a similar team approach with Investment Partnerships Canada. Under our innovation agenda, we launched Technology Partnerships Canada, an innovative investment approach to support technology development and commercialization.

The new Canada Foundation for Innovation will invest in the revitalization of our research infrastructure.

We've worked to increase access to capital for small business through changes to the Small Businesses Loans Act and by establishing the Canada Community Investment Plan. We gave the Business Development Bank of Canada, BDC, a new mandate to support the growth of knowledge-based, export-oriented businesses. The bank has responded by building new partnerships with lending institutions and developing new programs such as the technology seed investment funds.

To help more small businesses learn about how we can work together, the Industry portfolio organized a series of 29 info-fairs across Canada earlier this year. The response was overwhelming. More than 50,000 people attended the info-fairs.

We've updated key marketplace framework legislation such as the Standards Council of Canada Act and the Bankruptcy and Insolvency Act to promote a fair, efficient, and competitive marketplace. We've put in place an information highway strategy to promote access, competition, innovation, and new economic opportunities. The information highway was one of my priorities in the first mandate, and I'm going to elaborate a little bit on that strategy again in a few seconds.

Just over a month ago, in the Speech from the Throne, the government set out its priorities for seizing the opportunities presented by the global knowledge economy. Our priorities focus on setting the conditions to create jobs and wealth in all economic sectors, ranging from high technology to services and primary resources. The agenda sets out clearly the actions we intend to take and the partnerships we need to forge to ensure that Canada realizes its potential in the new economy of the 21st century.

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In support of our priorities, the government is implementing a strategy built on four themes: connecting Canadians, realizing our international potential, investing in innovation and knowledge, and increasing the participation of Canadians in the new economy.

The first is connecting Canadians. Our goal is to make Canada the most connected country in the world, making sure Canadians, wherever they are, can have access to the electronic highway and information economy by the year 2000. This is perhaps the single most important action government can take to ensure success in the knowledge-based economy.

[Translation]

We are connecting rural and remote communities through public access sites across Canada to give them the tools to help further their economic and social development and make the most of their existing resources to tap new markets and create new job opportunities for their citizens. Through our Community Access Program we will connect 5,000 rural communities to the Internet by 2000-2001. Our goal is to expand on this initiative to increase access in both rural and urban environments.

By working with private and public sector partners to ensure that all of CanadaÂs 16,500 schools and 3,400 libraries are connected to the Internet by 1998 we are helping to make online learning a reality for Canadians and we are setting the conditions for Canada to become a laboratory for the creation of multimedia learning software and networks. The next challenge will be for all partners to figure out how we can put at least one connected computer in every classroom. This project to connect all schools to the information highway before the end of next year is at least two years ahead of similar efforts in the United States. It is therefore a fairly ambitious project, but we are convinced we can do it.

[English]

We've gone on-line with new Internet resources such as Strategis and ExportSource to provide businesses and individuals with strategic information 7 days a week, 24 hours a day. Strategis has had more than 1 million visitors. Those are individuals who have logged on. Just to put this in perspective, we're receiving about 200,000 hits per day on Strategis. This puts it in the top 3% of web sites in North American. Imagine Industry Canada trying to answer 200,000 phone calls per day and provide quick and accurate information in response to those requests.

These initiatives follow through on the commitment to give Canadian businesses, particularly small- and medium-sized enterprises, access to the strategic information that can help them innovate, grow, and create jobs.

By the year 2000 we want to establish Canada as the world's best legal, commercial, and technological environment for electronic commerce. This will mean modernizing the rules for the electronic marketplace in such areas as digital signatures, security, encryption, privacy, intellectual property, consumer protection, and commercial, corporate, and competition laws.

We need to co-operate with the private sector and with other governments and other levels of government to establish a framework for the conduct of electronic commerce in Canada and around the world. I have invited my OECD ministerial counterparts to come to Canada in the fall of 1998 for discussions to develop the global framework.

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By putting the government on-line, we can facilitate communications between government and citizens. Through the Internet, many government services will be available to Canadians around the clock. We can make Canada a leading supplier of multimedia content in priority economic, social, and cultural areas. But we need to expand our efforts to digitize Canadian collections of historical, cultural, and educational significance. All of these things are opportunities for us. I hope you share my excitement in endeavouring to do them.

By connecting Canadians to each other, to their institutions, to governments, and to the rest of the world, we will all better understand who we are, and Canadians will have the tools they need to maximize their potential. These are only some of the many advantages we can enjoy as Canadians when we link up with the new economy.

The second theme is realizing our international potential. Increasingly our prosperity is dependent on making the most of our international opportunities. One in three Canadian jobs depends on trade, and every $1 billion increase in exports generates about 8,000 new jobs.

With Team Canada we have improved our trade and investment performance, but there's still much more we must do to secure Canada's place in the global economy. We're already extending our Team Canada approach to help Canadian businesses prepare at home to compete and win in international markets. We will continue to place a strong emphasis on building the abilities of small- and medium-sized businesses.

Earlier this month, my colleague, the Minister for International Trade, announced how we are building on the Team Canada approach with the creation of Team Canada Inc. We will provide a single window into our trade and investment promotion activities and tools, offering seamless service and 24-hour-a-day access to strategic information. We've set up regional trade networks linking Industry Canada and portfolio partners with provincial and municipal governments across the country.

Our goal is to provide businesses with quick and easy access to the expertise of all partners to help them with a range of export issues, from export preparedness to market opportunities.

As the committee may be aware, last month I chaired the meeting of ministers responsible for small and medium-sized enterprises from the 18 economies of the Asia-Pacific Economic Cooperation forum. The meeting outlined a number of measures that can be taken in domestic economies as well as international fora to promote SME growth, and I assure this committee that we will place a high priority on encouraging SMEs to participate in the global economy. Our objective for the year 2000 is to double the number of active exporters from Canada, doubling from the base year of 1994.

Through Investment Partnerships Canada, we're working on the investment side of this trade and investment coin, working with industry on a focused marketing campaign in priority markets to attract investment from high-impact multinational businesses as well as to retain Canadian investment at home. This partnership approach has been key to attracting major investments, such as Stora's investment of more than $0.5 billion in Port Hawkesbury, Nova Scotia and the decision by Pasteur Mérieux to invest up to $350 million in a new cancer vaccine R and D project in Toronto. There are other examples.

The third theme is investing in innovation and knowledge. By investing in Canada's research facilities and university laboratories, we will maintain one of the best research and development infrastructures in the world. We will also improve and expand the knowledge base that individuals and businesses need in order to succeed.

We will see our $800 million investment in the Canada Foundation for Innovation used to leverage additional private and public sector investments to renew and expand the research infrastructure at Canadian universities and research hospitals.

The Technology Partnerships Canada program is a key element of our efforts to promote innovation in Canadian industry. TPC invests in private sector innovation at the commercial end of the R and D spectrum. These are real investments where government and the private sector share both the risks and the rewards.

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Our investments will be repaid in the form of royalties, should the innovations prove successful. The royalties will be used to fund further investments. Our TPC investments to date have ranged from aerospace to environmental technologies, from Pratt & Whitney in Montreal and Halifax to Ballard Power Systems in Burnaby, British Columbia.

We want to build on the success of the National Research Council's Industrial Research Assistance Program, IRAP, to increase the resources available to help small- and medium-sized businesses develop and commercialize new technology. The knowledge economy is transforming all industry sectors, but there are several key sectors that we believe we can target now and make substantial gains on in the near term.

Canada has sectors that can lead the world, for example, aerospace, biopharmaceuticals, biotechnology in agriculture and fisheries, and the environmental information and telecommunications technologies. Over the coming months we will work with leaders of these sectors to set goals for growth and measurable targets for investment and to establish global market share objectives. We will work with them to develop and access the tools they need to achieve these targets.

[Translation]

Supporting innovative enterprises and building knowledge infrastructure is not enough in itself.

As a country, we need to ensure that more of our post-secondary graduates have the skills required to acquire jobs in the new economy, and promote continuous learning and skill upgrading within firms. Governments, academic institutions and the private sector will have to work together to address these issues.

As part of that challenge, we must encourage more young Canadians to acquire the skills and training in maths, sciences, and technology that are critical for many of the most rewarding jobs in the economy.

Another challenge is to ensure that quality education is accessible and affordable to every Canadian.

A third challenge is to focus Aboriginal business investment programs on more long-term, strategic investment opportunities. This will help develop a strong and resilient economic base and foster partnerships among the federal, provincial and Aboriginal governments and the private sector.

Finally, we are challenged to help rural communities diversify their economies, capitalize on new business opportunities and build on their strengths.

[English]

The industry portfolio plays a major role in the government's strategy to put in place the elements necessary for sustainable growth and job creation in the knowledge economy. The portfolio brings together 13 key departments and agencies responsible for science and technology, regional development, marketplace services, and microeconomic policy, which explains why the book of answers is so thick.

My priority since we created the industry portfolio, which was in January 1996, has been to ensure that the entire portfolio is focused on helping Canadian business to fulfil its potential to innovate, grow, and create jobs. From Industry Canada's targeted sector investments and strategic information to the venture capital programs of the Business Development Bank of Canada, from the National Research Council's technology transfer programs for industry to the small business and export support of the regional agencies, we are uniquely positioned to address the factors of success in the global knowledge economy.

Obviously these factors of success are complex and wide-ranging. Some high-quality, thought-provoking studies on the knowledge economy have been produced in Canada in recent months. I brought a few along, because although I assume they're circulated to members, I want to make sure you know about them.

In the Conference Board of Canada's study on productivity, entitled “Performance and Potential 1997”, there is a lot of information on both the productivity gap and to some extent the innovation gap.

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The Aerospace Industries Association of Canada produced its annual report, entitled “Creating Wealth for Canadians”, and we have the final report of the Information Highway Advisory Council, “Preparer le Canada au monde numérique” or “Preparing Canada for a Digital World”.

I think all of these are very important studies relating to the challenges that Canada is facing. You may find it a worthwhile exercise, if the committee so chooses, to meet with some of these groups and hear what they have to say about the challenges facing Canada.

Madam Chair, in the months ahead the government will update many pieces of legislation that have a profound impact on the initiatives and priorities I've been listing today, including the Competition Act, the Co-operatives Act, which was in Parliament last week, the Telecommunications Act, together with the Teleglobe Canada Act, which will implement Canada's negotiated participation in the World Trade Organization's telecommunications round, the Canada Business Corporations Act, the Privacy Protection Act, especially as it relates to electronic commerce, and the Small Business Loans Act. I'm looking forward to the committee's analysis of these pieces of legislation.

I also look forward to working with you in addressing the challenges that I've outlined today. I'm well aware of the valuable contributions this committee made during the last mandate on issues such as small business financing and marketplace framework legislation. I anticipate a productive partnership in building an environment where the private sector can get on with the job of creating jobs and creating economic growth for Canadians.

The global economy is changing, driven by technological change and by the information revolution. The most competitive nations are increasingly knowledge-based economies.

Canada has been very successful in creating world-class economic fundamentals. To be globally competitive in the knowledge-based economy of the 21st century we must combine this, I believe, with a microeconomic policy agenda that involves connecting Canadians, realizing our international potential, investing in knowledge and innovation, and increasing the participation of Canadians in the new economy.

Over the last 130 years Canadians have worked together to build a society and an economy that is envied around the world. We must build on these partnerships to prepare for a new economy. We have the potential to make Canada a leader in that economy and to maintain our place as one of the best countries in the world in which to live. This is what the industry portfolio is working towards, Madam Chair.

With that, I thank you. We'll distribute copies of the slide deck for your review and information, and if there are questions or comments or discussions, I welcome them.

The Chair: Thank you very much, Minister.

We'll begin our questioning with Mr. Schmidt of the Reform Party.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you very much, Madam Chair.

[Editor's Note: Technical difficulty]...giving us a rather comprehensive overview of the challenge that lies ahead instead of looking back. I think it's really a very interesting position that has been brought forward, and it shows some vision and some direction that is worth pursuing.

Before we go any further, Madam Chair, I would like to know how much time we have here today. We've had a long presentation, and although I'm certain it was a worthwhile presentation, I would really like to know if we will be limited in our questioning of the minister. I think he represents a very significant portfolio. Can we have a full opportunity to ask questions?

The Chair: It's my understanding, Minister, that you're with us for the full meeting of the committee.

Mr. John Manley: Yes. In any event I think the bells start at 5.15 p.m. Is that not right?

The Chair: Yes. We have a vote at 5.30 p.m.

Mr. Werner Schmidt: Thank you very much, Madam Chair, and Mr. Minister, thank you very much for the time.

Mr. Minister, I would like to look at one of the areas that I think you focused on rather carefully. I want to make sure I'm not misunderstood here. It has to do with the Technology Partnerships Canada program. I think there are some very innovative ideas underlying the program, and some of the projects that have been undertaken certainly deserve some support; in fact, some deserve considerable support.

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The question I wish to address, however, has to do with the management of the application of those funds and in fact the return on the investment. I know the word “investment” seems to be the hallmark describing what these moneys are. If they are an investment, I believe there ought to be a pretty good indication of what the return should be. I think the minister used the word “royalties” in terms of what would be the issue here.

Could you outline for us, Mr. Minister, exactly the mechanisms of how the royalties will be paid? What are the conditions under which they will be given? Also, perhaps, what is the rate of return that the taxpayer could expect?

Mr. John Manley: I'd be happy to do that. In fact, we will table this fall the first annual report on TPC. This will necessarily be a little preliminary, because most of the investments were just made in the last year or so.

Essentially what we do with TPC is look to participate in near-market product development. This is not meant to do basic research; this is meant to do research that is capable of completing a product that's able to go to market. There must be a risk factor, because one of the criteria is that the investment must be truly incremental. In other words, it must be something that we do not believe would go ahead without a TPC participation.

The next thing is that you'll notice we never deliver a cheque to TPC recipients. That's because they must incur the R and D expense, and then we participate on the sharing ratio we have negotiated. This varies, because it's a matter of negotiation, but roughly speaking, case by case, our share is about 30% of the total R and D investment. In other words, we leverage $7 for every $3 that we put in to a development investment.

Everything is repayable out of the sales of the product developed. That's where the risk comes in. In some cases, the R and D may not be successful or in some cases the marketing may not be successful. However, we take what we believe are cautious estimates. Again, each case varies somewhat because you sell certain things differently from other things. Therefore, the repayment schedule may necessarily vary.

Our target is a rate of return for the fund of 15%.

It will be a number of years before we can report to you whether we're successful in achieving that target, because it will be a number of years until many of the developments are completed and the repayment stream begins. But based on experience and on an evaluation of the projects, that's the targeted return.

Mr. Werner Schmidt: Does that mean the projects will be repaid completely in seven years?

Mr. John Manley: On average, yes, but not necessarily in every case. Some would be faster. I expect that we have our first repayment coming in within a couple of months.

Mr. Werner Schmidt: Is the repayment strictly in terms of dividends? Would the dividends continue afterward? Is it strictly a return of the capital that the government advanced to them?

Mr. John Manley: No. When I say we're expecting a return on the investment, it's a return in excess of the capital. In some of the negotiated cases, there is a cap, but it's always in excess of the amount we put in. In some cases, there is no cap, so if the project is successful and goes on for the coming century, we keep sharing in the proceeds.

Mr. Werner Schmidt: So the capital is never repaid?

Mr. John Manley: No, the capital is repaid, but out of the royalties. I hope I understand what your question is. The payments are not structured in terms of this part is capital, while that part is royalties; all we receive are royalties. If there are no sales, zero sales, we get zero repayment.

Mr. Werner Schmidt: Is it in perpetuity that the government would share in the revenue of these sales?

Mr. John Manley: Not in every case. That's a matter for case-by-case negotiation. In some cases that we have negotiated, there is no limit, but you expect.... We're dealing with projects that are high tech, and some of them don't have a very long lifespan before the next generation might overtake them.

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Mr. Werner Schmidt: These are project-specific. They would not be related to the overall profitability of a company.

Mr. John Manley: That's correct.

The Chair: Thank you, Mr. Schmidt.

Mr. Werner Schmidt: Is my time up already?

The Chair: You asked a lot of questions.

Mr. John Manley: Time flies when you're having fun.

The Chair: Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): Thank you very much.

That was a very good intervention, Mr. Minister. I've read the Conference Board of Canada's report, and I wonder—

Mr. John Manley: Congratulations.

Mr. Alex Shepherd: —if I could address some of the things that concern me there.

One of the things that was mentioned was that Canada, of most countries in the world, has one of the lowest training records in terms of in-house training, of companies retraining their workers. As a government, what can we do to encourage companies to train their workers better? What can we do to encourage people, workers, to upgrade their skills more effectively?

Mr. John Manley: I'm sure there is a variety of measures. Many of these would emerge in the context of the human resources development portfolio.

To respond on the parts we've tried to play on with this, first of all, the major companies generally find ways to finance training programs. The more there is the application of technology, the more likely that is to be the case. Where we frequently face challenges is in the small- and medium-sized enterprises, in which there is a constant challenge to service the customers while at the same time finding adequate time to provide training opportunities to employees. In many ways, I think the keys to this lie in the building of partnerships, relationships, not just between government and business, but also with educational institutions. I think we have a number of examples of innovative programs around the country, sometimes with universities, sometimes with community colleges, and sometimes with secondary schools, indeed where there is after hours teaching available.

I think we need to bring a lot of tools to bear on this issue, having identified the issue as a problem. In my opinion, this is perhaps one of the biggest challenges facing Canadian governments. It's not just there for the federal government. Provincial governments have the key responsibility for providing the training and for the education facing our industries.

Over here we have about 1.3 million people who are unemployed. Over here I have a variety of industrial sectors—software, aerospace, marine, and others—saying they can't get people, they can't get employees to do the job. I had a high-tech company from Montreal tell me last week that it feared it would have to move some work out of Canada for one sole reason: it can't get enough people. That we have a lot of people who can't find their way into the workforce and we have companies saying they can't get enough people has to be a big frustration for all of us, at every level of government.

I don't think there's an easy solution, nor do I think there's hope for a company that doesn't invest in its human resource development needs. When you look at the kinds of charts I've presented to you, the direction in which the global economy is going has nothing to do with us. It's not unique to Canada. Increasingly, wealth is going to be created by people who are able to apply information in a knowledgeable way. If companies don't invest in the skills and training of their people, they will not compete in a global, knowledge-based economy; they will lose. Our key is to make sure we have enough in Canada that are winning, so that we as a country, as an overall economy, are winners in that economy.

Mr. Alex Shepherd: Maybe I can focus on something that's more within your portfolio, and that's scientific and technology tax credits. I know there has been some debate over a long period of time about the scientific tax cuts themselves. You mentioned that 75% to 80% of those exporters were large, multinational corporations. It seems to me that 75% of the scientific tax credits are also going to large corporations. Since our orientation is to recognize the importance of small- and medium-sized businesses, I wonder whether there wouldn't be some justification in reviewing our scientific tax credit policy so that it is directed more to small- and medium-sized businesses.

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Mr. John Manley: I'm sure if the committee wants to look at that it's something you can take on.

I'll give you my opinion of it, Mr. Shepherd. I think we'd be nowhere without the R and D tax credit today. One of our biggest challenges—and this has been the case for a number of years—has been the low level of industrial R and D in Canada. It's already low; it would be nowhere without those credits.

Here's my bias on this. I'm from Ottawa. We have what people call a Silicon Valley north. It truly is amazing. When I grew up in this city, everybody's parents worked for the federal government. Now there are more people working in high technology in Ottawa than work for the federal government. It is a big transformation. Why? There is a variety of reasons. One of the key ones is the importance of the presence of Bell Northern Labs in this community. It's here for a variety of reasons. One of them is the R and D base here. You can track, from the existence of that one facility, the creation of a whole range of companies, some of which are still here, many of which are elsewhere in Canada. If you look at small firms, they depend on these investments. Ten years ago Newbridge Networks was a small business start-up. Now it's a large firm. More importantly, it spun off 20 other companies around the country.

The genius of the R and D tax credit is that it doesn't require an application to a program in order to get it. It requires up-front investment by entrepreneurs who are prepared to take a risk. You don't know whether they will succeed or fail, but you know that with the encouragement of the tax credit they're more likely to take that risk in Canada than elsewhere if they can get the qualified personnel.

I'll give you one more example. Twelve years ago a previous government brought in a policy on wireless telephones. As a result of that policy, the Ericsson company of Sweden agreed to put a small facility in Montreal. I think the original commitment was fewer than 50 employees. Now that facility based in Montreal is the world centre of excellence for Ericsson—certain aspects of wireless technology—and they will tell you, as they've told me, that one of the reasons they've put so much there is because of the R and D tax credit. God bless them. If they're going to do it in Montreal rather than Stockholm, I don't care if they're big; they can have the tax credits.

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

[Translation]

Mrs. Lalonde, do you have a question?

Mrs. Francine Lalonde (Mercier, BQ): Thank you very much, Mr. Minister, for your presentation and your enthusiasm. You may have to come back because you have raised so many questions.

You know that itÂs not my field and that it doesnÂt match with what I see, but I would like to share your enthusiasm. I would say, however, that there is many a slip between the cup and the lip.

First, you spoke about challenges; it seems to me that you should have included employment. An economy cannot be said to be performing if at the same time there is a high rate of unemployment. But letÂs get to the heart of your proposal.

• 1625

For a knowledge-based society to play fully the role we currently ascribe to it, the must be real accessibility both for individuals and for businesses. You understand I do not mean the big businesses that have all the necessary tools. I mean the small businesses and the self-employed workers.

At this time, the number of self-employed workers is increasing very rapidly. Right now, they very often donÂt -<- and I could quote a number of examples -<- even have access to the Internet. In many areas in Quebec, an hour or so from Montréal, there are a lot of areas where, to get access to the Internet, you have to pay long-distance charges. ThatÂs the case for self-employed workers, small- and medium-sized enterprises and also for individuals.

You talk about access for communities before the year 2000. To my mind, that does not solve the problem, especially since the competitiveness is there now and now is when the small- and medium-sized enterprises that we are calling upon to innovate must create links with the United States, for example. In Quebec, very often the links are forged with Ontario, but very often also with the United States. That is why I raise this issue of accessibility for individuals.

I should ask my questions, feeling pressed for time, but there is a lot of ground to cover. You, as a government, and you as Minister of Industry, have taken positions in regard to the CRTC. You have told the CRTC that it should not concern itself with the economic viability of companies that broadcast by satellite, with, as a result, the failure of Alphastar Canada and the fact that many people are worried now.

Why doesn't the government tell companies that will be granted permits or licenses off the bat that they will have to offer services everywhere? I have spoken to a few of the chairmen and chief executives who are building the information highway and they agree that there will not be any competition in Saint-Glin-Glin, where there are 20 people. There is an important problem there, directly in the path of your objective.

As for access to higher education, perhaps you were not in agreement with your governmentÂs decisions, but unfortunately the message it sent during the last three years was the opposite of the one it is now sending. If you had been with this Committee and had heard the academics we had last week, you would have understood that while we have an urgent and pressing need for all these people, we need to keep them in Quebec and in Canada. Offers elsewhere are very tempting whereas conditions here are very difficult. The AUCC has asked for a significant increase in grants, to which I responded by saying they were not demanding enough. That also applies to your objective.

On the other hand, access to credit is very important. Our Committee has studied this question but I believe we need to go further. I have met representatives of small- and medium-sized enterprises and bank representatives who know that currently banks require a governmental guarantee for businesses that would not require it. And when businesses need it, during growth or when small or medium-sized enterprises are created, we ask them, in addition, to give their home and the rest as guarantee. I will stop here, Mr. Minister, but you will understand that for me to share your enthusiasm, there are many important questions that you will have to answer.

Hon. John Manley: I am defending a different point of view here, not only because I am a member of the government, but also because I believe we are living in a period of global change that gives us the opportunity of becoming a richer country and that gives citizens more opportunities of participating in a truly extraordinary economy.

• 1630

The philosopher

[English]

Pogo once said, “We is surrounded by insurmountable opportunity”.

[Translation]

Yes, I agree that it is a challenge and that certain businesses in small towns pay a lot for access, but they can get access and that is different. The Internet gives us the chance to eliminate the distance that separates businesses in small rural communities, whether it is in Quebec or in Ontario. Yes, there are problems. In New Brunswick, a very rural province, we already have a digitized telephone system everywhere in the province. It is the first province or state in North America to have it. That is a deficiency here in Ontario and in Quebec. We still have shared lines not far from Montréal and Toronto; that is not acceptable, in my opinion, and it has to change. However, through a strategy aimed a creating access to the information highway, to the electronic highway, we are giving small villages the opportunity to truly participate in the global economy.

I have seen it. I was in a small town southwest of Toronto, Otterville, that almost everyone knows. It is very well known, isnÂt it? I was in a room smaller than this one, in a community centre where we had set up our Community Access Program. I met a young man of 17 who gave me his business card; he was a Web site designer at the age of 17. I met a young woman of 30 who had a business and who grew herbs that she sold all over the world via the Internet. I met a 62-year old farmer who communicated with other farmers all over the world. So itÂs possible. ItÂs not here now, but itÂs possible. The possibility exists.

I agree we have made budget cutbacks. But as I said at the beginning of my presentation, we have to present ourselves as a competitive country. We had to solve a big problem, that of the deficit, and we have reduced it.

[English]

The Chair: Thank you, Mr. Minister.

I remind members we are trying to stick to some time limits, so about two and a half minutes into your time I'm going to have to stop you so I can allow the minister to reply. We are going over. It's gradually increasing and it's not going to give adequate time to everyone. We were doing so well in the first two meetings.

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Madam Chair.

Mr. Minister, the opposition was too nice to you. It is time for harder questions.

You mentioned that we are the lowest group among the G-7; 1.3 million people are unemployed. At the same time small- and medium-sized businesses are starving for qualified people. As you know, if we go back to the first red book in 1993, we made a commitment that we were going to create an apprenticeship program where we were failing. In my opinion, most of the time it's short-term training for jobs that are not there. We are spending money to train people probably just to keep them off unemployment.

• 1635

If you analysed small- and medium-sized businesses in Canada you would come to the conclusion that they were started by entrepreneurs educated somewhere else, most of them in Europe. The evidence is that Comdev, ATS, in my riding, Newbridge.... As a matter of fact, Newbridge and Comdev are forming a new company. There's Spacebridge in Quebec. I never hear of any company from Quebec coming to my riding.

A voice: Comdev?

Mr. Janko Peric: Yes, Comdev and Newbridge.

Mr. Minister, is there anything in the near future from your department and Human Resources to encourage private sector educational institutions and us as government to develop that apprenticeship program?

Mr. John Manley: Let's face it, one of the realities is that there's no question that apprenticeship is a provincial responsibility. The federal government doesn't run apprenticeship programs, particularly if you're referring to certified trades and so on. This is not what we do.

What we have done, however, is to create a lot of opportunity in the performance of internships. We support internship programs. We've supported the participation partly through the youth employment strategy of young people in a variety of fields that relate to the theme areas I've pointed out—participation in technology, participation in international trade, and trades-based learning experiences—building on that kind of experiential value together with the internship of many young people in the federal government itself. So the attempt there is to provide some of the learning opportunities.

When it comes to the fundamentals, why do we have a shortage of software engineers? You have to look to a variety of sources to analyse that problem. It's certainly not just the federal government. This committee may want to look at some things we've done, such as Ovitesse, which is attempting to address the shortage.

But we're not producing out of our universities enough people to fill a number of the employment categories that have people shortages at the present time. That's multijurisdictional, not just ours.

The Chair: Thank you.

Mr. Axworthy.

Mr. Chris Axworthy (Saskatoon—Rosetown—Biggar, NDP): Thanks very much, Madam Chair.

Mr. Minister, I must admit, I share your explanation as to why we're where we are and some of where we might be in the future. I might add, too, that I share your optimism, but it's important to make sure we do the right thing. Otherwise, we will merely be Pollyannaish about it.

I have two questions, one quite specific and one longer. First, you rightly point out the concerns we have with regard to innovation and research in this country. One very quick and effective way of addressing that concern would be to invest in the synchrotron. I would ask you whether, and when, you will be making an announcement that will ensure that Canada can—

Mr. John Manley: Where is that located?

Mr. Chris Axworthy: That's in Saskatoon.

Mr. John Manley: Oh.

Some hon. members: Oh, oh.

Mr. Chris Axworthy: I'm sure you're ready to make a very positive announcement on the financing of the synchrotron. I'd be only too pleased if you did it today. That's the short, specific question.

The other question is with regard to the vision of where we might be as an economy in, say, 5 or 10 years' time. I'd say that was a little short in your presentation today. In contrast with the approach taken by your counterpart in Saskatchewan, which was to meet in a consultative process with all the actors in the marketplace, all the actors in the economy—business, labour, universities, aboriginal communities, the communities themselves—and build a vision for the economy, which that process did, and which everybody could buy into.... That vision then recognized that there was then an allocation or direction of who, whether it be in the public sector or the private sector, would carry out the activities needed in order for us to get from where we are to where we want to be.

I would ask you, on that point, why would you not have followed that same kind of process?

• 1640

Mr. John Manley: I'm well aware of the synchrotron project. As you probably know, I've been there and I've met with the people. It's an ambitious project that has received endorsement not only from NSERC but from a number of private sector participants as well.

The existing finance that we have, the variety of programmings that exist in the federal government—there's really none inside the government that is capable of providing the capital that's required to do synchrotron. I strongly suggested to them that when the Canada Foundation for Innovation is in a position to receive project applications, which I hope will be soon, they look to the CFI initially for support for the project. That will require some other partners. They can be from other levels of government or from the private sector. It will also require that they find a means of ensuring that the project can operate on a continuing basis without needing to draw funds. At the moment, that's the only source of funding I can offer them.

Mr. Chris Axworthy: Would you not admit, though, that we can't do without the synchrotron if your objectives for the future are to be accomplished?

Mr. John Manley: No, I wouldn't. I think NSERC did the examination, and I think it's a good project. But there's also a lot of evidence that suggests that there are many industrial applications, and in every case where that is true, you need a good explanation of, if there are that many industrial applications, how much industrial money is there to go into the project to help finance it? So I don't think we're quite to the point of saying that this can justify that we break into the fiscal framework in order to find some special source of funds, literally. Since the 1995 budget, that has not been an approach we have entertained.

Mr. Chris Axworthy: What about my second question?

Mr. John Manley: I feel we have had a very extensive process of consultation and discussion. I didn't just arrive in this job last week. We've developed over four years an approach to these problems, and it has involved discussions with a wide variety of representative groups, organizations, associations, and people from all parts of the country.

I don't mean to suggest that it's not a challenging task, but Saskatchewan is a lot smaller than Canada. The diversity of the economies—there are multiple economies within the country—is profound. One of the dangers I face in making a presentation like this one is that I'm trying to sort of skim across the surface to give you a sense of in which overall direction I'm trying to go. But you can't take a broad presentation like this and say, well, how does it apply to Kelowna? Kelowna is a local economy; it's a regional economy. There are undoubtedly elements of it that apply to Kelowna, as there are that apply to each part, but it is a broad-brush approach.

This isn't developed in a vacuum. It is developed after a lot of work and a lot of discussion, and it emerges out of priorities that the government has endeavoured to set out of other consultative processes over the course of the last four years.

The Chair: Thank you, Minister, and thank you, Mr. Axworthy.

Mr. Ianno.

Mr. Tony Ianno (Trinity—Spadina, Lib.): Thank you very much.

Mr. Minister, I have three unrelated questions, and then I'll allow you to give it your shot.

On financing, the banks are coming in on Thursday, and you also saw the information I provided, which was that over the last several years the banks are still at approximately 26% of their corporate commercial loans to small businesses, and not really moving. There are many products they are supplying, but in the end the overall number is not increasing.

• 1645

About financing, I've not really been in favour of the SBLA loans for working capital, but is there any contemplation on that at all? Also, with the BDC, I guess the way they have it structured it's generally on a three-year short-term approach, but they don't allow any shorter term, such as a year or six months' payback, or bridge financing of any sort. That's just on the financing of SMEs, which is still very much needed.

The second part is if you might be able to elaborate on targeting growth sectors and the national sector teams and the regional areas you might be trying to elaborate or target.

The last part is tourism. What are we going to do to continue improving? Can you can give us the status and what we might be able to do to change that format a bit?

Mr. John Manley: Thank you. On the question of access to financing for SMEs—Madam Lalonde raised the question as well, and I don't think it was one of the ones I got to—I think it continues to be a point of contention. We still hear it. I hear it from the small business representative organizations I meet with on a regular basis, on a continuing basis. Although I believe there has been an improvement...and I think this committee deserves a lot of credit for the improvement. Frankly, the quarterly visits of the banks to this committee are a salutary reminder to the banking community that there is an accountability. I know you are always very polite to them when they are here, and I know they look forward to these periodic visits to share their vision with you. I think it's helpful, it's worth while, but it's a continuing problem I hear about. We need to continue to monitor and to work toward greater progress.

I think the opening of foreign branch banking in Canada, the arrival of Wells Fargo, are going to be important factors in increasing small business financing. I believe whether it's telecommunications or it's banking, our best discipline is likely competition rather than command-and-control regulation.

On the SBLA, I mentioned we'll be bringing a bill to you. In the past it hasn't been used for working capital. I think when we open the bill anyway we'll review all of its terms.

I should say that since we brought in the amendments a couple of years ago, first you will recall we were told this was going to suppress demand for the SBLA program because we actually charged people. I don't think, Madam Lalonde, anybody uses an SBLA unless they need one, because now they pay up front and it's very visible. With the program before they didn't even know they got a government guarantee. Now if they don't need the guarantee they don't want the program, because they don't want to have to pay the extra fee.

We've made it revenue neutral. The fees pay for the program. Basically it pools risk in the small business area. You will recall we increased the limit in the program from $4 billion to $12 billion. Well, one of the reasons we are coming back with legislation is we've hit the limit.

So we didn't suppress demand. In fact, we are pretty much at the limit of $12 billion and we needed to raise that.

On growth sectors, I'll include tourism in growth sectors, because indeed it is one of the targeted sectors. In 1994 we brought in a new strategy with the Canadian Tourism Commission. It has worked exceptionally well. We increased the amount of money we put into tourism, but it's highly leveraged now. When I arrived we were spending about $15 million a year on tourism promotion in Tourism Canada. This year the Canadian Tourism Commission, including the provinces and the private sector contributions, will spend in the order of $150 million promoting tourism, mostly in foreign markets.

We've managed to move up slowly in tourism receipts from 12th in the world in 1994 to 10th in the world in 1996. My objective would be to see us go to 8th, which is another $3 billion in receipts over the next three years.

• 1650

In aerospace we're 6th in the world in terms of sales. I think we can move to 4th, which means passing Japan and Germany. But in that we are first in regional aircraft. We are first in simulators...the CAE of Montreal. We are first in certain other components. And so taking that as an example, I want to see us win gold medals in other sectors.

This is a matter not of picking winners and losers, but saying there are sectors where Canada is already in a leadership position, what tools will it take for us to really surge forward and win in those sectors?

I've identified, as I mentioned, that biotechnology is one of them where we can do that, both in the biopharmaceutical as well as agricultural, as well as application in the fisheries. We have potential in environmental technologies. Some of that is going to relate to global climate change. These are areas for us to identify, figure out what tools we need and then say all right, let's go, let's win the gold medal.

The Chair: Thank you, Mr. Minister.

Mr. Power.

Mr. Charlie Power (St. John's West, PC): Thank you, Madam Chairperson.

I have three or four short questions. I'll ask them one at a time and see if the minister wants to respond.

I will say that as a Conservative I can't help but smile when I see a Liberal minister praising the free trade agreement and how it has significantly helped the Canadian economy. It seems it happens every day now.

With the presentation the minister made, which was certainly impressive, I'm still concerned that the unemployment figures haven't changed significantly with all of the things we're doing. I'm sorry.

Mr. John Manley: That's all right. I'm just indicating to Madam Lalonde that this was her question as well.

Mr. Charlie Power: Are we destined to have an 8.5%, 9.5%, 10% unemployment rate for the rest of this century?

Mr. John Manley: I don't think so. People talk about a jobless recovery, and when we look at the numbers we've generated since the economy began to grow again, coming out of the 1990-1992 recession, what we've had is a slow recovery. If you compare the recovery in the 1990s to the recovery in the 1980s, the rate of growth in the 1980s was faster than it has been in the 1990s, and there is probably a variety of reasons for that. But there is still no reason to believe that economic growth will not be followed by job creation.

We're seeing that it's happening in the current year, where job creation has been quite strong. What I think is also fair to say is that when you look at some of the slides, the job creation is not always in traditional sectors. The really strong growth is in some of the other sectors, and that's why I'm urging what I'm calling a microeconomic strategy to see that we advance in those sectors where we see and believe we will see greater job creation occur.

Mr. Charlie Power: Industry Canada is perceived, certainly the part of Canada I come from, as Industry Ontario.

Mr. John Manley: That's wrong.

Mr. Tony Ianno: I want ACOA.

Mr. Charlie Power: You can have it.

Atlantic Canada and parts of Quebec haven't significantly benefited from.... ACOA or the Western Canada Diversification Fund haven't helped the regions of the country, certainly not Atlantic Canada.

Does the minister have any plans in his new strategy for particular programs for Atlantic Canada?

Mr. John Manley: First of all, I wish to point out the important role that I think ACOA continues to play. Having brought it within the Industry portfolio, we've tried to co-ordinate its activities with the broad goals and objectives.

I've said many times in Atlantic Canada that I don't think the solution to the obvious challenges in Atlantic Canada lies in an office at 235 Queen Street, which happens to be where Industry Canada is located. I think the solution lies in building on the strengths that exist in Atlantic Canada and analysing the measures that are going to be necessary to overcome some of the challenges that exist for Atlantic Canada.

• 1655

We know that the global economy is increasingly going to be knowledge based. The application of that principle to a region such as Atlantic Canada brings with it different implications than it does in Mr. Peric's district in Ontario. It means we have to make sure that in terms of expertise we develop the kinds of telecommunications tools that operate in that environment.

We have reason to think that Newfoundland, for example, which is the first province in Canada to have linked all of its schools, can be one of the laboratories for distance education.

These are the kinds of things we can do, and the co-operation that exists between ACOA and Industry Canada, with the not insignificant amount of money that is available through ACOA, is one of the vehicles for doing that.

Mr. Charlie Power: One of the points I would like to make, for want of any better description, is that the regions of the country, certainly the Atlantic region, need an affirmative action program. You can cite many examples of how when the laboratories are sent here, close to Ottawa, and close to Montreal, all of the other industries spin off from that. If that continues, it simply means that the richer part of the country will get richer and the poorer parts will get poorer. That does not serve anybody very well.

I would just say that if the minister does not have an answer to that today, then affirmative action or some specific programs to get some of those types of industries into Atlantic Canada are badly needed.

My third brief question will be—

Mr. John Manley: You have to admit as well, though, Mr. Power, that it is not always possible to make water run uphill.

I think you can look at many examples within the Atlantic context where governments have tried lots of techniques to create industries where they would not otherwise exist and, sure enough, within usually a dozen years they don't exist. So the solution is not simply, as you put it, affirmative action: let us deem it to be a high-tech centre. If it does not have the nucleus to build upon, it is not going to happen.

So what kind of research institute does the NRC have in St. John's? It is one on cold oceans. That makes a certain element of sense, and in fact there have been spin-offs that have driven from that. But increasingly I think what we see in economic development across Canada is that communities need to see what the economic development potential for themselves can be, and then other levels of government can begin to help to realize that. But we do not make them something they are not by simply willing it to be so.

Mr. Charlie Power: All I will say to the minister on that point is that I think we both agree that many of the industrial incentive packages for Atlantic Canada were in many ways job creation programs and income support programs. I am saying that in the new economy that is evolving we need some affirmative action, some extra help from the Government of Canada, from Industry Canada, to make sure that Atlantic Canada won't always be the poorest part of Canada. How that will be done is up to the minister and his staff to try to find out. There are many ways to do it, and I am sure hat if you look at it seriously, there can be better programs than there were during the 1970s and 1980s, which programs simply did not work.

My final question will be, are there any joint committees between Industry Canada and HRDC? I am still amazed that when you have 1.4 million people unemployed you have to relax your immigration policies or you have to say that we have 30,000 or 40,000 jobs we cannot fill. Does the deputy minister of Industry and the deputy minister of HRDC actually work on a committee together to know what each department is doing?

Mr. John Manley: There is a variety of co-operative mechanisms between the departments, but I take you back to the earlier point. We can identify some of the challenges, but we cannot necessarily enact all of the solutions, because training and education are not a federal responsibility in Canada. Consequently, the identification of shortages—for example, in the software area, which was addressed in part through changed rules for immigration—is not.... We do not have the tools to say that we are going to ask the Université de Montréal to increase their enrolment in software engineering by 400. That is not one of the powers we have.

Mr. Charlie Power: We have the power to ask.

Mr. John Manley: The problem is evident. The solutions are going to require co-operation, and it is not simply governmental co-operation; it is also institutions that need to tailor their output to the needs that exist. So it is a very deep problem. It is not one for which there is a simple solution. Certainly meetings occur at a variety of levels between officials in the two departments.

• 1700

The Chair: Mr. Pankiw.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): I have three areas I would like to cover. I will keep my questions brief, and if you keep your answers brief we'll probably get through it.

First, about the Canada Foundation for Innovation fund, I know you can't give an answer on the day when applications can be received, but as the minister, can you tell me at what point you would be saying they are dragging their feet or you would consider intervening? By what time do you think they should be receiving applications?

Mr. John Manley: First, I don't think they have dragged their feet. The process is complicated. This is a separate corporate entity and in its constitution it has members who are like shareholders whose role it is to receive annual reports and to name directors.

Basically the appointment process is that the government named a minority of the members. Those members needed to meet and name the rest of the members, 15 in total. None of them are entitled to serve as directors. The 15 then needed to name a majority of the directors. When they do that, which is now the case, as of very recently, the government names the balance of the directors. I hope to do that very shortly. Then they are fully operational. As you may know, the membership has already named an executive director and so on.

So the work is actually quite well progressed. As soon as we can name the remaining directors, they are flying on two wings.

Mr. Jim Pankiw: Can you give me a date?

Mr. John Manley: My hope is within the next couple of weeks.

Mr. Jim Pankiw: Okay.

Now about the synchrotron project, you have said that's one area they would be able to get the money from. From what you know of the Canada Foundation for Innovation fund, in your opinion does the synchrotron project meet the requirements of what that fund was designed for?

Mr. John Manley: Yes, I think it does. Whether it is going to compete well against other possible projects is something they will have to decide.

Mr. Jim Pankiw: Okay.

SSHRC, the Social Sciences and Humanities Research Council, last week appeared before the committee requesting an increase in funding of 60%, which amounts to $52 million. I submit to you that the $62 million would serve taxpayers better by either remaining in their pockets or, if it must be spent, by being spent on the Canada Foundation for Innovation fund.

I want you to comment on what I just said. Do you think funding for SSHRC should be increased, in light of alternate ways that money could be spent?

Mr. John Manley: First, to be clear, I don't think it was SSHRC that said that. I think it was the social sciences association.

Mr. Jim Pankiw: They were all seeking increases in funding, and recommending 60%.

Mr. John Manley: It would be a little surprising for a government agency itself actually to come in and ask a committee for money.

Anyway, I have said I believe increased funding for the granting councils would be a good expenditure of funds. There are three of them, as you know. Two of them report to me, SSHRC and NSERC. The Medical Research Council reports to the Minister of Health.

Let's break this down. Do I think the government should be funding social sciences research? Yes, I do.

Mr. Jim Pankiw: Do you think the funding should increase?

Mr. John Manley: That's a question of priorities. Could they use additional funding? Yes, they could. Am I told good projects are not being funded because they have inadequate resources? Yes, I am. But in terms of sorting priorities, without knowing how much money is available I can't really give you an answer.

Mr. Jim Pankiw: In Atlantic Canada it was reported a few weeks ago that you said maritimers would pay a price for not electing Liberals. My question is how are Atlantic Canadians to interpret this statement, given the vast amounts of money Industry Canada invests in the region? Does this mean political considerations will now colour decisions about industry initiatives in the Maritimes?

Mr. John Manley: The first thing they should do is find out that the quote is inaccurate, because I never said what you said.

Mr. Jim Pankiw: I said you reportedly said that.

• 1705

Mr. John Manley: All I did was answer a question from a reporter on whether there would be an impact from the different composition, and I said frankly that the challenge for Atlantic Canadians is that any minister has a very long list of items on his or her agenda. Very often MPs hope to get those items moved up the agenda and into a higher priority.

Mr. Power is a fine fellow. He and I have had a private meeting, and I think he has the interests of his constituents at heart, but I don't see him as often as I see Mr. Ianno. I'm not sure I wouldn't rather see him than Mr. Ianno—

Some hon. members: Oh, oh.

Mr. John Manley: —but the reality of the way our system works is that he has more infrequent access to me. I just don't have time in the day to think of all the things in this six-inch book.

So which ones do I think about? Yes, I think about the things that I consider to be priorities, but very often it's responsive. I happen to think that the challenges facing Atlantic Canada are very important and I think we're going to need to tackle the difficulties there with a great deal of determination to ensure that the region is not left out of what I think is the tremendous opportunity that lies before Canada.

But on a daily basis, bringing the local concerns to my attention is a lot harder for members of the opposition to do effectively than it is for government members. That's just reality. It doesn't mean it's not going to happen, it doesn't mean they're not important, it doesn't mean we don't care about it, and it doesn't mean that because they didn't vote Liberal we think they shouldn't get any response. It doesn't say any of those things. It just means that there aren't as many people as there are sitting around in our caucus saying, “Manley, you have to think about this because this is important to me.” That's all I said.

The Chair: Thank you, Minister.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé (Lévis, BQ): Mr. Minister, being an opposition MP, I will take this opportunity to talk to you today.

You have spoken about objectives and strategies for the future. ThatÂs very good. A new economy, thatÂs very good, and one canÂt be against that. On the other hand, there is an old saying that the past is prologue.

Now, before your first mandate, during the 1993 election campaign, there were commitments made in terms of the industrial sector and I would raise two of them. On the one hand, there was talk about a fund for converting the defense industry to civilian industry. On the other hand, being the Member of Parliament for Lévis, I recall hearing, and it was written, that there was to be a summit on the future of marine construction during the year following the election. That was in 1993, therefore the summit should have been held in 1994. I wasnÂt the only one who thought it was important since former Premier McKenna, who resigned recently, had even put it on the agenda for a meeting of the provincial premiers, saying that it was an important topic that absolutely had to be discussed. However, we are now in 1997, on the eve of 1998.

This afternoon in the House, in response to a question from the NDP member for Halifax West, I believe you said that it was out of the question that you, as the Minister, encourage grants to the marine industry. Although it is possible to debate these issues at length, we should perhaps remember that it is done in almost all countries, including Japan, Korea and the Scandinavian countries.

I also heard you speak this afternoon about tax credits and their possible effects on research and development. Now the Government of Quebec grants tax credits for marine construction, including oil platforms. Do you intend to follow this example by means of tax credits?

Hon. John Manley: First, I believe that our Technology Partnerships Canada Program deals with the question of the conversion of the defense industry. It is one of the aspects of the program. We have made investments, not only in conversion, but also in the creation of dual-purpose products. It is one of the aspects of the conversion that a defense industry business can sell its products in the commercial market. ItÂs the same thing for our military.

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That is the answer to that commitment. First there was the PPMD Program, and now we have the Technology Partnerships Canada Program, which I believe is a better program. It is working well and it represents our best effort to meet this challenge.

Mr. Martin might be in a better position to answer your question on marine construction and tax credits. I have not seen any proposals to that effect. It would be necessary to explain why the marine construction sector should benefit from them and not the manufacturing sector. On what basis could we discriminate? The issue could be examined.

The previous federal government had set up a program to reduce the capacity of marine construction facilities and had made payments to that end. That was before I became Minister. The aim was to reduce capacity in Canada. But we still had a problem: the production that we are capable of surpasses domestic demand. The industrial entrepreneurs of MIL or St. JohnÂs must therefore turn to international markets. We are talking about massive grants here, and thatÂs where the problem lies. ThatÂs why the first thing, for us, is to try and reduce the grants at the international level; thatÂs whatÂs killing us. Even in the United States the programs are not in agreement with the OECD rules.

[English]

The Chair: Thank you, Minister.

[Translation]

Thank you, Mr. Dubé. Mr. Saint-Julien.

Mr. Guy Saint-Julien (Abitibi, Lib.): Minister, in you presentation you spoke of increasing the outlets for the people in rural regions and for Aboriginal people in Canada. I am aware that we are in a time of change.

I have met some James Bay Crees who want to participate in the Canadian economy. Last September I met with Chief Billy Diamond in his community of Waskaganish. He asked me how small Cree businesses could get Internet access at a reasonable cost. Does your Department foresee an Internet access program for small businesses in the North and small communities in largely rural areas far from the major centres?

Hon. John Manley: Yes, absolutely. We already have examples of small Aboriginal communities that have done it. For example, there is an Inuit community in Rankin Inlet where a teacher was accepted as an advisor to MIT University because he had set up an absolutely outstanding Web site for the Rankin Inlet Inuit. We have to create access for all Aboriginal communities everywhere in Canada, at first in the schools. Our objective is to create this access in all Aboriginal schools in Canada.

Second, for rural communities we have invested fairly significant monies in our last budget to connect all communities of more that 400 people everywhere in Canada, especially rural communities. It is a partnership program with the communities. I come back to the example of Otterville in Ontario that I have already mentionned. Up to now we have connected some 1,500 communities and we expect to reach an additional 5,000 by the year 2000-2001. That represents almost all communities in Canada. We will be able to create the idea that Canadians are connected to each other.

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Mr. Guy Saint-Julien: Thank you.

[English]

The Chair: Thank you, Mr. Minister.

Mr. Lowther, did you have a brief question for the minister?

Mr. Eric Lowther (Calgary Centre, Ref.): I've heard a lot of people say they have brief questions but they haven't always been that brief. I'll try to break that pattern.

I appreciate the minister's natural candidness here. We're getting some really good answers, I think.

I have the pleasure of sitting on the heritage committee as well as the industry committee and I'm having a hard time trying to define the line of where the heritage committee goes and where the industry committee goes and how you both approach it. It seems to be somewhat contrary.

The heritage committee is kind of focused on controlling and protecting. We talk about the globalization of the information network, yet we have this sort of contrary approach of the heritage side. On the industry side we hear the good things today promoting and strengthening the international marketplace and realizing our potential. Both groups talk about industry—in that case the culture industry—but I need some clarification from you as to how you see where that line is. How do you approach this shared responsibility?

Mr. John Manley: First, I think there are occasions and there are certain files where the line is fuzzy. There's no doubt about that. The CRTC is the Canadian Radio-television and Telecommunications Commission. The industry department has responsibility for telecommunications policy. The heritage department has responsibility for broadcasting policy. As we move to a universe in which you have convergence between telecommunications and broadcasting, there's no doubt that the line gets a little bit fuzzy.

I think we have similar objectives, whether you look at it from a cultural point of view or from an industrial point of view. There are many reasons why Canadians want their own stories told, their own content available to them, whether it's on broadcasting outlets or on the Internet. There's also a heck of a lot of money to be made in industries related to production of content.

One of the reasons the Americans, I believe, are so interested in every aspect of our policies is because they like making money on selling their cultural products to us, and they watch very carefully to make sure they continue to have that dominant share of our market.

When you think of the fact they've got over 80% of dramatic English-language television in Canada, that's not exactly a closed market we're offering them; it's pretty good access. There aren't too many areas or sectors where we get 80% or more of the U.S. market.

I think we have some common objectives, but what I'm really driving here is my belief that if you build the highways, somebody is going to build cars to run on them. Using this analogy, my job is not the cars right now. My job is to get the highway. If we get the best linkage, the best network, the best highway in the world, people are going to produce the cars. Some of them are going to be distance medicine, some of them are going to be distance learning, some of them are going to be cultural content, some of them are going to be museums of Canada available on-line. This is what I want to do.

Mr. Eric Lowther: I hate to interrupt, but what I'm seeing is the fact that we're not allowing people to have access to our highway; therefore they don't allow us to have access to their highway. This is all through some of the protectionist approaches of—

Mr. John Manley: Give me some examples.

Mr. Eric Lowther: Well, our approach to the DTH scenario.

Mr. John Manley: You're assuming we can beam Canadian direct television into the United States from a Canadian satellite. We can't.

Mr. Eric Lowther: Well, if you had a subscriber....

Mr. John Manley: No. No, you can't. Expressvu cannot offer its service in the United States.

Mr. Eric Lowther: Why not?

Mr. John Manley: Because they're not allowed, under the U.S. law.

Mr. Jim Pankiw: Why should we let that have an impact? Their protectionist laws shouldn't affect our protectionist laws.

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Mr. John Manley: I guess your starting point is whether you think we should have a Canadian service. If not, no problem. Let's just buy DirecTv, because it's a heck of a lot cheaper for them to add Canada to their service than it is for us to run a service like Expressvu. Of course, they've got a market of 250 million. It would cost them absolutely nothing. That market is sufficient for all of their services. It costs them nothing to pick up the Canadian English market on the side—nothing, zero marginal cost.

That's the economics. Meanwhile, they wouldn't let a Canadian broadcast in the United States. That's what the Telesat dispute was all about. Excuse me, I happen to think we should have a Canadian service. I think it should be a competitive service. I think there should be choices for Canadians. That's one of the reasons we told the CRTC they shouldn't decide there's only room for one. That's for the market to decide. But I think there's room for a Canadian service. I think Canadians want it.

Mr. Eric Lowther: Can that Canadian service go beyond Canadian borders? Is there a potential market for a Canadian-packaged product to go beyond the borders of Canada?

Mr. John Manley: A DTH service provider, such as Expressvu.... Is that what you're asking?

Mr. Eric Lowther: Not so much the pipe, but the content.

Mr. John Manley: Oh, yes. We're selling content around the world now. CBC does it, but we sell content to many services internationally. Canada, in many ways, is second only to the U.S. in export of cultural products—certain sectors. So, yes, there's an international market, but there's also an economic reality that says some of this really requires that we be quite clever about how we ensure that there's a place in what is a very undifferentiated market for Canadian services.

The Chair: Thank you, Mr. Lowther.

Mr. Eric Lowther: [Editor's Note: Inaudible]

Mr. John Manley: We certainly offered reciprocity on facilities, but the United States has not been willing to buy that. So if there's no reciprocity on facilities, we're a long way from reciprocity on services.

Mr. Werner Schmidt: Is there ongoing consultation?

Mr. John Manley: There's nothing current at the moment. We've just completed the WTO round.

The Chair: It sounds like we could have a long conversation on this.

Mr. Werner Schmidt: We could.

The Chair: Perhaps there'll be another discussion—

Mr. Werner Schmidt: I hope so.

Are you coming back, Mr. Minister?

The Chair: One final question from Madam Lalonde—briefly, one question.

[Translation]

Mrs. Francine Lalonde: Mr. Minister, in this picture you have painted there are a series of choices, sectoral choices and strategic choices. Now these choices are also of interest to Quebec. Have you consulted the Government of Quebec, which has also prepared an economic policy statement? Could there be a clash between the strategies? No business can afford to have two strategies and perform.

Hon. John Manley: I have certainly looked at the written views that I received from the Government of Quebec, which accepts the technological poles that we have indicated are important for the province. Historically, I believe that it has always been the federal government that has put in place a strategy that has benefited especially the Quebec region. It is our investment in aerospace companies that that underlies that technological pole for metropolitan Montreal. It is the National Research Council that established the Biotechnology Research Institute in Montréal, which has become a strategic pole for industrial development in Quebec. Those were not bad choices by the federal government since Quebec recognizes that they are important.

I went to Ericsson with Mr. Bouchard almost exactly a year ago. It was a decision of the Government of Canada that, in effect, convinced Ericsson to invest in Canada. Later the company decided to invest in Montréal.

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Mrs. Francine Lalonde: Because of the tax credits in Quebec.

Hon. John Manley: The tax credits were certainly important but frankly I think there were other aspects that motivated its decision. The Government of Quebec and the city of Montréal had made considerable efforts to win this investment. It was very important because it is a base that entailed the creation of many activities in the telecommunications sector.

It is not hard to identify sectors in which Canada could gain an international advantage.

[English]

The Chair: Minister, we want to thank you for being very generous with your time this afternoon and for coming before this committee to give us some direction of where the Department of Industry is heading and what the future holds.

The department and the minister have prepared a box for us that you'll find at the back of the room. In it you'll find a number of brochures and a video on Industry Canada. Perhaps you could pick one up before you leave, members of the committee. It's available in either English or French, and hopefully you'll have a chance to look at it before we determine the future of this committee.

Again, I want to thank you for your presentation. I want to thank you for your patience and for enduring question period all on your own this afternoon for well over an hour. Thank you.

The meeting is adjourned.