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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, October 1, 2003

1535

The Chair (Mrs. Sue Barnes (London West, Lib.))

Mr. Jim Campbell (Vice-President and General Manager, Chamber of Maritime Commerce)

1540

1545

The Chair

Mr. Hans Konow (President and Chief Executive Officer, Canadian Electricity Association)

1550

1555

The Chair

Mr. Tad Brown (Chair, Government Relation Committee, Association of Fundraising Professionals)

1600

1605

The Chair

Mr. Jayson Myers (Senior Vice-President and Chief Economist, Canadian Manufacturers and Exporters)

1610

1615

The Chair

Dr. Louis Dubé (President, Canadian Dental Association)

1620

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

The Chair

Mr. Rahim Jaffer

Mr. Hans Konow

1625

Mr. Rahim Jaffer

Mr. Jim Campbell

Mr. Rahim Jaffer

Mr. Jayson Myers

1630

The Chair

Ms. Pauline Picard (Drummond, BQ)

Mr. Jayson Myers

1635

The Chair

Ms. Pauline Picard

Mr. Hans Konow

1640

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Hans Konow

Mr. Shawn Murphy

Mr. Hans Konow

1645

Mr. Jayson Myers

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Jayson Myers

Mr. Roy Cullen

Mr. Jayson Myers

Mr. Roy Cullen

Mr. Jayson Myers

Mr. Roy Cullen

Mr. Jayson Myers

1650

Mr. Roy Cullen

Mr. Tad Brown

The Chair

Mr. Michael Gorman (President, Canadian Federation for Promoting Family Values)

1700

The Chair

1705

Mr. Joe De Mora (President, Association of Canadian Academic Healthcare Organizations)

1710

The Chair

Ms. Sharlyn Ayotte (Chair, T-Base Communications Inc.)

1715

The Chair

Ms. Sharlyn Ayotte

The Chair

Ms. Sharlyn Ayotte

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)

1720

The Chair

Ms. Sharlyn Ayotte

The Chair

Mr. Mark Nantais (President, Canadian Vehicle Manufacturers' Association)

1725

The Chair

Mr. Mark Nantais

The Chair

Mr. Mark Nantais

1730

The Chair

Mr. Mark Nantais

The Chair

Mr. Phil Benson (Lobbyist, Teamsters Canada)

1735

1740

The Chair

CANADA

Standing Committee on Finance

NUMBER 074

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, October 1, 2003

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Pursuant to Standing Order 83(1), we are in pre-budget consultations.

Our first panel of the day is from the Chamber of Maritime Commerce, Ray Johnston, president, and Jim Campbell, vice-president and general manager. Welcome to the two of you.

From the Canadian Electricity Association, we have Hans Konow, who is the president and chief executive officer, together with Roy Staveley, senior vice-president, public affairs and environment. Also we have Eli Turk, vice-president, government relations. Welcome to you, gentlemen.

From the Association of Fundraising Professionals, Tad Brown, chair of the government relations committee, is with us today.

From the Alliance of Manufacturers and Exporters of Canada, we have Jayson Myers, vice-president and chief economist. Welcome, Jayson, again.

From the Canadian Dental Association, we have Louis Dubé, president, and Andrew Jones, director, corporate and government relations. Welcome to you both again for joining us.

As we have votes in the House today, I'm going to ask you to go directly to your presentations. We will go in the order you are in on the agenda.

The Chamber of Maritime Commerce, please commence.

Mr. Jim Campbell (Vice-President and General Manager, Chamber of Maritime Commerce): Thank you, Madam Chair. It's a pleasure to be here before the committee today and to be able to present a number of issues and fiscal requirements we believe are important to the marine industry in Canada and its many stakeholders.

We are here representing the Chamber of Maritime Commerce, which has a membership of over 125 companies across Canada that either provide marine transportation services or require marine transportation services to operate their businesses. This broad group of stakeholders includes shippers, including mining companies, agricultural firms, and companies in the construction industry; ship operators, both domestic and international; ports; terminals; grain elevator operators; the St. Lawrence Seaway; and suppliers of services and equipment to the marine industry.

We've provided in our brief some background information about the industry, and I'd just like to touch on a couple of points. First, it is a key component of our national transportation system that is often somewhat overlooked. It handles more tonnage than any other single mode of transport in this country. Last year, it handled in excess of 340 million tonnes, which is about 30% more than the tonnage carried by railways.

It's important to international trade, not just with the U.S. but with countries around the world. In fact, it's the only way of reaching countries outside of North America. Canadian ports handle close to $1 billion worth of cargo every year.

It has a large employment base, directly and indirectly employing in excess of 100,000 Canadians. It's a highly competitive business; it operates in a truly global and competitive environment. It also has a lot to offer in terms of environmental and safety benefits compared to other modes. Again, that's highlighted in our brief.

Our recommendations are aimed at two specific areas. They're aimed at enhancing the competitive position of the marine industry and, in turn, the competitive position of all those industries that rely on marine transport. Secondly, our recommendations are aimed at exploiting and developing those environmental and safety attributes: reducing greenhouse gas emissions, reducing transportation-related accidents, and reducing congestion and noise in our urban centres.

Specifically, the three most important recommendations we've put forward deal with ports, maritime security, and coast guard user fees.

On ports, a review has just been completed of the Canada Marine Act. It points to the need to increase the flexibility and options available for ports to finance their activities and their growth. At the moment, the act restricts public investment in Canada's port authorities, thereby putting them at a competitive disadvantage vis-à-vis their competitors in the United States and globally.

In the area of security, our position is that national security is the responsibility of the federal government, and this includes funding-related security expenditures. Ports in the U.S. have identified over $400 million of security requirements, and most of those requirements are being funded by the U.S. government. But in Canada, our government is not permitted to do so at this time because of the Canada Marine Act.

On coast guard user fees, we've brought this issue before this committee in the past, and to the Department of Fisheries and Oceans, responsible for coast guard services. We have made two national proposals to the minister and to the coast guard calling for a long-term agreement to eliminate marine service fees as soon as possible—marine service fees are charged for navigational aids, ice-breaking, and dredging—and a commitment on the part of industry to work with the coast guard to address the way they provide services to the commercial sector, and the cost at which they do that.

No decision has been made on the part of DFO. The industry has been waiting 32 months for a reply.

¹ (1540)

Another recommendation in the area of short-sea shipping really speaks again to taking advantage of the environmental aspects of marine transportation. Transport Canada has launched a program to start exploring opportunities to increase the use of marine transportation across the country. Taking trucks and traffic off roadways would be the primary objective, but it would also be a means of reaping the environmental benefits associated with marine transport.

We are calling on the government not just to consider this but to actually fund an ongoing campaign to promote and sustain this sort of initiative, and to be prepared to assist in implementing new marine transportation projects.

Another area that deals with the environment is the green ship award program—again, something the government is considering—parallelling programs that exist internationally. At this time there is no intention on the part of the government to fund this sort of initiative. We maintain that incentives should be provided to encourage the green ship program to develop in Canada, and for shipowners to take advantage of it.

The final area we address in our brief could come under the heading of getting the basics right, or smart regulation. There are a number of areas in the marine sector where we cross over many different departments. A ship, for example, coming into the St. Lawrence Seaway and going through the Great Lakes would encounter no fewer than 23 government agencies and departments on both sides of the border—not the most seamless way to encourage traffic and facilitate trade.

The CCRA levies a cost recovery fee for services provided at the Detroit-Windsor ferry crossing. That again is an initiative that was set up and designed to facilitate border crossings by relieving the traffic and congestion on the Ambassador Bridge. These sorts of costs are contrary to the objective of facilitating trade and are counterproductive.

The situation is similar with coast guard user fees. Here the government is adding charges to an industry and effectively discouraging the use of this environmentally efficient mode of transport.

I will conclude my remarks. Thank you.

¹ (1545)

The Chair: Thank you very much.

We'll go to the Canadian Electricity Association. Please go ahead, sir.

[Translation]

Mr. Hans Konow (President and Chief Executive Officer, Canadian Electricity Association): Thank you, Madam Chair. I am pleased to be here today.

[English]

I'm very pleased to have this opportunity to meet with the committee again. In order to be brief, I will make my remarks in English, otherwise you would be here a little longer. I believe you have been supplied with a deck of overheads that I will speak to in orienting our presentation.

In terms of page 3, the Canadian electric power sector's contribution to the economy, I think it's important to recognize the size of the industry and the important contribution it makes. We grew at about 1.5% a year over the last decade, roughly. We contribute about $23 billion a year to GDP.

If you look at the chart, you can see the downward ticks in the middle and toward the end. They represent the 1998 ice storm and 9/11, external events that had a significant impact on demand for electricity, in both cases negative. However, looking forward, we do see that we will be called upon to deliver increasing amounts of electricity over the coming decade, and as I will show later in the presentation, our surpluses are beginning to erode.

On page 4 we talk about the electricity sector representing 2.4% of overall Canadian GDP, which compares to oil and gas at 2.8%. So roughly, we're equal partners, as it were, within the total energy mix. However, electricity is a commodity that is generally consumed at home, although we do have significant exports, but certainly not on the scale of oil and gas. As a result, our value-added on the domestic plane is quite important.

The next page gives you a little bit of a feel for what we are looking forward to and where we expect our capital to flow. When we look at projections of demand over the next years to 2020, roughly 17 years, we expect we will have to build about the equivalent of 35% of our existing asset base again in order to meet demand. That's roughly 20,000 megawatts of new electric generation per decade over the next two decades. That takes into account energy efficiency gains, which you will see taken off at the bottom, as well as replacement of old plant, which will provide for greater efficiency and lower emissions and cleaner facilities, as well as for incremental new growth.

To give you a sense that our projections, we believe, are realistic, the next slide shows the most recent NEB statistics estimating 2020 demand at about 817 terawatt hours, whereas ours were 670. What the right number is nobody will know until we get there, but it's somewhere in between the 600 and 800 terawatt-hour range.

In terms of the contribution of what we call emerging renewable and alternative—and I would highlight the term “emerging renewable” because our system is today about 60% hydro-based, which is renewable and therefore a major positive contribution to our overall low carbon intensity—the emerging renewables are things like wind, biomass, solar, tidal, solid waste, etc. Again, we see them growing quickly over the next several decades, but from a very small base and in total probably not accounting for much more than a slight growth from the 2% they account for today. Perhaps it will be 4% or 5% by 2020.

¹ (1550)

On the point I alluded to earlier, on the next page you see a picture of Canadian reserve margins. As you can see, in 1980 they were somewhat short of 40% and at one point between 1980 and 1985 they hit almost 45%. Today they're in the range of 22%, so the trend line is clearly down. What that represents on the one hand is a more efficient industry, able to match demand to its capacity more effectively. But unless that is arrested, and you can see a hint of that at the far right of your chart, we will get into a situation where we have, at least regionally, significant issues with adequacy of supply. That will then impact on the reliability of the system and tend to create volatile prices, none of which is attractive to the economy as a whole.

The next slide gives you a picture of our import-export situation in terawatt hours; that is, in commodity flows. You can see relatively consistent exports in the mid-1990s and a slight decline over the last few years.

The other interesting piece of the pattern is the growth in imports from the United States. It's perhaps counterintuitive, but we are both seeing an increase in the competitiveness of some U.S. generation and also taking advantage of the interconnectedness of our systems and the ability to buy off-peak power in the United States and store it behind our dams as water and return it at a higher price on-peak. This helps both sides optimize the efficiency of the interconnected electricity systems.

Moving to the next slide, we have released a five-point plan for how to move forward in maintaining our competitive advantage in five key areas.

Smart and effective regulations. There we are referring to the need to have harmonized and coordinated regulatory regimes that allow new projects to move forward in a foreseeable timeline and not be hostage to uncertainties.

The second talks to the need to foster innovation; invest in R and D; bring forward new technologies that will help us utilize some of our traditional resources more efficiently, including coal; and accelerate skills development where we, like many other high-tech industries, face a significant outflow of our established workforce due to age.

The third point talks about sustainability and how we in the electricity industry can contribute to the environmental goals that we all share. Obviously, as major contributors to major emitters of many of the substances that we want to control, we will have to do better through technology.

The integrated North American system is another one that we need to be very conscious of, and notwithstanding comments around the recent outage, we derive immense benefits from being part of an interconnected system.

Finally, the investment climate. We must flow capital in order to meet our future obligations.

The next page talks about those obligations in terms of approximately $150 billion over the next 20 years that will need to be invested. Investment levels need to improve. We have seen a decline in those. To some extent this mirrors the capacity reserves that we showed you, and we believe CCA rates need to be improved in order to reflect appropriately the economic life of our assets, track new investors, build the necessary supply, provide reliable power at affordable prices, and meet our environmental performance objectives.

The next page provides you with a picture of current U.S. and Canadian depreciation rates. I would emphasize that the U.S. is in the process, in front of Congress, of asking for rates that are more in the 25% across-the-board level. Our requests are outlined in terms of roughly 20% for generation and 12% for transmission and distribution assets.

On the next page those points are highlighted. Also, we make mention of the need to expand and streamline the class 43.1 provisions, which deal with the need to encourage emerging technologies.

¹ (1555)

Finally, in terms of the impact on government revenue on an incremental basis, this chart provides you with a bit of a sensitivity analysis. The key point is actually not here, but the key point is to understand that, for the most part, our industry is made up of provincial crown corporations, about 80%. The other 20% is private. There's a major trend developing in terms of private investment to help meet the needs of all of the electricity companies.

With that, I thank you.

The Chair: Thank you very much.

From the Association of Fundraising Professionals, Mr. Brown, the floor is yours.

Mr. Tad Brown (Chair, Government Relation Committee, Association of Fundraising Professionals): Thank you.

Good afternoon, Madam Chair and members of the Standing Committee on Finance. On behalf of everybody at the Association of Fundraising Professionals, I want to thank you for the opportunity to appear before you today.

My name is Tad Brown, and I have the privilege to serve in the charitable sector in a number of capacities. I serve as the finance and development counsel at the University of Toronto. I'm also here today representing, and as chair of, the government relations committee of the Association of Fundraising Professionals.

By way of very brief background, the Association of Fundraising Professionals is the largest association of fundraising professionals in the world, with over 26,000 members worldwide and over 2,000 members in Canada, stretching from coast to coast, literally from Victoria, B.C., to St. John's, Newfoundland.

Our members represent charities of all sizes, from grassroots to the largest charities in the country. Our members also champion the causes and missions of virtually every type of cause in the country, from arts to education, to the environment, to health, and to scientific research, to name a few.

Our members are required annually to sign our code of ethical principles and a statement of professional practice, which were first developed in 1964.

I give you this background for two reasons. The first one is to emphasize the importance that the Association of Fundraising Professionals places on ethical fundraising. Fundraisers are the stewards of public money, and the success of the charitable sector is dependent on public trust and confidence. We take that responsibility very seriously. The second one is, because of our diverse membership, it's critical to us that any tax policy that is recommended to you benefits the entire charitable sector.

Over the last few years, the government and the third sector have invested an enormous amount of time, energy, and money into investigating the charitable sector through the voluntary sector initiative, with a goal of charting the best path forward for the growth and the strength of the sector. One of the key outcomes of the voluntary sector initiative is the identification of capacity-building and sustainability as essential to the success of the charitable sector in achieving its goal of filling its vital role in Canadian society. Likewise, this committee has identified as its major theme the question of what measures should be taken to ensure progress in investing in and caring for all members of Canadian society.

Funding is the key. Support for the charitable sector must come from a variety of sources if the goals of sustainability and capacity-building are to be met. Direct government funding is key and essential, and remains the primary source of funding for most organizations. However, given the era of shrinking budgets and expanding needs, philanthropy—that is, the giving of private resources for the public good—is becoming an ever-increasingly important component of the solution.

The policy changes I am going to recommend to you today will enable the professional fundraisers to have the tools they need to go out with a goal of sustainability and capacity-building, within the charities they represent and within the charitable sector as a whole. Those recommendations are three.

The first and foremost recommendation is the complete elimination of capital gains tax on gifts of publicly listed securities, as well as extending that to private foundations and considering the expansion of the provision to other types of capital properties, such as real estate. The second one is the immediate reduction in the disbursement quota for charitable endowments. The third one is the creation of a government-sponsored day to recognize and celebrate the importance of the voluntary sector and to increase public awareness of private giving, such as a national philanthropy day.

Because of time constraints today, I'll focus my comments on the first proposal, which is for the complete elimination of capital gains on gifts of securities. I refer to our written submission with respect to other items. The complete elimination remains the number one priority for the Association of Fundraising Professionals and is the single most effective measure this committee can recommend to enhance charitable giving in this country.

I want to thank this committee for recommending this enhancement for the last two years in a row, including the extension to private foundations, and recommending consideration of extending the provision to gifts of real estate as well. I'm here to strongly encourage you to do so again this year.

I know that recently there have been a couple of articles in the Canadian Tax Journal questioning this provision in terms of eliminating the capital gains tax for gifts of charitable securities. I would like to take the opportunity today to address those directly.

º (1600)

First of all, I would point out the obvious. The articles here are two individuals' opinions. In fact, they are countered in the same journal by an opposing opinion by William Innes, which mirrors the recommendations that this committee has made for the last two years. In fact, I would submit that this opinion, and the opinion of this committee, is the overwhelming majority opinion in the community in the third sector.

As evidence of that, I've asked to have a letter circulated that was written in the last couple of days by arguably the leading tax and charitable authority and statesman in the country, Wolfe Goodman, in response to these articles, where he expresses his most strenuous objection to them. He has allowed me to present them to this committee today. I would submit that this represents the view as a whole within the sector.

I'd also like to note that this committee is going to receive submissions and presentations from a number, if not all, of the major national umbrella organizations in the voluntary sector, which collectively represent virtually every charity in the country. They include the Association of Fundraising Professionals, the Canadian Association of Gift Planners, the Canadian Bar Association, the Community Foundations of Canada, the Philanthropic Foundations of Canada, the Council for Business and the Arts in Canada, and the Canadian Centre for Philanthropy.

I would note that, in a remarkable show of unity, each and every one of these organizations recommends this measure as the number one priority for all of the charities that they represent. This is a measure that will positively affect all charities, large and small, across all sectors, and will provide them with a valuable tool to increase charitable giving. The evidence of the success of this is clear, dramatic, and evidenced not only in a report from the department itself but also in a Deloitte & Touche report.

I've also circulated another two-page document. I think it shows the effect of this provision, which is a list of gifts in excess of $5 million, which has happened in the form of listed securities since 1997, when this measure was first put in place. They total nearly 50 gifts from individuals and nearly $1 billion of additional giving to communities across our country.

I would say that this is clear indication of the success of this measure. I'd like to point out, as someone who deals with these types of donors on a regular basis, that the gifts simply would not have happened if not for this measure.

Again, donors do not make their gifts to charities because of tax benefits; they make them because they believe passionately in the mission and the causes of the charities they support. The level of their support is affected by the tax benefits and tax measures. As much as we should celebrate that the wealthiest citizens in our country are giving back to their communities, I think it's also equally important to recognize that this tax measure affects us all. In fact, it has been equally effective at encouraging gifts at all levels. As most Canadians hold their wealth and assets in the form of publicly traded securities, a number of people have made the gifts of their lifetime to charities, regardless of their means.

I once again would recommend that this committee recommend the full exemption of capital gains from gifts of publicly listed securities.

Again, I'd welcome any questions if there's time permitting. Thank you very much.

º (1605)

The Chair: Thank you.

We'll go to Mr. Myers, from Canadian Manufacturers and Exporters.

Mr. Jayson Myers (Senior Vice-President and Chief Economist, Canadian Manufacturers and Exporters): Thank you very much and good afternoon.

Together, Canada's manufacturing and exporting sectors account for about 25% of GDP and employ 2.4 million Canadians. The indirect contribution of these sectors is also fairly significant. Every $1 in economic output by manufacturing creates another $1.36 in economic activity in our primary and services industries. One in every three jobs in Canada depends on our export success.

I want to start out by stressing the importance of these two sectors, because both right now are in the midst of a recession, which is already having some fairly pronounced effects on the viability of individual companies, on the structure of Canadian industry, and consequently, I think, on the long-term growth potential of the Canadian economy as a whole.

This restructuring will be driven over the next three to five to ten years by three factors. The first factor is the intensification of competitive pressures from lower-cost knowledge countries like China, Brazil, South Korea, India. These are already rapidly becoming manufacturing powerhouses and they're all setting their sights to develop their business by exporting into the developed markets of North America, Europe, and Japan.

The second factor is a continuing globalization of enterprise as companies not only relocate operations and source products but they are now expecting their customers, their Canadian suppliers, to be able to offer them the high value, very low cost, high design, better engineering, better quality, better service type of business that many Canadian suppliers have not yet had to provide.

The third factor is a series of demographic changes that over the next decade will mean that manufacturing and exporting companies across Canada are going to experience a wave of retirements, a loss of skilled and experienced personnel, at the very same time as they're going to be having difficulties in finding skilled people.

These factors are going to continue to change the nature of Canadian industry across the country. But the urgency of this restructuring is being underscored today by the weakening market conditions that manufacturers and exporters are facing, particularly here in North America: continued weak demand on the part of U.S. manufacturing, our major customer; weakening demand on the part of heavily indebted North American consumers; more intense international competition; overcapacity in international markets, which is driving down selling prices; and at the same time, higher business costs, particularly energy costs and the costs of mandatory overhead, the costs of regulatory compliance. These are the costs that are rising most rapidly, and what that's doing is compressing profit margins across Canadian industry. Right now we're working on the thinnest profit margins that we've experienced since the depth of the last recession in 1991. That's important, because it's the bottom line that generates the jobs and it's the bottom line that generates the investment that we need to make sure we're successful in restructuring.

The loss of production capacity in North America is also a particular problem, and this has really affected manufacturing in the United States, as we're seeing more and more companies pull out and move their operations, particularly to China. I'm very concerned about the impact of this, because it means the loss of production facilities here, it means the loss of customers in the United States, and above all, what we're seeing right now is a wave of protectionist pressure in the United States that I think has to be very much of concern to Canadian industry.

These factors, coupled with all of the other problems we've experienced this year in Canada, are driving down the value of Canadian manufacturing shipments. Manufacturing production is going to fall by about 3.5% this year. The value of our exports is going to be down by about 5% this year. We've already seen 60,000 jobs lost in manufacturing since the beginning of the year. And all of that means that Canadian economic growth in 2003 is going to come in somewhere around 1.8%, which is less than half of what we were looking at early in the year. We'll be lucky to see 2.2% for 2004.

Manufacturers and exporters are already taking steps to respond to these problems, to respond to the impact of dollar appreciation. A 15% rise in the dollar is effectively a 15% price cut for any exporter in Canada today. Companies are cutting costs and, in some cases, employment levels. They're downsizing production. They're improving efficiencies. They're reducing inventories and overheads. They're consolidating the production. They're outsourcing both products and services.

Innovation remains a priority. The introduction of new and improved products and services, the adoption of new technologies, improved business processes, upgrading skills, these are all still very important, but investments in innovation have declined this year along with cashflow. Manufacturers and exporters are being driven to improve their products, their production systems, and their business methods. It's essential just to survive today, let alone to grow over the long term.

º (1610)

The real question is not whether this restructuring is going to take place—it already is. The real question is whether this is going to take place in Canada. I think this is going to be a very big challenge for the Canadian economy over the next several years.

In one word, that challenge is investment. Investment is the key to success in business. If we want to ensure that Canada remains a competitive location for investment, process improvement, product innovation, business expansion, and global product mandates, we also have to ensure that Canada can boast a business environment that is second to none in rewarding risk-taking on the part of our entrepreneurs and our financial sector, and in offering companies competitive returns on their investments in new organization, new capital, and the new skills required by a modern workforce.

Canada needs a strategy to retain, attract, and encourage investment in our capacity to generate wealth. I think this is a key strategy that has to be adopted by federal and provincial governments together. I think there are five steps here. Listed in order of priority, some are longer-term steps and some have to be studied much more closely. But there are five key changes in our tax policy that have to be made, and be made quickly.

First, continue to ensure that budgets are balanced, that there are adequate contingency reserves to offset economic downturns, and that unspent revenues continue to be used to pay down the federal debt. Sound fiscal management underpins investor confidence, and that's extremely important. I don't recommend any change in policy there.

Second, improve the efficiency of Canada's tax and regulatory systems in order to reduce unnecessary costs borne by taxpayers. Remove bureaucratic impediments to innovation and investment, and increase the effectiveness of existing tax measures.

Specifically, we recommend first of all that the elimination of the capital tax be accelerated, and that this tax be entirely eliminated by 2005.

We recommend that the administration of the SR and ED tax credit system continue to be improved, and that those tax benefits be available to companies who may be not experiencing profit growth right now, who may be ahead of their earnings curve, or companies that may be having to consolidate their corporate earnings for foreign tax reporting purposes.

Canada should negotiate the reciprocal elimination of withholding taxes, especially in interest earned from investment income in its tax treaty with the United States.

The Income Tax Act should be amended to allow Canadians enrolled in educational and training programs related to their employment to claim education tax credits.

The government's smart regulation initiative is a priority, and we again solidly recommend that Parliament pass Bill C-212, Mr. Cullen's private member's bill aimed at improving the administration of federal cost recovery programs. I'd like to recognize the leadership of this committee and the support it has given to Bill C-212. I also want to recognize the support of your colleagues in the House and every party in the House who supported the bill on the third reading. I hope the Senate will support the bill when it comes to vote on it.

The third step is the acceleration of CCA treatment for investments in machinery and processing equipment.

The fourth step is a reduction in the overall corporate income tax rate to 17%.

The fifth is the consideration of investment tax credits for investments in strategic enabling technologies.

If these tax changes are made, I think we're setting ourselves up very well to be able to compete in the long run and to be able to respond to some of these very, very serious restructuring challenges that Canadian industry will have to respond to over the next several years.

Our vision is to make Canadian manufacturers and exporters the benchmark in the world. In order to do that, we have to make sure that Canada is the benchmark of the world when it comes to attracting, retaining, and encouraging investment.

Thank you.

º (1615)

The Chair: I know that the time is short and I don't like to cut people off, but we do have to move on here to the Canadian Dental Association and its president, Mr. Dubé.

Commencez, s'il vous plaît.

[Translation]

Dr. Louis Dubé (President, Canadian Dental Association): Good afternoon. Madam Chair, committee members, thank you for letting us express our view on the most important financial issues.

My name is Louis Dubé. I am President of the Canadian Dental Association and I practice in Sherbrooke, in Quebec. With me today is Mr. Andrew Jones, our Director of Corporate and Government Relations at our head office in Ottawa. The two issues that concern us most are the oral health of Canadians and our profession's infrastructure.

Over the years, the dental profession contributed a great deal to the improvement of the oral health of Canadians. In fact, most of us can now expect to keep our teeth in our mouth even as we age instead of in a glass on our night table. The next generation will be even luckier because many of them still do not have any cavities. Heightened awareness, new research, leading edge techniques and specific measures, such as fluorinated water, have produced good results. However, you will note that I used the words "many" and "most" and not the word "all". There are still a number of gaps in the system providing access to care.

I have been practising for 23 years now and not a day goes by where I do not have to extract a tooth. The water is not fluorinated where I live. We have a fairly good dental care program for children, but because of budget cuts over the years, we moved from a prevention-based system to an intervention-based system. Furthermore, some provinces do not even have a dental care program like the one in Quebec or their program budgets have been substantially reduced.

Low income earners are the most affected. They are not poor enough to benefit from the welfare programs and they do not have access to private dental care programs. Having a toothache, having trouble eating or sleeping is no laughing matter. Until a few years ago, there were excellent screening programs in schools. Since then, a number have been abolished. What happens to the children in those cases? Who takes care of them? I can assure you that a number of dentists do voluntary treatments in urgent cases, but we cannot meet the demand. Also, too many people do not have the means to go to the dentist. It is often a choice between going to the dentist or buying groceries or paying the rent. So where do those patients go? They go to the hospital emergency ward. Prevention would have been a much better option. We must find ways to facilitate access to dental care for those who can ill afford it.

[English]

Earlier I mentioned to you that most of us will have our teeth all our lives, but once we finish working we don't have our dental plans any more. How can we pay for our dental work? We need to set up systems to address the needs of older patients now, because the majority of the baby boomers will retire from the workforce. Because these people have high expectations for the care they receive, they're not going to go for second best.

Also, we're starting to understand through research that when our mouth is sick, the rest of the body is affected, and the effects may be quite major. We don't have all the answers yet, but it's starting to look as though periodontal disease might be a complicating factor in heart disease and in producing pre-term and low-birth-weight babies, and there's definitely a connection between oral health and diabetes.

These are big health care concerns, both in terms of impact on quality of life and the cost of the health care system. If it turns out that dentists can help to prevent or reduce the severity of some of these illnesses, it will be great. Dentists have established a track record of dealing with life-threatening oral cancers as well as oral after-effects of cancer treatments in the mouth.

We are ready to do our share to improve the overall health care of Canadians. In terms of care, here is one final item. I want to update you on the first nations and Inuit oral health situation.

We've thought about this many times before: the high rate of cavities, gum disease, and poor utilization of the program. We know you've been listening, because there has been some action in this area. Our brief goes into much more detail on the NIHB, but we still have some concerns. We'll welcome your questions on this issue later, and I ask you for your support.

Now I want to talk to you about the health of my profession. Last year CDA talked about high tuition fees and how they will impact on the makeup of our profession. Dentistry has the highest fees of any program. We're still concerned about that and encourage you to recommend the implementation of changes to directly assist the students. Over the past year, though, we've come to realize that tuition fees are not the illness, but a symptom. We can trace the symptom back to the real problem, and that is the underfunding of universities.

Operating dental schools is very expensive. The equipment, maintenance fees, the operation of public clinics— these all add up. Good faculty is hard to find and even harder to keep. Universities cannot compete with private practice incomes, so it's very hard to interest new graduates in academic life, especially if they've graduated with a debt of over $100,000.

Academics are finding research grants also harder to get. Two years ago we reported to you that the Canadian Institutes of Health Research was devoting about 1.6% of its funding to oral health research. Since about 7% of the health funding goes to oral health care, we consider this number to be too low. Since that time, however, things have gotten even worse. This past year less than 1% of the funding went to oral research. Without dental schools we have no dentists; without research we have no improvement in oral health. These are fundamental issues we want to work with you to resolve.

There are two new areas in our brief this year addressing family issues, and I would like to draw your attention to them. Dentistry is increasingly a gender-balanced profession that is often practised as a small family business. Dentists are also current and future parents. We have the same kind of priorities for our children as other Canadians have. Unfortunately, though, we do not have access to the same kind of parental leave benefits as others, and we are not currently able to pay child care providers through our payroll systems. We call upon you to take a closer look at these areas in our brief and to look for a better chance for fairness for dentists and other professionals who want to do their best for their families.

Although I have a lot more things to say, I will welcome questions either in English or en français later. Merci.

º (1620)

The Chair: Thank you, all of you, for the very complete briefs you've provided to the committee.

I'm aware there will be House votes at 5:30, and we have another panel, so I'm going to ask for short questions from my colleagues and for complete but brief answers, if we can accomplish that.

We'll start with Mr. Jaffer. He'll show us how this is done.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): How long do we have, Madam Chair?

The Chair: You'll have six to seven minutes.

Mr. Rahim Jaffer: I'll start by saying that I appreciate everyone making their presentations today. I think there may have to be some follow-up on some of your briefs outside of the committee, because I do have some questions, and I'll do my best to follow up on them with you .

I'll go down the list of the initial questions. I'll start with the presentation on electricity. I know we've dealt with this issue of the capital cost allowance in relation to the resource-based industries. It's something we really need to look at from our country's perspective, especially in relation to the United States and the ability for us to compete in other markets, obviously.

I appreciated this chart that you put together in your brief, which basically compares some of the depreciation rates in the different areas, especially with regard to Canada and the U.S. I notice that in many of the areas we're comparable, but in a lot of them we seem to be behind.

One of the areas I wanted you to address, if you could, is this. It seems to me that along with dealing with the capital cost allowance, there need to be other incentives as well, since Canada is engaged in environmental policies and we want to try to improve the ways of production of many of these types of energy sources. I notice that you put a note in here that the U.S. incentives are much higher, with production tax credits for alternative energy, such as wind, PV, and biomass. Can you maybe shed some light on what we're doing in this country and whether or not it's helping some of the things you are trying to deal with when it comes to the production of alternative energies? Do we need to look not only at the issue of reviewing the capital cost allowance but also at developing these sorts of tax incentives here at home in order to be competitive with the U.S.?

Mr. Hans Konow: Thank you for the question. If you look at the treatment of alternative energy between the U.S. and Canada today, there's roughly a 30% depreciation rate on both sides. So there's not a significant discrepancy in that regard.

However, we do have issues around the scale of investment going into new clean technologies. In the United States very large sums are being devoted to examining ways to use indigenous resources in a clean and acceptable manner. For instance, in the area of clean coal research, the U.S. Department of Energy is investing billions of dollars in trying to advance the already determined processes for cleaning up coal waste streams and making either low-emission coal facilities or even zero-emission coal facilities a practical economic reality. We in Canada have a similar project, which is funded largely by industry, with some help from government. We're continuing to talk with government about how to integrate our investments in Canada with those in the United States in order to come up with a technology that will work for our coal types in the west. That's one example of a need for R and D incentives to match those south of the border so that we can become full partners.

In terms of other technology opportunities, quite a number are pursued. But most technology today, on the scale of the plants we work with, is global in nature. So you work with global technology companies. Canada can aspire to have niche capabilities, but we can't cover the entire waterfront. Fuel cells is an area we're very good at, and we have a competitive advantage there, but we're not unique in that capacity. Unless we're able to bring them to market successfully fairly soon, we'll find that the rest of the world has caught up with us.

º (1625)

Mr. Rahim Jaffer: I'd like to try to get a few other questions in. To the Chamber of Maritime Commerce, on an issue that you've raised, I just wanted to mention that I sent a letter to Minister Caplan to see if she could extend the times of the Windsor-Detroit ferry crossing. It's something that I think needs to be addressed, together with the whole issue of security and resources at our borders in order to facilitate a lot of trade on both sides.

We're still grappling with a lot of the security things at our borders, such as the reallocation of where ports police may go and whether we're going to change some things and move them over to the Solicitor General. These are some of the ideas we've put forward.

From your perspective, the companies you represent and the people you deal with, have you seen a direct improvement in services when it comes to cross-border trade on the U.S. side since they've created this Department of Homeland Security? Have there been some improvements, to your knowledge, and are there some things we can learn from that?

Mr. Jim Campbell: My understanding is that their efforts, while they might look good on paper, perhaps are not producing the sorts of results they anticipated, or they are slow in coming. So while I couldn't point to specific serious problems or issues, I'm not sure the full integration of coast guard, immigration, and customs has really been achieved, since they are wrestling with some huge systems and internal communication problems right now.

Mr. Rahim Jaffer: Okay, this is my last question, then.

Mr. Myers, I notice in your submission--and I wonder if you could address it specifically--the issue of the SR and ED tax credit. I know one of the things you said in your submission was that here in Canada, taking advantage of the commercialization after this tax credit has been in place, we have one of the poorest records of most industrialized nations to facilitate that. I hope you can address that particularly, because I think there are certain things we need to address in awarding a significant tax credit like that to create competition, to create that sort of innovation. But it seems that some of the pieces of the puzzle are missing, because it's not stimulating the final results.

I wonder if you could address as quickly as possible what we need to look at, as a committee, to make that tax credit really effective on other tax issues that would relate to that.

Mr. Jayson Myers: Very briefly, I think there are two issues. One is the complexity that companies face in filing for the tax credit and the way this is handled. There are administration costs, there are delays, there's uncertainty about technical rulings. All that is focused on administration issues.

I know several small companies say, well, it's not worth our claiming this, because the cost of the administration of the credit is too high, and unfortunately, many small companies don't look at using the tax credit, where perhaps they should. I think a lot has been done by CCRA to improve it. There's a lot that can be done in the future to improve the efficiency of the administration of it.

The second issue is that a number of very large companies in Canada cannot take advantage of the tax credit either because they're not profitable at the current time or because they're investing in R and D before they have the profits to back that up, and then they're ahead of their earnings curve; or in the case of many large foreign-owned companies, because of their tax consolidation rules, when they report at headquarters the tax credit doesn't have the same impact in terms of an incentive.

So I think we should be looking as well at perhaps ways to provide that incentive as either a tax credit or an offset against other taxes that are being paid.

º (1630)

The Chair: Thank you.

Now I'm going to go to Madame Picard, followed by Mr. Murphy and Mr. Cullen. That will be the final round for this panel, and then we'll move to the next panel.

Madame Picard.

[Translation]

Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair.

Mr. Myers, I find your brief most interesting, but I noted one thing in particular. You said that because the population is aging businesses would lose skilled and experienced employees and that we would end up with a serious labour shortage.

I can tell you that where I live, in the Drummondville region, in the centre of the province of Quebec, in the past 10 years the number of businesses increased to 547 from 280 and the population grew by 34 per cent. Our economy is booming and that is very good for us, but because the skilled workers are aging, we already have a problem finding workers. Every year, job fairs are organized to recruit people from outside the area, but the result of that is that the other regions are losing their people. Moreover, the industries do not always end up with the best people to meet their needs.

Have you thought of any solutions to that phenomenon? I am sure we are not the only ones in Canada dealing with that issue. Unfortunately, I did not read your entire brief, but I would like you to tell me what recommendation you would make to the government to meet this problem, which will become acute in a few years.

[English]

Mr. Jayson Myers: Thank you for your question.

This is probably the key issue as you go across the country and speak to manufacturers, or really to any industry today, about what their long-term problems or challenges are.

The first issue they regularly raise is the issue of skills, the lack of skilled personnel and the looming shortage of skilled and experienced personnel because of retirements. As you say, although there are some very rapidly developing sectors of the economy, that is also attracting skilled personnel away from other regions, thus creating problems there.

I think there are a number of steps that can be taken and will have to be taken in the future. I can't say we have all the answers right now, because, frankly, it's very difficult to predict what the areas of technology or the skills requirements will be. But I can say that probably the business sectors will be able to predict that first.

One of the key things is to provide for a better environment for skills training within companies themselves. I don't think we're counting the amount of money that goes into skills development by companies, particularly on a day-to-day basis. What we're counting is the amount of money they're spending on skills programs that are provided outside of companies. But business itself will have to focus on providing better skills training within companies, and I think there are ways of encouraging that.

The issue of immigration, though, has to be key, because Canadian industry especially, for a long time, has been counting on skilled immigrants coming into the country to provide industry the type of technical skills that we don't provide here in Canada. That has been very important, and I think part of the immigration policy--and we're very active in talking to the Department of Immigration--has to look at being able to bring in the skilled people required by manufacturers and by other sectors of the economy as well and to make sure that when these skilled people do come into the country, they're better integrated into manufacturing or other businesses, too. When skilled immigrants come into the country, often there are problems in that they don't have any Canadian work experience. So I think there are ways we can help to introduce them into the community much more effectively.

This is a long-standing challenge we face, and as I say, I think it will become one of the major challenges over the next five to ten years.

Thank you for the question.

º (1635)

The Chair: Thank you.

[Translation]

You have two minutes if you like.

Ms. Pauline Picard: I would like to ask a question to Mr. Konow.

I listened to your brief very closely, and I would like to know what the most urgent issues are for your sector in terms of the upcoming budget. I was surprised to hear you say it would take $150 billion, or $7.5 billion per year over the coming years to expand and replace aging facilities and that the investment could come from private capital markets. I find that $7.5 billion is somewhat unrealistic. I am not saying the needs to do not exist and I am not questioning the amount of $150 billion—I am sure you are correct—but how will we encourage investors to give us $7.5 billion to ensure all Canadians are adequately protected? We all know that many facilities are obsolete. What is the most urgent and what do you recommend? There are many recommendations, but what is vital and what could be included in the next budget?

Mr. Hans Konow: Thank you for your questions, Ms. Picard.

That is not an easy question to answer, but I will try to give you a few ideas in English.

[English]

We presented yesterday at a meeting of energy ministers across the country a five-point plan. To summarize its main tenets, it talks about the need for investment on the scale you've described—and $150 billion is nothing to sniff at.

On the other hand, the industry we represent is an attractive investment proposition, providing the conditions around return on investment are appropriate, which is not a federal responsibility in our particular area. However, CCA rates will make it attractive for private capital being mobilized by both private concerns and by our publicly owned concerns. As you know, in Quebec for instance, Hydro-Québec is entering into partnerships with private sector enterprises in providing for future generation and it also goes to private debt markets to raise capital.

So there are three things I think we need. First is an overarching vision or perspective on energy, which is lacking both at the federal level today and in many cases in an integrated sense at the provincial level. The preoccupation of the last few years has been around the environmental implications of energy. We signaled at the meeting of energy ministers... 20 associations, one presentation, if you can believe that, and all of it was about supply.

Regarding the issue of how much needs to be invested, we're talking about the electricity industry. If you take the whole energy patch, of course, it's a far larger sum than $150 billion.

So the three things are a clear energy policy environment; efficient regulation—because many of our projects are delayed through inefficient regulation, particularly major hydro projects—and third, the fiscal regimes that I've described in our presentation. With those I think we can mobilize that capital.

º (1640)

The Chair: Thank you very much.

Mr. Murphy, please.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Madam Chair.

I have one question for Mr. Konow and/or Mr. Myers, and it deals with the rate of CCA allowances. This is a recurring theme that comes up in quite a few presentations that we hear in this committee.

I guess I have difficulty with it sometimes, because the underlying tax principle is that the CCA allowance is to reflect the economic life of a particular asset. It would be hard for this committee to deal with every asset that came up.

I know the trouble that exists when technology is ahead of the officials of the CCRA. We've had strong lobbying from the railway industry, the printing industry, and a whole host of other industries with the same theme, that the CCA rates aren't high enough to reflect what the technology is—the economic life of these assets. At one time a printer might have had an economic life of 20 years; now for that printer they're talking about two and a half or three years. But again, it would be difficult for this committee to get into every asset. We just can't. We don't have the expertise, neither should we try.

What is the experience dealing with the CCRA? Are they flexible in their approach? Are you recommending anything of an overall approach that should be changed so that the rates do reflect the economic life of an asset, rather than dealing with it on an ad hoc basis, which quite frankly can't be done—through this committee, anyway?

Mr. Hans Konow: Thank you for that question.

Quite simply, what we've done is invested close to $1 million in third-party research, which we've deposited with the Department of Finance. We're told they've looked at the arguments we've brought forward with respect to the equitable treatment of our assets and they have no issue with that. So in essence we've proven our case.

Now the question is, is there room within the fiscal envelope to accommodate what we've suggested would be fair and equitable treatment of our assets? That's really where the issue sits. As far as we're concerned at least, and from the feedback we've had from the department, there's no quibble with the case we have put to them. It's a matter of whether CCA rates are dealt with as a single issue involving all sorts of different communities of interest, or whether the particular needs of our sector will be looked at and dealt with individually.

Obviously this is a bit of a challenge for them.

Mr. Shawn Murphy: But do I understand correctly what you're saying, that you've gone to CCRA, convinced them that the numbers they're using are wrong and the information you have is correct, and they still won't change the rates?

Mr. Hans Konow: No, let me be clear about right and wrong. What we've simply done is made a case, which they accept, on what would be a more equitable treatment of those rates. I mean, the 4% they accorded for many years, which you alluded to, probably was sufficient at a time when our assets would last that long. Today the turnover rate is much higher, and the type of assets in our mix has changed. And they accept that. So the issue is on what precisely the rate should be. Whether they accept exactly our number or some number in between, that's an ongoing discussion, but there's no argument that the direction we've suggested is appropriate.

However, there was an issue around the size of the fiscal envelope and whether they could accommodate our ask from last year. Hopefully this year there'll be some more room. Your guess is as good as mine on that.

º (1645)

Mr. Jayson Myers: If I may, Mr. Murphy, we've had similar experiences. I think a number of our members have been very active in having discussions with finance people here, pulling on or bringing in research. John Baldwin's group at Statistics Canada has also done quite an extensive analysis of the economic life of assets in industry.

I think it is accepted that economic life...and it's also the useful life of assets, which is often difficult to gauge prior to investing in assets because of the way technology changes and the way competition changes the use of assets as well. So it's very difficult to do it on a class-by-class or asset-by-asset basis.

The government several budgets ago tried to respond to some of these issues by providing a mechanism where companies could define assets as they invested in these assets and then specify at the time of investment what the expected life would be. But that's very difficult to do at the time you're investing, because who knows where technology is leading you? It becomes a very complex administrative problem if you have to specify every single piece of equipment you're investing in at that time. So I think the issue we're dealing with in finance is how to make this a simple, uniform system and still respond to this very important competitive problem.

The Chair: Thank you.

Mr. Cullen, final questions.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair, and thank you to all the presenters.

I have a question for Mr. Brown, but before that, to Mr. Myers, in your brief you talk about the spread in the effective corporate tax rates between Canada and the United States. In the last few years, we've been reducing corporate statutory tax rates to a point where I think, in terms of statutory percentages, the corporate tax rates in Canada are getting much more attractive. What are the major drivers to equate this gap with the effective tax rates? Is it depreciation for tax purposes, or are there other major factors?

Mr. Jayson Myers: To a large extent it is the accelerated two-year depreciation that the U.S. government has introduced. That is a major factor, and it accounts for about three percentage points in the gap, but there are other tax programs as well, such as tax credits. The FISC is a major issue, a major difference, and it has always been an outstanding problem for Canadian manufacturers competing with tax treatment in the United States.

Mr. Roy Cullen: Which is that, the export program...

Mr. Jayson Myers: The tax credit that offshore companies can claim if they're exporting from offshore. That of course has been challenged by the WTO, but we're likely to see it coming back in some form.

There are a number of tax changes, too, and the depreciation rate is a major one.

Mr. Roy Cullen: Okay. If you have that information handy, perhaps you could supply it to the committee, because it has come up a few times--the difference in spread now of the effective tax rates.

Mr. Jayson Myers: That information is drawn from C.D. Howe's lastest report, published in August, on the taxation of capital in Canada and the United States.

Mr. Roy Cullen: Okay.

Now, in I think the month of July, the manufacturing sector performed quite well. That was good news, but I think what I hear you saying is that this probably is not sustainable. Maybe you could comment on that.

There's also the question of the Canada-U.S. exchange rate and the pace of change that's happening. Ultimately, it puts the question on the table about productivity of our manufacturing and commercial sector generally. We had made some progress on the gap between the United States and Canada, but it looks as though the gap is going to start to grow again.

What are we going to do, or what should we be doing in Canada, in terms of public policies and tax policies in order to be more productive and to support productivity gains, which we're going to have to achieve or be hit economically?

Mr. Jayson Myers: Well, that's a big issue. I will also provide the committee with the latest analysis on the productivity issue.

July, I think, was fairly good, but it followed a quarter where we saw a 4% decline in manufacturing shipments. I think in August, combined with the problems in British Columbia and the power outage in Ontario, we'll see certainly a decline in output in the manufacturing sector there, too. So I don't think the July numbers are going to hold up very long.

In relation to the dollar, keep in mind that most Canadian exporters are pricing in U.S. dollars. As the Canadian dollar goes up in value, that doesn't change their price competitiveness in the United States. They'll keep their million-dollar U.S. contract there, but it'll change the amount of money they make in Canadian dollars in return. If a company were paid last March, they'd be making 15% more than they were paid in June, although it was for the same contract. It was just because of the exchange rate fluctuation.

It's the very rapid increase in the dollar that companies have had a problem in responding to. Companies will respond to the fact that their revenue has fallen by 15%. The only way they can do that is by becoming more productive, by improving their product or their business method, and by becoming more efficient in cutting costs. That's what they're doing. It's how fast that occurred. That 15% for some companies wiped out their profit margin in that quarter. Many are really struggling right now to correct that situation. That's why we're seeing the job losses that we have been.

In the short term it's a real problem. In the long term, though, a higher dollar is going to mean that technology becomes less expensive. It means that companies cannot use the low dollar as a cushion. They're going to have to improve productivity simply to survive.

I think we will see the productivity gap begin to close with the United States, largely as a result of the higher dollar, but we may, at the same time, not see as many people employed in manufacturing. In the short term we may not see as many manufacturing companies in operation.

º (1650)

Mr. Roy Cullen: Thank you, Mr. Myers.

I have a question for Mr. Brown. Paragraph 38(a.1) of the Income Tax Act, the one that deals with the inclusion rate for donations of marketable securities to charitable organizations, has come under some attack, as you noted, in terms of its effectiveness.

You've submitted this letter from Goodman and Carr. Is that your letter? This committee has been supportive of that particular measure. If I'm reading Mr. Goodman's letter correctly, he's saying that anecdotally... and what you report anecdotally is that the number of large donations has increased. But the letter seems to indicate that some of the smaller donations have fallen off in an aggregate. If you were just to look at the total, someone would say that there has been no appreciable gain in the amount of these donations.

Surely it must be a fairly straightforward thing to actually measure the number of large donations of marketable securities and indicate categorically, rather than just anecdotally, how effective this measure has been, is it not?

Mr. Tad Brown: It is. As I pointed out, the latest reports from the Department of Finance, in fact, support that conclusion.

The goal of it was twofold. One was to increase donations generally across the board.

In terms of your question about large donations, if it has increased those amounts, donations of the size in the list that I have distributed were in fact unheard of pre-1997. We just didn't experience gifts of that magnitude in this country. They could be directly attributable to this provision.

In terms of the effect, there are no statistics. If you look back pre-1997, there are virtually no gifts of this magnitude across the country, which is why there's very little comparison about how the increase has been. When there was no tax advantage, nobody made their gifts of security of this magnitude.

The Chair: Thank you very much.

On behalf of all of the members of the committee, I appreciate the fact that we moved along and everybody had all their evidence put in.

We will suspend for a minute and clear the room quickly so that the next panel can get up to the table, and we'll get to that testimony before our bells start to ring on us. We are suspended for a minute.

º (1654)

º (1658)

The Chair: We will continue with our pre-budget hearings pursuant to Standing Order 83(1).

Our second panel of the afternoon is comprised of the Canadian Federation for Promoting Family Values, Mr. Michael Gorman, president; the Association of Canadian Academic Healthcare Organizations, and its president, Joe de Mora, and with him as chief executive officer, Glenn Brimacombe; from T-Base Communications Inc., Sharlyn Ayotte, the chair; from the Canadian Vehicle Manufacturers' Association, Mark Nantais, the president; and from the Teamsters Canada, we have Robert Bouvier, president, and François Laporte, the director of government affairs and public relations, and Mr. Phil Benson.

Bienvenue à tous, welcome to the committee.

As you are aware, some votes will take place at approximately 5:45 in the House. The bells will probably start to ring at 5:30, so I would appreciate it if we could commence and hear your presentations. We may or may not have to come back for questioning after the votes.

We'll start now with the Canadian Federation for Promoting Family Values. You have up to seven minutes, sir, and because of the voting today I will be very strict with time.

Thank you.

Mr. Michael Gorman (President, Canadian Federation for Promoting Family Values): Thank you, Madam Chair.

My name is Michael Gorman. I represent the Canadian Federation for Promoting Family Values, which we call the CFV. We're an incorporated non-profit organization that has been around for about 14 years now. What we do for the committee is to prepare each year about a five-page report. We think it's straightforward and simple. If you have any comments, please let us know.

We always start it the same way, with what we think is the most important thing going on in the country right now, which this year happens to be debt surplus, which it happened to be the year before, and the year before that, and I think the year before that as well. For the first time, we've also had health care up there in a tie for first place. Things like defence, the environment, pensions, education, and so on, follow in behind.

We give a very short paragraph on the number of issues across the country. They range from everything from Canadian unity to employment. I believe there are probably 20 or 25 in there as well. From all the numbers and surveys we do across the country, we can come to a number of conclusions. I can't get into them because we just don't have enough time.

I'd like to get right into what we feel should be the recommendations this year. The first one would be to commit $5 billion to debt reduction. I know it's going to be awfully tough with the three things that have gone on—those being SARS, the one mad cow, and the number of fires out west. It's going to be quite expensive once these things come to be.

But we do think this is the year we should be looking at beefing up some of our social programs. The first thing we should be doing is to continue the trend of eliminating taxes to low-income families with children. We feel that the tax-free zone should be about $10,000, with an objective of about $15,000 within three years. It's presently about $8,000.

The other group that we feel has been left behind in social programs is single, low-income seniors. Again, that's not to be mixed up with a couple living together—but certainly we think that single, low-income seniors should be able to retire with a guaranteed income of about $15,000. I realize we're mixing up provincial and federal legislation here, but we feel this should come about this year. You just can't rent a place....A single, low-income senior cannot live on $12,000 a year. We would also like to see that increase by about another $1,000 a year for the next three years.

Now, people think this is a very costly affair. Yes, okay, perhaps it is. One thing that could be done is that we could make qualifications based on an individual's net worth and the general need of the individual. A person living, for example, in Toronto wouldn't necessarily have to have the same income as a person living in perhaps a rural town or a city where they don't have the costs that would be incurred this way.

We also believe we should apply a proposed additional $1 billion to defence. CFV favours a larger, better trained, and better equipped military. A much larger emphasis on a younger military reserve force is preferred.

In partnership with free enterprise, ladies and gentlemen, we think we should be developing a Canadian tourism strategy aimed at Canadians. If Sears can develop point plans for people to buy in their stores, surely governments can come out with some sort of program that can take people from the east to the west and the west to the east. I don't think we've seen this kind of thing before.

Another thing we should be looking at is in the area of civil servants and educators. We feel this is a field where you need at least five years' experience in free enterprise before you can assume senior responsibility in your chosen field.

We also believe we should continue the privatization of government-funded organizations. We feel that Canadian authorities must learn how to play hardball with unions supporting government, education, and health care professionals and workers.

Finally, we feel that the Canadian gun registry should be suspended due to excessive long-term cost overruns.

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My last recommendation, ladies and gentlemen, would be that second language development should be expanded in all provinces in Canada, aimed at preschool and primary education levels, with support from the provinces and municipalities.

Thank you, Madam Chair. That wraps me up.

The Chair: Thank you very much.

We'll now go to the Association of Academic Healthcare Organizations. The floor is yours.

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Mr. Joe De Mora (President, Association of Canadian Academic Healthcare Organizations): Thank you, Madam Chair.

Good afternoon. The Association of Canadian Academic Healthcare Organizations is pleased to be here today. This is our first opportunity to brief the committee and we're pleased to be able to do so.

My name is Joe De Mora. I'm the chair of the Association of Canadian Academic Healthcare Organizations and I'm also the president and CEO of Kingston General Hospital. Our association's board is comprised of members, and all of our board of directors are voluntary and elected and all represent the teaching centres across the country.

ACAHO represents the teaching centres that provide to patients in this country the treatment and services for the most critically ill. It also represents the group that trains virtually all of the health professionals. In Kingston General, for example, we have 1,000 students a year, thereabouts, and that's equally true of all the other healthcare academic centres across the country. We are also involved in the lion's share of the health research that takes place in the academic health centres. Most people would not realize that the universities, in fact, provide the context, but many of the clinical research projects are actually done in the health care settings within the hospitals or regions.

We believe that, really, we are the only organization that represents the broad brush of health policy in all three areas and we believe we should play a constructive role in the dialogue on health policy in this country, so we're pleased we can come here today to talk to a couple of those issues.

The first has to do with access to health care. We see that as having two parts. The first is to ensure we've an adequate supply, mix, and distribution of health care professionals—and I should tell you that the workforce is certainly aging and has not kept pace with the demands in Canada, and we really need to make certain that it does so—and the infrastructure, the actual buildings and programs in which these programs for patient care research and teaching are provided. So we have two parts.

We have the strong view that we are not just local, or even provincial, organizations any longer. We now should be seen as a national resource. In many cases the patient care program that we provide spans more than one province, and sometimes across the country. Similarly, that is true for the training of physicians and nurses and professionals, as well as the research projects. And this point was strongly endorsed by, for example, the Kirby committee when it met and discussed health most recently.

In this regard, we have proposed in our brief that the federal government, in close collaboration with the provinces, establish a national teaching centre health infrastructure fund that would focus on four particular areas: one, health and human resources, the key to the health care system; two, medical equipment; three, health information technology; and four, capital redevelopment of our plants. This recommendation reinforces the view that there's an important strategic role for the federal government to be a direct contributor to assist the teaching centres in this regard and to be a catalyst in accelerating system renewal and excellence.

Such a fund would be time limited. We're not talking about an ongoing commitment. We're talking about a sunset clause and we're talking about being able to fund the infrastructure of the teaching centres for a specific period of time. This would reinvigorate the cornerstones of medicare and, frankly, help to make a reality of the federal government's most recent announcements in terms of the health accord and the results of the work of Mr. Kirby and Mr. Romanow, both.

We should note that this is not the first time this has been done. There was a similar effort particularly aimed at infrastructure in the mid-sixties, and again in the nineties, and of course, there has been more recent discussion in the federal budget that just went through. So there have been precedents in the past for looking at infrastructure, particularly as it relates to buildings and to people, and we would urge that you look at it once more.

Really, it's about looking to the future. We have aging infrastructure that really needs to be repaired, and we believe there are a number of important social policy benefits that would accrue to the federal government should it decide to establish such a fund. First of all, the federal government could re-establish its leadership role in a way that is time limited in terms of the money that's provided, but also in a major and most visible way to the people of Canada. It would also help to support the notion that we're striving for excellence in terms of the provision of both patient care and innovation.

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As well, it would also help to look at the overall efficiency of the system and the cost-effectiveness and integration of the system. It would also reinforce the financial accountability in terms of linking federal financial resources with national uses. It could be structured in such a way that the federal government would be very clear about the ends to which this fund would be directed. As I indicated, it's time limited, so it's not an ongoing commitment, but it would have a major impact in terms of the way in which the system develops from here.

We're strongly encouraged that the Kirby committee made a number of recommendations in this area, particularly talking about physical infrastructure, and they recommended somewhere around $4 billion over 10 years for medical equipment and health human resources. In other words, there was a recognition by the Kirby committee that this was an important ingredient that, frankly, was left out of the federal budget, in our view, and needs to be re-examined.

In addition, over the past several years we've strongly supported the federal government's policy initiatives in support of health research and infrastructure, including creation, for example, of Canada's Institutes of Health Research and Genome Canada, as well as subsequent increases in their budgets that we believe were entirely warranted. More recently, we've seen permanent funding for indirect costs of research—the cost, actually, of housing these programs, making sure we have bench space to let the research go forward.

The association would strongly encourage the federal government to continue to invest in these vehicles. It's very important that we don't let that lapse, that it continues. After all, today's research really is all about caring tomorrow. I don't believe we can leave the future of research to our American neighbours or our European neighbours. We have to be part of it for the good of all Canadians, we believe.

We also believe we can be centres of health innovation. As a result of that, we have a series of recommendations in our brief that talks to the interrelated dimensions of health care research enterprise. Again, we believe we can achieve a number of policy objectives for the federal government that relate to the issues of the application of research in the worldwide context of commercialization.

In the context of where the majority of Canada's health research capacity resides, teaching centres have a vital role to play when it comes to harnessing the full value of health research. We believe we can lever this more properly, that we need to invest in such a way that we get return back from the health research money we invest, find ways to increase the economic benefit to Canadians, and we believe the federal government has a role in that.

In closing, ACAHO believes it has offered to the Standing Committee on Finance a series of cohesive and targeted policy measures that are consistent with the values of Canadians, the mandate of the federal government, and focused on the strategic combination of financial and structural initiatives that are required to place teaching centres and the health care system on a more suitable footing, now and in the future.

As the process continues, we look forward to being an active and constructive partner in the national dialogue about the future of health care in this country. At the same time, we look forward to participating in national discussions that focus on strategic investments that nurture health research and innovation and can play an integral role in contributing to Canada's sustained economic prosperity and the health of Canadians.

Thank you, Chair.

The Chair: Thank you very much. I notice you have an extensive brief, well documented, and the committee members will take note of that, also.

Now we go to T-Base Communications Inc. Ms. Ayotte, go ahead, please.

Ms. Sharlyn Ayotte (Chair, T-Base Communications Inc.): Good afternoon, ladies and gentlemen. As always, it's a pleasure and an honour to be invited to participate in this forum. I take my responsibilities of citizenship and consultation very seriously.

This is actually my fifth presentation to this standing committee, and each year I've discussed issues affecting Canadians very broadly, from the standpoint of accessibility. Today I want to focus on one of the issues that I've addressed year after year, and that happens to be the unequal playing field as it pertains to voluntary sector and private sector competition.

I know this is a thorny issue, because we all feel that people volunteer for all the right reasons. We volunteer because we care about each other, because we want to make contributions and make sure everybody is treated fairly. But you can do both. In the old days, people would contribute to each other because there was a real need within the community. I see voluntary sector organizations now turning into major corporations, using high-priced fundraisers and competing directly with business, and it's no longer fair.

I was appointed to an advisory board of the Government of Canada on issues affecting small and medium-sized enterprises, both nationally and internationally. Of the 17 board members who were represented on this particular board, six members had significant issues with competition in global markets and national markets.

One of the things that continue to happen nationally is that these organizations... Let's just take an example that I'm really familiar with. I'm a blind business woman and run a successful company. I compete with the voluntary sector as I do business. One of the scariest things I know of at this time is that these organizations are now making representations on international stages. On those stages, voluntary sector not-for-profit charities that purport to represent the perspectives of the consumer audience are impacting the development of policies and strategies on a global stage, and they are now having an impact on small and medium-sized enterprises everywhere.

I actually prepared a briefing note and I was going to request that Rocco, my assistant, my talking computer, read it to me, but I can't plug it in and my battery just died. It is a very short briefing note, and I would like to request that somebody read it on my behalf. It's one page long.

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The Chair: It's been distributed.

Ms. Sharlyn Ayotte: But nobody else can share in my presentation. Would you read it for me, please?

The Chair: Go ahead. Mr. Discepola will just read it out.

Ms. Sharlyn Ayotte: Thank you.

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): It reads as follows:

ISSUE: Unfair competitive advantage of the not-for-profit sector over the private sector: a call for clarification, consultation, and adherence to existing government policies.

BACKGROUND: There are inconsistencies in the application of existing policies that govern competitive processes involving the voluntary and private sectors. This has led to a distortion in the understanding of federal laws and regulations, which govern the competitive process. Protection mechanisms within the policies are adequate to mitigate competition between the two sectors. However, such policies are not always demonstrated in practice. Small and medium sized businesses (SMEs) are most vulnerable when the application of these policies favours the not-for-profit sector.

Where the not-for-profit sector is permitted to compete directly with the private sector, voluntary organizations are provided an unfair competitive advantage in delivering their products and services. The voluntary sector has access to government funding, charitable tax status, and volunteer labour. SMEs lack similar advantages. In addition, the private sector is often not invited to the table where the federal government and voluntary sector organizations meet to discuss new policy and legislation. When discussions relate to market competition, it is imperative private sector has a seat at that table. Otherwise, another advantage is afforded through advance knowledge of policy direction and development.

The consequences of unequal competition: present barriers to the commercialization of private sector products and services; are a deterrent to foreign investment in Canada; a loss to Canada of the SME's knowledge, expertise and innovation in favour of more equitable markets abroad; and a decline in the diversity, quality and competitive pricing of mainstream customer products.

RECOMMENDATIONS

1. Adhere to Policy: The Government of Canada is requested to adhere to its existing contracting and procurement policies.

2. Mechanism for Review: Establish a mechanism to assess current and future unintended impacts emerging from policy designed to enhance the sustainability of the voluntary sector.

3. Consultation: The current bilateral dialogue between the federal government and the voluntary sector should expand to a trilateral discussion on policies that potentially impact the private sector. This provides clarification for and inclusion of all stakeholders.

4. Knowledge Strategy: Develop a knowledge strategy to ensure the commercial sector has access to the tools and opportunities to develop business solutions to meet the requirements of the changing global market.

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The Chair: Ms. Ayotte, do you want to close?

Ms. Sharlyn Ayotte: Yes. In closing, what I would like to request from the Government of Canada is very simple and doesn't cost a lot of money. I would like to request that funding be allocated to assess the impact of voluntary sector initiatives on private sector businesses; to simply develop a level playing field and an environment that is fair and doesn't impact our human rights, where organizations speak on our behalf without any kind of consultation ever having taken place.

Thank you.

The Chair: Thank you.

To the Canadian Vehicle Manufacturers' Association and the president of the association, please go ahead, sir.

Mr. Mark Nantais (President, Canadian Vehicle Manufacturers' Association): Thank you, Madam Chair. Committee members, good afternoon.

For those not familiar with CVMA, our membership includes Canada's largest automobile manufacturers—specifically, DaimlerChrysler Canada, the Ford Motor Company of Canada, General Motors of Canada, as well as the International Truck and Engine Corporation—and their affiliated finance companies.

Let me begin by saying that strategic public policies such as the Auto Pact and free trade have really played a crucial role both in developing a very large and productive automotive industry here in Canada and in creating high-value assembly and auto parts jobs. These policies, along with some of the economic and business realities, have resulted in an automotive sector that has become highly competitive and truly global in nature.

Yet we have seen that significant changes to domestic and international policy throughout the 1990s have undermined the ability of these policies to draw new investment into Canada. Quite frankly, we have not seen any new greenfield investment for over a decade here.

With unprecedented competition, excess capacity, and the elimination of most of the key policy tools to encourage automotive manufacturing investment, the future of much of Canada's automotive industry may actually be at risk. To ensure that Canada remains a competitive location for automotive production and investment, we have been working with the federal government, the governments of both Ontario and Quebec, as well as with labour and academia through the Canadian Automotive Partnership Council to create and implement a strategic automotive policy for our future.

CAPC, as it is known, has a mandate to develop a new policy framework that will create an environment that facilitates the strengthening and growth of our industry here. This includes recommendations for guiding investment and innovation as well as for creating a competitive and fair marketplace for consumers purchasing new vehicles. Many recommendations have been put forward by CAPC that will help sustain the hundreds of thousands of jobs and literally billions of dollars of government revenue that depend on a vibrant and competitive auto industry.

While some of these recommendations have begun to be implemented, we must ensure that the complete package of economic and social policies is fully and expeditiously implemented by the government. We've previously submitted a full set of recommendations to the committee that we feel would help to strengthen both investment and sales in the automotive industry.

My presentation today will highlight only a few of the major issues affecting our industry. It will include recommendations on alternate fuel vehicle rebates or incentives, rising health care costs, corporation taxation, and infrastructure, as well as investment in innovation.

Let me start with alternate fuel vehicle incentives. Traditional internal combustion engines, or ICEs, as they are called, have evolved significantly over the last number of decades and have made significant advances in terms of both fuel economy improvements and emission reductions. Improvements of this nature are expected to continue, and therefore we see internal combustion engines expected to dominate the Canadian fleet for the foreseeable future.

Concurrently, vehicle manufacturers have spent billions of dollars developing and bringing to market traditional alternate fuel vehicles, as well as advanced technology vehicles such as the electric hybrid and the soon-to-be-seen fuel cell vehicles.

Although they have been available for many years, alternate fuel and, more recently, these advanced technology vehicles—namely hybrids—have not been significantly adopted by the Canadian public or marketplace. Cleaner, more fuel-efficient advanced technology vehicles have a role to play in achieving Canada's air quality goals and will contribute to reducing vehicle-related greenhouse gas emissions.

The magnitude and speed of the contribution, however, is largely related to how quickly these technologies are adopted by consumers. Because of the associated advanced vehicle technologies involved and the costs to manufacturers, these vehicles are priced many thousands of dollars higher than a comparable conventional vehicle. The premium is significant, because studies show that for every $100 increase in the cost of a new vehicle there is a corresponding 0.8% reduction in demand. Surveys show that consumers indeed want greener and cleaner products, including cars, but their enthusiasm quickly dissipates when it is evident they may have to pay more for those types of products.

To assist consumers with the price premium, the government should provide consumers with meaningful incentives to purchase these advanced technologies. Creative options could include direct consumer incentives such as rebates, or sales tax rebates, or perhaps income tax credits that would allow consumers to effectively offset the higher costs associated with these vehicles. Additionally, the federal government should continue to encourage the development of refueling infrastructure for these alternate fuel vehicles and advanced technology vehicles—

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The Chair: Excuse me, Mr. Nantais, but our translator is having a bit of a problem keeping up to the speed of your presentation. I know we're pressed for time, but as a courtesy for some of our members, I think we need to take care of this.

Mr. Mark Nantais: My apologies.

The Chair: It's not a problem.

Mr. Mark Nantais: Additionally, we think the government should encourage the refuelling infrastructure for these technologies and ultimately look toward the infrastructure requirements necessary for hydrogen fuel cells and the hydrogen economy, moving forward.

Let me switch gears to health care costs. These costs have risen dramatically for the government; however, over the past number of years as costs rose and service providers began looking for avenues to reduce or share costs with third parties, in many cases these costs shifted from the government to the private sector through corporate health plans, as with the costs for semi-private rooms. Additionally, companies are paying increasing amounts for prescription drugs and other health care needs of current and retired employees. This is placing major strains on corporations today, with the potential for even greater impact in the future, depending on health care funding.

We must ensure that health care is properly funded in order to limit the amount of cost ultimately carried by the private sector. We bring these issues forward not to request certain amounts of money for health care funding, but to ensure that the government realizes the private sector is contributing a significant amount to health care today, and it affects the overall cost outlays and competitiveness of industry.

Let me turn to fiscal and investment policy. Multiple factors drive investment decisions by corporations, including market access, labour and other costs of production, political stability, and after-tax return on investment. Within NAFTA the United States has the advantage of market size to encourage investment, while Mexico has labour cost advantages.

One clear area in which to make Canada a more attractive location for investment is in creating a hemispheric competitive tax policy that improves after-tax return on investment. By leveraging the corporate tax system to encourage capital investment, Canada can maintain and create a large volume of highly skilled, high-wage, high-tax-stream jobs. Policies that stimulate domestic and foreign investment generate industrial growth and jobs, which provide revenues for other priorities such as health care, education, infrastructure, and the environment.

We believe the areas of focus for an automotive investment tax policy must include the following.

The federal government announced in the 2003 budget that it would phase out the large corporation tax by 2008. That's a good thing. This tax, more than any other, unfairly targets capital-intensive industries such as the automotive industry and acts as a disincentive to investment. The CVMA recommends that the phase-out of the LCT actually be accelerated.

Second, the federal government rate reductions for non-manufacturing and processing profits will be fully phased in next year. However, we believe they should be lowered further and that the corporate surtax should be eliminated. The CVMA therefore recommends that the federal corporate tax rate be lowered to 17.5%, which would be the lowest rate in North America.

CVMA also recommends the rates of capital cost allowance on manufacturing equipment be increased. This would improve the competitiveness of the tax system as well as of Canadian companies, because it would encourage investment in new technology and equipment.

Taxes are generally required to be withheld when a Canadian company issues payments in respect of interest and dividends to non-resident investors. This requirement creates a significant disincentive for foreign companies that are contemplating investing in Canada. We therefore recommend that future tax treaties provide for the elimination of the withholding tax on interest and dividend payments between Canada and the foreign country, in order to promote direct investment in Canada.

With respect to trade and infrastructure policy, the automotive industry, as you may know, is highly integrated across North America. Our members' just-in-time delivery systems rely on seamless transportation and streamlined border crossings between Canada and the U.S. to ensure that production parts are available to feed assembly lines and to permit our facilities to operate efficiently. As a result, our sector accounts for roughly 25% of the total two-way traffic between Canada and the United States.

Because of this high level of integration, we've been actively engaging with the governments of both Canada and the United States to implement changes in customs regulations to streamline the processing of shipments crossing the border. We have worked with both governments to implement the 30-point action plan, and our members have been the first to implement new programs such as free and secure trade, otherwise known as FAST, into their operations.

However, the programs aimed at security and expediting border crossings do very little if the physical infrastructure that carries goods as well as people to the border is outdated and inadequate to handle current volumes. The money announced in the 2002 federal budget for infrastructure was a good start; however, it is insufficient to meet current or future demands. We therefore recommend that the federal government increase funding for physical transportation infrastructure that will indeed sustain current, as well as future, trading demands.

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On innovation policy, investment in innovation is effectively two halves of the same whole. As a result, the government needs to ensure that in addition to having an effective R and D tax credit system, Canada has a complementary product commercialization strategy to help bring new products to market.

To support strategic innovation we have a number of recommendations, which include an early commercialization investment tax credit. This tax credit would be stackable on top of other available incentives or assistance for early modules of production of new technology to attract new technology production opportunities to Canada.

Funds should also be specifically earmarked for automotive R and D, with particular focus on lightweight materials, hybrids, fuel cells, and pilot programs involving hydrogen refuelling infrastructure.

We need to expand vigorously process review within the SR and ED directorate to allow companies to spend more resources on SR and ED rather than defending their SR and ED claims.

Last, we need to enhance the definition of eligible SR and ED activities to better address and encourage automotive product development and manufacturing process innovations. I think it's absolutely critical that Canada position itself as the most favourable location to produce the first module of new technology. That is wherever the intellectual property is developed.

The Chair: Mr. Nantais, you're over time by about three minutes. I will just take that there with the rest of your brief. I think you got in all your recommendations, though, in your presentation.

Mr. Mark Nantais: Thank you.

The Chair: This is a 15-minute bell ringing. I would propose to the committee members that, unless I have objection, we hear the testimony from Teamsters Canada in full, as they wanted to present it, before we go to the House, but in deference to not making our witnesses wait for nearly an hour because of the number of votes, we will, as individuals, get back to individuals here--so they can catch their flights and finish their arrangements--with any individual questions that committee members have had, and I give my apologies, as chair.

We do have work in the House besides our committee work, but we have another panel at 6:30 p.m. So it will back up another panel if we delay you.

Is everybody agreeable to this?

Some hon. members: Agreed.

The Chair: Okay, thank you very much.

I'm now going to turn the floor over to Mr. Benson.

Mr. Phil Benson (Lobbyist, Teamsters Canada): Thank you, Madam Chair. We welcome the opportunity to come before the committee. We recognize the need for and the importance of public consultation prior to budget-setting. We also want to recognize the committee's important contributions to that process over the years.

Teamsters Canada is a labour organization with more than 105,000 members. We're affiliated with the International Brotherhood of Teamsters, with 1.5 million members across North America. We represent workers in many sectors, including transport, retail, motion pictures, brewery, soft drinks, construction, dairy, and warehousing.

Paul Martin's victory in the change of leadership in the Liberal Party it makes it somewhat more difficult than in other years. We can only guess at what his priorities may be. He does talk about continuing the debt and tax reduction policy of the current administration.

We recognize that the Government of Canada faced a crisis in the 1990s and this government did respond. It was a decade of balanced budgets and debt and tax reduction. However, cuts were made to social programs—and we do recognize the government's reinvestment in those programs over the past few years. But even with those changes, our members, like many Canadians, are seeing the hope of university education dashed for their children with every tuition increase; we take way too long for needed medical attention; and not all unemployed workers yet receive the benefits they should.

We understand the need for continued prudence. However, we would recommend that in this decade the government address the social deficit with the same vigour as it addressed the fiscal deficit in the past decade.

Until we hear some of the new administration's policies and they're announced, we're going to focus more on more specific items of concern to teamsters that would continue to matter whichever administration or whatever policies come forward.

In the transportation industry, we are in air, truck, ports, and of course rail is coming up, and infrastructure is very important. There are two aspects.

The first is the infrastructure. As you've already heard, and I won't belabour the point, we can't have truck drivers waiting four and five hours at a border. Just-in-time delivery is, well, not just in time. We support things like the Windsor truck tunnel project and other projects that will make it faster and easier to get across the border.

But there's a second aspect of cross-border traffic these days—security. We're working with Transport Canada to encourage a standard security clearance for all modes of transport. We're working with Minister Coderre on the biometric card proposal, and we're also pursuing cross-border traffic issues with our brothers and sisters in the United States. We hope eventually to find a solution to this problem that will be acceptable to both governments, to Canadians, and to our members.

We understand that the meal deduction for truckers will be addressed soon, but the 50% cap on those deductions will remain. We'd like to make the committee aware that in the United States currently, there are two bills before the House that would see that deduction increase from 50% to 80%. With the competitiveness and integration of the market, we hope we could work with the committee and with members towards the goal of harmonizing those deductions in the few years ahead.

We recognize also that it has been very difficult for the airline industry this year. We represent workers at Air Canada and Jetsgo, as well as associated industries on and around the airports. Though it's clear that air transportation is going to continue to serve Canadians well in large markets, it's not so clear, according to reports in the media, that the smaller markets will continue to receive adequate service or service to which they have become accustomed. Air transportation, even in smaller areas, is needed to attract business, workers, and immigrants to more remote locations. Though the government has acted to help the industry in a general way, it has not yet recognized the importance of those smaller markets.

Again, in the United States they do subsidize smaller markets. We think the committee would agree that the solution for Canadians in smaller markets can't be to “let them drive”. We recommend that the finance committee examine this issue further towards supporting creative, innovative solutions that work for smaller markets, the taxpayer, the industry, and all Canadians.

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As specifically concerns the garment industry, currently the government places an import duty of approximately 17% on textiles to protect the textile industry. The problem is, of course, that garment manufacturers have to pay the 17% on textiles whether or not the Canadian textile manufacturers manufacture the specific textiles they require.

Peerless Clothing provides an excellent example. It's in the fashion industry and it must supply the product the market demands at a price point the market demands. It produces 40,000 suits a week in Montreal, mostly for the U.S. export market. You might be surprised that this export market is suits, garments. It's the largest suit manufacturer in North America. It employs 3,000 workers, and many more are employed in auxiliary occupations. It paid more than $4 million on this tariff duty last year on imported fabrics.

Now, to protect the textile industry is one thing. To force a company like Peerless and others to pay $4 million a year, some less, some more, on fabric the Canadian manufacturers will never make is a little difficult. Eliminating it would help these companies reduce their price point, increase their market share—new jobs, a growth industry, a garment industry in Canada. We'd like very strongly for the committee to examine it.

On a better note, on the film industry, another one of our divisions, generally the government action over the past few years, in all the tax credits and help they've given the industry, appears to be working. We'd suggest the industry is in its infancy. It's starting to grow and thrive and survive. As it matures, the levels of assistance and support will have to be reviewed to ensure it remains competitive.

A principle is that provinces shouldn't tax-shop, shouldn't play with tax points to try to attract business. But that's exactly what happens in the film industry. We think one of the most important things this committee could move forward on to help this industry is to lead off discussions with provincial counterparts to harmonize tax treatment in the industry country-wide so that the film industry will compete on the quality of the production, the quality of the people, and the quality of the individuals and skills and crafts they bring to it, and not on the preferential tax treatment of individual provinces.

With that we'll conclude. Thank you very much for having us here. We greatly appreciate it.

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The Chair: I greatly appreciate your understanding and your patience. You have all given us excellent written and oral briefs today.

We are adjourned until 6:30 p.m. We have two minutes to get down to the House for the bell. I have ordered some food in so people can have a late supper here at our next meeting. Thank you.

We are adjourned.