NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 30, 1998

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning, colleagues, and good morning to our witnesses, who I will introduce in a moment.

Please to call to order this April 30 meeting of the Standing Committee on Natural Resources and Government Operations. We are continuing, and nearly concluding, what might be called phase one of our study of the knowledge- and technology-based industries that have evolved over time in the natural resources sector.

Briefly, for the record, historically Canada has been a hewer of wood, a drawer of water, among other natural resources. We have tended to be very much the extractors of these natural resources, but over time a very strong industry has evolved in support of those sectors in terms of technology and the knowledge base. Our committee is interested not only in job creation, but in knowing how government policies can ultimately help or hinder the development of those sectors.

We're pleased to have with us today, to move us along that road of understanding, Mr. Chummer Farina, who is the acting director general of the innovation policy branch of Industry Canada. With him are Sue Milne and Ken Hart.

Mr. Farina, thank you for being here. I invite you to make an opening presentation.

Mr. Chummer Farina (Acting Director General, Policy Branch, Department of Industry): I greatly appreciate the opportunity to come and address this group. I thought we'd try to do three quick things; I realize your time is short. First we would like to give you some sort of context for why innovation and science and technology are so critical at this time, what is the current S&T policy, and from Industry Canada's perspective anyway, what are the key issues we're working on at the present time.

If I could just give you a very snappy summary of what this is about, basically our view is that our central challenge at the present time is that of productivity. It will be productivity improvements that will drive increases in the quality of life in Canada, increases in the standard of living. Through those increases we will be able to address the issues that are so central to Canadians: environment, health, and income distribution. Without those productivity improvements, we feel they will simply not have the resources to address those problems. The key to productivity improvement is innovation.

What I thought I'd do first is tell you a little bit about putting all of this in a global context. First, Canada is the best place in the world to live. United Nations studies have found that repeatedly. We rank number one because of our high quality and low cost of education, universal health care, cities that are safe and clean, cultural diversity, etc. The central question we have to ask ourselves is whether we can sustain that.

The standard of living is very high in Canada; we rank number three in the G-7. Unfortunately, although we rank number three and that's a very enviable position, we are losing ground with respect to other countries. Our third standing in the G-7 was based upon a 6% higher standard of living than the rest of the OECD, but that 6% higher has fallen dramatically from 1980, when it was running roughly 20%, down to 6% in 1995. That downward trend continues, I think partially because of productivity growth, and that's our critical central problem here.

Analysis that has been done by many organizations, conference boards, Statistics Canada, etc., has shown that the central reason that our standard of living has slowed down in the last 10 years is slow growth in productivity. That explains about 60% of the slowdown in standard of living. In addressing that problem, we feel the central issue is that of innovation.

Science and technology is about discovering something new, invention is about taking new knowledge and making it into something useful, and innovation is about turning that something useful into profits and commercial goods and services. So it's innovation we have to focus on. On the whole, most of the studies that have been done on Canada demonstrate that we suffer from what the OECD has called an innovation gap. This innovation gap consists of a number of components, but one we've repeatedly heard is that Canada's expenditures on research and development are among the worst in the OECD. Not only are they among the worst, but they really haven't gotten better over the last 20 years.

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In addition to that, with all the focus on high-technology industries, Canada's share of manufacturing in the high-technology industries is relatively small. The top graph shows that. Unfortunately, although we have improved our situation from 1970, the improvement has not been as much as in most of the other countries.

Not only do we suffer from some problems in the R and D area, we also have a problem with respect to our adoption and diffusion of technology. The next chart shows a comparison between Canada and the U.S. by sectors in terms of technology intensity. This is a measure of how quick we are at picking up technologies and using them.

You can see that although we have done reasonably well in certain areas of computing, most other areas of the economy suffer. We lag behind the U.S. in terms of our use of technology.

If you look at some of the newer and fancier technologies that have been coming on the market in the last 10 years, that gap is even larger. The U.S. is well ahead of us in the use of computer-aided design and a variety of computer-based technologies, and in terms of combining those technologies, Canada lags behind the U.S. in terms of the uptake of those.

Why is it that we lag behind in innovation? Recent data on this question is on the chart that follows. It says the number one issue we face is the availability of skilled personnel. Not only is that a problem for small companies, it is a problem for large companies. Right across the board, this seems to be the number one issue as identified by industry itself.

Other key issues include information on markets—more so for smaller firms—government standards, technologies themselves and some university-industry stuff. But the central issue is that of skilled personnel.

Looking at that a little more closely, most of the work that's been done in this area suggests a pretty good correlation between firms that train and firms that are innovative. The top chart shows very clearly that innovative firms tend to be the ones that focus on training.

Certainly in the last ten years or so, Canada has been a bit slow in terms of the retraining issue. The bottom graph shows that we have been falling behind our competitors with respect to retraining. This is the 25- to 64-year-old group. So in terms of retraining our workforce, we have fallen behind most of the other countries.

That gives you a very quick overview in terms of the innovation challenge we face. Government can play a critical role with respect to innovation. Business climate is a central component of that, but the thing I'm most involved with and where I can probably help you the most is in the area of science and technology, and here again we have a fairly critical role to play.

Recent stats in this area show that Canada has been increasing its expenditures in R and D. Obviously, compared with other countries it hasn't been as much as we would like. Most of that growth in R and D has been by the private sector, which is a positive thing. We've been trying to get more industrial expenditure for 20 years at least. It has been growing in the private sector. In fact, the industrial sector in Canada has lead the G7 in terms of the growth in expenditures in R and D. That's growth, not total amount. We still lag well behind other countries, but the growth has been good.

However, that has been balanced a bit by decreases in public sector expenditures. Certainly at the federal level, expenditures have gone down. As the charts in there show, it gives you a kind of a quick breakdown of how those cuts have been taken across the various departments.

I thought I would focus more on the strategy itself. The government put in place a new strategy in 1996 that laid out goals, core activities of the federal government, policy, funding and doing. Those are the classic kind of roles for government in science and technology, but it also talked a bit about the role of the government as catalyst in bringing together the various sectors to be more effective as an innovation system.

It also put in place some new governance elements to ensure that we do a better job in terms of coordinating the federal effort in science and technology. It established a number of key operating principles to be put in place.

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However, it should be noted right up front that the strategy Canada has taken in this area is one that recognizes that ministers need to use science and technology as a tool to address their central mandates. So the responsibility for decisions on science and technology rest with the ministers, and we have put in place a system to improve coordination among groups, but the big decisions are taken by the ministers themselves.

So we have a decentralized approach to science and technology policy in this country. Other countries have taken different approaches, and that's a debate that has raged for 20 years or so.

I thought I would tell you a little bit of how that governance system works in Canada. The Minister of Industry is at the centre of it, as he is the minister responsible for science and technology. Two new elements were introduced into the policy process with the strategy in 1996. One was the Advisory Council on Science and Technology. This is a group that reports to the prime minister and provides overall advice on science and technology for the federal government. What is new about it is that it reports annually to the cabinet committee on economic union. It meets with them once a year to provide its advice. It met with them last December and it was a productive meeting, I think.

The second new body is the committee of federal science and technology advisory bodies. The idea behind this group is to bring together the advisory bodies that advise ministers in science-based departments and agencies. For example, the external chair of an advisory body would be put on this committee and it would look at the issues that cut across the interests of many of the science-based departments and agencies. That is just getting underway and the first meeting will probably be this spring.

What are the government's major achievements in the last few years in the area of innovation? Where do we think we're going? That's the last part of this presentation. First of all, we've been focused on two central areas in the last little while—the knowledge base, because we must have the knowledge base in place, and the commercialization of that knowledge, moving that knowledge into commercial products and processes, and the human resource elements of it.

On the knowledge base, the more recent initiatives have been the Canada Foundation for Innovation, which is to stimulate rejuvenation of the infrastructure in our universities and teaching hospitals, increased funding for the granting councils, stabilization of the networks of centres of excellence—that program has been made permanent—and new competitions for new networks have been launched.

With respect to the commercialization of knowledge, Technology Partnerships Canada was put in place. The Industrial Research Assistance Program at the National Research Council—the funding for that has been increased. We have the tax credit in place, and that's been reviewed recently. There have been major changes at the Business Development Bank of Canada to allow them to focus more on high-technology industries, especially in the small and medium-sized companies.

The last part is the human resource area. The last budget had some fairly major new initiatives with respect to the training of people. The Canada Millennium Scholarship Foundation obviously leads the charge on that front.

To conclude quickly, we think we need to be spending more effort in terms of bringing together the knowledge creation and the commercialization processes to make that process more efficient, more effective. Second, we need to be looking at the pool of people with the critical skills that are going to be required to move to a knowledge-based economy. Those are the two things we're focused on at the present time.

Thank you very much.

The Chairman: Thank you, Mr. Farina. Obviously it's a pretty complex network or patchwork that we have at the federal level. No doubt when you add the provinces and the private sector, it is even more so.

We'll begin questions with Mr. Cullen, Mr. Mancini and then Mr. Jackson.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

Thank you, Mr. Farina. I'm speaking in the House later this evening about the skills gap question. One of the things the government undertook in the throne speech was to try to bring industry and universities and educators together to better plan for the future in this rapidly changing world. I recognize that education and training are very provincial in terms of responsibilities, but my own view is that the federal government can use moral suasion and certain policy levers to bring the stakeholder groups together.

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I'm putting the question to the Minister of HRDC, but if you're trying to match industry's needs with the educational institutions, I suspect that Industry Canada has to be involved. Could you talk about some of the newer initiatives, particularly since the 1996 throne speech?

Mr. Chummer Farina: Certainly. There are two things that I could highlight. The information technologies branch of Industry Canada has organized a skills summit later this month, and it does precisely what you've just described. It brings together the key industries, the universities and the provincial and federal people to look at the problem in the information technology area.

The second thing I could highlight is the Advisory Council on Science and Technology. As I mentioned, it met with cabinet in December and has come forward with several recommendations in this area, along the lines you have described, in terms of trying to bring people together to find solutions to these problems. The government's response to that has not yet been made public, so I can't go much further than that. But they too were concerned about that, and I think you will see some initiatives flowing from that as well.

Mr. Roy Cullen: When we look at unemployment at around 8%, and I have companies in my riding that say they can't find the skills that are required— No matter who you talk to, they say we could be short as many as 20,000 to 30,000 information technology professionals. The Canadian Manufacturers' Association has just put out some numbers on the various skill sets and shortages—27% here, 29% there. Those are significant, so I'm glad to hear that something's happening.

Mr. Chummer Farina: This is not the work of Industry Canada, so I don't know it well, but Human Resources Development has established human resources sector councils. These are focused on areas such as software, environment, biotech, etc., and they are very involved with this issue as well.

Mr. Roy Cullen: With respect to TPC, how much of that goes toward the natural resources sector? There are certain strategies areas that you're focusing on, is that right?

Mr. Chummer Farina: Yes, the TPC does focus on strategic areas. Environment is one of those areas. Funds have flowed to that and those will have an impact on the natural resources sector. Other areas are biotech, into which it has put some funds, and the aerospace industry is fairly significant as well.

Mr. Roy Cullen: I need to be careful on this one because there's not a lot of forestry or natural resources in my riding, but there is aerospace, and we've done fairly well—

The Chairman: What is TPC?

Mr. Roy Cullen: Sorry, that's Technology Partnerships Canada. That program was rejigged quite significantly from the old DIPP, which was the Defence Industry Procurement Program. It's not a granting or loaning program, it's more a royalty-based kind of system.

Mr. Farina, as I recall it was the practice of Industry Canada to enter into MOUs with various natural resource sector research organizations. I can speak with a little more knowledge about the forest products industry—PAPRICAN, the foreign techs, the FERICs. Is that still in play? What are some of the things that are happening with those agreements?

Mr. Chummer Farina: We had to cut back most of the programs within the Department of Industry as a result of program review, and to my knowledge most of those are no longer in place.

Mr. Roy Cullen: They're just gone.

One area that was interesting was this business of closed loop or zero effluent when we looked at pulp mills. At a pulp mill, if you take water in and you process it, right now the water goes back out into the rivers. Even though the toxins are controlled, the concept— There is some technology out there called closed loop or zero effluent, so you don't have to put the grubby old water back into the rivers and streams. I know some work was being done on that and that our government was supporting it. Is that still going on?

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Mr. Chummer Farina: Yes, to the best of knowledge. Again, this is not my area of expertise but as I understand it Environment Canada has a fairly major pilot project underway on the closed-loop system. I'm not sure whether TPC has any money in it or not, but I do know that Environment Canada is pursuing that quite vigorously.

Mr. Roy Cullen: It has some environmental appeal and if you can get that technology proven, you can sell it or license it abroad.

That's all for now, Mr. Chairman.

The Chairman: Thank you, Mr. Cullen.

Mr. Mancini, welcome to our committee.

Mr. Peter Mancini (Sydney—Victoria, NDP): Thank you, Mr. Chairman.

As you'll gather, I'm a visitor to this committee. I normally sit on the justice committee, but I'm here for Mr. Godin of our party today. So if my questions lack a certain foundation, I hope you'll be patient with me.

I have two areas that I'd like to question you on, though. The first one is the opening statement you made, and that was that productivity is the key to prosperity. I find it timely to hear you say that, because I've just finished reading a book by two Dutch economists. I think the title is Beyond Poverty and Affluence: Towards a Canadian Economy of Care. They challenge that notion, so this is compelling to me.

I am under the impression that we've had an increase in productivity in this country over the last three or four years. Your statistics may prove me wrong, but I think there has been an increase in productivity in most sectors in this country. We still have, as has been indicated in the statistics, a rising gap between the rich and poor, and in fact our standard of living has fallen. So can you clarify that for me? Has productivity been rising or declining?

Mr. Ken Hart (Department of Industry): Slide seven in the handout—we didn't put it up on the screen—shows that there's been an increase in productivity, but it's unbalanced and it's not competitive with some of our major comparator countries. That's not just the U.S. and Japan, but Norway and countries like that.

Mr. Peter Mancini: But at the same time we've had that increase in productivity, it has not resulted in a better or higher standard of living. It hasn't closed the gap between the wealthy and the poor. Nor has it necessarily produced a better quality of life. So when I look at the last chart that you referred to where the triangle is there and it says more productivity, better employment, better quality of life—that hasn't proven to be the case if we look at this. I'm not challenging you on this; I'm asking for my own edification—in this country we've had that increase in productivity, but it has not been followed by the results it ought to have been, given your hypothesis.

Mr. Ken Hart: I think there are two sides to the question. One is that for productivity increases to be effective, they need to be comparative, relative productivity increases. So if our major competitors in the mining or forestry area are experiencing faster productivity gains than we are, we will lose market share and that will mean lost employment and lost profits.

Mr. Peter Mancini: Okay.

Mr. Ken Hart: Secondly, productivity gains are a medium- to longer-term issue in terms of the outcome end of that diagram. Not that long ago, at the turn of the century, well over 30% of Canada's workforce was in agriculture. We're down to 3%, yet we produce more agricultural products. That's a vast increase in productivity. In the short term there were probably some dislocations for the people dislocated that were not happy. In the longer term I think we could say that our quality of life, the quality of the food and the amount of the food we have available to us has improved vastly, but it's taken a little time. So there are two things: the comparativity and the length of time.

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Mr. Peter Mancini: Okay, that's a good segue to my next question.

I represent an area of the country that is struggling dramatically with the very thing you have mentioned, and that is the movement from a resource-based economy into this technological economy. I come from Cape Breton. So as I read this, there is a component to Industry Canada that is concerned with regional development. So I'm going to ask you perhaps in a broader context: are there specific programs to address the regional disparities in this country?

Much of what you're talking about is very helpful in the urban centres. You can see in the aerospace industry and in major urban centres in this country where much of Industry Canada has directed its efforts: the growth of high-tech jobs.

I'm going to be parochial here and ask: can you indicate particularly in Atlantic Canada what initiatives we can expect in the next year?

Mr. Chummer Farina: First, let me say that this issue of industrial development versus regional development has been one with a long history in this country. Industry Canada has gone through various structural changes over the years to reflect that.

At the present time, there's a distinction with the regional development agencies, ACOA, Enterprise Cape Breton Corporation, etc. Those agencies have been set up specifically to address regional disparity issues, and Industry Canada is not involved with those issues in the same way. With respect to regional disparity issues, you'll see those addressed through those kinds of agencies rather than through us.

Mr. Peter Mancini: There is a partnership, though, that operates.

Mr. Chummer Farina: Yes.

Mr. Peter Mancini: I had the opportunity to be at a conference—your minister couldn't be there, so Mr. Pettigrew was there in his place—at the University College of Cape Breton just recently. So I would expect there is a partnership there.

Mr. Chummer Farina: Oh, yes.

Mr. Ken Hart: In this context especially, it's important to note that, for example, on the Prime Minister's Advisory Council on Science and Technology, Dr. Thayer-Scott of the University College of Cape Breton is a key member and will probably be working in areas on human resources. We do tend to deal with more than the longer term, and some of those longer-term issues will be raised there.

Mr. Peter Mancini: Thank you.

The Chairman: Thank you, Mr. Mancini.

Mr. Jackson, and then over to Pierre.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Thank you, Mr. Chairman. I am probably going to ramble on with some comments to start with and then I'll have some questions.

I will just mention the fact that we are decentralized in a lot of ways. I guess there's some good in decentralization, and then there are also problems with centralization. Perhaps you don't have enough time, but maybe you could give us a quick view as to what's good about decentralization and centralization.

It seems to me that Canadians, because we want to maintain this high standard and good quality of life, have to have high-tech, high-skilled jobs and be very productive. I think Mr. Mancini was right that we should also make sure that we don't have this big gap in the middle. We need a big middle class. If we have the gap increasing, then we are going to run into some problems.

Here's the dilemma. I don't know whether or not or how you crystal-ball. If you crystal-ball, you may have some long-term planning. But at the present moment, I think you have some immediate needs. I want to know how we are going to jump-start that. If we have to lock in certain skill sets, obviously we have to get those people very quickly, maybe through immigration.

But the fact that we are decentralized means that across this country of ours, we are not using best practices, perhaps. Maybe some provinces have better educational systems by using the private sector to interact with the schools and what have you. Also, how do we get into that skills base globally?

Here are the questions I would like to ask you. First, give me a quick blurb about a centralized approach versus a decentralized approach. I want to know whether or not you are crystal-balling. You may not want to tell me what you think are the skill sets and things we might need to put us ahead of the game. Also, how are we going to jump-start the economy and work toward a long-term solution to having the right skill sets because we saw the crystal ball and we know the right things to do?

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The technology changes so quickly, and sometimes you've got to make some quick moves in another direction because it changes completely.

Mr. Chummer Farina: That's a tough set of questions.

On the centralized and decentralized issue, I think there is certainly a long history—this is not only here in Canada, but around the world—on these issues. With respect to its strengths, I think what you've seen in the last 20 years or so is that science and technology just permeates everything now. There are very few things that go on in the world, very few avenues of life, that in one way or another have not been affected by science and technology. From that perspective, anybody trying to address issues in the environmental, agricultural, or natural resource sector is naturally going to turn to science and technology for some of the solutions that are there.

A strength of the decentralized model, clearly, is that you have the people who understand the issues the best, who are at the front lines of these things, taking the decisions with respect to how the science and technology should be deployed in that area. That's clearly a strength, as you're putting in the best people and giving them the tools to address the challenges.

The weakness of that, if you like, is that there are a number of challenges out there that are right across the board. You touched on one just now: the skills area. We can see that information technologists are important not only to our high-technology sectors, telecommunications, and software, but they're critical to the banks and the forestry industry. They're critical right across the board.

In a decentralized model, you clearly need some way of bringing those things together and to be able to deal with issues that cut right across. I think we've put in place a couple of things to try to do that in the last little while, but there's always a balance to be found here between dealing with that coordination issue and being able to put the tools in the hands of the people who are at the front lines of these problems. Those would be my comments on the centralized and decentralized issue.

On the skills, I guess I would start with a cautionary note. I think most governments around the world have tried at various times to do these analyses of where the shortages are going to be and do supply and demand kind of models for skills.

The difficulty is that the technology moves so fast and the data is so slow to be captured that most of those things have been pretty much a dismal failure. For example, I don't think you would find anybody who might have predicted the need for COBOL programmers today because of the millennium bug. I don't anybody would have come up with that. Or five years ago, when we were trying to do models, we wouldn't have known what a Java programmer was. I think you have to be a bit cautious about trying to think we can model this program and therefore be clear about what the specific skills would be that we would need.

On the other hand, I think there are a number of ways forward. First of all, there doesn't seem to be much doubt that it's in the science and technology areas where our shortages are going to be, and that we need to be doing more to encourage our young people to be looking at careers in that area.

If you look at the numbers in terms of participation of youth in science and technology in universities, etc., I think they've stabilized in the last few years, but they've fallen dramatically since the 1960s and certainly haven't recovered. That clearly is going to be a problem for us down the road. I think you can do things in a general promotional and encouragement kind of way, but not get too focused on the very specific needs.

In terms of trying to address those specific needs, I think that's where Mr. Cullen's comments were very helpful here. In trying to bring the industry together with the universities, looking at opportunities for ongoing training, looking for opportunities for retraining, are the kinds of things that I think are the way to go.

Knowledge cycles are clearly shortening. It's Java today; who knows tomorrow what we'll need. Those life cycles are shortening, and we've got to find ways and means of getting more people engaged in continuous learning, if you like.

Mr. Ovid Jackson: I have just one last quick question.

Is it the kind of culture that Canadians should adopt from the grass roots up such that if we're innovative, we can work on science and technology? Look at the past and what has traditionally happened.

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I think in the past what's traditionally happened— I'm a bit of a technocrat. I was born in Guyana, South America, and at an early age, about 17, I had a scholarship, so I fixed cars. I'm a licensed mechanic. I had to keep up with the cars. They started with one computer, then they got two computers, then three computers, and they all interact. The old-fashioned guy who used to fix the distributor and fool around with the carburettor opens the hood and he slams it shut and kicks it and walks away, because for the most part the problem is very complex and you have to know circuit diagrams and calculations and stuff like that.

All my friends complain about their cars now. Actually, a good mechanic will make about $70 an hour because of what you can do with a car now. They have modems on them and assembly line data terminals, so you can put it into the phone system. A guy in Detroit could have a scope and short the cylinders out and do all this kind of stuff and tell you what's wrong with it. If you're smart and you have a service station, that's basically what you do. You pay these guys $70 an hour and charge the guy $100 and get the thing fixed right the first time.

The culture is that everybody wants to be a lawyer or a doctor and they force their kids into that, and the same darn kids who are in those streams are the ones who could fix the cars. When I get them at the shop now they say well, this guy ruined his life, he can't do math and so on, but you make him fix a car. Well, there's a real dilemma there. Is there a cultural gap there that maybe we have to get involved with?

Mr. Chummer Farina: I think you've identified a very good problem. If you look at the skill shortage issues, these are not all people with PhDs and Masters degrees in advanced esoteric disciplines. The shortages are in people with basic technological capabilities, and the cultural issues involve people seeing those kinds of professions as being important, useful, glamorous, exciting.

In the States, for example, which also suffers a lot from the skill shortage issues, the Information Technology Association of the Americas has done a number of very big studies on this. One of the key things they're focused on is the image issue, the geek image problem. For example, Microsoft is spending very large amounts of money producing videos and things like this trying to address that issue of the image of somebody who's involved with technology.

So I think you're quite right. That is a very serious issue.

The Chairman: Pierre, did you have a question?

[Translation]

Mr. Pierre de Savoye (Portneuf, BQ): Mr. Chairman, I thank you for having calmed things down on the other side.

[English]

The Chairman: Powerful committee!

[Translation]

Mr. Pierre de Savoye: I am sorry for being late, but I did take the time to read the notes you circulated. Before asking you a specific question, I would like to comment that in Quebec all information systems technicians know at the present time how to program in COBOL. That being said, it doesn't mean that it would be easy to solve the year 2000 problem, but Quebec at least has the required skills to do it.

In your presentation, you stress the fact that productivity in Canada has not kept pace with that of the United States. As you also mention, an increase in productivity goes hand in hand with an investment in technology which, generally speaking, has two consequences from the stand point of skills.

First of all, those who work in a technologically advanced field must have a specific training. As my colleague Mr. Jackson and you have stressed, there is a shortage of skilled technicians in some technologically advanced areas.

Secondly, employees who worked for a company at a time where the technology was not so advanced very often can't be retrained, which creates a dilemma. If on the one hand businesses become more productive we will have on the other hand a shortage of properly trained employees as well as a surplus of employees who don't have the skills required for the job and who probably can't be trained.

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A proper balance must be found between maximum competitiveness and people's well-being. People are not only workers but consumers. If they don't have jobs, they will be a burden on the state. How can we find a proper balance? Productivity is not a God to be worshiped.

[English]

Mr. Chummer Farina: That's an extremely difficult question.

I would challenge a little bit the dichotomous model you've portrayed where you're saying that the people who are there now cannot be retrained. I think we have to get to a model that is more the continuous learning one.

Our problem right now is that what we have put in place in our society, and this is not unique to Canada, is that we train people up to an age of 21 or 25, or whatever it is, then we put them in the workforce and say that's it. We expect that the knowledge and the skills and abilities they accumulated at 25 are going to last them the rest of their lives.

First, you have to focus at the beginning part on the ability to learn. Then, if we are ever going to get anywhere on this problem, we have to build in in that period of work periods of learning. That has to be a continuous process. Otherwise, you do arrive where you have just described, and this is that somebody who hasn't had any ongoing training for 20 years now all of a sudden is faced with totally new technologies that are coming on stream. He has not got any kind of a basis for this, has had no training for the last 20 years, and ends up, as you described, as not being able to be retrained.

If you can build that in earlier on, so that this training process is continuous, then I think you can go some way to solving this problem.

Mr. Pierre de Savoye: But still, the only way a corporation can be more productive is to lower its payroll more than the technological investment will cost. So one way or the other, even if you did retrain all the former employees, some of them will just have to lose their jobs for productivity to increase. So they've been retrained for nothing by this corporation.

The alternative would be to have more corporations hire more people. That means expanding the market, and the Canadian market can be expanded just so much. As a matter of fact, it has been expanded to its 100% capacity. Export now is the solution. This is where Canada and Quebec have been investing tremendously. Yet you can only do so much so fast. How can you reconcile all that?

Mr. Chummer Farina: These are fundamental questions. They're not easy to answer, but I would suggest a couple of things.

First, again, looking back over the history, as these technologies advance they create new opportunities. Twenty years ago did we have an Internet industry? Did we talk about electronic commerce? No. Those things are brand new.

The skills people had been acquiring in the information technologies 10 years ago might have gone into a software company. Now they can go into a bank. They can go into a whole lot of other areas. They can create new businesses in new areas of commercial enterprise.

So you have to look at the equation not just in terms of existing jobs, but as these technolgies develop they create whole new industries. Growth in information technologies has been spectacular in the last 10 years. Those jobs weren't there 50 years ago at all. So there is some compensation that goes on there.

There is also the other side of this equation that you have to look at, and it is that if you don't address these productivity issues, then those industries will simply disappear. There will be no jobs there because we will simply be put out of business by companies out of Chile or someplace else.

It's a double-edged sword here. Yes, you are going to lose some. There's no question about that. But if you don't keep pace with the rate of change in the global economy, then the impact is going to be even more horrendous. At the same time, these new technologies are creating new opportunities and hopefully we will be able to capture those.

[Translation]

Mr. Pierre de Savoye: If I understand you correctly, there are different parts to this solution. We must invest in new technologies or else not only will the jobs that presently exist be lost, but the businesses themselves will disappear. That is why we must invest in technology.

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At the same time, the employees who will keep their jobs will have to be continuously trained in order not to lose them. We must also train people so they can find jobs in the new markets which will emerge. That means we also must develop new markets.

The issue is a complex one. We must also maintain a social security net for those who will be left behind. I know Industry Canada is very concerned with technology and productivity. Do you have contacts and do you coordinate your work with the work of other departments, namely with the department headed by Mr. Pettigrew which is the department that take cares of those people whose skills are no longer required in the workplace?

[English]

Mr. Chummer Farina: Yes. That's a simple answer. Absolutely. We work quite closely with Human Resources Development Canada. We have a number of projects under way, principally in this area of skill shortages, trying to understand what they are, trying to understand what that means in a global economy, trying to understand this concept of brain drain in the new environment we're in. We work quite closely with Human Resources Development Canada, and of course the minister does work with his colleagues internationally in a variety of forums to try to look at these issues.

The questions you're posing are questions that are being posed around the world. France, for example, is going through an interesting experiment in these areas, and as I understand it the next meeting in Birmingham of the G-7 will be partly dealing with this issue of technology and jobs.

Mr. Pierre de Savoye: I have one last short question.

On a scale from one to ten, or even zero to ten under the circumstances, where would you put, productivity-wise, the House of Commons, and can Industry Canada do anything to augment its productivity?

Some hon. members: Oh, oh.

Mr. Chummer Farina: I don't think I want to answer that question, actually. I'm no expert on such matters, so I think I would bow to the judgment of others.

Mr. Pierre de Savoye: As you know, I must go now, but thanks for giving me this opportunity.

[Translation]

I would like to thank our witnesses.

[English]

The Chairman: We're going to go back to Roy Cullen, a fountain of questions.

Mr. Roy Cullen: I'm going to stay away from the last question too, although there is some debate about whether we should be introducing more technology into the House of Commons.

But we have got into this discussion about productivity, and one of the things your chart portrays is you're really looking at total factor productivity. There was a time when we looked at labour productivity exclusively. Of course what happens, in my judgment, is that labour is a commodity, so if labour is priced in relation to capital it becomes an opportunity cost or an opportunity gain, and then labour is replaced with capital. I think we're seeing some of that.

I'm not trying to be crass about it, but I think some of the automation— I don't know if you talked about the Dutch economists, about the book they wrote. I haven't read it, but I read another book by Jeremy Rifkin called The End of Work, and automation is playing a part in the thesis that he promotes. But some of the automation is not only, in my view, displacing labour because labour has priced itself out of the market, although in some cases that's what's happening, but automation is actually replacing a lot of the repetitive, redundant and boring kind of work.

But we do have this challenge, and if we look at Atlantic Canada, to me that's a classic. I think Mr. Farina made an excellent point that we're in a dilemma there now because perhaps people have not been part of a life-long learning process and that is a real trap. How do you train them and train them for what at a certain age?

During the last election, I knocked on someone's door and they said to me, “All this automation and productivity, we should stop it, because it's affecting jobs”. I had to say to her, “I hear what you're saying, but I can't subscribe to that, because as a country, as a people, if we don't get into technology and the knowledge-based economy of the future, we will eventually all suffer”.

I would like to come back to a question, and get off the philosophical for a moment, although they're very important issues, I would agree.

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Mr. Farina, when we look at total factor productivity, what are the components of that? Are we able to measure where we've been losing some of our momentum, if you like? We have labour, we have capital, we have innovation. Are we able to make a judgment call in terms of where the best leverage potential is, or where we've been missing the boat?

Mr. Chummer Farina: Ken, perhaps you could speak to that.

Mr. Ken Hart: If I'm not mistaken, there's a pie chart.

Mr. Chummer Farina: Number 6, page 6.

Mr. Roy Cullen: Okay.

Mr. Ken Hart: I'm no economics professor—

Mr. Roy Cullen: That's okay, we'll forgive you.

Mr. Ken Hart: —and I'll stumble in this as well, but we're pretty sure that a lot of what's driving this fall in productivity is in fact the innovation side of it: that people working with the right tools and having the right skills are simply able to produce more, and to the extent that they're not able to get access to the tools and they're not able to learn to use them and maintain them and modify them, we're going to have slippage. So we think it's that intersection that is where the problem is; it's not one or the other.

Mr. Roy Cullen: I know in the forest products industry, and we talked about this the other day in committee, one of the problems that was presented to me is that often we're on a third-generation technology in our labs, but on the shop floor we're working on phase one because there are literacy issues, there are computer-based technologies that are replacing manual processes. So that's an ongoing challenge as well.

On this question of the culture gap, I've been working on that a little bit where we look at how in North America in certain cultures you have to send your kids off to university. In parts of Europe and Scandinavia there's no stigma attached to going to a good trade school, getting a technical skill. And that's very often, as you pointed out, where many of the shortages are today. So that's a longer-term challenge, and I hope that Industry Canada working with HRDC is going to help to push that envelope in terms of making it more acceptable to have a trade, to have a technical skill.

Can I just ask two questions? In terms of technology transfer, the diffusion of technology, what role does Industry Canada play in that, if any, and what's happening on that front? In terms of the question of apprenticeship and internship, how do you see that, and what role does Industry Canada play in that sort of debate?

Mr. Chummer Farina: Maybe I can start with the technology transfer one.

First of all, Industry Canada itself at this time does not have any specific programs outside of Strategis. Strategis is our World Wide Web product. I think it is the largest industry-focused site at the present time in the world. In it we have a number of specific services that are offered and which relate to technology transfer. One is an index of all of the capability in the government labs and in the universities, which helps companies find the people and the labs that are doing things that are similar to them. We also have a licensing opportunity capability in it, where the public institutions are putting up their opportunities so that the private sector can have a look at them.

There are a number of other related kinds of services that are up, that address both the issue of the talent, because it's people who transfer technology, not just the technology itself, and also the kinds of new knowledge out there that could be commercially interesting. So that's what the department does itself.

Under the same minister, there's the National Research Council, and it's probably the organization that is the most focused on this issue. Through the industrial research assistance program, most of that is about technology transfer, about bringing to companies technologies that will solve their problems.

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They also have in place the Canadian Technology Network, CTN as it's called, and that too is designed to assist in this process. What CTN brings to the mix is that IRAP focuses just on the technical problem: My tin cans are rusting; what can I do about it? They can find you the technical solution to that; they bring that talent to bear. What CTN can do is, okay, your cans are rusting, but my real problem is that I lack the management talent, the financing, the contacts internationally. CTN can bring those kinds of resources to bear to help solve some of these problems.

So there are things that are going on. There's no question about that.

You'll note in our presentation that on the commercialization of knowledge, we think one of the central problems is that we have to try to bring the players together earlier on in the process, that we don't just search for knowledge and then say we have this great knowledge, now I wonder who could use it. We have people out here who are probably quite close to the markets and have a sense of where the markets are going, but really no understanding of the research.

We need somehow to bring that together in a way so that what we're looking at in terms of new knowledge is a little bit more informed by what our capabilities and potentials are. Similarly, those looking at markets have a better understanding of what is technically kind of coming down the pipe. So that's sort of part of the equation too.

The second part of your question was—

Mr. Roy Cullen: It was about apprenticeship, internship and your views.

Mr. Chummer Farina: Maybe Sue could speak to that a little bit.

Ms. Sue Milne (Department of Industry): One of the programs Industry Canada has been involved in and on that has really demonstrated the importance of partnerships that cross the sectors has been the networks of centres of excellence program. That has been a terrific model for bringing students, both at the undergraduate and graduate level, in contact with the potential users of the knowledge base that's coming out of the university and to an extent the college sector as well. I think that has really proven that the more time that students themselves spend in that other environment, the better they are at understanding ultimately what that real world will be like; they become very productive employees, and the learning curve has been shortened considerably.

I think that has been proven to be extremely successful in areas as diverse as pulp and paper or information technologies, that the same principle applies. I think because of the networks of centres of excellence model, both the universities and the private sector have changed their own culture. In the years since it was first introduced in 1989, I think there's been a tremendous change in the environment and a much better appreciation of the importance of having co-op programs, apprenticeship programs at all levels. I think this is something that is really growing. It's certainly something we're trying to foster by as many mechanisms as possible. I think it's now sort of a real grassroots response that this really is beneficial.

Mr. Chummer Farina: I would add one other thing. Certainly in Industry Canada I know we don't have a sort of across-all-sectors approach to internships or apprenticeships, but if you look at specific sectors, there are initiatives.

The furniture manufacturers have come together and established out on the west coast a centre that is specifically an apprenticeship kind of program. That has been done with some money from the department, money from the industry itself, and I do believe it involves a couple of the educational institutions as well. There are a number of specific examples like this we could point to, but as I say, it's not a universal program that's out there.

Mr. Roy Cullen: All right. Thank you.

The Chairman: Thank you, Mr. Cullen.

I would like to indulge myself a question or two before we adjourn. I think some of the philosophical questions are quite fascinating.

I have a short question to start off with. Within either the scientific community or the bureaucracy involved with science, or the educational sectors, is there any sense of urgency relative to our ability to do science and technology, to diffuse it, to adapt it? When we look at our neighbours to the south, our closest neighbours, the president has a chief science adviser. They have NASA, which because it's so big is on TV a lot. Science is there and it demonstrates the U.S.'s power in areas of science and technology. Is there any sense of urgency here with respect to these matters, or are we just kind of moping along?

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Mr. Chummer Farina: Again, I think that's a very good question. I think there is a growing sense of urgency to it.

I would cite a couple of examples. I don't think I can quote statistics on this, but Northern Telecom, for example, the largest R and D performer in Canada, recently has done a fairly good paper on the skill shortage issue and has been pressing very hard on the Ontario government on this issue.

The Chairman: Is that something we can get?

Mr. Chummer Farina: I believe so. I think Nortel can supply that for you.

The Chairman: Maybe our researcher can get that for us.

Mr. Chummer Farina: They have been pressing very hard on these issues. That very issue, urgency, is the central theme that the Advisory Council on Science and Technology has been pushing. We have to be addressing these issues in a more serious and direct way. So I think there is some of that.

On the good news side, though, I don't know if you saw the news last night, but the Sudbury Neutrino Observatory opened in Sudbury yesterday with delegates from the U.S. and the U.K. present. Five Nobel laureates were there. I think it really highlighted Canadian capabilities in science and technology and the fact that we now have the world's most advanced facility for detecting neutrinos and studying neutrinos in the world. That's located in Sudbury, which I think in itself is interesting.

I will point out that the heavy water that goes into the observatory has come from Cape Breton, and I don't think you want to pursue that story.

Mr. Peter Mancini: No.

The Chairman: We don't have an equivalent to a science advisor. I think Mr. de Savoye was sort of getting into this.

Pulling it all together, is there some one person or agency that tries to coordinate the otherwise disparate efforts of different departments at the federal level to make sure we don't get square things trying to fit into round holes, for example? We have the advisory council that advises the Prime Minister and the committee of committee chairs and so on, but is there any one person or secretariat that does that?

Mr. Chummer Farina: I would just preface my comments on that, if I may, with a little philosophical statement. It's not obvious that centralized approaches do that better than decentralized approaches. I don't think the case for that is clear. There are many examples of fairly good decentralized models that work very well and there are also examples of countries that have adopted centralized models that work very well. A lot of that is a cultural issue, the kinds of institutions and their histories that exist in that country and that make one system more workable than another in that country.

Having said that, I think that's where we're at in Canada. We've been down this road many times about whether we should have a centralized or a decentralized approach. Senator Lamontagne back in the 1960s did probably one of the most exhaustive studies in this area done by any country ever.

The bottom line is that we have looked at that time and time again and we have come up with the decision that a decentralized model is the model we wish to pursue, partly for the reasons I described earlier. We just feel that science and technology is so ingrained into everything we do that we need to have the capabilities in that area to take the decisions closer to where the action is rather than the centralized approach. And that was a decision that was reconfirmed no later than two years ago, in the release of the new science and technology strategy.

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Do we have one single place? No. We do have a number of committees, a number of structures, where these issues come together and are discussed. Internally we have a science ADMs' committee, assistant deputy ministers' committee. There is a deputy-level group that looks at certain issues with respect to government science. There's the Advisory Council on Science and Technology from the outside.

Most ministers have external advisory bodies that provide them advice on science and technology within their own departments. Many of them have revitalized those in the last couple of years, or created new ones as a result of the science and tech strategy. And we will have this coordination of those groups through another body. The thinking at the present time is that level of coordination does the job.

You may wish, Mr. Chairman, to have a look at— Sir Robert May, the chief science adviser for the U.K., was in front of the industry committee yesterday here in Canada, and he addressed that issue as well. It came up; it's a perennial. So that's a different model they have that you may wish to look at.

The Chairman: And just a very short final one, if you were to choose some other— Obviously we're not in the lead, so there must be somebody else doing something better than we are, presumably, in terms of science and technology management. What other country would you look at, or have us look at, in terms of lessons to be learned?

Mr. Chummer Farina: You have to find a balance. You have to find one that has enough of a similar history and tradition that the lessons you can learn from looking at that model are applicable to Canada. If you pick one that's totally different politically, structurally, and socially, then it just doesn't apply.

So if you're now looking at a parliamentary democracy and looking at the kind of history they have, probably I would say the U.K. is the one I would look at, myself, as being the one that has enough similarities that the lessons could be something we could apply, and yet has chosen a route that's a little different from ours. There might be some interesting comparisons you could make.

The Chairman: With that, thank you very much, on behalf of the committee.

Mr. Chummer Farina: You're welcome.

The Chairman: We found the discussion very stimulating today. We're concerned about the natural resources sector, but we can't do that without looking at the question of science. I know the industry committee is doing their study of science, and we don't want to overlap; we want to complement their efforts.

We reserve the right to ask you back again someday.

Mr. Chummer Farina: With pleasure.

The Chairman: Did you have a question?

Mr. Peter Mancini: Well, not a question for the witness, but a question for you. I was under the impression that today there would be some discussion of witnesses for the natural resources committee.

The Chairman: Yes. We don't even have a quorum for that, so we're going to do it Tuesday.

Mr. Peter Mancini: Okay.

The Chairman: We'll try to do it early Tuesday. We're also having the Auditor General speak on Tuesday about some of his comments on the public service employment situation. I think that's about all we can do.

So with that, we'll adjourn, and thank you all.