FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 18, 1999

• 1136

[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this morning.

As you know, the finance committee is consulting Canadians from coast to coast to coast, and today we have the pleasure to have with us representatives from the Conference of Defence Associations, the Railway Association of Canada, Genome Canada, and the Cultural Human Resources Council.

Many of you have appeared before us and you know how the committee works. You have approximately five to seven minutes to make your presentations. We've already received many of your briefs and I've read them, so give us an overview of your major points and that will allow us to engage in a question and answer session thereafter.

We will begin with the Conference of Defence Associations: Colonel Alain Pellerin, executive director; and Colonel Sean Henry, senior defence analyst. Welcome.

[Translation]

Colonel Alain Pellerin (Executive Director, Conference of Defence Associations): Thank you. Mr. Chairman and members of the committee, it is with great pleasure that I come before you this morning for the second time on behalf of the Conference of Defence Associations, which represents some 600,000 members in Canada.

[English]

CDA is a non-profit organization dedicated to the maintenance of a beneficial defence policy and effective armed forces to implement that policy. We distributed to you, in September, a comprehensive analysis of the unsatisfactory funding situation of the defence department and the severe negative implications for the Canadian forces. I urge you to review this document, as it presents the evidence to support the case I shall make to you in my short remarks today.

As a minimum, I urge you to read the one-page synopsis that has been distributed to all MPs and senators, which I will repeat to you this morning. You could also read the front-page article in the Ottawa Citizen this morning, which gives a good summary of our main concern.

I will start by mentioning our deep frustration, generated by the inability to convey to government and the public the seriousness of the defence crisis in this country today and its negative impact on our well-being. People do not understand or will not believe that parts of the Canadian forces, especially the army, are on the verge of collapse.

The armed forces are a fundamental component of the framework of this nation. They defend our sovereignty at home and support our economic and political interests abroad. This ought to be of more than passing interest to Canadians, given the fragile nature of our prosperity. The armed forces are a solid insurance policy to help bolster our prosperity.

CDA is now embarking on a major project, supported by a grant from the Molson Foundation in Montreal, to produce an analysis that will show in detail how defence spending benefits Canadians in a wide variety of ways.

Our well-being also depends on the support of friends and allies. A number of recent articles show that Canada's influence and respect, on the international stage, have fallen sharply, in tandem with the decline of its armed forces. This reached a climax some weeks ago when Lord Robertson, the new Secretary General of NATO, publicly criticized Canada's weak defence contribution. This was an unprecedented act. Senior NATO officials seldom, if ever, publicly criticize alliance members, especially in the host nation.

In January 1999 CDA published a strategic assessment. It argued that the wide variety of conflicts that dominate the news today and those looming in the future in the 21st century call for robust armed forces.

• 1140

The policy in the 1994 white paper calling for the maintenance of combat-capable armed forces, vice a lightly armed peacekeeping constabulary, remains valid. The problem is that budget cuts, particularly since 1995, are preventing this policy from being implemented.

The situation is actually worse than that. Canada's armed forces are crumbling because of the mismatch between increased commitments and the decreasing resources provided to execute these commitments. This is shown graphically in the diagram on the back of the CDA synopsis, which was distributed to you this morning.

Note that since that chart was prepared in June 1999, the imbalance has become even worse. Today, with the recent East Timor deployment, there are almost 4,500 Canadian troops serving abroad on 22 separate missions. This is the largest deployment of troops overseas on operations since World War II and Korea.

It is shocking that an increase in commitments of this magnitude would coincide with the largest budget cuts and associated reduction in people since 1970. The decision to withdraw from Kosovo and East Timor will help, but will not significantly alter this mismatch.

These peace support commitments, undertaken while the Canadian Forces were simultaneously reduced by more than 30%—although the figure of 60,000 is mentioned in an official document, it's more like 57,000 and still going down—has had its worst impact on the army. There is a major shortage of people, and the tools to do the job are either insufficient or worn out. The army is working with only 65% of the people it needs. This leads to burnout in the face of constant rotation overseas.

Other army shortages are legion, and include everything from uniforms to spare parts and most seriously, major pieces of equipment. The navy, the air force, and the support units have equal cause for complaint—from worn-out airplanes, helicopters, and ships, to lack of supplies.

Moreover, the reserves, which should normally be able provide backup to the regular force, are in an even worse condition. Overall, the Canadian Forces are rapidly becoming a manpower pool fit for little beyond police work.

DND has recently published two documents, Strategy 2020 and Defence Planning Guidance 2000, which purport to show how the department will do more with less and still meet the challenges of the high technology future. They are well presented, but in the end they still engage in robbing Peter to pay Paul. The trend line of combat effectiveness remains in steep decline.

This has led, in turn, to preparation of so-called desperation options, to deal with the funding shortfall. A few of these have been published, such as deleting the Snowbirds, electronic warfare trainers, and other types of aircraft. But much more remains under wraps and would reduce the armed forces to insignificance, if implemented.

I will now quickly review several details of DND funding. You will find the complete analysis of this in the main CDA submission to the committee. It shows that despite the small but welcome increase for DND in budget 1999, the results are well short of the requirements. The reason for this is that DND has never been able to recover from a $450 million cut from its budget base in program review phase two in 1995—the final straw, as it were.

Also, the funding increase this year was quickly dissipated by so-called flow-through requirements and directed expenditures, such as quality of life projects. In the end, only $27 million of extra money remains to address some $1.5 billion of shortfalls related to policy objectives in the 1994 defence white paper. This was substantiated by the report of the Auditor General, submitted last year.

Finally, I will summarize several developments that I believe strongly support additional and meaningful funding for DND in the next budget.

In the first place, the finance minister is predicting a healthy surplus. CDA believes that a large part of this should be applied to tax reduction and to reduction of the national debt. Thereafter, the parlous state of the armed forces ought to rank near the top of this list of priorities for additional funding.

• 1145

With this in mind, members of the CDA were grateful that the Speech from the Throne stated the government's commitment to ensure that the armed forces had the resources necessary to do their job. Moreover, we note that the Ontario association of the Liberal Party of Canada approved resolutions recommending that defence spending be increased from the present 1.2% of GDP to 1.6%.

Also germane to that is a comment recently by the chairman of the standing committee, Pat O'Brien, who suggested there should be an increase of some $2 billion. The official opposition has also called for a $2 billion increase to the budget.

Public opinion polls published in the Chief of Defence Staff's annual report to Parliament last year indicate that some 80% of Canadians support increased defence spending.

Finally, the Minister of National Defence and the Chief of Defence Staff have both sounded warnings that the armed forces cannot continue to perform at the current operational level without additional funding.

CDA urges, therefore, that this committee add its voice to the growing support by recommending that a significant increase be added to the budget base of DND. Such an increase should not be less than $500 million, to be allocated in the next fiscal year. Additional amounts in the following five years would be needed to remove the remainder of the $1.5 billion overall shortfall.

Thank you very much for your attention.

The Chairman: Thank you very much, Col Pellerin.

We'll now hear from the Railway Association of Canada, the president, Mr. Robert Ballantyne. Welcome.

Mr. Robert H. Ballantyne (President, Railway Association of Canada): Thanks very much, Mr. Chairman.

You will have received our written submission and I think the members all have copies of the charts, but we'll be showing them on the monitors, as best they show up.

What I propose to do in my few minutes is review the place of the rail industry in the Canadian economy, focus on government actions that affect our ability to compete, make some recommendations as they relate to our industry, and then make some general comments about the budget for the coming year.

Canada is a trading nation and our prosperity really depends on the ability of Canadian industry to compete in competitive world markets. About two million Canadian jobs depend on trade, and about 40% of Canada's export trade moves by rail. That represents about 60% of the railway workload. Rail freight is self-funded and makes no demands on government expenditures for a fixed plant.

Canada's industries have benefited from competition and strong Canadian railway productivity gains in the past few years. Average Canadian rail rates have declined by 10% in current dollars or almost 20% in constant dollars over the last decade. Right now we're getting about 3.5¢ per revenue-tonne-mile for the work we do. Just to put that in perspective, it means we have to move a tonne of freight about ten miles in order to generate enough cash to buy a pencil. The result is that Canada has the lowest rail freight rates in the industrialized world and probably the lowest in the world.

In the ten-year period from 1988 to 1998 Canadian railways handled 27% more freight with less track and fewer freight cars and locomotives. Just in passing, 1997 was an all-time high for rail freight in Canada. We're doing this with a smaller workforce. Our workforce has been reduced by about one-third in that decade. It is down from about 75,000 people to about 45,000 people in the industry.

Most of the productivity improvements available from downsizing, restructuring and deregulation have been achieved. To continue our productivity improvements, we need sustained investment in new technology and equipment.

• 1150

Despite the gains we've made in productivity in the railway industry, which have been substantial, our American competitors have done even better. This chart shows the output on a per-employee basis, and the big American railroads are about 50% better than we are.

Of course the U.S. railroads have some natural advantages. They serve a much larger economy, and they have greater traffic density. American railroads have been investing about 50% more on a comparable basis than Canadian railways. This particular chart shows the density of traffic between the two systems.

Our U.S. railroad competitors are looking at spending about $90 billion in capital investment over the next 10 years. Canadian carriers will need to spend proportionately the same amount just to tread water, just to stay in place. While that may not be important in itself, Canadian industries that are served by railroads are in competition with U.S. industries served by their railroads. So the nation's competitiveness really is tied to this.

Canadian taxation policies do discriminate against investments essentially in raising railway productivity. Railway taxes are about 50% higher in Canada than they are in the United States. The bar on the left in this particular chart shows the tax burden that CN and CP have in Canada. The bar in the middle shows what the tax burden would be if they were operating under the U.S. tax regime, and of course the last bar shows the difference.

Focusing on the tax and the federal jurisdiction with regard to tax, the capital cost allowances for Canadian railways are a substantial problem for us. This chart shows the amount of undepreciated investment in four years, eight years, and twenty years for Canadian railways, Canadian truckers, and U.S. railroads. You can see by the middle graph that the railways have about 45% of equipment still left to depreciate, whereas Canadian truckers are at almost nothing, and U.S. railroads have depreciated their investment at that time. The result is that U.S. railroad equipment is newer and the American railroads and their customers are gaining the competitive advantage from that.

In effect, what we're asking for is not any special treatment but a tax regime that is comparable to what other industries in Canada have.

The other point I'd like to make in regard to investment is that governments at all levels have ignored the potential of the rail industry to ease both road congestion and pressure on the environment. A 100-car freight train can take about 275 big trucks off the highway, and rail intermodal can handle up to 30% of current transborder truck traffic. Trains do all this on privately owned and in fact taxpaying infrastructure.

The particular chart that's up there now shows the difference in the age of the locomotive fleets of the two countries. The two bars on the left show that just under 30% of Canada's locomotive fleet is from 1970 or earlier, and the grey bar in the middle shows that the U.S. railroads have a much higher number of high-horsepower 1990s-version locomotives. The chart on the far right shows the average age of the locomotives in the two fleets. Ours is about 25 years, and for the Americans it is about 17 years.

With regard to environmental issues, rail produces slightly more than half of all freight revenue tonne-kilometres—that is, as compared to both trucking and domestic marine. In doing this, rail produces 4% of the greenhouse gases from all transportation, and the trucking industry produces 20% to 23%. Railways have been improving their greenhouse gas performance by more than 1% a year every year since 1975, and we expect this trend to continue for at least the next four or five years.

• 1155

The Kyoto transportation tables options paper has identified improved capital cost allowances for the railway industry as one way to help Canada meet its Kyoto commitments.

The last slide basically shows the fuel tax burden that we pay across Canada. The dark part at the bottom is the federal excise tax of 4¢ per litre, and the grey bars on top are what the provinces tack onto that.

Does it really make sense to penalize the most energy-efficient, least polluting mode with fuel taxes that were nearly $200 million in 1998?

I said I would summarize by making some recommendations, first of all, as they relate to our industry.

With regard to the year 2000 budget, we would certainly like to see the capital cost allowance rates harmonized between the railway industry in Canada with other modes in Canada—that is, with the trucking mode primarily, and with U.S. railroads. We would like to see railway investment essentially treated as other industries—no more, no less.

We also think it would be useful for government policy and taxation policy to recognize railways for the way they can reduce pollution and congestion and conserve fuel, first of all by phasing in a reduction in the federal excise tax on locomotive fuel by one cent a litre, and also, if there is to be an infrastructure program, to look at least at extension of support to intermodal projects.

Lastly, I have some general comments with regard to budget surpluses.

In support of something you'll hear from the Canadian Chamber of Commerce and probably almost every other group that appears before you, the first priority should be to reduce taxes, both personal and business. This is the most important action that government can take to promote Canadian competitiveness.

Secondly, there should be a reduction of the debt. That should clearly be the second-largest priority after the reduction of taxes.

Thirdly, there should be limits to new spending programs. In our view, any increases in spending should really focus on three areas: education and training, being the most important to Canadian competitiveness; health care and child care should certainly be a high priority; and we also feel that there do need to be improvements in the amount of money that's spent on Canada's military. As a nation, we can't go on the way we've been going. We would certainly support increased spending on the military.

That's all I have to say. Thank you.

The Chairman: Thank you very much, Mr. Ballantyne.

We'll now hear from Genome Canada: Mr. Martin Godbout, executive director; Mr. Brian Harling, executive vice-president, MDS Health Corporation; and Mr. Peter McCann, president, Ag-West Biotech Inc. Welcome.

Mr. Brian Harling (Executive Vice-President, MDS Health Corporation): Thank you, Mr. Chairman.

I'm Brian Harling, the vice-president of corporate affairs for MDS. Today, as part of speaking to the proposal from Genome Canada to encourage the federal government to take national leadership on a new technology area that will be a major economic driver going into the next century, I thought it might be helpful if the committee understood what MDS is doing in this area, just to give you an idea of how this fits into the overall picture.

For those of you who might not know, MDS is one of Canada's health and life sciences company. Our revenue this year will be about $1.2 billion. About 55% of that revenue is generated from activities, businesses and initiatives external to Canada, on a global basis.

MDS has taken technology leadership and strategic leadership in a number of areas. About a year to a year and a half ago, MDS felt that the area of genomics, and particularly the subset of that, being proteomics, was a new growth opportunity. We have made a strategic decision as a company that our goal is to establish ourselves as the global leader in this area. We are working very actively to develop this technology.

• 1200

As you get the genomic structure in place, the proteins in the body are what actually makes things happen. They will be the new targets for diagnostics, the new targets for the pharmaceutical industry, and our goal is to be the company that develops those.

In 1999 alone, we have invested $20 million into proteomics, only $5 billion of which was invested in Canada. The reason for that is that was about all we could do. We managed to find a key researcher at Mount Sinai, at the Samuel Lunenfeld Research Institute. We formed a partnership there and created a company from which we expect to be able to spin off additional companies.

MDS also has a venture capital arm. In part of the concept where we have $650 million under management for investment into the health and life sciences sector, it is our vision that as you start to develop those key targets, you will be able to then spin off a company that will actually take that intellectual property and turn it into a new business. We see the two fitting together very effectively.

Another area we're looking at is the genetic diagnostic field. It's an interesting aside that I think you heard about in Quebec, from Jacques Simard, who was involved in the development of the breast screening gene BRAC2. The kind of infrastructure and the kind of technical support we're talking about in the Genome Canada proposal—what we need in this country—was not here. That technology ended up in the United States. The original research was being done in Canada, but to take it to the next step, we weren't able to do that here. MDS is now in discussions with the company in the United States about bringing that technology back to Canada. Unfortunately, we missed that step.

The concept is that in addition to the $20 million that we invested into genomics alone, one of our divisions, MDS/Sciex, would manufacture the mass spectrometry equipment that is key in this area. They spent $19 million on research and development of new products, and are working now on developing a new product that is even more suited to this area. To me, the concept that is so key here is that if we look at the kind of economy that we need to have in Canada, we need to get in on the leading edge of what the next major economic engines will be.

It is interesting that one of my colleagues at MDS was down at MIT, in Massachusetts, where they have what's referred to as the media lab group. They're the group that looks at technologies and provides leadership in the United States as to where the future is going. They're the group that was telling the telecommunications industry ten years ago that the Internet was going to be the next major economic engine, and many companies followed that lead and started to invest.

At yesterday's presentation they said the next major economic engine will be what they referred to as the post-human-genome period: i.e., after you have identified the genes and have started to actually do something with them. That will be a major economic engine. My colleague learned that companies like Motorola and Netscape are planning to make.... Those seem to me to be unusual companies, but the fact is that they've decided genomics is the area for their growth. When companies of that size are moving in this direction, that tells me it's going to happen. The question is whether it's going to happen in Canada or whether we will follow behind once again.

We've missed many of these technological revolutions that have taken place because we haven't taken that leadership to provide that infrastructure to make things happen. For example, in our involvement with the Samuel Lunenfeld Research Institute, MDS has recruited one of our key scientists to lead our initiative. That person has been a Canadian exile, but is coming back to Canada to work with MDS on this initiative. At the Samuel Lunenfeld Research Institute, three additional scientists from the United States have come back to this project.

We can build that kind of a capability. There's not a shadow of a doubt in our minds—certainly not in my mind—about the capability in Canada to make this happen. The challenge for us is whether or not we're going to take that leap and get out in front. We clearly need to have the knowledge-based economy. These are the kinds of industries that will create the jobs in the future.

The proposal from Genome Canada is to basically create that infrastructure to support that at a higher level than basically that of an individual scientist working in a lab. Put in place the more sophisticated infrastructure that is necessary to support that kind of leadership.

By pulling it together with the provinces, we're very excited about it, and MDS is very excited about it. Our $20 million investment this year—and that was just this year's investment—will at least be matched in 2000.

The question for us—and I guess I would say the question for you—is how much of that investment MDS will make in Canada versus other parts of the world. We've invested in the State of Washington. We have invested in a company that's doing work in Denmark. We are working with the researchers wherever they are.

• 1205

As I stated, our goal is to be the global leader in this sector. Obviously we wouldn't want to be just based in Canada, but as a company we would like to have the major portion and the nub of that leadership based here in Canada. There's no reason it can't be. It just requires getting started and establishing some of the infrastructure in place.

I would draw your attention to the package that's been drawn around. I'll just make one reference to it—and this is a personal opinion. I can tell you that based on the work that MDS has done, on the studies by the consultants we've hired, and on the research we've done in this sector, I would say the benefits that are described in our proposal to you are extremely conservative. MDS is looking at doing that almost by ourselves. How much of it we will do in Canada remains to be seen, but we see that within three to five years our proteomic initiative should be generating $500 million for MDS. And that's just one company. There are many other companies in Canada that are geared to benefit from this initiative.

I guess I would urge you to consider seriously that this is really a key area. It fits with the comments in the throne speech about genomics being an important part of the knowledge-based economy as we go forward into the next century. That was absolutely correct. We're here today—and I'm here today—to tell you that MDS believes it, and we're going to do it. We'd like to do as much of it in Canada as we can. If we can't, we'll do it in Denmark or we'll do it in the United States, because we see this as a phenomenal economic opportunity for our company to grow. I thought it would be important for you to know that.

In closing, I'll introduce you to Peter McCann. One of the comments is that this is below the health sector—which is what MDS is involved in—and that it is a key part of what's happening from the genomic revolution, if you like. It's not limited to that. Peter will talk in Calgary about the impact this initiative and the proposal from Genome Canada will have on the agricultural industry and its future in Canada.

For MDS, we focus primarily on the health sector. That is our niche in the world economy, if you like. That's the part that we see. But when you talk about a genome centre, it's like the biotech revolution: it crosses sectors. The other point that I think is worth emphasizing is that if we're going to have biotech industry—I know the federal government is to put a lot of energy, a lot of resources, and a lot of enthusiasm into supporting the biotech industry—the genome structure is basically the scientific base of building that industry. If you don't build a strong base, it's hard to build a strong industry.

Thank you, Chairman.

The Chairman: Thank you very much, Mr. Harling.

We'll now hear from the Cultural Human Resources Council, Monsieur Jean-Philippe Tabet and Ms. Leah Geller. Welcome.

[Translation]

Mr. Jean-Philippe Tabet (Executive Director, Cultural Human Resources Council): Thank you, ladies and gentlemen of the Finance Committee, for hearing what we have to say at this time.

I will be making a three-part presentation: first, an overview of our sector; second, the strategy that the Cultural Human Resources Council has developed and implemented and for which we hope to have the support of the Finance Committee for some of the key aspects; finally, some specific recommendations that we would like to see the committee support.

I will start with an introduction. Although many of us invest a great deal of our talent and time in creating and defending arts and culture in Canada—and I know that some members of your committee do so as well—we would probably all find it very difficult to define exactly what culture is.

Matthew Arnold, the English poet whom George Meredith called the passionless poet, described culture this way: “It is the quest for total perfection by wanting to know the best of what has been taught and said throughout the world about all subjects of concern to us.”

For others, culture is what you still have when you've forgotten everything. But the German writer Hanns Johst said, and I know that he has unfortunately been imitated: “Every time I hear the word “culture,” I get out my revolver.”

[English]

Please hold your guns.

No offence, Colonel Pellerin. I did not know you were going to be here.

Voices: Oh, oh!

[Translation]

Mr. Jean-Philippe Tabet: In response to those somewhat radical statements, Arnold Koesler added: “Two half-truths do not make a truth and two half-cultures do not make a culture.”

• 1210

Well, in the five minutes allowed to me today, I will try to bring to the attention of the Finance Committee how we can develop the means to strengthen Canada's culture and identity. Naturally, whatever the reality of these issues, we can at least recognize that the culture of a group is the sum total and more of the expression of all its individualities. Defining culture, however, is not the goal of this report or of your committee.

What we need to do is to create a climate and develop tools to provide the 700,000 cultural workers in Canada with a better economic and spiritual environment in which to apply their talents. For more than 40 years, the government of Canada has recognized the importance of the cultural sector by promoting and supporting its development through various public mechanisms that have ensured the sector's steady and vigorous growth.

The cultural sector in Canada includes heritage, visual arts, crafts, performing arts, audiovisual works, cultural industries and the world of new media. It has become an indelible facet of our national reality, contributing not only to Canada's image abroad, but also to the pride in our country felt by every individual and every community. It has also, and this is the argument that I'm going to try to develop here with you, contributed to our country's economic and social health.

In recent budgets, the government of Canada, certainly through your efforts, has recognized the importance and excellence of our country's cultural sector, renewing its commitment to provide funding in several key areas, notably national cultural training institutions. I would like to thank you for having supported that recommendation two years ago, since we can now see that there will be adequate funding to give a major boost to research and development in this area. We also have, of course, the Canada Council for the Arts.

Now that the country has just eliminated its deficit, the time has come to try to define more precisely what strategic investments you will need to make in our sector. That is why we are here today; we would like to give you a few ideas on this subject.

The Cultural Human Resources Council thanks the government for its past support and for investing in human resources development in the cultural sector. For the cultural sector to continue to grow in Canada and abroad, the opportunities are huge, as are the challenges, and your decisions are important.

I will give you a few statistics. Between 1981 and 1996, the cultural work force increased by nearly 28%, a rate of growth nearly twice that of the overall work force in Canada. From 1991 to 1996 alone, the work force in the cultural sector grew by 11%. These statistics are taken from the 1996 census. According to our own figures, which date unfortunately back to 1995—unfortunately, because we have not carried out a study since then—the cultural sector contributes $30 billion to Canada's gross domestic product, which makes it one of Canada's most important industrial sectors.

One of the main points that I want to focus on again this year is that 50% of cultural workers work in small businesses or are self-employed, and Canada has still not responded to the realities that have created that work force that is very different from the one that existed in 1950.

I will now pass the microphone to Leah Geller. She has participated in many activities in the cultural sector. She studied dancing and is now a writer. She also works as an administrator in the cultural sector.

Ms. Geller, if you would like to go ahead, please.

[English]

Ms. Leah Geller (Marketing Director, Cultural Human Resources Council): The Cultural Human Resources Council was established by the cultural sector in 1995, under the sectoral partnership initiative of Human Resources Development Canada. Its mission is to facilitate, undertake, coordinate, and promote cultural human resource planning, management, development, and training. Through its members, it represents 10,000 people.

• 1215

Establishment of the CHRC has had a major impact on the cultural sector. Recognizing that career development for the cultural labour force is key to a strong cultural sector, CHRC has devised a strategy that seeks to meet systemic, cross-sectoral, cross-disciplinary, and Canada-wide needs. Cultural sector workers, especially the self-employed, who make up nearly half of the cultural workforce, need the training infrastructure and financial support or incentives necessary to meet the challenges of a rapidly changing working environment in the cultural sector.

Our strategy at CHRC is based on three elements. The first is to facilitate development of career information and training programs that keep pace with the needs of the employment market in the cultural industries. The second is to undertake research on changes in the field of cultural work in Canada. And the third is to work on the development of an attitude favouring training and lifelong learning in the cultural sector.

Since 1993, as a result of strategic partnerships created by CHRC between the cultural sector itself and the federal government, 10,000 people in the cultural sector have benefited from career training and skills improvement programs that emphasize new technology, marketing, business and career management, and technical and specialized artistic skills.

[Translation]

Mr. Jean-Philippe Tabet: I would like to close with a few recommendations, since I must wrap up now.

First, we recommend that the government of Canada continue to invest in school-to-work transition programs for young Canadians. More specifically, we suggest that the cultural sector should be the vehicle for this and the means through which young Canadians get their first work experience, since it is quite clear that the cultural sector develops entrepreneurial skills that the country needs; one example would be an initiative to sponsor young people in cultural activities.

Second, we recommend that the government of Canada continue to support the sectoral human resources development initiative. In my view, we cannot deal with economic problems on a piecemeal basis or in the abstract. We must put in place and promote mechanisms for the overall development of the industry. Canada has developed such a mechanism through the sectoral initiatives of Human Resources Development Committee. This mechanism is the only one of its kind in the world.

We would therefore ask that long-term support for the sectoral councils be maintained and that it be tied to the efforts by the sectoral councils to generate revenues from the private sector. We are not asking for the government of Canada to give full and comprehensive funding to the sectoral councils, but rather that it develop shared-cost investments strategies. I can come back to this if you have any questions.

Third, we would ask Revenue Canada to please prepare an interpretation bulletin for self-employment, so that self-employed workers in the cultural sector and in other sectors as well can better understand how Revenue Canada deals with self-employed earnings. We feel that Revenue Canada does its work very well, but that it should give more attention to the new realities of work today, where self-employment is a growing trend. If you could make a specific recommendation to urge Revenue Canada to spend a bit of time and energy dealing with this issue of self-employment, that would be very much appreciated.

We also call on the Canadian government to lighten the tax burden on businesses, in particular small business. There are a very high number of small businesses in Canada's cultural sector. It would be extremely helpful if they had, for example, a provision for income averaging in order to reduce their tax burden. I know that you made this recommendation last year and that Revenue Canada did not listen to you. We are making the suggestion again today, because it is very important. In Quebec, for example, writers who earn less than $15,000 a year are exempt from paying income tax.

• 1220

We also ask that the number of tax incentives for small and medium-sized businesses be increased in order to help them attract investors and develop better strategies for generating their own revenues. Small businesses need special support in the area of tax relief.

Lastly, we recommend that the government of Canada create mechanisms to ensure that human resources development investment funding better meets the strategic and emerging needs of the sector. In particular, we would like to see a pilot project set up under the Employment Insurance Act to study the issue of self- employment and we feel that the cultural sector especially should be called on to take steps to respond to this research. The Employment Insurance Act provides for pilot projects to be used to study needs of self-employed workers. The government should take advantage of that provision.

Canada will begin the 21st century with a work force that has changed dramatically. The world of work, in particular, where new technologies are concerned, is much different from that of 1950. Despite that fact, we do not yet have the tax and other policies to meet the needs of this new work force. We are asking you to try to remedy that situation. Thank you.

[English]

The Chairman: Thank you, Monsieur Tabet, Ms. Geller.

We'll now go to a question and answer session. It will be a seven-minute round, and we will begin with Mr. Solberg, followed by Mr. Cullen and Mr. Szabo.

Mr. Monte Solberg (Medicine Hat, Ref.): Thank you very much, Mr. Chairman, and thank you to the witnesses for their presentations. We heard a lot of interesting and diverse comments. We have quite a mix in this group of witnesses.

I'd like to comment on something that everyone has said, starting perhaps with Mr. Harling. I'm very interested in what you're doing. Obviously the genome project and your proposals are at the forefront of science in the world, I suspect. What you're proposing is very ambitious, and I suspect that we do need to catch this scientific wave that's washing across the world. You're correct in saying that we've missed other opportunities. I really do believe that. However, I have some questions and some concerns. I think you're suggesting that for this project, it would cost $395 million to set up these genome centres around the country. It's somewhere in that range, is that correct?

Mr. Brian Harling: That's the five-year budget, yes.

Mr. Monte Solberg: Beyond setting up those centres, are there other things that can be done on the tax side, for instance, to encourage more of this kind of development? Or is this basket really where you're putting all your eggs? Do you have any sort of a fallback plan? In the past, biotech has relied heavily on research and development credits and that kind of thing.

Mr. Brian Harling: On this one, I think what we're looking at is an infrastructure capability. My personal opinion is that changes to the tax structure can make some things happen over time, but if you're trying to establish the integrated research and infrastructure support capability, I don't see a genome centre, for example, being created as a result of tax changes.

There are some things the state just has to take some leadership in, and I think this is one of those areas in which you establish that integrated capability in order to allow the development of the new science. When you're talking about a new science, it evolves. It's hard to predict today what tomorrow's breakthrough will be, other than that you know there is going to be a breakthrough. You just don't know exactly how that will transpire.

One thing we've learned about the genetics area is that you need massive computing capability in order to be able to do a lot of the analysis and research that is necessary. It's very difficult for people to fund that as part of the specific project. When their project is done, what do they now do with all this infrastructure?

Mr. Monte Solberg: You've proposed five different centres around the country or something like that.

Mr. Brian Harling: Six.

• 1225

Mr. Monte Solberg: Six. Why is that? Wouldn't it make more sense to cluster these projects where we already find a lot of the biotech industry already clustered? Forgive me for saying so, but isn't this a little bit of a political sop? It would seem to me that if we're talking about precious resources, we have to put them where they'll do the most good. Wouldn't it make sense to cluster them where we already have a bit of an infrastructure already?

Mr. Brian Harling: You have to keep in mind that this is not one science area. This is a sort of core science for a whole sector, whether it be forestry, agriculture, or mining. And there's also the ethics component that is associated with the genetic revolution.

The concept is that even though the centres might be geographically located, the researchers based across the country would be integrated in those. The researchers that we have to build the base on are scattered across the country.

In order to build on the infrastructure that's there now, the concept we're recommending from the board to the government is the concept of having proposals come from the universities, from the hospitals, from industry, from the players in the system now, about what this genome centre would actually do and how it would work.

Where the centres would be set up is on a bidding basis, if you like. The concept is three large centres and three small centres. That's the concept we're recommending, and what we think makes the most sense when you look at where things are being done now. If we're looking at fisheries, for example, Atlantic Canada is where most of the research capability is in that area. If you're looking at agriculture, Saskatchewan has a major portion of that. Yes, there's some in Guelph, Ontario. Yes, there are pockets. Our sense is that it makes sense, in effect, to build and use that capability to draw even more research and more strength. That's the rationale.

The Chairman: Would anyone else like to add anything?

Mr. Peter McCann (President, Ag-West Biotech Inc.): Thank you very much, Mr. Chairman.

Just to reinforce what Brian has said, there certainly is an intention that it will build on existing strengths. In terms of agriculture, there are major strengths in and around the University of Guelph, in and around the University of Saskatchewan, and in and around the University of British Columbia as well, of course. The whole concept is to build on those strengths, to create clusters such as the one that exists in Saskatoon right now, with fifty companies already involved in agricultural biotechnology. We have to go to the best places in order to produce the biggest bang for the buck for Canada.

Mr. Monte Solberg: Mr. Chairman, I'm going to have to choose here, so maybe I'll direct a question to the people representing the defence association.

It seems to me that you're recommending that we withdraw, I would suggest, from some of the peacekeeping duties we're currently involved in, because we're overstretched. If we were in a situation in which we did have $2 billion more in the budget for defence tomorrow—that's what my party does propose, because we do think the military has been unfairly treated—what would you do with that? Would you simultaneously withdraw from...?

I'm hearing music in my head, Mr. Chairman.

Mr. Jean-Philippe Tabet: I have nothing to do with it.

Mr. Monte Solberg: It's beautiful, it is.

Would you simultaneously withdraw from some of these efforts? How would you decide on which ones to be involved in? And the question, of course, is what you would do with the $2 billion. Would you put it into more equipment? That seems like an obvious thing to me. What exactly would you do?

Col Alain Pellerin: There's no doubt that the equipment issue is a very important one. In a sense, we are in the same situation we were in in 1970, when we had the rust-out of equipment. For instance, on the air force side, we saw the Hercules as an example. Over 90% of the Hercules fleet is from the period of 1965 to 1970. It has the highest flying rate of any military fleet in the world. Lockheed keeps track of the various military fleets, because Lockheed produces the plane.

We've heard a lot about the Sea King helicopter and its problems. It's over thirty years old or more. But it's not just a problem of thirty years in the case of the Sea King. The Department of National Defence has spent over $10 billion for the new frigates, and they're really state of the art. Even the Brits and the Americans say that. But we can only get 50% of their capability out of the frigates because the helicopters that provide the legs to the frigates are of 1960 vintage, as is the equipment inside them. That's the sort of thing we have to look at.

The capital acquisition, which used to be over 20% during the Cold War period, is down to 17% and is still going down. So obviously we need to address that.

• 1230

We also need to address the personnel issue, especially the army, because more than 95% of our peacekeeping commitments involve really the army. When we talk about 4,500, it's really three times that number, because if we commit ourselves, for example, to East Timor, Kosovo, or Bosnia and we remain there for a year, then we have to identify the same number of troops for the rotation six months from now and a year from now. So you're talking about three times that number. For the army, which is about 20,000 out of 57,000, you end up with what we would describe as bayonets—maybe 11,500, 12,000 at the most. So the army also needs to be increased.

We can't just pull out from the world. There are a lot of crises in which Canada must participate, but we must be credible when we participate.

When we talk about peacekeeping now, most of the missions we're involved in, except for about 300 out of 4,500 people, are not the traditional blue beret operations. They're under the UN mandate, but they're there for a specific purpose, to stop a war, essentially, and they need combat capable troops to do that.

As an example, very few people know that we now have tanks in Kosovo. It's the first time we've ever deployed tanks on a peacekeeping mission. We had some in Korea, for instance, but that was not a peacekeeping mission per se. So we need troops that are not just lightly armed for peacekeeping blue beret operations, such as in the sixties or seventies. We need combat capable troops. Otherwise, we put our troops in jeopardy.

Colonel Sean Henry (Senior Defence Analyst, Conference of Defence Associations): Just as a very quick follow-up, I would underline what Colonel Pellerin has said regarding looking at this from the right perspective.

I would not look at it from the point of view of cutting back on our commitments. We're already going down by 1,000, which in my view moves the situation from an emergency down to at least a deep crisis. But for a country like Canada, a G-7 member, to be able to maintain only about a battalion's worth of troops overseas is pretty questionable.

What we should do is take the $2 billion and look at the total picture. There are all kinds of places where that money needs to be spent. As Colonel Pellerin mentioned, the whole organization is crumbling, all the way from numbers, equipment, training, you name it. You need to put money everywhere merely to get up to a stable level where the armed forces are able to make this sort of minimum commitment in a meaningful way and to keep the people who are doing it in a satisfactory condition. As you well know, they don't even have proper clothing. It's mind-boggling.

Col Alain Pellerin: Could I just add a last point to that?

The Chairman: You sure can.

Col Alain Pellerin: Thank you very much.

As an example of where we stand as far as credibility of our contribution abroad and the capabilities of the armed forces are concerned, I came back yesterday from a two-day symposium on Kosovo, which was held at the National Defense University in Washington, where I spoke about Kosovo. I had a chance to bump into a number of people from Brussels and whatnot, and they were all questioning again the capability of the Canadian Armed Forces.

For instance, during the Kosovo crisis we were the only country of the G-7 that was not part of the inner circle of those making the key decisions on a daily basis. The only other country that was not included was Japan because they were not a contributor. But of the G-7 countries, Canada was the one that was left out because either we indicated we wouldn't contribute or wouldn't contribute enough or we were taking for granted that we would contribute whatever the Americans would ask us to. It gives an indication of the state the armed forces are in and that we've lost a lot of credibility.

To go back to your original question, if we are to participate in these missions, we have to be credible and have credible armed forces on the ground.

• 1235

The Chairman: Thank you. There's no question about the fact that this particular issue requires the attention of this committee.

Mr. Solberg, you're done.

Mr. Monte Solberg: Mr. Chairman, I'll be in deep trouble if I don't ask a question of Mr. Ballantyne. I come from a rural riding, and I simply have to ask a question, if I could.

The Chairman: Are you trying to encourage me to allow you to ask a question?

Mr. Monte Solberg: Yes, I am.

The Chairman: Okay, go ahead.

Mr. Monte Solberg: Mr. Ballantyne, you stated that costs are coming down for shippers, but on the prairies costs have gone up dramatically for anybody who ships grain to the west coast. Can you assure me that costs will go down for those people? When will we see them go down? There has been a lot of restructuring on the prairies. We've seen a lot of rail lines abandoned. When will those cost savings be passed on to farmers, so that I can defend the railways in a positive way when I'm asked about these things?

Mr. Robert Ballantyne: I can't tell you when the costs will go down.

But I would make a couple of comments. We're coming from the base of the Crowsnest Pass rate, which was set in 1893 and kept constant from 1893 to 1983. There was a little bit of inflation in that period. That's the base we were coming from. Of course, rail rates after the WGTA was passed would go up. That's the reality.

In terms of savings, some of the information I've seen that CN and CP have produced—of course the CTA monitors the books—is that they've passed on more than 50% of the savings they've made to the shipping community in general and the agricultural community in particular.

Mr. Monte Solberg: Thank you.

[Translation]

The Chairman: Mr. Marceau.

Mr. Richard Marceau (Charlesbourg, BQ): Thank you. I would first like to thank everyone for taking the time to meet with us today. I know that a lot of effort went into preparing the documents you presented to us today and I thank you for that.

I first would like to make a comment to Colonel Pellerin. I am pleased to see you here today. Although this is not the main point I want to raise, I would just like to express my surprise that your presentation was distributed only in English and that you spoke only English. I find that a bit odd, especially since you claim to represent people across Canada. I just wanted to mention that to you.

Col. Alain Pellerin: We sent our report in both languages in any case, as well as the synopsis, which was distributed in both languages.

Mr. Richard Marceau: On the last page of your presentation, where you summarize your positions, you say that any surpluses should go first to tax reduction and then to debt reduction. Further on, you say, and this is expected from your association, that much of the rest should go to the armed forces, or at least that that should be one of the priorities, the third, I assume.

I must tell you that at a time when the provincial ministers of Finance have unanimously called for increased transfers for social programs, at a time when hospitals are closing and the number of beds is decreasing, at a time when cancer patients are being sent to the United States for treatment, at a time when Alberta's premier—and I am not making any value judgment on his decision—has decided to privatize part of his province's health care system, at a time when four out of every ten people who are unemployed are not eligible for employment insurance benefits, at a time when there are fewer books in university libraries, as a university professor was telling me earlier, it seems to me a bit strange that we would choose to give more money to the army.

I am not just saying that because of my personal beliefs. We also held pre-budget consultations in Quebec, and I never heard anyone, in the villages or even in my riding, where the Valcartier military base is located, say that that was one of the priorities.

What do you have to say to that?

Col. Alain Pellerin: There is no doubt that there are provincial priorities and we recognize those as well. The provincial governments are clearly going to focus on the areas they are responsible for. We recognize that there are certain general priorities that the federal government must recognize and that it is the government's responsibility to decide how to divide up the pie.

• 1240

Since the government is continually assigning a lot of jobs to the Canadian Armed Forces, as it said in the Throne Speech and as I pointed out with the statistics I gave, the government must recognize that the resources have to be in line with the tasks that are assigned.

Mr. Richard Marceau: It may be that we are asking too much of them.

Col. Alain Pellerin: It is not necessarily that we are asking too much. The Armed Forces have been asked to do a lot and they are prepared to do so, but they need the necessary resources. The problem is that the budget or buying power has been cut by nearly 30%. The Forces themselves have been cut by over 30% and, as I already mentioned, the 4,500 members of the military who are currently on missions abroad will be further reduced, this time by a greater extent than we have seen since the Korean War.

In Germany, we were contributing to NATO, but that was different. There were 5,000 troops in Germany out of a strength of 90,000, but there was no problem having a six-month rotation, and the families were over there.

It is important to acknowledge that the environment has changed dramatically and that more is being asked of the military at the same as its budgets are being cut back.

Mr. Richard Marceau: But are there not also problems with the way in which resources are allocated? In a recent National Post or Globe and Mail article, the Canadian Armed Forces were compared with the Australian, and the article said that a higher proportion of Canada's Armed Forces worked at desk jobs than their counterparts in Australia. So there would appear to be a major resource allocation problem.

Is it not a bit simplistic to think that more money will solve the problem?

Col. Alain Pellerin: I will ask my colleague to respond.

[English]

Col Sean Henry: I'll answer that point first, and then go back to add what Colonel Pellerin said about the first point.

There is no doubt that in this country the cost of doing business is much higher than in other countries. That is why when people say we are the sixth-largest bulk spender on defence within NATO, that does not tell the entire story. Even though the armed forces and the Department of National Defence have made huge cuts in administration over the past five to ten years, the fact remains that the cost of doing business in this country is very high. If you give the Australians the same amount of money as we have in our budget, they will produce more armed forces because their costs are less.

Going back to your first question, I would like to point out—and many people in this country need to be reminded of this—that unless you have a fundamental framework in your country, a fundamental framework that is maintained by the federal government, and of which the armed forces are a key part, and unless you have international stability in which to carry out your trade relations and so on, your prosperity is going to suffer. And if your prosperity suffers, it will negatively impact on your social programs.

Canada's economy, despite what it says in here—and if you read behind the lines in here you find it as well—is what I would call fragile. It depends an awful lot on external factors. And the armed forces are an important factor in contributing to stability, and therefore shoring up some of the fragility.

[Translation]

Mr. Richard Marceau: I am not sure that I agree with the idea that an army is necessary in order to have a prosperous economy. That is going a bit far.

Mr. Pellerin, I will make one last comment and then address questions to another group. When you say that Canada is the only G-7 country that was not involved in the major decisions concerning the former Yugoslavia, with the exception of Japan, it seems to me that that was due more to the fact that the United States was the only military super-power and that the events took place in the backyard of the four G-7 European nations. I think that those are the main factors.

• 1245

Col. Alain Pellerin: Why exclude one of the G-7 countries, the only one that was not involved in these decisions, when that country, Canada, played a major role? The United States provided 75 to 80% of the fighter aircraft, attack planes, and Canada about 10%, that is, the F-18s in Italy, which means that, together, Canada and the United States provided over 85% of the aircraft and the Europeans about 15%.

We made a very large contribution, but unfortunately, previous records show that Canada was not invited, for instance, to a secret meeting in Bonn at the end of May, just before a decision was made about a land offensive. Five of the G-7 countries met in secret, without Canada.

Mr. Richard Marceau: Thank you. Do I have one more question?

Mr. Tabet, I have plenty of questions for you. I am young, and many people of my generation have the same problem, and thus I find your comments on independent workers extremely interesting.

You said that Revenue Canada should produce a brochure to explain a potential pilot project for employment insurance. Mr. Tabet, I now ask you what could be concretely done to help independent workers apart from an explanatory brochure. Could you answer me in 30 seconds? Then we can discuss it.

Mr. Jean-Philippe Tabet: By asking me what we intend to do, what do you mean? Several different solutions could be adopted. One has already been found. Here it is in brief. Independent workers are constantly looking for contracts, which are not always available. Thus, while waiting between contracts, independent workers absolutely must maintain their skills whether they be writers, dancers, film producers or producers in the new media. Without maintaining your skills, you lose your competitive edge as well as your access to the job market. So we are making a proposition to the federal government, but it is only one of many ideas. You're asking me for an idea in five seconds. You are asking for a miracle.

Mr. Richard Marceau: We, too, are often asked to do that.

Mr. Jean-Philippe Tabet: We propose that the Canadian government adopt a long-term strategic policy whereby Canadians would have a system complementary to the unemployment insurance system—whose shortcomings you have emphasized, as well as the fact that it no longer serves the current labour force—to help them maintain their skills. For instance, this could be a registered on- going education system. It could be a system whereby a contract would allow producers, individuals or governments to invest in a fund for on-going education. In this way, when independent workers have no work, or are looking for work, they could maintain their skills and get some revenue from this registered education savings plan. This is not what I propose nor is it what the Cultural Human Resources Council proposes.

On the other hand, we do insist that you recommend to the minister in charge of employment insurance that the issues of independent workers in Canada be studied at long last, as they involve 18% of the Canadian labour force.

Mr. Richard Marceau: Thank you very much.

The Chairman: Mr. Cullen.

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

Many thanks to all the witnesses.

[English]

for your presentations. A special welcome to Brian Harling, MDS group, who I'm fortunate to have in my riding of Etobicoke North. You could use all the buzzwords—world class, leading edge—and they certainly apply.

I had a couple of questions for Genome's Monsieur Godbout, and Monsieur McCann.

The proposal you've put forward here is a five-year plan, $400 million dollars, of which $145 million would be funded by other partners or the industry, leaving $250 million. When you talk about centres, are you referring to bricks and mortar, or are you talking about centres of excellence?

In terms of the funding mechanism I wondered, Brian, if you could tell us where things are at now. For example, is there any funding right now for Genome, and where would it be held? Is the optimal funding solution the granting councils? Is it the networks of centres of excellence? Is it TPC? Is it an infrastructure program? Could you comment on that?

Mr. Brian Harling: Yes, thanks, Roy.

• 1250

Genome Canada would not be a granting council. In fact we've had meetings with the heads of the various granting councils and they understand that. They would provide funds for many of the projects that would get carried out at genome centres.

What the genome centres would be doing would be providing technical infrastructure to support those projects with computer systems, with technologists, with people, as well as leading major initiatives around building the bio-infomatics system necessary to support that kind of research. So it's not bricks and mortar at all. In fact a lot of this stuff would be virtual and use existing facilities. Genome is building the capability within a centre—not a room per se, but a geographic centre with links across the country.

The other piece I would add is that you point out that much of the funding necessary to do this will come from the provinces, the private sector, and others. The key thing is we're a small country, and, as you know, our provincial structures tend to be very protective of their own turf. If they're funding a leading initiative, it will be a province-based initiative and we're liable to find province A doing the same thing as province B. And that's not maximizing our ability to compete in a technological leadership area.

A race is on as to how this stuff is going to unfold and where the jobs in the economy will flow. That's where we need the federal government to provide that glue, if you like, to make sure we have a concerted Canadian effort, as opposed to a bunch of provinces trying to play independently in the national arena. And that's what we'll get if we don't get the federal leadership.

For example, I think Alberta has committed $40 million for proteomics research. If that isn't coordinated with the proteomics activities taking place in the rest of the country, and if it's only funded by Alberta, it won't be coordinated.

Mr. Roy Cullen: Thank you. That helps to clarify it. But just so that I'm totally clear in my mind, if the federal government, for example, wanted to support this to the level you're indicating, what would be the mechanism? I know Genome Canada wouldn't be a funding agency, but where would that funding come from, logically?

Mr. Brian Harling: From Genome Canada to the genome centres. So a proposal would be put together by the various universities and academics in a centre, saying here's what we're going to do: we're going to build a bio-infomatic centre in Montreal or Quebec, and here are the capabilities we have and this is what we're going to do and this is what we're going to work on. Then Genome Canada would say they would basically provide the support to allow that to happen.

Mr. Roy Cullen: Maybe that's the point. Genome Canada is a federal agency?

Mr. Brian Harling: Yes.

Mr. Roy Cullen: Set up under whose auspices? Industry Canada?

Mr. Brian Harling: It would be under the auspices of the federal government. I guess that would be for you to determine, whether it belonged in Industry Canada or not. Probably it would. It would be a not-for-profit agency, basically driving the genomics efforts across Canada.

Mr. Roy Cullen: But where would the federal funding come from? Which source?

Mr. Brian Harling: Well, that's actually one of the problems, the same problem as with the biotech. Because it crosses six or seven existing ministries, there is no genomics ministry. So whether it would come out of Industry Canada or.... Basically it would have to be a collective decision by the government that this is something that needs to be funded. Then which ministry would drive it I'll leave to you to decide.

Mr. Roy Cullen: Okay. Thank you very much.

So we need a minister of genomics? I'm not volunteering, but it's an exciting area.

I have a question for Colonel Pellerin and Colonel Henry. The House of Commons committee has crossed Canada and talked to the military people, and I'm wondering if you could comment on the quality of life of our military from the point of view of compensation, housing, turnover, travelling away from family, morale, etc. Is it still an issue? Could you just give us a broad description of that?

Col Alain Pellerin: I believe the increase in budget last year went a long way to address some of the concerns, the issues of housing and salaries. You know, their salaries had been frozen for a good six years. So that side of the house I think addressed these concerns.

And that was a serious issue. On the issue of salary, for instance, because the forces had been reduced, the promotions were not forthcoming and therefore the soldiers stayed in the rank much longer and didn't get the promotion.

• 1255

As an example, a corporal who's been in the rank for 11 or 12 years would make $35,000, so he would be very much first in line when they required volunteers to go to Kosovo or Bosnia because of the special allowance—namely, after six months normally they would come back and have an extra $8,000. I would suggest that's the wrong reason to go to Kosovo, but that was the situation.

That side of the house, I think, has been addressed to a large extent satisfactorily. On the other hand, the issue of constant posting, the six-month rotation, has not. The army has shrunk so much and our commitment has increased so much that you now have soldiers in Kosovo or Bosnia or wherever who can probably expect to go there within a year or even less than that.

The majority of our soldiers being married, you can see the problems that would cause for the families left behind. Salaries are not very high, and the divorce rate is very high in the armed forces because of that.

As well, there's the psychological impact that I don't think was realized when we committed our troops to these peacekeeping missions in Bosnia, Croatia, and Kosovo, where the human misery that had been imposed on the population there really affected the soldiers psychologically. That was an issue that was not foreseen and is now being addressed more satisfactorily.

So these are serious problems that affect the well-being of the soldiers, and they will remain unless we can increase the numbers.

Col Sean Henry: There is an add-on to that. This is where we get into the detail. The detail is important, and it is very difficult to put it across to people who are not hands-on with the military. The detail in this case has to do with the demilitarization I talked about.

One of the aspects of demilitarization is that Treasury Board programs for the entire government are imposed holus-bolus on DND, without any consideration of the military requirement. One of those very hot-button programs right now is alternate service delivery. I'm sure you're aware of it.

To some extent, in some areas of DND, it's quite useful, but it has been pushed without regard, really, for the military requirement.

What has this meant? Well, among other things, it has meant that many of the support people in the military are no longer there, because their jobs are being done by civilian contractors. What happens when you go to Kosovo and places like this is that you need a certain component of support people in the commitment over there. But guess what? You have hardly any of them. So if you're talking a 12- to 18-month period of constant rotation, for the support people they're looking at six months between their postings overseas. This is one of the huge crises within the general crisis.

Mr. Roy Cullen: Go ahead, Carolyn, if you like.

Mrs. Carolyn Bennett (St. Paul's, Lib.): I had just a quick question for Mr. Harling.

I understand what you'd like in terms of the infrastructure, but I guess I see what you're describing as more like our centres of excellence infrastructure rather than something you would just apply to this innovation fund or something.

The second part of the question is with regard to the biomedical field. Professor Lemieux from Alberta and a number of others have complained that our Canadian banks don't know anything about this area. So if you have something that's going to be making $500 million almost as a sure bet, is it just that the banks don't know what they're doing? Because most people feel they have to go to New York to get any type of financing for any of these modern, genome-type things.

Mr. Brian Harling: We've had considerable success at MDS Capital Corporation in getting Canadian banks and financial institutions to partner with us around some of this science where they rely on the expertise of MDS to provide the leadership.

We put a fund together for basically very early-stage development in neuroscience and got $25 million from the Royal Bank. So there is a fund. We have a venture capital fund in B.C. where, again, one of the banks put in I think $10 million.

They basically look at our track record and the experience MDS has had and say, well, if you're telling us this is okay, then because of your history and your experience we'll come with you.

• 1300

It's hard for them to do that when they're approached directly because many of them don't have that expertise in-house to be able to evaluate whether this is real or just fantasy, and they're not in a position to judge that. That's where MDS has been able to play a role in actually making that happen.

Mrs. Carolyn Bennett: Back to you, Mr. Cullen.

Mr. Roy Cullen: To the Railway Association, I notice in your detailed brief you talked more about....

You know, there are provincial issues here, and municipal and federal. I'm not here to get into a jurisdictional battle, but I wonder if you could clarify or expand on your chart, which shows property in terms of fuel taxes. I'm assuming that includes tax depreciation. How does this split out among federal, provincial, and municipal?

I've had some numbers from CP and CN that for freight that originates in Ontario, the cost structure in Ontario is very high. In fact, I'm taking this up with the Ontario government to see what we can do, or at least what their explanations are.

Can you expand on that mix in terms of federal, provincial, and municipal in terms of your cost burden?

Mr. Robert Ballantyne: Yes, I think I can, to some extent. For instance, if we were to look at the issues of locomotive fuel tax, property tax, and then other sales and excise taxes, or just the input taxes, last year that came to $453 million. Of that, locomotive fuel tax was about $185 million.

Let's see; on average, about 30% of the $185 million would be federal. The remainder would be provincial sales tax. Property tax and the other sales and excise taxes are largely provincial. With the GST, the input taxes from the federal side have to some extent gone down.

Property tax is a particularly difficult issue for us. We have no problem paying property tax on such areas as shops and offices and yards where municipal services are used, but on the straight right-of-way on which we pay taxes, we're competing against truckers who use rights-of-way that consume taxes. So we have a serious problem with municipal and provincial governments on those items.

Of the input taxes, then, I guess most of them are at the provincial level.

Mr. Roy Cullen: But the issue for us to look at, I guess, is primarily tax depreciation?

Mr. Robert Ballantyne: Primarily, yes.

Mr. Roy Cullen: Thank you.

I have one quick question, if I may, for the Cultural Human Resources Council. I know our colleague, Madam Copps, certainly makes the point that the skill sets needed in the cultural industry are evolving and changing rapidly.

I'm wondering, do you have a skills training council? Have you looked at that, and do you know what it's about? Do you think it would be helpful?

As well, could you give some examples of the pace of change in terms of the skill sets you need in your industry?

Mr. Jean-Philippe Tabet: Do we have a skills training council? Well, the Cultural Human Resources Council used to have an opportunity to do that, but as you know, sir, there's been a devolution to provinces with regard to training. In fact, we are facing now an issue that the federal government, we think, should really look carefully at, because many workforces in Canada, not only in culture, depend on interprovincial exchanges.

For example, in the cultural sector, I may be a filmmaker, trained in Nova Scotia, whose work as a self-employed filmmaker will drive me somewhere else. We don't have mechanisms at the moment in Canada to facilitate interprovincial training. That's an issue that is very important, because every province will train within its boundaries, but I don't think the federal government is prepared to build in every province a national theatre school or a national ballet school. You understand what I'm getting at.

• 1305

We need to have a mechanism by which this training will be both of international significance and interprovincially related, because we will be moving mentors or we will be moving trainees. That's what will happen.

We don't have that mechanism. We used to have that through the Cultural Human Resources Council. It was not a very expensive program, but it was meeting the needs of the cultural sector.

Regarding the training needs and the skill development needs, I'm not talking so much about artistic needs, sir. I'm talking about needs that are more related to what is the business of culture here. You will hear from other organizations with regard to artistic needs. I'm here to build the economic and social argument.

Basically in Canada there are four strategic skills cultural workers must have, must use. First of all is career self-management. No training institution in the cultural sector is actually delivering courses that will help a young Canadian cultural worker develop themselves as a small business. It's unfortunate, but it is a reality. The world of work and the world of education are still two worlds apart in Canada.

Secondly, we must export marketing skills. Definitely a growing number of cultural enterprises are, for example, recruiting businesses through the web. Hardly any training has been provided. In fact, 70% of cultural workers in Canada have seen their work change because of new technology but only 30% of them have had adequate training. Most of the training is done on the job, which may not be the right way to do it.

Thirdly, we need business and management skills. You know that many cultural organizations or institutions in Canada are driven by board members, for example, who may have the goodwill but not the proper skills to undertake management of such institutions as the Toronto Symphony, the Canadian Opera Company, the National Arts Centre, or the galleries. We definitely need more business and management skills within our sector.

As a matter of fact, sir, a very interesting statistic came out of the 1996 census that the number of cultural managers between 1991 and 1996 decreased by 14%. Less and less people are interested in working in our sector as managers because of the difficulties.

You know, we are in a sector where managing an arts service organization, or managing a cultural enterprise, is a real tour de force, because you have to improvise. Nothing is predictable in our sector. Basically we are producing services or products that nobody wants, really. We have to create a market around it. That involves a lot of risk.

The fourth element in terms of strategic skills is more artistically focused—for example, creating in Canada a desire, I would say, for Canadian works in, say, music or opera or the film industry, and have those products distributed. That's going to take a long time.

The Chairman: Thank you very much, Mr. Cullen.

On behalf of the committee, I would like to thank all the panellists. As you probably gathered from just listening to each other, various needs are being placed on our budget, all very important. Although there is no question about the fact that the Canadian public is in no mood for a major spending spree, with the points you have raised certainly you've made a very strong case for your sector. We will keep that in mind as we decide which recommendations we will make to the Minister of Finance.

Again, on behalf of the committee, I would like to thank you very much. You've certainly added value to the debate.

The meeting is adjourned.