Yes. This gives information to the committee on that.
Today we want to begin with the pre-budget consultation exercise. The theme we have for this meeting is the rise of the Canadian dollar; we'll use that as a theme. For the subsequent week, the theme will be the tax system.
With that, we'd like to introduce our witnesses.
In the first session we have the Association of International Automobile Manufacturers of Canada....
I think what I'll do is just go through your titles; then as we give you the floor we'll introduce you individually.
There's the Canadian Auto Workers Union, the Canadian Manufacturers and Exporters, Cascades Paper Products, TD Bank Financial Group, and Toyota Canada Inc. Those are the ones in the first session.
We will yield the floor to you in order. I will give you five minutes to make your presentation, and then we will leave time for questions and answers after we hear from all of you.
We'll start with David C. Adams, president of the Association of International Automobile Manufacturers of Canada.
The floor is yours.
Mr. Chairman and honourable members, thank you for the opportunity to present before you today.
As you indicated, my name is David Adams. I am the president of the Association of International Automobile Manufacturers of Canada. My association is made up of 13 manufacturers, importers, and distributors of light-duty passenger cars and trucks whose head offices are located outside Canada and the United States. Those members are BMW, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Toyota, and Volkswagen.
In 2006 AIAMC members sold over 733,000 new vehicles in Canada, representing approximately 45% of Canada's new vehicle market. AIAMC members have invested over $6 billion in manufacturing facilities, and annual production from those facilities reached a record 900,839 new vehicles in 2006, out of the 2.54 million vehicles produced in Canada; over 77% of those vehicles were exported out of the country.
Member companies with production facilities in Canada include Honda, Toyota, and Suzuki, with General Motors in a 50-50 joint venture in Ingersoll.
With respect to the automotive industry, the 20% appreciation in the Canadian dollar against the U.S. greenback has adversely impacted various components of the industry: vehicle assembly, parts manufacturing, and vehicle sales.
For AIAMC members Honda, Toyota, and Suzuki, who assemble vehicles in this country, the fact that they are very vertically integrated and have brought with them key suppliers to the country to ensure the local supply of critical components means they have not been able to take advantage of the natural hedge arising for other assemblers who import significant quantities of vehicle parts from the United States. So the appreciation of the dollar is a real issue.
Given that we turn around and export about 80% of vehicle production to the U.S., the economics of that market are critical to Canadian producers. There are other significant factors impacting vehicle sales in addition to the higher Canadian dollar, namely higher energy costs, the fallout from the reset of adjustable-rate mortgages, tighter lending standards, and overall lower consumer confidence. All these factors are converging to produce lower sales volumes currently in the United States. There was a 2.4% drop through October, and significantly lower volumes in 2008 are forecast, with some forecasters suggesting that a 9% drop from this year's sales figures is not out of the question.
With respect to the parts manufacturers in Canada, the currency appreciation is one more factor making them less competitive with their American counterparts and is contributing to the 11,000 job losses, the 41% reduction in profit, and the 4.5% reduction in production this year, according to a recent Conference Board of Canada report. However, there are other factors impacting parts makers over and above the appreciating currency, namely higher energy and commodity costs, decreased production from primary customers, lack of adequate capital investment, and globalized sourcing by all OEMs for parts. I would encourage the committee to invite Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, to appear in front of this committee to more fully elaborate on the impact of the dollar on this critical segment of the automotive industry in Canada.
With respect to vehicle sales, it's not lost on manufacturers that with ready access to television, newspapers, and the Internet while the dollar is at par or above, Canadian consumers can readily compare prices for what they believe are identical vehicles in both markets and are justifiably concerned when advertised prices in the U.S. are lower than they are in Canada. It is, however, important to note that vehicles offered for sale in the U.S. are rarely exactly the same as the vehicles in Canada, due to different standard equipment packages and different regulatory standards. Not the least of these is the unique immobilizer standard in Canada vis-à-vis the United States, as reported in today's papers. Those differing standards contribute to higher costs.
That said, if vehicles were equipped exactly the same and if our regulations were fully harmonized, different cost structures exist for business in Canada versus the United States. For instance, the U.S. has greater purchasing power, lower distribution costs, lower hydro costs, and lower levels of taxation than Canada. With respect to our industry specifically, Canada has a 6.1% tariff on imported vehicles, versus a 2.5% tariff in the United States. That differential adds about $1,000 to a $30,000 vehicle.
But consumers really don't care about structural costs and regulatory differences. They are focused on price. By strictly looking at the market price, it would appear that manufacturers understand this and are responding. If they were not, highly discretional vehicle purchases would not have been made while consumers waited for lower prices, or they would have headed to the United States in droves for cheaper vehicles there.
There has been a worrying uptake in vehicle sales imported from the United States, but, importantly, there have been robust domestic sales, with October sales up 2.1% over the same period last year; and year-to-date sales are up 3.8% over last year. And it should be noted that last year saw the second-best vehicle sales in history.
The appreciating dollar is a concern for all components of the industry, and in this regard we would make the following recommendations:
We would encourage the immediate announcement of the 2008 eligible vehicles for the ecoAUTO rebate program. While the criteria have been set for that program, the list of eligible vehicles for 2008 has not been announced. Those rebates, as many of you are aware, can put $1,000, $1,500, or $2,000 into the pockets of consumers, giving them another reason to purchase vehicles in Canada.
We would also argue for the temporary tariff reduction on vehicles from all sources, removal of the excise tax on air conditioning, addressing unique Canadian standards as a top priority, appropriate funding for a vehicle scrapping program, investment tax credits, and clear signals from the government concerning the fair value for the Canadian dollar.
I look forward to answering any questions you may have.
Thank you very much, Mr. Chair and committee, for having me.
The CAW represents about 260,000 members in a range of Canadian industries, mostly in the private sector. About one-third of our members work in the auto industry, which is one of the industries hard hit by the rising dollar.
The auto parts sector is feeling the pain most immediately. Over 15,000 jobs have now been lost in auto parts since 2002, when the dollar first took off. I know from personal knowledge that there are literally dozens of auto parts plants facing imminent closure--one more, apparently, announced today. Lear Seating in Windsor is going to close, I understand. Without a dramatic change in the industry's outlook, I would expect at least another 10,000 auto parts jobs to disappear in the coming year.
The situation in auto assembly is not as dire but is still very negative. Auto assembly has lost about 10,000 jobs in Canada since the late 1990s. Thousands more will be lost in coming months due to plant shutdowns and shift layoffs.
Now, it would be wrong to blame the auto industry's problems entirely on the dollar, but the rising Canadian dollar has taken a bad situation and made it far, far worse.
The same story can be told across manufacturing. Canadian manufacturing has lost well over 300,000 jobs since the loonie started rising in 2002, but the job losses we're seeing today are the result of the dollar's rise two or three years ago. There are significant time lags and adjustments resulting from company investment planning, multi-year contracts, the impact of hedging, and other transitional factors. So we have not yet begun to see the consequences of the dollar's rise through 90¢ and then the dollar's rise to and beyond parity.
If the Canadian dollar stays anywhere near parity with the U.S. dollar in the medium term, I project another 300,000 manufacturing job losses in the next two to four years.
Some commentators have said the problem is global and results from a weak U.S. dollar rather than a strong Canadian dollar. This is not true empirically. Most of our problem is that the Canadian dollar has been uniquely strong, not that the U.S. dollar is weak. Consider the evidence. Compared to its 2005 average level, our dollar is up by about 25% against the U.S. dollar. On a trade-weighted basis against all its trading partners' currencies, the U.S. dollar has fallen by 10%, so it's fallen by 10% against the broad basket. Our currency has risen by 25%. That suggests that less than half the problem is a weak U.S. dollar; more than half the problem is a strong Canadian dollar.
The picture is even clearer from a longer-term perspective. If we go back to average 2002 levels as the starting point, our loonie is up 60% against the greenback; the dollar is down only 20% against its trade-weighted basket. That means for every penny of depreciation against the trade-weighted basket, we've experienced three pennies of appreciation of our currency. So, again, more like two-thirds to three-quarters of the problem is the unique strength of our Canadian dollar.
Not all currencies have strengthened against the U.S. dollar. Some have been stable and have even fallen. The yen, the yuan, the peso, the Taiwanese dollar, and others have all been broadly stable or even declining. It is factually false to claim that Canada's experience of rapid appreciation is universal.
Our currency has risen faster against the U.S. dollar than the currency of any of its other major export partners. Look at the list of the 10 largest exporters to the U.S.: our currency has increased faster than any others, by more than twice as fast as the average, yet we are the ones who are the most dependent, along with Mexico, on exports to the U.S. market. The combination of the uniquely rapid rise of our currency and our unique dependence on U.S.-bound exports puts Canada absolutely in a class of its own in terms of the risks we face from currency markets today.
How do we understand the run-up in our currency? Monetary policy is clearly part of the story but not all of the story. Our central bank has increased rates while the U.S. Fed has cut rates. That differential is a consistent determinant of our exchange rate. The Bank of Canada's recent actions were clearly a mistake. They have been guided by an unduly narrow reading of their own inflation-targeting mandate.
The bank should cut rates immediately and substantially. Moreover, it should indicate more clearly that its future interest rate decisions will take into account exchange rate volatility and the long-term economic risks that volatility pose to us.
Those actions alone would release much of the steam from the loonie's bubble, but that would not be enough. The loonie has been driven up in tandem with world oil prices. Some people call Canada's dollar a petro currency. There's no economic justification for that. We export more motor vehicles than oil, but this is the behaviour of financial markets, resulting from record prices for minerals and energy exports, record profits for Canadian energy and mineral producers, the investment boom in energy and resource industries, and the surge of incoming portfolio investment from foreign investors, who are purchasing Canadian resource companies.
The inflow of many tens of billions of dollars of foreign portfolio investment to Canada has been a crucial cause of the loonie's assent in the last year, and the government can take action on this point, too. They can control the pace of Canadian resource development more carefully, they can ensure that Canadians are getting fair value from that resource development in terms of taxes and royalties that make sense, and they can review foreign takeovers to make sure they can add real value to our economy. Merely announcing those measures would be akin to taking down the “For Sale” sign that currently hangs on Canada's door and would cool down the overheated, speculative inflow that's driving up the dollar.
The federal government and the Bank of Canada have both declared they can't do anything about the dollar. In my view, this is an absolutely blatant shirking of their economic responsibility.
Thank you very much, Mr. Chair, and thank you to the committee for looking at this very important and urgent issue for two of the most important sectors of the Canadian economy, the manufacturing and exporting sector, and for all those service jobs that depend on a strong manufacturing and exporting sector. I think it also shows the importance and the urgency of implementing the recommendations of the House of Commons industry committee that were tabled earlier this year.
I speak on behalf of Canadian Manufacturers & Exporters, but I also speak on behalf of the 37 industry associations that are members of the Canadian Manufacturing Coalition. We cover the entire manufacturing sector, and we've distributed the letter that we've written to the Prime Minister outlining our policy priorities for manufacturing over the year ahead.
I've distributed this presentation to all members of the committee as well. You'll be glad to know that I'm not going to go through it page by page in this presentation, but it does show the impact the Canadian dollar is having on manufacturing sales, on pricing. It draws from the 1,014 manufacturers we surveyed earlier this year who have said that the appreciation of the dollar is their most pressing concern, and it shows here what their response is.
The very rapid appreciation of the Canadian dollar, of course, acts like a price cut on export sales for many companies that are either pricing their exports in U.S. dollars or having to adjust their prices to remain competitive in their major market in the United States. We have companies that are exporting 85% to 90% of what they're producing into the United States. If you look at the impact that's having on producer prices, you'll see that finished goods prices have fallen 6%—this is over the last five years. Consumer products prices are down 12%. Machinery and equipment product prices are down 14%. Automotive prices are down 32% over that period of time. Much of that is driven by the impact of the dollar appreciation.
But the two factors that are driving the dollar up are also having a major impact on investment decisions and on the bottom line for manufacturers and exporters. Of course, as regards the higher commodity prices and energy prices that Jim was referring to, manufacturing is the largest consumer of commodities and energy, so that's driving up costs as prices are coming down. That squeeze on the bottom line means that, last year, out of an average eight-hour production shift, Canadian manufacturers had about six minutes to make money, after they paid depreciation, operating costs, taxes, and financing expenses—six minutes to make money, and that's the money they needed to invest in new products, new technology, reorganization, new market development, and skills upgrading. Those are the things they have to invest in, in order to remain competitive.
So the number one problem right now is cashflow for companies. The problem, though, is this surge in the Canadian dollar, a 25% increase that we've seen over the last six months alone—or actually since February, so I guess we're at eight months now. That rapid surge has meant that on contracts that were put in place earlier this year, companies are getting paid now, but they're getting paid something like $800,000 on a million-dollar contract. The appreciation of the Canadian dollar simply overwhelmed their pricing strategies and overwhelmed their ability to adjust costs. We're in a situation right now where many companies are simply in a loss position on their export sales and export contracts.
That's the major problem--cashflow--right now, but it's also the other problem we're seeing: the weakness of the U.S. dollar caused by a weakening performance in our key industrial markets in the U.S., in housing, automotive, and consumer markets in particular. What we're seeing is an increasing rate of plant closures—Jim referred to that—but there's a common story here. There are conditions of overcapacity in the North American market. Companies are consolidating, and with the high Canadian dollar, Canadian operations, as good as they are and as efficient and as world class as they are, are being closed because it's no longer productive to remain here.
I just want to go to the very end, the policy recommendations, which are also outlined in our report to the Prime Minister.
We recommend that the two-year writeoff window for investment in manufacturing equipment be extended to a five-year period. But I think it's also important at this time, under these very extraordinary circumstances, to consider measures that would enable manufacturers to be able to monetize the loss they're incurring, to provide some form of either a loss carry-back for companies that were profitable over the previous number of years or some kind of investment tax credit that could help them to monetize their loss at the current time.
We've recommended making R and D tax credits refundable. This is the time when companies should be innovating, but if they're not making any money, they can hardly take advantage of the R and D tax credits. So the refundability is important.
We've also recommended the implementation of a trading tax credit that could be creditable against EI premiums. All of these target cashflow, and at this very urgent time for manufacturing and exporting, and all of the other sectors that depend on it, that's what is necessary.
Ladies and gentlemen, members of the committee, Cascades is a multinational specialized in the production and processing of packaging products and tissue paper made mainly of recycled fibres. The company has over 100 production and logging units in Canada, the United States and Europe. Founded in 1964, the company employs over 14,000 men and women, and generates business on the order of $4 billion Canadian a year.
The relative increase in the value of the Canadian dollar compared to its US counterpart has become very significant for Cascades and the sector it does business in. I would like to thank the members of the committee, which is holding pre-budget consultations on the Canadian dollar, for giving us the opportunity to explain the scope of the impact of the high dollar on our activities, but also and especially to present solutions which may help us address this situation.
Given the fact that 90% of our sales are affected by the fluctuating value of the dollar, that 40% of Cascades' production is in the United States and 50% in Canada, that its labour costs in Canada compared to those south of the border are not competitive anymore, it is clear that Cascades has been struck hard by the stronger dollar.
The increase in the value of the Canadian dollar alone, which occurred between 2002 and 2007, has cost us over $300 million annually. The sudden rise of the dollar has forced us to close three manufacturing units in Canada, in Ontario and in Quebec, and two other plants temporarily. These closing alone have led to the loss of over 1,000 jobs in outlying areas. Whereas under the Cascades business model we have always tried to help struggling businesses, the recent decision to close plants was very difficult for my brothers and myself, our management team and our employees.
Furthermore, the price we pay for raw materials has gone up because of increased demand for waste paper from Asia, where the paper is sorted by hand by a much cheaper labour force. If we hadn't refocused some of our activities and if we hadn't reduced our costs, our company would not be profitable anymore, which is what happened to several other companies in our sector which had to considerably reduce their operations or merge with American companies.
If the loonie remains strong, Cascades will have no choice but to shut more plants in Canada and shift more of its production to the United States, if it is to remain as competitive as it was before. In fact, we will from now on make our strategic investments in the United States or in other countries where costs are lower. This is a market change for a company which 40 years ago began when it bought out a bankrupt company which exported all of its products to the United States.
The US greenback will remain the benchmark for the basic reasons we are all familiar with. And because our asset base in Canada is still significant, we still want to continue to export to the US. I am not an expert in monetary policy, but a businessman and a manufacturer of packaging products and tissue paper. I cannot tell you what to do, but I will make some suggestions.
Yes, it is possible to live with a Canadian dollar at par. Cascades has adapted and will continue to do so. No, it is not possible to live with the current direction and volatility of the dollar, and to plan for investments in Canada. We therefore have to make Canadian companies more competitive by making available better, faster and refundable incentives for our sector, including in the areas of research, development and innovation, infrastructure and labour support, as well as accelerated depreciation programs, as my colleague has suggested. In Scandinavia, the depreciation period is very short, and this has helped the pulp and paper industry to modernize and remain competitive. We would like the federal government to acknowledge the impact the sudden rise in the Canadian dollar will have on the Canadian manufacturing sector in the medium and long term, especially in sectors like ours, where we are trying to do things differently while protecting the environment.
As for the environment, a final measure could really help us, and that would be the creation of a carbon exchange. As do other companies operating in Europe, Cascades has greatly benefited from the European carbon exchange, and it still does. On this side of the Atlantic, for the fiscal year ending December 31, 2006, we have reduced our 125,000 tonnes of greenhouse gas emissions by 10%. That represents a fair amount of money which unfortunately is not credited to us in North America.
We need to quickly create a carbon exchange in Canada. This could easily be achieved with the Montreal Stock Exchange, which is in the best position to accommodate this type of exchange. This kind of system is recognized as being potentially the most effective one to fight climate change, and it would be a strong incentive for companies, as they would also benefit financially.
It is also imperative that the creation of a carbon exchange use 1990 as its base year, because we should not penalize the companies which first chose to become environmentally friendly before the environment became a concern for all of us.
Finally, such a system won't work within a reasonable timeline unless mandatory caps are imposed on each industrial sector based on yet-to-be-determined conditions.
Thank you for giving me the opportunity to speak. I remain available to take your questions.
Thank you, Mr. Chairman. I promise not to use his five minutes as well.
I'd like to thank you and your colleagues for offering me the opportunity to address the committee. At Toyota we believe it's very important in these uncertain times to maintain a dialogue with Canadians, and clearly the committee plays an important role in that regard.
Mr. Chairman, the dollar's strong performance this autumn has created many challenges for all Canadian manufacturers, and Toyota is certainly no exception. In the face of a rapidly escalating loonie, Canadians have made it clear that they're looking for pricing equality with our neighbours to the south.
Toyota is a global company, but we firmly believe in building vehicles where they're sold, and I'm pleased to say that Toyota has invested billions of dollars in Canadian manufacturing facilities to build vehicles not only for our Canadian customers but for the North American market as a whole.
By building our most popular models here in Canada, Toyota was able to shield Canadian consumers from the impact of the dollar's slide in the early part of the decade and build export sales to the United States. Now, however, we're challenged to find ways to improve our offers to both our American and Canadian customers while remaining profitable.
Certainly, we pledge to respond in ways that are viable in the Canadian regulatory economic context that are meaningful to current and future customers and are respectful of our employees.
It may be stating the obvious to say that manufacturing starts with sales, but I think it's important to remember that without a market, there's no reason to build a product. It's also worth repeating that customers are driven by value, whether shopping for a book or a car. I mention books because with both Canadian and U.S. prices printed on their covers, books have become symbolic of pricing disparity.
I can't speak for the publishing industry, but I think there is some parallel with automobiles insofar as consumers look at vehicles bearing the same name in Canada and the U.S., see pricing differences in advertising on the Internet or other media, and feel they aren't getting a fair deal. As the old saying goes, “You can't judge a book by its cover”.
All vehicles that we build for sale in the Canadian market, as distinct from the American market, are equipped with features mandated by federal regulatory requirements--indeed, some that are not required by our U.S. counterparts. Other Canadian vehicle features, again as distinct from those American cars, relate to choices we make as a distributor based on a variety of factors, from what survives a Canadian winter to what has proven popular with our customers in the past.
Dollar parity has resulted in a new conversation with consumers to highlight the many differences between Canadian and U.S. products. We need to examine how best to minimize these, whether by truly harmonizing regulatory standards across North America or by changing standard features to make Canadian and American vehicles more directly comparable. I can report that we are responding on both fronts.
We're repositioning the prices and features of our vehicles that are popular with Canadians. We're offering a variety of financing lease rates. We're providing additional value through complementary service, gas cards, cash equivalents, and other programs. As we've done for the past 40 years, we're going to continue to monitor the market and adjust our operations, our products and services, to ensure best value for our Canadian drivers.
Now, Canadian companies are good at being successful despite a relatively small domestic market. But we're more successful when we're operating in a favourable economic environment, and this is something in which the federal government plays a key role.
Toyota Canada would like to suggest three ways in which the government can help. First, there's support for capital investment. Every time Toyota retools for a new model, it must invest hundreds of millions of dollars in equipment and technology. Out-of-date plants, clearly, are less productive, and American policy makers are keenly aware of this. As one example, in the state of Kentucky there's an incentive for this very type of investment.
Second, there are people. We must continually train our people to improve processes and enhance productivity, and there are almost no incentives or programs to support this effort in Canada. Support for technology investment and people development would help Canada compete more effectively with other countries.
Third, as you've already heard from my colleague, Dave Adams, inconsistent Canadian regulatory requirements and other policies that burden Canadian consumers should be removed to encourage consumers to buy Canadian. I've already mentioned disharmonious vehicle standards, but that's not the only reason why Canadians must pay more for vehicles. For example, subcompact cars are not built in North America, but both Canada and the U.S. apply duties on imports of these vehicles. Why any duties should apply is a perplexing question, but it's particularly perplexing that in Canada, a market that demands small cars, the duty is 6.1% while the U.S. limits its tariff to 2.5%.
In summary, we're making adjustments across all of our Canadian operations to ensure that Toyota is able to provide competitive pricing and features for our customers across North America. Governments can help us by pursuing economic and fiscal strategies that will restore stability to the marketplace, eliminate unnecessary costs through regulatory and tariff harmonization, and by assisting automakers to retool and retrain for added productivity.
I look forward to discussing these proposals with you and would be pleased to answer any questions you have.
Thank you, Mr. Chairman.
Thank you, Mr. Chair, and thank you very much to all the witnesses for being here.
Since this is the first session of six on this topic, I thought I'd begin with just a brief explanation of why we Liberals pushed for these hearings of nine hours on the connection between the high dollar and jobs. And I'm grateful to our opposition colleagues for supporting this. The reason we're pushing for this is that the Liberals feel there's a looming crisis in relation to the high dollar and jobs and that now is the time for action.
Partly I say this using my economist's hat, because it is definitely true that when there's a major exchange rate appreciation, it will have an effect on jobs and manufacturing and other exchange-rate-sensitive industries, whatever the state of the economy overall. I'm only talking about exchange-rate-sensitive industries. But these effects operate with a lag. Companies can go on for a while, but when they make their new business plans, if the dollar is still high and is expected to be high, they'll plan to produce elsewhere, like in the U.S. It's likely that we've seen only the tip of the iceberg in terms of layoffs. We had 1,100 at Chrysler and 800 in forestry in the last few weeks.
My hypothesis is that if this dollar is sustained at parity or thereabouts for the coming year or year and a half, then what we've seen to date will only be the tip of the iceberg in exchange-rate-sensitive industries. The oil sector might be fine. The economy as a whole might be all right, but I'm talking about exchange-rate-sensitive industries like yours. I think, to use a Wayne Gretzky metaphor, a good government should be focused on where the puck will be down the road, not on where the puck is today. We know that 12 months from now, if the currency is still at parity--and that's an “if”--the situation may be a lot worse.
I should also say, just as a premise, that we don't think the government has a plan, so part of the purpose of these hearings is to get your advice to develop such a plan.
I would like to ask my questions as follows. My first question to those who represent industries with jobs at risk--maybe starting with Mr. Myers--is whether you agree with the hypothesis. You have problems today. But do you agree that if nothing is done, assuming that the dollar remains where it is, then looking ahead 12 months to 18 months, the situation will be even more dire in your sector?
Maybe I could go first.
Don is absolutely right; there are longer-term challenges that we have to address in terms of productivity improvement, innovation, skills development, and so forth, that are exacerbated by this very rapid surge in the value of the dollar. It makes the issues I think much more urgent to address.
To my mind, the recommendations we put forward—to consider some form of investment tax credit that would help to monetize the accelerated depreciation, refundability of R and D tax credits, some form of employer training tax credit—are not only measures that I think would assist manufacturers at this time, but they put in place the measures that are going to enable them to adjust to these competitive factors over the long term. All of these recommendations, which were made last year, were made at an 84¢ dollar. I think they're even more important today at a dollar that could be $1.02 to $1.10, depending on where the market goes. It's more important than ever.
The longer-term issues outlined in the recommendations the coalition has made for skills development, for connecting research to industrial innovation, for dealing with issues around enforcement of trade rules—all of these—are extremely important as well.
But this rapid appreciation of the dollar really puts the emphasis on tax measures that go to the heart of building a competitive industrial economy that is able to compete in the global marketplace: investment, training, and innovation.
Thank you, Chair, and thank you, witnesses.
It's a bit of an unusual day when I have the CM and E and the CAW talking from the same hymn book—they may not be on the same song sheet but at least from the same hymn book—and the TD being a bit of an agnostic here.
I just note in passing that half of the tax base in the mini budget in November was taken up by a GST cut, which pretty well does nothing for any of you. From what I can see, all it does is, in effect, create more inflation and higher interest rates, which leads me to my first question, directed to Mr. Myers—that is, the cost of money and the credit crunch. I think what you said was it's difficult to raise money. How does that relate to the sub-prime crisis that's going on in the U.S.? How is that spilling over to you?
My second question has to do with the differential rise in the strength of the Canadian dollar versus the U.S. dollar. I wonder what Mr. Drummond thinks of Mr. Stanford's analysis on that.
My third question was the comment by Mr. Stanford on controlling the pace of resource development and foreign takeover reviews. I wonder, Mr. Myers, if you could comment on that as well.
So I appreciate that those are a number of questions, but I think we may have a useful dialogue if we get some conversation among the panellists.
I would like to thank you all for coming.
I would like to ask Mr. Lemaire a couple of questions. I really appreciated your presentation, in part because it was in French, which is a rather rare thing here at the Standing Committee on Finance, and in part because you told us about the importance of setting up a greenhouse gas emissions trading exchange. The Bloc Québecois has, for a long time, been talking about the need for proceeding with the Kyoto Protocol, setting binding objectives and absolute greenhouse gas reduction caps for environmental reasons, since we need to take care of our planet and because this carbon exchange creates new economic opportunities for our companies.
The government has always responded by saying that in fact absolute targets for reducing greenhouse gases pursuant to the Kyoto protocol would be, for all intents and purposes, an economic catastrophe. However, I have heard what you are saying. You are a businessman, you want your company to be profitable and I would imagine that you see this as, on the contrary, an opportunity to do business.
I would like you to explain to us, in greater detail, how this carbon exchange would be, in your opinion, a real business opportunity for Quebec and Canadian industries. You also talked about the fact that this carbon exchange would be in Montreal. Why do you think that Montreal should be the location for such a carbon exchange?
Cutting the GST is a wonderful way of giving back tax money to people because this is a wonderful income distribution, but it has no other redeeming qualities, in my mind.
Vis-à-vis the economic challenges we talked about, particularly in the manufacturing sector, the forestry industry, or particularly the more general implications for productivity in Canada, it does absolutely nothing on that front. It can only stimulate consumption.
We have, quite frankly, the Bank of Canada saying that with a 5.8% unemployment rate, we don't lack for any consumption, so we have a very slow savings rate.
We do have other problems that, to its credit, the government has acted on I think very positively on the corporate tax side.
I think our remaining huge problem on the tax side is the extraordinarily high marginal effect of tax rates on families up to about $50,000 of income. If they contemplate earning an additional dollar, they only get to keep about 30¢ of it, and it just destroys any of the incentives to work, save, and invest.
It takes about $10 billion to address that, and there I think is the sad irony of the GST cut, because that's over $10 billion that could have been put more profitably to that purpose.
Thank you, Chair. Thank you, committee members.
My name, as you've heard, is Richard Hardacre. I'm a Canadian actor; I'm a professionally trained working actor. I'm also the elected president of ACTRA, the union representing the interests of performers in film, television, sound recordings, radio, and new media. I'm very pleased to bring you the concerns of more than 21,000 members of ACTRA who live and work in every comer of the country; English-speaking artists, all of us, whose performances entertain, educate, and inform Canadians and global audiences through the most powerful media that presently exist.
That's our boilerplate.
What I have to say here today is serious business, because for us, creative art in Canada is serious business. According to StatsCan, in 2002 the culture industries contributed $40 billion to Canada's gross domestic product. More people work in culture than work in agriculture, forestry, mining, and oil and gas combined. In the most recent year for which we have industry stats, the film and television production sector was a $4.8 billion business employing more than 125,000 people.
I hope you have copies of our September written submission. I'll briefly touch on the main points, and then we'll talk about the impact of the high dollar on the film and television industry, Mr. Chair. The clerk informed me that you want to hear specifically about that.
ACTRA made several proposals in our submission, which you have. First, we asked the finance committee to recommend adequate, stable, long-term funding for the Canadian Television Fund, for Telefilm, and for CBC. This is critical to being able to bring Canadian stories to our televisions and cinemas. It's important to us to establish a home-grown industry.
Our second recommendation is to reintroduce income averaging for professional artists. As many reports have observed, professional artists have income that can fluctuate enormously from year to year, and the present tax regime is unfair to creative artists. Just as artists must spread their income over years to survive, we're asking that the tax liability also be spread over years. Canada has previously had income averaging. Many countries still have it and specifically include artists. Quebec introduced a system in its 2004 budget to help artists in that province spread the tax load over several years.
Now I'll provide the committee with some insights from the film and television industry about the soaring dollar. The current surge of the dollar is indeed a serious threat to this sector of film, television, new media, and commercial production.
To understand the impact you need to know that we have two types of production in this country. We have Canadian producers making programs and movies primarily for Canadian audiences. Nationally, less than half our work at the moment is Canadian content. More than half of it is on service productions: making programs, movies, and television commercials, mainly from the U.S. locating in Canada.
This is the type of production that is the reason this country gets dubbed “Hollywood north”. It's primarily this U.S.-based service production moving to Canada for location—this “service production”, as we call it—that's affected by the high dollar.
A 2004 industry report pointed out seven factors that affect Canada's competitiveness as a filming location. Of these, the most important is the value of the Canadian dollar relative to the U.S. greenback. The ratio is simple: the more we lower the dollar, the more work there is; the higher the dollar, the less work there is in service production.
Remember that producers plan their productions well in advance. It can easily take more than a year of planning ahead for big budget films. The superpower strength of our dollar was not anticipated when locations for today's productions were being scouted.
This brings us to 2007 and currently 2008. At the moment, production levels throughout North America have been affected by the run-up to and now the complete strike of scriptwriters in the United States. I'm sure you've heard that the Writers Guild of America is in the third week of its strike. ACTRA supports them, because creators everywhere deserve a fair share of the returns from digital media.
U.S. producers and productions have been anticipating labour unrest for some time. This means that the studios were pushing very hard to complete projects before the writers' strike. Production in 2007 has been artificially inflated, so to date we've been insulated from the rise of the dollar. As the writers' strike continues to affect us, two big productions in B.C. have shuttered already, and more are coming. Canadian actors and crews work on these shows, and the strike has already put as many as 1,000 out of work in British Columbia alone.
So that brings us to the dollar. The full impact of the overheated dollar, the Canadian dollar, will not be felt until the middle or the end of 2008. We know the studios intend to let projects already on the books go ahead. But due to the dollar, they're not planning on many new productions. This will be felt especially in British Columbia, which is in the same time zone as Los Angeles, one of the reasons for its popularity.
But we have suggestions on what you can do to help--three things. Some of them are already in the written brief submitted to this committee. This is what we need to do. We need to build the Canadian industry, build an industry that's not dependent on foreign production moving to Canada. The way to do that is to increase the tax credits and broaden the base of the tax credit system. We've had tax credits in Canada for many years. We know they generate substantial economic activity, and more taxes are created than those that are forgiven.
We have suggested two formulas to increase the tax credit formula. One is for film and television video, the tax credit for domestic productions. Increasing the base is what's really important, so it's not just simply on a small labour component, Mr. Chair.
I've distributed to members of the committee a short paper. There was a group of economists from the labour movement that met with the Bank of Canada this morning. This was prepared as a background note for that meeting.
In our view, the Canadian dollar is greatly overvalued compared to economic fundamentals. We see the key need now as being an interest rate cut by the Bank of Canada. That is by no means the entire solution to the problem. It's the immediately available solution that would be of most use in dealing with the problem. I think in the longer range there's a whole series of issues bound up with the international currency regime. The fact that the currencies of China and most other Asian countries are tied effectively to the U.S. dollar fundamentally makes the problem of overvaluation for us significantly worse.
In our view, an exchange rate at or above parity will destroy cost competitiveness for large and important sectors of the Canadian economy—not just manufacturing, but also, as my colleague has alluded to, cultural industries, tourism, anybody selling goods and services into the U.S., and for that matter, the Asian market, given their tie to the U.S. currency.
I think history teaches us that exchange rates can and do overshoot the level justified by fundamental economic factors, and that can persist for long periods of time with permanent structural damage being inflicted. One view of that damage can be seen by looking at the United States and what has happened to its manufacturing sector over the past few years as the U.S. dollar was overvalued.
How do we assess or correct the exchange rate? One way would be by purchasing power parity, which would take you to the low 80¢ range. Another really important benchmark for the manufacturing sector is the exchange rate that's needed to equalize unit labour costs between Canada and the U.S., and by most estimates that would be in the low 70¢ range. That's just given our lower level of productivity than the U.S. The fact is that now, in dollar terms, wage rates in Canadian manufacturing are equal to the U.S. Unless on average you have an exchange rate that offsets the productivity disadvantage, you're going to see significant shrinkage of the Canadian manufacturing sector.
In round numbers we've lost 300,000 jobs in the manufacturing sector already. That reflects the exchange rate appreciation that's taken place over the last two years. These exchange rate impacts operate with a lag for a number of reasons. It would be our estimate that if the dollar persists at parity, we're going to lose something in the order of another 300,000 jobs over the next two or three years, unless it falls back earlier.
So what is causing the surge of the dollar? Well, the conventional explanation, of course, is that it's an oil price effect, that Canada's dollar is a petrodollar, that this is what has driven the upward appreciation of the exchange rate. In point of fact, it's a misperception that the Canadian currency is a petrodollar. Only 12% of Canada's exports consist of oil and refined oil products. Energy exports are larger, but that includes natural gas. Natural gas prices have not been shooting out of sight. They're no higher than they were a year ago.
The fact that our dollar adjusts so quickly in relation to oil prices is, on the face of it, rather absurd. If it was the case that the increase in the price of oil was improving our balance of payments by increasing our exports, an oil price effect would be to improve our balance of trade. In fact, what we're now beginning to see is the emergence of a huge and growing manufacturing trade deficit, and a severe deterioration in our trade balance reflects in the overvaluation of the currency. Just look at the trade figures from last month.
The other factor that is driving the appreciation of our dollar is the fall of the U.S. dollar. And yes, this is indeed important. But over 30% of the depreciation of the U.S. dollar, in terms of their basket of trade with the rest of the world, is accounted for by Canada alone. We are bearing 30% of the brunt of the depreciation of the U.S. dollar. Most other major exporters into the U.S. market, from China through Japan through the developing Asian countries, have tied their currencies to the U.S. dollar, so they're not affected by this depreciation.
In fact, as our export share of the U.S. market falls, it's not being filled by U.S. domestic production, by Asian exporters, just as the U.S. is not gaining in our market as their dollar depreciates. In fact, that is going to Asian imports.
So what is the explanation? Why has our dollar surged so high just recently?
Thank you, Mr. Chairman, and I thank everyone for this opportunity to appear before you today.
In the previous panel you heard the other side of the auto industry, if you will. The CVMA, on the other hand, is a national association, a leading association that represents light- and heavy-duty manufacturers, including Chrysler, Ford, General Motors, and International Truck and Engine Corp. Together, these companies account for over 70% of all domestic vehicle production, 55% of vehicle sales, and in total they support 150,000 Canadian workers and retirees throughout their entire operations.
On the surface, Canada's auto industry looks to be in fairly good shape, especially when one reads news reports about near record levels of new vehicle sales across the country and the significant recent automotive investments in Canada, including those from our member companies. However, under this thin facade is a much different reality. Today we are witnessing what I would call a perfect storm, demarcated by several threats, and one that will make for a wild ride as we go forward.
The rapid acceleration of the Canadian dollar has been one of the largest hits, no doubt. However, this is just one of the many impacts on our industry in Canada that include most recently what I call deep impact regulations, such as the new requirements on fuel economy, unique and inconsistent Canadian regulations, record levels of auto imports from offshore, outdated trade infrastructure, and border backlogs, just to name a few.
In the not too distant past, Canada had a competitive advantage within North America to help attract investment, one being a lower Canadian dollar compared to the U.S. dollar and another being the often repeated labour and health care advantage. However, recent contract negotiations in the United States between our members' parent companies and the UAW have changed part of this dynamic as a result of health care trusts being established to reduce some of that burden, while the rapid acceleration of the Canadian dollar has had a dramatic change on the other.
The rise in the dollar impacts Canadian assembly in several ways. Generally, all inputs into production are calculated in U.S. dollars to create a baseline for comparison of costs between assembly plants in various jurisdictions. The cost of all local inputs increased significantly with the rapid rise of the dollar. These impacts have wide-range inputs, including labour rates, employee benefits, corporate taxes, parts and services, and sourcing, etc.
In light of these realities, I'm here before you today to present an opportunity for Canada to develop and implement an automotive strategy that will help our sector deal with the rapid rise of the Canadian dollar, and the other impacts and, create a position for Canada to be a competitive location of choice for automotive investment.
First is ensuring that we have a globally competitive investment fund and corporate tax regime. The second critical element is supporting auto industry efforts and environmental sustainability. Canada really needs to introduce national vehicle standards, and in particular fuel economy standards, that are in line with the dominant North American standard. Recently in Canada several provinces have publicly stated their desire to adopt their own standards or California standards. These are what I call deep impact standards that have a tremendous impact on our industry.
The third element is creating a smart, efficient, and cooperative regulatory regime with Canada and with our major trading partners.
Expanding critical trade infrastructure and simplifying border processes is the fourth major element of the auto investment strategy. Simply put, it is 27,000 times more difficult and costly from a customs perspective to get 4,500 North American built vehicles into our market than it is to import those vehicles from offshore. This is because, during production of those vehicles in North America, parts and components can cross the border six or seven times, each time with the necessary paperwork and security checks, while imported vehicles simply clear customs by the boatload or 4,500 units at a time.
The last but not least important element of an automotive investment plan for Canada is opening foreign markets through free and fair trade agreements. Canada's auto industry, and Canada, as a result, has benefited greatly from free and fair trade, especially with our NAFTA partners. However, implementing trade agreements that create unbalanced, one-way trade in vehicles without reciprocal access would undermine all other aspects of an automotive investment strategy if they were implemented.
Canada is currently negotiating a free trade agreement with South Korea that would result in continued one-way trade in automobiles and no broader economic benefits for Canadians. In most cases, products can be built anywhere within corporate global enterprise and sold in markets around the world. If Canadian manufacturers simply cannot access foreign markets, then production mandates will be placed in other jurisdictions.
In summary, I cannot stress enough the difficult situation our member companies in the OEM parts sector are now facing within Canada. The rapid rise in the Canadian dollar is just the latest strike against our industry in which 570,000 Canadians are directly and indirectly employed.
We urge the government to immediately develop and implement an automotive strategy to help restore a competitive advantage to investing in Canada's critical automotive industry.
Thank you, Mr. Chairman.
Good evening, my name is Jean Laneville. I am the economist for the Quebec Federation of Chambers of Commerce. I am very pleased to be here to talk to you about the impact that the rising dollar has had on our members, particularly those from the manufacturing sector.
The Quebec Federation of Chambers of Commerce represents 162 chambers of commerce bringing together more than 55,000 members. We claim to be the largest and most representative business network in Quebec. Indeed, we have members in all administrative regions of Quebec and we also have members in all of Quebec's economic sectors.
During the next three or four minutes, I will first of all address the issue of the soaring dollar from a structural perspective. I will also discuss the Dutch disease effect theory. I would be pleased to answer any questions you may have in order to clarify the economic context.
The rise in the price of raw materials has had an impact on the Canadian economy because Canada is a net exporter of natural resources. This increase has had an impact primarily on our currency. Over the past five years, the Canadian dollar has appreciated substantially. On average, it has climbed 10% per year. This situation has proven to be relatively difficult for exporters and manufacturers because the profit margin of exporters has declined whereas most of them are price-takers on foreign markets, particularly the U.S. market.
If we were to divide the Canadian economy into three sectors, we would have the natural resource sector, the domestic and service sector and the manufacturing sector. We can see that the soaring dollar has created a great deal of upheaval. Over the past few years, in Canada and in Quebec, we have noted that the natural resource sector has performed relatively well: very well in the west and not so well in Quebec. This has resulted in a great deal of wealth that has contributed to the service sector, namely to domestic consumption.
Resources have been displaced, they have gone to the natural and service sectors, whereas the manufacturing sector has performed very poorly. With the soaring dollar, this sector has found it increasingly difficult to export, but it also faced the problem of dwindling resources. We are starting to see the situation, in Quebec, where there are shortages for certain types of jobs. This is rather difficult in a situation where competition is fierce. The situation is difficult because of the appreciation of the dollar.
In terms of the GDP, on the manufacturing production side, Quebec has had an average annual decrease of approximately 4% since 2002. This is not huge, but we have observed, on the employment side, an average annual decrease of approximately 4% since 2003. So we are talking about a substantial impact.
There is one fact that is alarming: over the past three years, from 2003 to 2006, we have seen declining investment in the manufacturing sector. However, the government refuses to see this and tells us that, with the higher dollar, it will be easier and less costly to purchase machinery and equipment, which is completely false. Our members are telling us that certain conditions have to be present before investing. One does not invest because the machinery is cheap, but because better performance can be achieved. This is how we have to look at the situation. We can't simply say that the higher dollar will enable us to purchase machinery at a lower cost. The first point that we want to get across is that the higher dollar is making the situation less profitable for Quebec manufacturers.
In Quebec, we have seen production, employment and investment decline. That is very alarming. Everything is pointing to the beginning of deindustrialization. The word may be strong, but there are certain indicators present that lead me to the theory of the Dutch disease effect.
As the name suggests, this theory originated in the Netherlands. At the end of the 1950s, natural gas was discovered in the North Sea. There was a period of prosperity in Holland, which made it very wealthy and increased the value of the currency. In the long term, over 15 years, the manufacturing sector declined. Once the economic prosperity caused by the natural resources disappeared, Holland found it no longer had a manufacturing sector to drive the economy. That is what we fear. That could happen, particularly in Quebec, because we are more dependent on the manufacturing sector than the United States and Canada are as a whole.
There are a number of very appealing solutions that have been put in place in Norway. The first is to be cautious as regards fiscal policy. When there is very high potential growth and consumption, the economy should not be over-stimulated, by reducing the GST, for example, because this results in inflationary pressures.
Quebec manufacturers are suffering because of the fluctuation in the value of the dollar, which is something that cannot be controlled. It would be a good idea to do what Norway did and establish a fund to stabilize the dollar. Natural resources and government revenues should be invested in the fund, and it should then be used on the exchange market to stabilize the dollar.
I have just five points.
First of all, a higher dollar is good, and good for the country. How high and how fast it's gotten high is another question, but I'm not despairing over the dollar being higher.
Number two, being below purchasing power parity, as Andrew Jackson mentioned earlier, when purchasing power parity has stayed constant over the last 30 years, in the low 80¢ range...I think it was bad for Canada to have the dollar consistently below that, at 75¢ or below, for a decade from 1992 to 2002. Why? Because we're then selling the entire economy too cheaply compared to our costs of operating.
What's the problem? I think the problem, as everybody said, is obvious. It has risen too fast and too high.
Just to give some perspective, it is truly unprecedented. If we look back over a long period of time, if we go back to the height of May 1974, at $1.04, the dollar took 11 years to drop 31%, to December 1985, to 72¢, and then did its big rise. The biggest rise the dollar has ever experienced prior to this one was from December 1985, over a six-year period, to October 1991, to 89¢, or a 24% rise. It then took another decade to fall all the way to 63¢, and another six years to rise to the current levels, a 60% rise. So think of this as being a rise that is more than double the amount in the same period of time as our previous most rapid rise, and it has dramatically overshot anything approximating purchasing power parity.
I agree with Jean Laneville, who just talked about the conflicting messages this sends to manufacturers or anybody buying machinery and equipment, hardware and software. All the service industries buy enormous amounts of hardware and software as well. On one hand, all the imported product, machinery and equipment, is cheaper by a long shot, but on the other hand, they're scared because they don't know where the dollar is going. The dollar has gone up so rapidly that it's hard to make the adjustment. That's why, as Jean said, they don't automatically go racing out and becoming more productive really quickly, because they're scared and they're experiencing something they haven't experienced before. So if anything, there is a lag effect until we'll see any kind of pickup in investment in machinery and equipment. It will only happen when the manufacturers feel comfortable and confident that their economic equation is going to work for them now in this new higher regime.
What does that mean? For policy—these are points four and five—there are two things I would say. One is that this is the best time ever for Canada to finally fix the problem with how we tax corporations and how that impacts corporate investment. As we've said on our task force for a number of years, Canada has one of the worst regimes for new investment in the world, among the highest taxation of corporate investment. Why we think we can be a great importer of capital and a place where companies want to set up shop and our own companies want to grow and expand, when we have one of the greatest punishments for new investment, is beyond me.
I think it's great that we finally have a dialogue in Ottawa on this, with both the Liberals and the Conservatives suggesting that they're going to cut corporate income taxation. All I say is that I would use the very positive treasury situation now to cut deeper in that than even planned, to make Canada below the OECD average in terms of its effective tax rate on capital investment.
So do it. I'm thrilled to see the fall update address it, but now is the time to go even farther to help our companies.
The final point I'd say is that this gets back to the question of fixing the exchange rate against the dollar. I know there's this argument every time this is raised, where everybody says, “Well, that will reduce our sovereignty and our flexibility”, and the like. All I have to say is, look what we're doing and talking about and saying now. Is this just so terrific to have this kind of sovereignty when it begs the question, in what respect is this great sovereignty that we have this huge problem now because the dollar has swung up 60% over a course of six years, 10% a year on average, and now we have to scramble to do something about that? Nobody in the world is free from the effects of the global economy. So saying that because we have our own currency we somehow are sovereign, more sovereign than we would be if we fixed it to our major trading partner, I think is an old-fashioned view, and I wish we as Canadians would just get over that and do the thing that will create the stable platform for our companies to invest and grow.
Thank you very much.
Boy, talk about a loaded question.
Let me say this. I think whether it was the previous government—they did some great things for the auto industry—or whether it was the economic statement this government made a month or so ago, those are all things that we can well support. I think we're at a position now where we have the opportunities I mentioned.
Putting the dollar aside for the moment, we need to do things that are going to offset the ramifications of that. Our view, as we said all along, is that we need a comprehensive, balanced automotive strategy, one that incorporates many of the things that have been announced, one that most importantly, again, reintroduces large-scale investment supports.
Any country around the world that wants to maintain or wants to introduce an auto industry to its economy provides supports. We can be very creative here. Australia is very creative, for instance, where they take revenues from import tariffs and funnel that back into the industry to fund these large-scale investments, and they've been very successful. So the key thing, moving forward here, is to put in place now an effective, balanced, and comprehensive automotive strategy that factors in things such as research and development incentives, that factors in many of the large-scale investments, as I've said.
Yes, we do need to get rid of some of the things that are impacting us very negatively. One of them is the ecoAUTO green levy program. That, clearly, amidst all these other things—
I'd be in agreement with my colleagues here from business. The reason a manufacturing sector is important is that it is a relatively high productivity sector and that it has the capacity to generate ever higher productivity.
By far the majority of research and development expenditure in Canada is within the manufacturing sector. If we're going to be a major player in the global economy of the future, we simply can't abandon manufacturing, the business of making things.
A lot of important service industries make a huge contribution. A lot of those are tied, in turn, to manufacturing. It's not a matter of fetishizing blue collar, metal-bashing jobs. I think what we have to realize is that the manufacturing sector is changing. But with a dollar at parity, it's going to kill our potential across a huge swath of industries—important industries of the future, not least auto and aerospace, which have been absolutely key building blocks for our future.
It's not a matter of preserving the status quo, I think. It's that we have to change the manufacturing sector. We have moved up the value chain and have become much more innovative. But we're not going to get the investments and innovation and training and so on that we need if the dollar is killing off any prospect of profit from new investment, as Mr. Martin said, and I absolutely agree with him.
Thank you very much, Mr. Chair.
Thank you to our presenters.
It's funny that Mr. Martin would, in his last comment, mention agriculture. I think there are some interesting connections that we can draw, because the way agriculture has managed to survive and prosper, I would suggest, is by becoming competitive.
I'm very concerned when I hear Mr. Jackson comment about the loss of 82,000 jobs. As a matter of fact, this year alone Canada overall has gained 345,000 new jobs, 655,000 new jobs since this Conservative government has taken office, and 80% of those are high-value jobs. So your suggestion about 82,000 job losses—not to trivialize that, of course, but there are new jobs.
To Mr. Martin's comment, the new way of doing business in Canada...people are changing their job profiles, and that's a positive thing.
A little clarification for Mr. McCallum: it was the Liberal government that started the free trade negotiation with Korea—
An hon. member: No.
Mr. Ted Menzies: —if I recall correctly, and I think I'm accurate on that. For him to suggest that the deal is done, unless he's privy to some information I'm not, the deal is not completed. The minister has said it will not be finished until we make sure we're protecting Canadian companies.
I have one quick question, and I want to address this question to all of you. I need a very quick answer because we have bells and we have to go. Should the Canadian government interfere with the Bank of Canada to influence the value of the Canadian dollar?
A quick answer, yes or no, to all of you, please.