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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, November 5, 2003

0840

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

Mr. Pierre Séguin (Vice-President, Centrale des syndicats du Québec)

0845

The Chair

Mr. Pierre Séguin

0850

The Chair

Mr. Gilbert Perreault (Member of the Executive Committee, Fédération des producteurs de lait du Québec)

0855

The Chair

0900

Mr. Richard Messier (Coordinator, Mouvement pour les arts et les lettres)

0905

The Chair

Ms. Claire Samson (President and CEO, Association des producteurs de films et de télévision du Québec)

The Chair

Ms. Claire Samson

0910

Mr. Jacquelin Bouchard (President of the Executive Committee, Association des producteurs de films et de télévision du Québec)

Ms. Claire Samson

0915

Mr. Jacquelin Bouchard

Ms. Claire Samson

0920

The Chair

Ms. Claire Samson

The Chair

Mr. Nicolas Brisson (President, Quebec's Federation of University Students)

0925

The Chair

Mr. Wenceslas Mamboundou (President, National Council of Graduate Students (Quebec))

0930

The Chair

Mr. Pierre Paquette (Joliette, BQ)

The Chair

0935

Mr. Pierre Paquette

Mr. Gilbert Perreault

Mr. Pierre Paquette

Mr. Gilbert Perreault

Mr. Pierre Paquette

0940

Mr. Pierre Beaulne (Economist, Centrale des syndicats du Québec)

The Chair

Mr. Pierre Paquette

The Chair

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

Ms. Claire Samson

Mr. Nick Discepola

Ms. Claire Samson

Mr. Nick Discepola

0945

Mr. Nicolas Brisson

The Chair

Mr. Pierre Séguin

Mr. Nick Discepola

Mr. Pierre Séguin

Mr. Nick Discepola

Mr. Pierre Séguin

Mr. Nick Discepola

The Chair

Mr. Nick Discepola

0950

The Chair

Mr. Nicolas Brisson

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Pierre Séguin

Mr. Pierre Beaulne

Ms. Judy Wasylycia-Leis

Mr. Pierre Beaulne

Ms. Judy Wasylycia-Leis

0955

Mr. Pierre Séguin

Ms. Judy Wasylycia-Leis

Ms. Guylaine Gosselin (Director general, Fédération des producteurs de lait du Québec)

Ms. Judy Wasylycia-Leis

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

1000

The Chair

Mr. Shawn Murphy

Mr. Nicolas Brisson

Mr. Shawn Murphy

Mr. Nicolas Brisson

Mr. Shawn Murphy

Mr. Nicolas Brisson

1005

The Chair

Mr. Pierre Beaulne

The Chair

Ms. Denise Pelletier (Executive Director, Rector's Cabinet, University of Quebec in Montreal; Vice-President, External Communications, Canadian Federation for the Humanities)

1015

1020

The Chair

Mr. Gilles Taillon (President, Conseil du patronat du Québec)

1025

The Chair

1030

Mr. Gilles Taillon

The Chair

Mr. Pierre Bérubé (President, Quebec Mineral Exploration Association)

Mr. Kamil Khobzi (Co-President, Quebec Mineral Exploration Association)

1035

Mr. Pierre Bérubé

1040

The Chair

Mr. Denis Richard (President, Coopérative fédérée de Québec)

1045

1050

The Chair

Mr. Michel Lessard (Treasurer, Confédération des syndicats nationaux)

1055

The Chair

Mr. Pierre Paquette

1100

The Chair

Mr. Gilles Taillon

Mr. Pierre Paquette

Mr. Gilles Taillon

Mr. Michel Lessard

Mr. Pierre Paquette

Ms. Denise Pelletier

1105

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

Mr. Vincent Dagenais (Assistant to the Executive Committee, Confédération des syndicats nationaux)

Mr. Shawn Murphy

1110

The Chair

Mr. Shawn Murphy

Mr. Vincent Dagenais

Mr. Shawn Murphy

The Chair

Mr. Gilles Taillon

The Chair

Mr. Pierre Bérubé

The Chair

Ms. Judy Wasylycia-Leis

1115

Ms. Denise Pelletier

Ms. Judy Wasylycia-Leis

The Chair

Mr. Gilles Taillon

Ms. Judy Wasylycia-Leis

Mr. Gilles Taillon

The Chair

Mr. Vincent Dagenais

Ms. Judy Wasylycia-Leis

Mr. Gilles Taillon

1120

Ms. Judy Wasylycia-Leis

Mr. Gilles Taillon

The Chair

Mr. Michel Lessard

The Chair

Mr. Nick Discepola

Mr. Gilles Taillon

1125

Mr. Nick Discepola

Mr. Gilles Taillon

Mr. Nick Discepola

The Chair

Mr. Nick Discepola

Ms. Denise Pelletier

1130

La présidente

The Chair

1140

Mr. Jean-Jacques Beldié (President, Association du transport urbain du Québec)

1145

The Chair

Hon. Jake Epp (Chairman, Health Partners International of Canada)

1150

Mrs. Christine Lancing (Director of Development, Health Partners International of Canada)

1155

Hon. Jake Epp

The Chair

L'hon. Jake Epp

1200

The Chair

Mr. Guy Véronneau (President, St. Lawrence Economic development Council)

1205

1210

The Chair

Mr. Jean Canac-Marquis (Vice-President, Academic Edition, Association nationale des éditeurs de livres)

The Chair

Mr. Jean Canac-Marquis

1215

Mr. Pierre Bourdon (Vice-President, General Edition, Association nationale des éditeurs de livres)

1220

The Chair

Mr. Jean Canac-Marquis

The Chair

Mr. Jean Canac-Marquis

The Chair

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

1225

Hon. Jake Epp

Mrs. Christine Lancing

Mr. Rahim Jaffer

Mrs. Christine Lancing

Mr. Rahim Jaffer

Hon. Jake Epp

Mr. Rahim Jaffer

The Chair

Mr. Guy Véronneau

1230

The Chair

Mr. Nick Discepola

The Chair

Ms. Pauline Picard (Drummond, BQ)

Mr. Jean-Jacques Beldié

1235

Ms. Pauline Picard

Mr. Jean-Jacques Beldié

The Chair

Mr. Nick Discepola

Hon. Jake Epp

1240

Mr. Nick Discepola

Hon. Jake Epp

Mr. Nick Discepola

Hon. Jake Epp

Mrs. Christine Lancing

Hon. Jake Epp

The Chair

Mr. Nick Discepola

Mr. Jean-Jacques Beldié

Mr. Nick Discepola

1245

Mr. Jean-Jacques Beldié

The Chair

Mr. Shawn Murphy

Mr. Guy Véronneau

Mr. Shawn Murphy

Mr. Guy Véronneau

Mr. Shawn Murphy

Mr. Guy Véronneau

Mr. Shawn Murphy

Mr. Guy Véronneau

Mr. Shawn Murphy

Mr. Guy Véronneau

Mr. Shawn Murphy

Mr. Guy Véronneau

1250

The Vice-Chair (Mr. Nick Discepola)

Mr. Scott Brison (Kings—Hants, PC)

Hon. Jake Epp

Mrs. Christine Lancing

Mr. Scott Brison

The Chair

Mr. Scott Brison

1255

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Mr. Pierre Bourdon

Ms. Judy Wasylycia-Leis

Mr. Jean Canac-Marquis

1300

Ms. Judy Wasylycia-Leis

Hon. Jake Epp

The Chair

CANADA

Standing Committee on Finance

NUMBER 099

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, November 5, 2003

[Recorded by Electronic Apparatus]

¾ (0840)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Bienvenue à tous.

The order of the day is pursuant to Standing Order 83.1. We are in pre-budget consultations today in Montreal, and this is our first panel.

The witnesses for the panel are

[Translation]

from the Centrale des syndicats du Québec, Pierre Séguin, Vice-President, and Pierre Beaulne, Economist; from the Fédération des producteurs de lait du Québec, Gilbert Perreault, member of the Executive Committee, Guylaine Gosselin, Director General, and Patrice Dubé, Deputy Director; of the Mouvement pour les arts et les lettres, Richard Messier, Coordinator;

[English]

Quebec Federation of University Students, Nicolas Brisson, president; National Council of Graduate Students (Quebec), Wenceslas Mamboundou;

[Translation]

and of the Association des producteurs de films et de télévision du Québec, Claire Samson, Chief Executive Officer, and Jacquelin Bouchard, President of the Executive Committee.

Welcome.

[English]

We will go in the order of the schedule. The floor is yours.

[Translation]

Please begin, sir. You have seven minutes.

Mr. Pierre Séguin (Vice-President, Centrale des syndicats du Québec): Madam Chair, this morning marks my first appearance before your committee, but I will do my best to summarize my presentation in seven minutes.

This morning, we would like to draw your attention to the fact that transfer payments need to be adjusted. So we would like to thank the Standing Finance Committee for hearing us this morning.

Last year, the government surplus was on the order of $7 billion. If not for the fact that certain initiatives, totalling $6.4 billion, were taken, the total surplus of the federal government would have been $13.4 billion. During that same period, the provinces were desperately trying to make ends meet. Together, the provinces accumulated a deficit that totalled $1.1 billion in 2002 and 2003.

This year, as we speak, the federal government's budget surplus is $1.3 billion, notwithstanding the fact that the economy dealt with many challenges in the second quarter. Last year, during that same period, the government surplus totalled $2.8 billion. We feel that this year, with the recovering economy and increased growth for next year, the government will again have a budget surplus.

As for 2004-2005, we don't feel that we should necessarily strive for a balanced budget. In some circumstances, you can have a deficit, especially during recessionary times. Conversely, we don't think there is any particular reason why we should not to try attain a balanced budget.

We also think that the budget should try to strike a precise balance, insofar as that is possible, between revenues and projected expenditures. In the last 10 years or so, projections have systematically underestimated revenues and inflated expenditures in the name of caution, but the parameters which were used to calculate these projections were so off-base that they systematically yielded surpluses which the government did not know how to spend. For us, this is evidence of a fiscal imbalance.

The government's priority should be to increase transfer payments to the provinces. Despite the fact that the federal government has begun reinvesting in health care, we don't think it is enough, given growing costs and needs. The Romanow report recommended that provincial and territorial health care funding be established at 25 per cent of costs, whereas it now stands at about 16 per cent. For their part, provincial ministers urged that that funding be increased to 18 per cent of costs in 2002-2003, and that that figure be increased by 1 per cent until the 25 per cent threshold is attained. We fully support that objective.

We also think that the federal government should confirm as soon as possible that the provinces will receive the amount of $2 billion for health care that was promised, and that the money should come with no strings attached.

We particularly insist on the fact that the federal government should provide the provinces with more stable and predictable funding, and that this funding be taken out of the supplementary funding announced last February.

As for post-secondary education, the Canada Health and Social Transfer will be divided between two envelopes for two different sectors in 2004, namely health, as was called for in the Romanow report, and post-secondary education and social assistance. The envelopes should be divided as follows: 62 per cent for health care and 38 per cent for post-secondary education and social assistance. This breakdown is based on provincial expenses for 2001 and 2002.

In our view, total transfers will be on the order of $25.5 billion, including $12.7 billion for health care and $7.8 billion for education, social assistance, social programs, as well as, from now on, specific funding for early childhood development.

¾ (0845)

[English]

The Chair: I'm going to ask you to slow down a little bit because you're making my translator work very hard. Don't be nervous in this group, because we're always so pleased. We're nervous in front of the wonderful witnesses we get. So please, just relax, and I'll give you an extra minute or so if you need it.

Thank you.

[Translation]

Mr. Pierre Séguin: Thank you very much.

In 1994-1995, before the Canada Health and Social Transfer was introduced, transfer payments totalled $8.1 billion for health and $10.6 billion for other sectors. If the money had been spent as announced, it would have meant that most of the funds had been spent on health care to the detriment of the other sectors, including post-secondary education. This would have meant a shortfall of $2.8 billion in federal support for post-secondary education. This is completely unacceptable to us.

In our opinion, cuts to provincial transfer payments following the introduction of the Canada Health and Social Transfer decreased federal investment to post-secondary education over the next 10 years, despite the fact that investment increased somewhat since 1999. The federal government's share of total university funding fell by 78.6 per cent in 1990 and 58.9 per cent in 2001. According to the Canadian Association of University Teachers, real public financing is 17 per cent under the level it was 10 years ago. We think that the government should inject an additional $2 billion to fix the situation.

Furthermore, if the government increases the demand for educational services, then, logically, it should also increase support for the provision of these educational services, while respecting provincial jurisdiction.

In our opinion, it is therefore urgent and imperative for the federal government to increase its financial support to post-secondary education by increasing transfer payments to the provinces by $2 billion a year.

As for research, particularly as regards the Social Sciences and Humanities Research Council, which involves a high proportion of students and professors, as well as in the area of health research, we believe it is imperative to increase grants.

With respect to employment insurance, given the government's hefty surpluses, which reached $45 billion over the last few years, we feel it is high time to reconfigure the program in order to improve eligibility for unemployed workers, to increase benefits, and to make the employment insurance fund more independent. If you want more details about this issue, we would invite you to consult the brief we tabled with regard to hearings on Bill C-2, which dealt with the employment insurance legislation.

The implementation of the Loi sur l'assurance parentale, Bill C-140, which was adopted by the Government of Quebec in 2000, depends on concluding an agreement with the federal government. One of the reasons negotiations broke down in 1997 had to do with the fact that the province and the federal government could not agree on the amount of the federal contribution, which was estimated at over $60 million. After 1997, when the federal government improved the system by increasing to 35 the number of weeks of parental benefits, and by reducing from 700 to 600 the number of hours a person needs to work to qualify, beginning at the start of 2001, negotiations were suspended. In this context, we ask the federal government to resume discussions with the Government of Quebec to find a solution allowing for the implementation of the bill.

As for social housing, the federal government, after eight years of inaction, recently announced a $1 billion investment over five years. This effort, though laudable, falls very short of what is needed. In the current circumstances, we feel that the government should increase its investment in social housing from 1 per cent to 2 per cent of expenditures. In our view, $2 billion a year should be invested in low-cost housing, housing co-ops and housing managed by non-profit organizations.

As for equalization, the problem, in our view, lies in the fact that transfer payments are unpredictable, which makes it extremely difficult for provinces to establish their budget. For example, in the spring of 2003, the Government of Quebec did not know whether it would receive $1 billion more or less from the federal government. This makes it extremely difficult to develop a budget.

Within the framework of discussions on the renewal of equalization payments, we suggest that particular attention be paid to creating a new funding formula which would provide the provinces with more stable and predictable funding than is currently the case.

¾ (0850)

We will leave it up to the experts to find the appropriate solutions.

We also hope that the equalization formula will be adapted to help reduce poverty in Canada.

Thank you very much.

The Chair: Thank you very much.

We will now hear from the representatives of the Fédération des producteurs de lait du Québec. Please begin, sir.

Mr. Gilbert Perreault (Member of the Executive Committee, Fédération des producteurs de lait du Québec): Good morning, members of the Finance Committee. My name is Gilbert Perreault and I am a dairy producer from the Lanaudière region. I am also the president of the producers' union in my area, as well as a member of the Executive Committee of the Fédération des producteurs de lait du Québec.

The Quebec dairy industry situation can be summarized as follows: 15,000 producers who own 8,000 farms; $1.7 billion in farm cash receipts; $2.6 billion in cash receipts downstream from production; over 60,000 direct and indirect jobs.

Our position on international trade is pretty straightforward. First, we believe that every country should have the right to protect its agricultural sector and ensure its food security through various market access controls such as tariffs. Second, those who wish to trade on the open market may do so, provided they do not grant domestic support to, or subsidize their export products. Third, exporters should have clear, transparent and equitable minimum market access for their products. In short, in our opinion, the World Trade Organization should concentrate on establishing clear rules to govern agricultural trade, that is, about 6 per cent to 10 per cent of world agricultural production, and not interfere with domestic agricultural policies that apply to the remainder of the world's agricultural commodities.

What's more, the dairy industry is an agricultural sector which receives no subsidies, whose total earnings come from the market, and it is a sector which needs to be protected given the fact that other countries massively subsidize their farmers.

That being said, our industry, no matter how profitable, is gravely threatened. The 15,000 dairy producers we represent are extremely worried—I can't tell you how much—when they hear talk about the future of their industry. Indeed, agricultural negotiations at the WTO are a major threat to their industry. I will focus most of my presentation on these negotiations. I will also take this opportunity to address the very real constraints that the BSE crisis has had on the supply management of dairy farms. I will conclude by sharing with you our concerns with regard to the transfer of farms to the next generation.

The proposals set out in the draft WTO ministerial conference declaration in Cancun would mean the end of the dairy industry in Quebec and the rest of Canada in the near or long term, since the proposed tariff reductions would result in eliminating border controls. In the meantime, other countries, especially the United States and the European Union, could continue to grant hefty subsidies while jealously guarding their markets. Given this scenario, and lack of support from the Canadian government, the demise of dairy farming in Quebec and the rest of Canada can easily be foreseen.

We believe it is in the interest of all Canadians for our government to undertake never to sign an agricultural agreement that would threaten any of the three pillars of our marketing system, that is, border controls, production planning, and price and income levels that cover the cost of farm production.

If the government were to venture down the path of economic liberalism in our sector, it would be held responsible for its decisions. It would have to make a commitment to provide the Canadian dairy industry with financial support at levels comparable to the support granted to American and European producers. Otherwise, a large segment of agriculture and of local and regional economies would disappear. It is estimated that to maintain these industries in the absence of border controls, the Government of Canada would have to invest at least $3.6 billion every year in the Canadian dairy industry as a whole, which represents about half of the production value.

The BSE crisis, commonly known as “mad cow disease”, whose effects continue to be felt in Canada, is clear proof of the fragility of international trade in the agricultural field.

¾ (0855)

Something that at first seemed to be an isolated and short-term event quickly became a major crisis that threatens the financial health of many dairy operations in Canada.

At current prices, the annual losses of an average dairy operation are estimated at about $13,500, while the net income of the same operation is about $50,000. We should note that this net income supports 1.3 families per farming operation and serves to renew the farm's capital.

It is important that the federal government announce a program that will help producers get through this crisis. The program currently under study at the federal level is not suited to dairy cull cows. It is predicated on the needs involving beef cull cattle. Any program should therefore provide the necessary funds, the flexibility required to consider the special conditions of the dairy cull cattle sector, and equity with the beef cull sector.

The Fédération des producteurs de lait du Québec also encourages the Government of Canada to continue multiplying diplomatic efforts with our main trading partners so that the embargo on Canadian livestock and beef is fully lifted.

This brings us to our third source of concern, the transfer of farms to the next generation. It has never been easy to get started in agriculture. The main reason that explained and still explains this difficulty is the heavy capitalization required during the start-up or acquisition of a farming operation.

In the past few years, the necessary investments to acquire a farm have not diminished—quite the opposite—while revenue expectancy has remained relatively stable and in some cases has decreased.

The agricultural sector can currently count on a number of tax measures. However, these measures could be improved, while others could be adopted. Our brief discusses some of these measures. I should also note that the Union des producteurs agricoles is conducting a wide-ranging consultation on this issue with its member bodies. We invite the members of your committee to pay close attention to the deliberations of Quebec agricultural producers and to consider innovative tax measures that will make it possible to increase the number of farm start-ups.

The Canadian dairy industry is in the midst of great uncertainty. The issues confronting it are likely, in some cases, to threaten the sustainability of our farms and our industry. They could also have significant budgetary and fiscal consequences for the Canadian government and taxpayers. We hope that you will consider these points in your recommendations.

I thank the members of the committee for their attention. We are available to answer your questions. Thank you.

The Chair: Thank you very much, Mr. Gilbert.

We will now hear from the spokesperson for the Mouvement pour les arts et les lettres. Please begin.

¿ (0900)

Mr. Richard Messier (Coordinator, Mouvement pour les arts et les lettres): Thank you very much and good morning. My name is Richard Messier and I am the Coordinator for the Mouvement pour les arts et les lettres.

The Mouvement pour les arts et les lettres is an organization which represents national artists' associations in Quebec and regional culture councils which operate in every region of the province. Our organization represents a total of 15,000 professional artists and creators who work in dance, music, theatre, visual arts, media arts and regional cultural productions throughout Quebec.

We are here this morning to ask for a significant increase in the budget of the Canada Council for the Arts. We would like to see the budget increased to approximately $300 million. The current budget is about $125 million. Therefore, we are asking the government to double the budget of the Canada Council for the Arts. It is important for us to speak to you, because the budget of the Canada Council for the Arts depends directly on the Minister of Finance and on Parliament, and therefore on yourselves, the members of Parliament, whose responsibility it is to approve the budget.

Culture is important in Canada and in Quebec. In an era of market globalization, national identity becomes extremely important. It used to be that countries distinguished themselves through the size of their economy. But with globalization, national identity has become not only important, but also essential.

Who creates this identity? Of course, it is all Quebeckers and Canadians, but also artists, and more particularly, professional artists, who play a major role in how our national identity is defined. But the people who define our culture, Canada's professional artists, are poor. Eighty per cent of artists in Canada live below the poverty line. More specifically in Quebec, given the great number of hours invested by artists to produce shows and works which are the pride of Quebec and Canada—though not only in Quebec, but in every province and around the world—the average income of artists is currently at 50 per cent of the minimum wage, which is unacceptable in a society like ours. With a yearly income of about $9,000 a year, these artists practically volunteer to create works which define our identity. There is no reason for a society like Canada to have artists who are so poor.

Of course, we are a small market. Quebec's francophone market falls below the threshold set by UNESCO. A few years ago, UNESCO did a study which firmly concluded that in societies with fewer than 10, 12 or 15 million people, it was the government's duty to invest in culture and to sustain it. In Canada, it is mostly the federal government which supports culture. Of course, the Government of Quebec invests approximately $500 million per year in culture, which is a large amount, though we cannot forget that any investment in culture is beneficial for the government.

Every study carried out by Statistics Canada, by the departments of Revenue of Quebec and Canada, by the Department of Culture and by the Department of Canadian Heritage has shown that for each dollar the government invests in culture, it reaps a direct tax benefit of $2. So, any investment generates twice the amount in economic benefits.

We are therefore asking for the budget of the Canada Council for the Arts to be increased to $300 million. In Quebec, every time $10 million are invested in a cultural sector, and more particularly in the arts and letters sector, the average income of artists increases by about $1,000.

¿ (0905)

We feel that in the Canadian context, in view of society's financial capabilities and its opportunities for growth, it is not normal for artists to earn less than minimum wage, to have an income that is lower than the poverty level.

Here, in Quebec, we have support from the province. Provincial support in other parts of Canada is much weaker, which means that the federal government's responsibility to invest in culture there is proportional, keeping in mind that culture is paramount in the definition of our national identity.

We insist that these funds be invested in the Canada Council, because this body's mandate is to support professional artists in Canada. Unlike what is done in other programs, Canada Council grants are awarded by peer review committees. It is up to these committees to decide upon the value of an artistic project or organization. We feel that peer review is one of the best tools to improve the quality of cultural productions in Canada.

Investing in culture also means investing in economic development. A recent University of Pittsburgh study by Dr. Florida has led to what is called the Bohemian Index. This index is determined by comparing the number of artistic creators and the number of scientific and technological creators within a given society. The index is very clear: as the number of artists increases, so does the technological development and the number of undertakings based on the knowledge economy.

In his last budget, the future prime minister, Mr. Paul Martin, stated that one of Canada's great priorities is to establish and develop new knowledge-based industries to solidify Canada's position as a technological innovator. A considerable amount was dedicated to that very purpose in his last budget, in 2001.

Now, we know that the best way to entice businesses to set up shop is to provide attractive conditions for technological development. The Bohemian Index has shown that the more artists, entertainment and exhibits there are in a given society, the greater the likelihood that businesses will want to establish a presence in the area. We know that a labour shortage is looming. Businesses must be more aware of the living conditions of their employees. Therefore, access to a broader and more diverse range of cultural activities increases our capacity to attract new businesses to Canada's high-tech sector.

In closing, I will say that we live in a wealthy society. Of course, we do have our problems, but we are nevertheless very fortunate. There is no reason for a group of citizens as important as our artists to earn an average income that is below the minimum wage. Artists represent one of the rare groups in our society that earns less than the minimum wage. I might add that most of our artists are self-employed. Because of their income, they have no social safety net, no access to employment insurance, and no way of contributing to a worthwhile pension fund.

This is something that, as a society, we can change. Together we can better define our national identity. Because of the rapidly developing economic globalization, there is no other option.

Thank you.

[English]

The Chair: Merci beaucoup.

I'm just going to go out of order for a minute, because I'm waiting for some copies of the briefs.

So we'll go first to l'association des producteurs de films et de télévision du Québec.

Go ahead, Madam.

Ms. Claire Samson (President and CEO, Association des producteurs de films et de télévision du Québec): You will allow us, Madam Chair, to share the document, as I handed my copy to your translator.

If we can make somebody's life a little easier today, why not?

The Chair: They are excellent translators.

It happens in the reverse when people read fast. It's hard.

Thank you.

[Translation]

Ms. Claire Samson: Good morning, Madam Chair. Thank you for inviting us to appear this morning. My name is Claire Samson and I am the President and Director General of the Association des producteurs de films et de télévision du Québec, the APFTQ. With me today is Jacquelin Bouchard, President of Pixcom and Chairman of our board of directors.

The APFTQ represents over 100 film and television production companies, in other words, most of the Quebec companies whose productions are seen on the small screen as well as in the cinema.

Two thousand and three is an exceptional year for the Quebec film industry. A number of our productions made headlines and generated large revenues, in Quebec as well as the rest of Canada, the United States, and many European countries. Canada's entry in the upcoming Oscars will be Les Invasions barbares. Other productions such as Séraphin: Un homme et son pêché, La Grande Séduction, Mambo Italiano, Sur le seuil and Nez rouge are on the way to becoming or have already become financially successful. Quebec's film industry is in very good shape, but it must be provided with the means for continued success.

Two thousand and three is also an exceptional year for independently produced television programs in Quebec. Whereas in the 1980s, popular dramatic series included Dallas and Dynasty, with 83 per cent of all programs aired on French-language stations imported mostly from the United States, today, 25 of the 30 most watched French-language television programs are Canadian and these 25 programs are produced by independent Quebec production companies.

¿ (0910)

Mr. Jacquelin Bouchard (President of the Executive Committee, Association des producteurs de films et de télévision du Québec): Good morning, ladies and gentlemen.

I will now give you a few economic facts about this industry which, besides its broad scope and great cultural importance, plays a major role in Canada's economy. The performance indicators for our industry are positive, but for the first time in its history, they are showing signs of a slowdown.

First, a few facts and figures on the industry's importance to Canada. While the Canadian economy, all sectors combined, posted an average growth of 3.8 per cent for 2001-2002, the total volume of film and television production remained steady at $5.1 billion, the same level as the previous year. This plateau in production volume followed two years of vigorous growth: 16 per cent in 1999-2000, and 9 per cent in 2000-2001.

Television accounted for 79 per cent of production volume, with $4 billion, while film made up 21 per cent, or about $1 billion. Television production was up 2 per cent in 2001-2002, and film production fell by 7 per cent.

Film and television production was the source, both direct and indirect, of 137,800 jobs in Canada in 2001-2002, and the industry directly employed 53,000 workers. The industry has been a significant factor in job creation over the last five years; the number of jobs has increased more rapidly than in a number of related industries and in the economy as a whole. Between 1996 and 2001, employment growth in the industry averaged 7.1 per cent, six times the rate in the broadcasting industry group and three times the composite rate for all other sectors.

Finally, one more statistic. The export value of Canadian production was $2.3 billion, down 14 per cent from the previous year. The decline stemmed from a significant decrease in exports of independent Canadian productions due to a downturn in the international market.

Ms. Claire Samson: As to our industry's needs and priorities, the first one will come as no surprise. I am referring to the Canadian Television Fund. The 2003 budget included a two-year renewal of the government's contribution to the Canadian Television Fund. We thank the government for this initiative, but we believe that a permanent commitment is needed to ensure the industry's stability, and allow it to plan for the future.

Unfortunately, this renewal was $25 million short of the historical amount, dropping from $100 million to $75 million. The consequences and impacts of this budget reduction are well-known.

The government is hoping that the private sector will step in to bridge the $25 million gap; that is an unrealistic expectation. Even though contributions from the broadcasting services distribution industry have doubled since 1996, from $50 million to $100 million, an increase in the number of television channels and television station licensing requirements have led to a greater demand for Canadian programming. A smaller government contribution therefore means a lower production level for the 2002-2003 season, and an even greater drop for 2003-2004.

With fewer Canadian productions to choose from, the networks will have to fill their program grid with lower quality foreign imports. There will also be job losses in this sector.

The government's budget for the Canadian Television Fund must therefore be renewed for a longer term and for an amount at least equal to historical levels, that is to say, $100 million a year.

¿ (0915)

Mr. Jacquelin Bouchard: I will now deal with tax credits, another important lever for our cultural industry.

Over the past years, a great deal of work has been done to simplify the government's Canadian production tax credit. The industry consultation process, which began in 2000, concluded with the development of a proposal endorsed by all APFTQ, CFTPA, Canadian Heritage and Finance department participants. The proposal contains a package of measures designed to clarify certain administrative requirements, and we are proud to say that after three years of discussion, all parties, throughout Canada, have reached a consensus. All that remains is the implementation.

We urge the Standing Committee on Finance to recommend to the Minister of Finance that these measures be implemented so that productions can benefit from them as soon as possible before the end of the fiscal year. The fruit is ripe and ready for picking.

I will now turn to the film and video production tax credit. The resources provided in the form of tax credits help to sustain production companies. They help support companies' permanent operations between productions, and fund research and development activities leading to the development of quality products.

For each feature film or television program shown, a production company has to invest in research and development of several projects in order to interest its financial partners in completing a single production. Just because a project is realized does not necessarily mean it will be shown. A number of products may be developed for a single on-screen production.

Because money is tight, producers cannot afford to develop as many different versions of each feature film as producers in the United States can, for example. The domestic market in the United States can support the development of more than a dozen scripts before one of them is put into production, compared with only three scripts in Quebec. This, of course, attests to the effectiveness of our creators, but there is only so much that we can do. We have far fewer resources than our neighbours to the south when it comes to producing multiple projects.

If we compare the film and television industry with other sectors, we find that in the mining, pharmaceutical and computer industries, substantial investments are made in prospecting or research to find the right ore deposit, the miracle drug or the perfect software application. And no one questions such investments.

We ask the government to keep improving this program's effectiveness in creating incentives for Canadian production through an increase in the production tax credit.

The government decided to increase the tax credit in the last budget in order to support production. Production services, or mainly American productions operating in Canada, the companies that we call production services in our business, were responsible for raising the rate to 16 per cent, I believe. However, the tax credit to support Canadian productions remained at its previous level. This requires some serious consideration. Logically, we should benefit from the same level as the Americans. Thousands of jobs depend on it.

Ms. Claire Samson: Quebec's independent producers contribute to the attainment of important economic and cultural goals and create performance and employment opportunities for thousands of Quebec artists, authors, producers, technicians, screenwriters and performers, with both English-language and French-language productions. The executives of these firms are entrepreneurs who have to meet the same economic challenges as any other type of company to remain competitive, ensure the firm's survival and preserve their workers' jobs.

Because of its geographic proximity to the United States and its low population density, Canada has to find ways of supporting its film and television production industry. The Canadian market alone is not large enough to generate the revenue needed to sustain the industry, which not only has to remain competitive but also must offer sufficiently appealing content to keep film and television audiences watching.

The accessibility and availability of American productions are reminders that Canada must protect its cultural industry and help it to grow in order to avoid American homogenization.

Film and television also contribute to Canada's image on the international stage. The recent success of film productions earlier this spring and this summer, as well as their export potential, cannot help but have a positive effect on Canada's visibility and reputation on international markets.

¿ (0920)

[English]

The Chair: Ms. Samson, I'll have to ask you to finish now. Do you have one final sentence you'd like to do?

[Translation]

Ms. Claire Samson: In closing, the APFTQ would like to thank the committee for this opportunity. We are now ready to answer your questions.

[English]

The Chair: Merci beaucoup. Thank you very much.

Now I'll go to Mr. Brisson.

[Translation]

Mr. Nicolas Brisson (President, Quebec's Federation of University Students): Good morning. My name is Nicolas Brisson and I am the President of the Quebec Federation of University Students, which brings together 19 student associations in Quebec representing more than 145,000 students. We would like to thank you for giving us an opportunity to present our brief to the Standing Committee on Finance.

The Federation's main priority is to encourage the Prime Minister of Canada to increase the federal post-secondary education transfers in the next budget. According to our estimates, for Quebec alone, the shortfall due to the reduction in federal post-secondary education transfers represents $3.64 billion, which can be attributed to the introduction of the Canada Health and Social Transfer.

These lower federal transfers have caused major problems for students. Because of an increase of 125 to 130 per cent in tuition fees in Canada over the past ten years, students are now deeper in debt. Student debt has tripled over the past ten years. This has led to a generation that has become more impoverished, and to lower university enrolment for young people from low-income families as compared to those whose families earn a higher income. One of the causes—and this is not the only one, since provinces are also responsible—is obviously the lowering of federal post-secondary education transfers.

We would like to see a boost in federal post-secondary education transfers in the next budget. We believe there is a $4 billion shortfall and we hope that over the coming years, the federal government will increase its transfers to the provinces for post-secondary education, ideally as tax points.

Another consequence of the reduction in federal transfers is what is commonly known in Quebec as the fiscal imbalance. This has nothing to do with a political option. There is no denying that a fiscal imbalance exists. We can't help but see that the federal government has too large a share of the tax base when compared to the services that must be provided by the provinces, particularly in the area of health.

Over the coming years, health needs will increase in Quebec, because Quebec will be the second largest world society to face a demographic upheaval.

According to the Clair Commission, within the next 25 years, in Quebec, health costs will soar from 40 per cent to 60 per cent of the provincial budget, in a context where there will be 2.5 times fewer taxpayers.

Therefore, the Quebec Federation of University Students feels that the federal government, along with the provinces, must clearly find a solution to the fiscal imbalance and increase the financial capability of their provinces, particularly Quebec, to face this demographic upheaval. Failure to do so will threaten the integrity and viability of social programs.

Along with this demographic shock, over the past few years, there has been a trend to lower taxes at both the provincial as well as the federal level. We believe that in the present context this is a mistake that will affect future generations.

In Quebec, if taxes continue to drop, the government will no longer be able to adequately fund its social programs, particularly in view of the rising health costs. In 10 or 15 years, choices will have to be made. In fact, there may no longer be any choice, since the situation will dictate the response. Some health services may have to be privatized or taxes will have to drastically increase, which could lead to intergenerational tax equity issues. Lowering taxes today means reducing the government's financial capacity to face rising health costs in the coming years.

¿ (0925)

So we are asking the federal government not to decrease its taxes and increase the transfers to provinces.

Those are our priorities. In winding up, I'd like to remind you that Canada's students have paid the price for the decrease in transfers. This decrease in transfers has changed the lives of Canadian families if only through the increase in tuition fees. Even here, in Quebec, tuition fees have increased contrary to what is often said. They have increased less than in the rest of Canada, but there has been an increase. That's why we demand that within the context of the transfers to provinces, the latter should be given the freedom to choose what they must do with that money in the field of education. For example, we dearly hope that in the rest of Canada the federal transfers could be used to decrease tuition fees which are extremely high. Let us remember that Canada is one of the countries where tuition fees are the highest in the world.

Thank you.

The Chair: Thank you, sir.

Mr. Mamboundou.

Mr. Wenceslas Mamboundou (President, National Council of Graduate Students (Quebec)): Thank you. I'm Wenceslas Mambounbou and I'm a doctoral level student in political sciences and President of the National Council of Graduate Students of Quebec.

The National Council of Graduate Students represents some 35,000 students in Quebec's universities at the master's and Ph.D. levels. It's a pleasure to be here before the Standing Committee on Finance to express our views as to the next federal budget.

As we all know, the government, a year or two ago, was looking at Canada's new innovation strategy with a view to making research a priority as Canada is not competitive at the present time in some areas as compared to other countries. So it was important to emphasize research given the needs that will be multiplying in the context of the knowledge economy.

Also, in 2001, Quebec set up its policy on science and innovation in order to make research a priority in those cases where research has a major impact on the economy.

As my colleague as just said, indebtedness is the problem students have at present. In Canada, average student debt is about $20,000. It's an enormous problem and we think that something should be done in that area to ensure adequate funding that would lead to a decrease in student debt.

Particular attention should be given to university and research funding because there is simply a human resources replacement problem in Canada. We have to recruit between 2,500 and 3,000 university professors by the year 2006. At the present time, the average number of people getting a Ph.D. each year is 4,000, and 30 to 40 per cent of them choose to pursue academic careers. So graduate students aren't only choosing university research and university jobs. Those graduates are useful to the economy as a whole. Graduates work for business, the public service and so on. That's how our business sector can remain competitive and we can develop new research and other programs and thus ensure that those who are leaving are replaced. So it's important to emphasize training and research.

The question of accessibility is especially crucial for graduate students, as most of them are funded by granting agencies. We think more money should be given to granting agencies in order to have more scholarships for graduate students.

Last year's budget created 4,000 new scholarships for graduate students. That was a good thing but it's still not enough, in our opinion, in view of the needs for renewing our human resources in the scientific area.

Beyond research funding, there's the whole matter of indirect costs involved with research. In our opinion, this is a major point. Last year, $225 million were set out in the last budget, but that is still not enough if we go by all the studies published on this matter. Recently, Quebec's Education Department and its Economic and Regional Development Department made public a study demonstrating that indirect research costs had to be funded as a proportion of 65 per cent of direct basic costs. Why should we fund them? You have to understand that if indirect research costs are not funded than the university budgets will have to pay for them. The consequence will be deficits preventing universities from fulfilling their primary role, which is training and research, because they will have to absorb the costs of university research.

As for the tax implications of scholarships, we think that some emphasis should be put on that and students exempted from taxes through more specific measures. That was done in Quebec in the year 2000. We think such a measure would cost the federal government some $30 million. Why? Simply because we want to decrease poverty in student ranks. That is important if we want more students to be in a position to pursue post-secondary studies.

In our opinion, we should also stop investing in the Canada Foundation for Innovation and give those funds to granting agencies that already exist. First of all, from a practical point of view, the foundation is not accountable. Even if it has the means to respond to the needs in the area of research infrastructure investments, we think granting agencies should play the role of investing in research and research infrastructure.

¿ (0930)

So we think that in order to improve concerted action and policy and in order to increase effectiveness, the amounts currently going to the Canada Innovation Fund should be redirected and invested in granting agencies.

As for the granting agencies, considerable effort should be made in the area of the humanities and social sciences. We should remember that 54 per cent of full-time researchers are working in the area of human sciences and that 61 per cent of full-time graduate students are working in that same field which happens to be one of the least- generously funded at this time in Canada.

We think there should not be any funding disparities between the different sectors. That's why a major effort should be made in that area of research.

Those were the comments we had for you as well as the recommendations we are making to the Standing Committee on Finance in order that Canada might position itself as a leader in the field of research, but also to allow us to ensure a renewal of human resources in Quebec as well as in Canada.

Thank you.

The Chair: Thank you. We appreciate your coming this morning.

We will now go to questions. Mr. Paquette, you have the floor.

Mr. Pierre Paquette (Joliette, BQ): How much time do I have, Madam Chair?

The Chair: Six or seven minutes.

¿ (0935)

Mr. Pierre Paquette: I'd prefer six or seven minutes US, but I'm still using the good old Canadian penny.

I'd like to thank you for coming, first of all. Your presentations were extremely useful. We have all kinds of questions we'd like to ask, but unfortunately, as you can see, there are time constraints. I have four questions for you; if you can answer them specifically and to the point, I'll be able to put them all to you.

First, I'd like to most respectfully welcome Mr. Perreault. You examined many questions and supply management was one of them.

I'd like to know if the Fédération des producteurs de lait du Québec is satisfied with the way the federal government is currently defending supply management, which we hold very dear to our hearts, in the context of the World Trade Organization negotiations.

Mr. Gilbert Perreault: Thank you for your question, Mr. Paquette.

First, Minister Vanclief and the Department of Agriculture and Agri-food have often stated in writing and verbally that they were defending our supply management system 1000 per cent. As far as actions go, I have some doubts. Recently, during the Cancun round of negotiations, the latest documents circulated before the whole thing fell through imperilled supply management, and yet the Canadian government was ready to sign that agreement.

As this is a sector that is not subsidized and costs the State nothing, I think the Canadian government should get together a Team Canada or a mission whose objective would be to promote this supply management system which could be adopted by many countries, especially the developing ones. This system costs the State nothing and does not go against the interests of the other countries that want to subsidize. You know that in Canada we have no subsidies for that. So I think that the best way of helping us right now would be to promote our system outside of our borders to make allies.

Mr. Pierre Paquette: As international trade is the responsibility of the federal government, do you think the latter has properly met its responsibilities in what is commonly called the mad cow crisis, especially for cull cows?

I know that in the Lanaudière region there have been some meetings on this matter. Has this file moved forward?

Mr. Gilbert Perreault: It's not going ahead very much, in my opinion. The government is implementing an action plan that will only cover about 10 per cent of the producers' financial losses. For cull cows, there's no link with the producers. This was a political crisis and it became a domestic economic crisis. The crisis might not be visible as we speak, but you must understand that within the next few months many producers will have to declare bankruptcy because the program doesn't really cover the losses that were incurred.

Besides, for the last two or three years, producers' incomes at the farm gate have decreased horribly for all kinds of reasons and the mad cow crisis is only one which, amongst other things, led to a decline in the price of grains and beef because it was an open market. Open markets are all the rage and you can see what the result is now. If our cull-cow beef was eaten in Canada, we'd be self-sufficient. We wouldn't need to export or import anything. So it's really a political question.

Mr. Pierre Paquette: Thank you.

I also welcome the representatives of the CSQ and the QFUS, and I'd like to say this.

First, in your own manner you have both looked at the problem of underfunding in education and underfunding in the transfers, and the pressure brought about by the health question on those federal transfers which are not enough for the provinces. Were the fiscal imbalance to be corrected, wouldn't this bring about a more structural solution than these piecemeal transfers? Of course, in the matter of equalization, the federal government must meet its responsibilities in the health and post-secondary transfer fields. Mr. Séguin has announced a 3-billion-dollar financial problem for next year.

Now, if we take away health and education, there's a 9-billion-dollar envelope left. Mr. Séguin cannot get $3 billion through savings managed thanks to budgetary restrictions applied to services other than health when the envelope is $9 billion.

Don't you think that by settling this matter of fiscal imbalance, Quebec, for example, would be able to better balance its investments in health and education?

¿ (0940)

Mr. Pierre Beaulne (Economist, Centrale des syndicats du Québec): We deeply believe that the economic and social development as well as the cultural flowering of societies depends on the persistent effort made in investing in education. The progress we've made over the last 50 years clearly confirms this thesis. On the other hand, we've seen the results of what we should avoid doing in those many countries where, unfortunately, they stopped investing in education in the mid-80s.

We've seen that the elimination of the federal government's deficit during the 90s mainly translated into decreasing financial transfers to the provinces. Support for education, health, social aid and other programs were particularly affected. The situation was particularly dramatic in the area of education.

Now, in light of the new hand that is currently being dealt, we believe that funding for higher education must be preserved. We have seen that from the moment the federal government decided to create two envelopes, the first one for health and the second for the other programs, we wound up recycling the funds from the budget cuts applied to social aid and higher education to fund health which, in our eyes, is particularly egregious.

So we believe the federal government, in its next budget, should set its mind to re-establishing the funding of higher education. Moreover, we think that it's through the equalization formula that things should be re-ordered and this includes a criterion concerning the fight against poverty, just as we had before within the framework of the Canada Social Transfer before it was eliminated.

Finally, to answer the question more specifically, I would say that in our opinion, the method that should be used would be a transfer of tax room to the provinces by the federal government so that they can correctly meet their obligations in matters of health and education. However, while we're waiting for that to happen, the financial transfers should be increased in order to meet the needs in the area of funding.

[English]

The Chair: Thank you.

[Translation]

Mr. Pierre Paquette: It could meet them in the framework of other questions.

[English]

The Chair: I know, but you've had eight minutes.

You have six to seven minutes, Mr. Discepola.

I should tell you that his time includes your answers. If you can cut them down so he can get more questions in, that helps.

[Translation]

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you, Madam Chair.

My first question is for the Association des producteurs de films et de télévision du Québec. I'd simply like some clarification.

In Ottawa, we heard from another group who also wanted to see an investment in the Canada Television Fund. Now, that group was asking for $125 million while, in your case, you've written in $100 million.

Are you really asking for $100 million? There is no doubt that our committee supports the demand, but before making any recommendations, we have to know whether it's $100 million or $125 million.

Ms. Claire Samson: It's clear that the purpose of our request is that, as a minimum, the Canadian government re-establish the funding it was granting in the past to the Canada Television Fund. However, we must remember that the 100-million-dollar yearly contribution forced the Canadian Television Fund to refuse a great number of requests submitted in the context of its programs. The requests were for over $100 million above and beyond the resources available.

In my opinion, $125 million in funding would allow 80 per cent of the production projects to be funded. On the other hand, if the fund were to receive $100 million, the rejection rate would remain at 60 or 70 per cent which, without a doubt, is a very high level for an industry like ours.

Mr. Nick Discepola: If memory serves, right now it is $75 million.

Ms. Claire Samson: The amount was reduced to $75 million: during the year, the Minister of Finance accepted to give an advance of $12.5 million from next year's budget. Thus, this year, the shortfall won't be $25 million but $37 million.

Mr. Nick Discepola: Thank you very much.

I'd like to put a question to everyone on the necessity of transferring additional funds to the provinces. I found that Mr. Beaulne made some good suggestions, but I think that Mr. Brisson also said that if we transfer money to the provinces, it will have to be used for education. I totally agree with him on that. There used to be a mechanism in place for that as Mr. Beaulne pointed out.

Here's an idea I'm throwing out. As we are reviewing the Canada Health and Social Transfer, wouldn't it be appropriate to establish three transfers, one for health, another for education and a third one for social programs? Without mentioning the word contract, there would be a distribution, in any case. This way we could transfer money and the provinces would have to show that they actually did spend the money for the reasons it was transferred. There are all kinds of examples and time is too short to give a list. I'm told that Alberta is the only province which, in its financial statements, delineates the three areas. There are a whole lot of cases where the money transferred to the provinces was not used for the reasons for which it was paid.

We're now being told there is a fiscal imbalance, but where were the provinces in 1995 when we had all that debt piled up? They didn't ask the federal government to send a bill to help with the lack of funding.

It seems to me this is a good time to encourage a spirit of cooperation with the provinces and find a way to manage public funds properly. I'm repeating that some transfers were analyzed and it was seen that the provinces, as a majority, chose to invest almost all the money in the health sector to the detriment of education. I agree with you on that.

What is the solution? Are you suggesting the itemization of the three envelopes?

¿ (0945)

Mr. Nicolas Brisson: The ideal solution, to our mind, would be to settle the fiscal imbalance question but, as you said, the money should be used for the reasons it was given, in other words to face the constant increase in financial needs in the areas of health, education and so on.

Let's take Nova Scotia. The province did not use the Canada Millennium Scholarship Foundation Funds to help students pay for their studies. It was used for other budget items and we find that unacceptable.

There is some inconsistency in Mr. Séguin's position. On the one hand, he's asking for a transfer of tax points to decrease the fiscal imbalance and, on the other hand, he's already announcing five billion dollars' worth of tax reductions. There's some inconsistency there.

To answer your question, I would say that we prefer the transfers to be itemized by sector of activity, which are health, education and social aid, all this to avoid having provinces act like Ontario, which decreased its taxes tremendously, or Nova Scotia, which transferred amounts provided for education to other sectors of activity. We would like a system that would allow us to make an assessment, and also give the provinces some leeway. They could invest the money from the federal government for education wherever they want to invest it, as long as it remains in the field of education.

The Chair: Let's go to another witness. Mr. Séguin, you have the floor.

Mr. Pierre Séguin: We share essentially the same position. We would like to see a certain level of independence in managing these envelopes, but otherwise we feel the same way.

Mr. Nick Discepola: If I understand correctly, you would like the CHST to be divided into three parts—

Mr. Pierre Séguin: Yes.

Mr. Nick Discepola: ...as long as the provinces are free to invest in the priorities that they themselves define.

Mr. Pierre Séguin: Exactly.

Mr. Nick Discepola: How many minutes do I have left?

[English]

The Chair: You have a minute and a half. Sorry, you have half a minute. I was going to give you the same amount of time as....

[Translation]

Mr. Nick Discepola: Let's deal with student debt. It seems to me that a certain level of debt would be acceptable. You can't say that students should be clear of debt. You said that the average was about $20,000. It seems to me that investing $20,000, knowing that I might recover $10,000 or $15,000 per year over my lifetime, would be a good investment. You call it a debt while I see it as an investment.

How far should the federal government—or the provinces—have to go in assuming this burden? I think that you share part of the responsibility.

¿ (0950)

[English]

The Chair: A very brief comment.

[Translation]

Mr. Nicolas Brisson: I agree. There is what we call, as you said, a return on a diploma. For example, in Quebec, a graduate will pay seven times the cost of his education in taxes. In any case, a student, during his working life, will pay seven times more in taxes than someone who does not hold a diploma. If we add to that amount a student debt of $20,000 to $25,000, it is unfair. Young people from low-income families will be in debt, they will pay more in taxes than non-graduates, with fewer opportunities to support a family and own property. In other words, they will experience debt-related problems.

We are of the opinion that university graduates, because of their higher income, will end up paying for their education in higher employment taxes. In Quebec, it would be seven times higher.

[English]

The Chair: Thank you.

Maintenant, Madam Judy Wasylycia-Leis. Go ahead, you have seven minutes.

[Translation]

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Madam Chair.

I would like to thank everyone for appearing here this morning. I will begin by asking a question of Mr. Séguin. I apologize if my French is not perfect, but I will still make an attempt to speak in that language.

I very much appreciated your presentation. You identified the problem that arises when the government underestimates its revenue. As you know very well, the government underestimated its revenue by $80 billion over 10 years.

To what would you attribute the government's tendency to constantly underestimate its revenue?

Mr. Pierre Séguin: Well, Ms. Wasylycia-Leis, I am not a mind reader, but I would say that the government, in acting in this way, was giving itself a certain amount of leeway—it was being extra cautious—in order to have more room to play with the figures.

I believe that the study that was undertaken helped to sensitize the public to the difficulties that the federal government could eventually encounter. At the same time, the over- or underevaluation meant that, at the time, the parameters did not reflect the reality, did not take into account what was truly happening. I think this had a negative effect on our economic performance, but, I must admit that I have limited expertise in this field. I would like to give my colleague an opportunity to answer this question.

Mr. Pierre Beaulne: Thank you.

I think that the government probably had a hidden agenda.

Ms. Judy Wasylycia-Leis: Yes.

Mr. Pierre Beaulne: Half of the surplus was supposed to be put towards tax reductions and the other half was suppose to go towards program spending. By making a false estimate, they were able to protect a significant percentage of the financial resources which were then put towards debt reduction.

In a nutshell, that therefore prevented the budget process from being followed in a democratic manner.

Ms. Judy Wasylycia-Leis: Thank you.

I agree with you when you say that balancing the budget is not about dogma, but it does seem to me that the government has a choice to make now. It can invest in health, education, culture and other programs without running a deficit. If the government were to decide to put an end to corporate tax reductions this year, which would result in savings of nearly $2 billion, and if it were to stop worrying about the debt, it could invest a lot more in social programs.

What do you think about these ideas and what do you think about the federal government's choice?

¿ (0955)

Mr. Pierre Séguin: I think that it is essential that the federal government have a balanced budget. As we spelled out in our brief, this does not necessarily always have to be the case, but we cannot fail to note that there has to be some link between spending and revenue.

If we were clearly in a period of recession, perhaps it would be desirable for the government to think about running a deficit, but under the current circumstances, this is not the case. Under such circumstances, the government must make an effort to fulfill its role as a State and invest both in health and in education and in other activity sectors.

Ms. Judy Wasylycia-Leis: Thank you.

If I had enough time, I would like to ask all of the other witnesses this question. Do you feel that the federal government should stop reducing taxes for corporations and wealthy individuals and invest this money in important services such as education, health, culture, etc.?

Ms. Guylaine Gosselin (Director general, Fédération des producteurs de lait du Québec): In all honesty, we do not disagree with what you are saying, but today we are telling you that the Quebec and Canadian dairy producers have a marketing system that does not require the government to intervene financially in the sector. Our system works well.

The government may not want to be investing new money and it always has in the back of its head this idea that it needs to cut here and there, but we do not understand why we cannot have the full support of the federal government with respect to our marketing systems, which do not cost one penny and keep the economy going.

I truly cannot answer your question even if we agree with what you are saying. There is money that probably could be put to better use. Under our system, we do not really need direct money from the government, but the government does have to be consistent. It has to truly support our marketing systems and ensure that, once the WTO negotiations are over, that we are left with a system that is still operational, one that works very well, because agriculture underpins the development of nations.

We feel quite close to the other people who are here. A government with vision will ensure that its education system is in good shape, that its culture is developing properly, that the people are eating and that agriculture is prospering. Our national identity is tied to us, and what we do we do well. These are sectors that the government needs to give consideration to. To do that, we think that we must not reduce taxes or give these corporations tax holidays. This is essential because we must ensure that our sector, our people, are prospering at the grassroot level. In the long term, a government with vision supports education, culture and agriculture.

Ms. Judy Wasylycia-Leis: Thank you very much.

[English]

The Chair: This is the final round.

Mr. Murphy.

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

I want to again pursue this discussion about the fiscal imbalance. I guess I'm having some difficulty as to where it's going. Perhaps I'll ask Mr. Séguin and Mr. Brisson for an answer.

We have a situation where there have been a lot of increases in funding for health, but there are a lot of demands on the situation--equalization, post-secondary education, early childhood development, you name it.

We heard from Mr. Manley, the Minister of Finance, on Monday that there's very little surplus, if any. Every cent of it has been dedicated totally to health, up to $2 billion, I should say.

There's one taxpayer. I think taxpayers are telling parliamentarians that they want the federal and provincial governments to work together in the best interests of all Canadians to improve the lives of all Canadians.

I sense this argument is being circular, because when there's any increase, the only response is that it's not enough. There's no formal constraint on any provincial government to raise taxes. It's my belief that if a provincial government is spending money wisely, if they're offering services to the taxpayers and those are services that taxpayers want, then I don't think anyone's going to really object to taxes being raised.

I see this as a circular argument, like a dog chasing his tail.

À (1000)

The Chair: The translation is not working for English to French.

Okay, go ahead, Mr. Murphy.

Mr. Shawn Murphy: Again, on the tax point transfer, that was done about 20 years ago. There was a major tax point transfer done to assist the provinces to finance health costs. But once that was done, a year later, the basic response was that it wasn't enough.

Where are we going in this argument?

I don't see the end result. Is there a figure out there? Where does the money come from?

Mr. Séguin or Mr. Brisson.

[Translation]

Mr. Nicolas Brisson: The problem with the tax imbalance resides in the fact that the federal government occupies 60 per cent of the tax field and there are growing health and education requirements in the provinces, but they do not have the financial resources that are needed to provide quality public services. In order to resolve this tax imbalance problem in a sustainable manner, we feel that the federal government should transfer tax points to the provinces.

Of course the government could transfer cash, but, unlike tax points, this would not be a sustainable solution. It is the public services that are jeopardized, particularly since, as I explained earlier, the demographic shock will result in a quite significant increase in health costs: it is expected that health costs will represent about 60 per cent of the provincial budget, whereas the taxpayers will be 2.5 times fewer in number.

So the provinces need many more tax points to fund their public services. Cash transfers may be one solution, but as far as we are concerned, we want the problem to be solved in a sustainable fashion. That way, we can avoid witnessing this psychodrama that occurs every three or four years when we have this conference of premiers to ascertain whether or not there will be enough money to fund health.

[English]

Mr. Shawn Murphy: But you will agree with me that if it was done, it would only create a big deficit in the federal government.

[Translation]

Mr. Nicolas Brisson: Absolutely not. As we have seen—and here I'm referring to the calculations made by the Commission sur le déséquilibre fiscal (Commission on Fiscal Imbalance), among others— federal surpluses are a lot higher than those of the provinces. In fact, this year people are saying that several provinces may find themselves running a deficit whereas the federal government, although it is anticipating less of a surplus, will be in a surplus situation.

The Séguin Commission—Mr. Séguin is currently the Quebec Minister of Finance—was predicting that 20 years down the road, the federal surplus could reach $90 billion, whereas Quebec may find itself dealing with a $3 billion deficit. Of course, these are forecasts, but they do illustrate the fact that the federal government is occupying far too much of the tax field with respect to the services that it has to fund.

[English]

Mr. Shawn Murphy: If I could ask one additional question, the federal government recently announced, about a year and a half ago, a five-year program to reduce both personal income taxes and corporate income taxes. There's no formal constraint on the provincial governments to increase taxes at both the personal level and the corporate level to make up any shortfall.

[Translation]

Mr. Nicolas Brisson: This is what happens in a situation where there is a duplication of programming. If you ask the provinces to increase their taxes to fund some of their programs and public services that are similar to those you are already offering, there is a problem of double taxation.

Of course, if the provinces feel that they don't have enough money, they can raise taxes. That is a possibility. Nevertheless, we feel that the current tax base would enable them to obtain a lot more money from the federal government given that the latter's responsibilities do not involve the growing costs that we see in the provinces.

À (1005)

[English]

The Chair: I'm going to give the last word on this one to Mr. Beaulne.

[Translation]

Mr. Pierre Beaulne: I'd like to draw your attention to the following phenomenon.

Right now, the federal government can increase its expenditures at a rate that exceeds economic growth because of savings generated by servicing the debt. Last year, spending increased by approximately 7 per cent, but the savings achieved by servicing the debt were calculated to be approximately $2 billion. In this regard, the federal government has, on the whole, increased spending by 3.5 per cent.

The federal government can therefore continue increasing spending at a much quicker pace than economic growth because of the role that the debt plays. However, in the provinces, where they have very high health, education and social assistance costs, the reverse is occurring. The provinces tend to run deficits, and therefore the amount of money they can spend on programs is considerably reduced. So we need to rebalance this dynamic quickly.

Thank you.

The Chair: Thank you. On behalf of my colleagues, I would like to thank you for testifying and participating in our proceedings.

[English]

Maintenant, we'll pause for three minutes to change panels.

We are suspended.

À (1006)

À (1010)

The Chair: We will continue with the second panel on November 5 in Montreal.

Bienvenue a tous.

From the University of Quebec in Montreal, we have Denise Pelletier, executive director; and from the Conseil du patronat du Québec, M. Taillon, le président, et Diane Bellemare, vice-présidente, recherche. From the Association de l'exploration minière du Québec, we have Pierre Bérubé, président, et Kamil Khobzi, co-président; and from the Coopérative fédérée de Québec, Denis Richard, président, et Pierre Gauvreau, directeur général. And from the Confédération des syndicats nationaux, we have Michel Lessard, treasurer; and Vincent Dagenais, assistant to the executive committee.

We will go in the order of the panel, for up to seven minutes each. You can present any way you wish, either reading or just making an oral presentation, but as we have five panels today, I'm going to be very tight with the time, so please respect the timelines.

We'll start with the University of Quebec in Montreal. Commencez.

[Translation]

Ms. Denise Pelletier (Executive Director, Rector's Cabinet, University of Quebec in Montreal; Vice-President, External Communications, Canadian Federation for the Humanities): Thank you.

Ms. Barnes, ladies and gentlemen of the committee, good morning. My name is Denise Pelletier and I am the Executive Director in the Office of the Rector at the University of Quebec in Montreal, one of Montreal's four universities. This university has a student population of 41,000 this fall and generates $45 million in research dollars.

I'm also representing the Canadian Federation for the Humanities, which includes 68 learned societies across Canada, 69 universities and 30,000 humanities researchers. This is the largest scientific federation in Canada.

The brief that I tabled this morning is written in French, but the recommendations found at the end are in both English and French.

Last year, I appeared here on the same date. I was very pleased at the way the committee responded to the federation's recommendations because, last year, a new student scholarship program was added to the funding agencies' programs. We were very pleased that 60 per cent of these scholarships were given to humanities students, which corresponds to the percentage of humanities students in Canadian universities. This is a first step towards equity and rectifies an historic problem of inequity that has prevailed in funding the budgets of the Social Sciences and Humanities Research Council of Canada.

You will understand that, after listening to the Hon. Paul Martin addressing the metropolitan Montreal Chamber of Commerce on September 18, I was really delighted to hear about his intention to pursue Canada's policy on innovation. I was happy that he pointed out, on this occasion, the importance of continuing to fund basic research, which is the basis for scientific development. I hope that the analysis made by Mr. Manley last Monday will not lead him to draw different conclusions and that he will continue to steer the course.

We are hoping that he will not only steer the course, but continue to increase funding for social science and humanities research to compensate for an historic deficit that has always existed with respect to the Natural Sciences and Engineering Research Council of Canada and to the funding of medical research in Canada.

As the strategy states, we need to understand that the countries that will distinguish themselves in the XXI^st century will be those with citizens who are able to create, to adapt to change and to be highly qualified.

In this regard, the greatest hindrance to world development will not be of a scientific or technical nature, but rather of a social, ethical, cultural or environmental one. It is the social sciences which contribute to improving the well-being of Canadians, helping them overcome their problems and significantly increasing their ability to adapt to the very rapid changes that will occur in the XXI^st century.

Let us now look at our recommendations. Our first, and as far as we are concerned, most important recommendation is the one that we made last year, namely, that the Government of Canada asymmetrically increase the budget of the Social Sciences and Humanities Research Council of Canada. The enhanced scholarship program is excellent and does afford us some catch-up, but much more needs to be done.

As an example, let us look at the budgets of the two main councils. In 2003-2004, the SSHRC is operating with a budget of $195 million. It is funding a community of 18,000 researchers. NSERC operates on a budget of $760 million. It is funding a community which is roughly half the size, namely 9,600 researchers. So that gives you an idea of how much catch-up has to be done.

With respect to last year, and this is new, I believe, Martha Piper, the President of the University of British Columbia, launched an appeal. She would like the Social Sciences and Humanities Research Council to undergo some major restructuring, loosely based on the model developed for the Canadian Institutes of Health Research.

À (1015)

This is why we have come up with a new recommendation this year. We're hoping that the Government of Canada will support restructuring the Social Sciences and Humanities Research Council of Canada and help it jump into the XXI^st century by enabling researchers to deal with a vast number of relevant issues, no longer in terms of isolated disciplines, but by promoting greater interdisciplinarity of research into the major problems confronting Canadian society.

This is a very ambitious undertaking and we are hoping that it will receive the support it deserves.

Of course, we are also very satisfied—and once again we must thank the Standing Committee on Finance—to see that the Government of Canada has agreed to create an ongoing program to fund the indirect costs of research. This will breathe much needed new life into our universities. You are aware of the problems that our universities are experiencing. So we must really be delighted with this measure.

Once again, we are hoping to obtain a little bit more and we would like the Government of Canada to increase this threshold to 40 per cent of the indirect costs of research.

We recognize that a great deal of effort has been made to renovate buildings as a result of organizations such as the Canadian Foundation for Innovation. Despite that, we still have some very big problems, particularly for humanities researchers, notably in the area of libraries.

On this subject, out of all the data that I've gathered, I will be quoting from only one report, which will give you an idea of what the situation is like. From 1992 to 1997, the funding of Canadian university libraries dropped by 3.4 per cent compared to the funding given to American universities which, over the same period, increased their funding by 31.3 per cent.

An inquiry conducted by the Association of Research Libraries, an American association, concluded that, with the exception of the University of Toronto, all other Canadian libraries that were part of the study had their ratings drop between 1992 and 1997.

You need to understand that libraries are the basic research instrument in humanities, and in the sciences as well, of course, but this holds particularly true for humanities researchers. The universities are already cooperating a great deal amongst themselves through library loans and they are rationalizing their collections, but our libraries are in sad shape if we compare them with those of the large American universities.

We really do need to improve the situation and that means increasing the indirect costs for humanities researchers.

I have emphasized these three recommendations because these are the most important recommendations of the six that we have put forward.

You obviously know that we will be experiencing serious difficulties over the next three years as we replenish our faculty members.

It is because of this problem in particular that we are tremendously concerned about the funding of education, and that is why we, like other Canadian organizations, would like to see the Government of Canada create a Canadian education transfer modeled on what has been done for the health transfer. This transfer should be funded at levels comparable to those given in 1993 and 1994.

Our third recommendation would be that the Government of Canada promulgate an act on post-secondary education.

We in the federation, when we discuss this issue, are aware of the difficulties that many Canadian universities are experiencing, particularly smaller universities and those located in provinces that do less for education than others. From that viewpoint, Quebec is somewhat privileged given that it has a very active Ministry of Education and also has a certain number of research bodies which guarantee a minimum amount of funding for the establishments. Let's say that there is a great deal of concern throughout Canada regarding the future of education funding.

I would conclude by thanking you a great deal for the work you have already accomplished and for the work which you will continue to do to defend what has been done and what needs to be done in the future.

À (1020)

[English]

The Chair: Thank you very much. You saw our report last year, and I know that you know we're supportive of many of these things. Many of the ones you've talked about are under discussion throughout the country right now.

[Translation]

I will now give the floor to Mr. Taillon. Please begin.

Mr. Gilles Taillon (President, Conseil du patronat du Québec): Thank you, Madam Chair.

Madam Chair, ladies and gentlemen of the committee, the CPQ believes that the Standing Committee on Finance is an extremely important forum for hearing and listening to the concerns of Quebec's businesses. This has been demonstrated in the reports that you have produced over the past few years and in the results achieved in the case of the tax on capital and the employment insurance program. We therefore have confidence in this committee and we would invite you to continue in this same direction.

At the outset, we recognize the efforts made by the Government of Canada to safeguard the foundation of the economy: paying back the debt, maintaining a balanced budget and tax relief. We would urge you to recommend to the Minister of Finance that he not give up, particularly since the economic situation appears to be deteriorating.

I will not be making a detailed presentation of the brief that we are tabling. I will attempt to provide a summary. Our message today is very clear and simple: We must continue along the same path and redouble our efforts, particularly in order to increase productivity in both Canada and Quebec.

A substantial increase in productivity will enable us to deal with an aging population without mortgaging the future of the upcoming generations too much. It will enable us to deal with a sustainable appreciation of the Canadian dollar serenely and it will enable us to maintain our standard of living and our ability to provide quality public services to all Canadians.

To achieve this fundamental objective of improved productivity, we have divided our recommendations into three themes.

First of all, we have to do all that we can to stimulate productivity. We believe that the federal government can play a big role in stimulating the growth of productivity in Canada, particularly in the area of corporate taxation. Indeed, everyone knows that corporate investment is a key to enhancing productivity in Canada. The government can have an impact on corporate performance rates, particularly through taxation. By reducing corporate taxes, the government may increase the return on investment, thereby increasing a company's ability to increase expenditures in the area of machinery, equipment and facilities.

It is true that in the recent past, the federal government decided to lower corporate tax rates from 28 per cent to 21 per cent by 2004, to gradually phase out the capital tax by 2007 and to establish a new tax system for the resource sector.

We are hoping that the government will go even farther, because although some data leads us to believe that the Canadian tax system does give a certain advantage to companies with respect to those companies investing in the United States, other data leads us to believe the opposite, even when we take the forthcoming changes into account. We quoted a study done by Professor Mintz in our brief.

This is why the CPQ is recommending that the government eliminate the tax on capital in 2005 rather than 2007.

The federal government must also deal with the issue of further reducing corporate tax. We are therefore recommending that it reduce the tax rates that apply to Canadian companies from 21 to 17 per cent over a five-year period. We must not only be on a par with the United States, we must surpass them.

The government can also stimulate productivity by preventing the negative impacts of an aging population on the labour market. This is why the CPQ is urging the federal government and the provincial governments to work together in order to make the recognition of foreign diplomas a priority.

It is also asking the federal government to amend the current legislation, particularly the tax laws, to promote the use of gradual retirement and make it possible to work on a part-time basis, a concept which, moreover, the Government of Quebec is about to move on.

In the same vein, the CPQ is recommending to the federal government that it implement a panel of independent experts with a mandate to assess the consequences of aging on the public purse and to put forward strategies to mitigate these effects.

Our first objective is, therefore, to do all that we can to stimulate productivity.

Now let's talk about complementary measures. In order to reduce taxes and thereby stimulate productivity, we need to continue managing the public purse cautiously.

We are convinced that, given the current climate of uncertainty and the aging population, the federal government should tie increased program spending to the rate of real economic growth, which has not been the case over the past three or four years. Budget expenditures have increased at a rate that is three times higher than real economic growth, and we believe that the federal government must not continue in this direction.

À (1025)

We believe that the government must do its utmost to preserve the contingency fund and demonstrate economic prudence. We have seen how unforeseen events can upset the economic situation significantly. It is, therefore, important to maintain this precautionary measure.

We are also encouraging the federal government to continue its practice of paying down the debt using unspent funds earmarked for economic prudence. As a result of the actions we have taken to reduce our debt, we have considerably reduced our dependency on foreigners and we would congratulate you on this achievement. We are hoping that we will pay down the debt at an even faster pace in order to achieve a GDP-debt ratio of 25 per cent by the end of the decade.

Our third major concern is that we need to ensure that all Canadians benefit from a well-run economy and good management of federal public finances. Through taxes, Canadians have largely been responsible for the improvement in public finances. Indeed, it is sometimes useful to remember that the battle against the federal deficit was to a large extent won through tax measures, particularly the non-indexation of the tables until the year 2000 and employment insurance, rather than by reduced spending.

This is why the CPQ is recommending to the government that it continue implementing its plan to provide individual tax relief, while at the same time gradually reducing the upper marginal tax rate. It is important that the highly remunerated members of the workforce, which is the workforce that is essential to the development of the learning-based economy, remain in Canada instead of going to other countries.

We are also recommending that we reduce the contribution rates for employers and employees to the employment insurance program, and that these reductions continue, in order to reach a rate of $1.70 in a few years' time.

Madam Chair, ladies and gentlemen of the committee, this concludes the presentation of the Conseil du patronat du Québec.

The Chair: You have made a very good presentation.

[English]

I always appreciate complete briefs that give us lots to work on. So thank you.

À (1030)

Mr. Gilles Taillon: Thank you.

[Translation]

The Chair: We will now be hearing from the representatives of the Quebec Mineral Exploration Association. Please begin, Mr. Bérubé.

Mr. Pierre Bérubé (President, Quebec Mineral Exploration Association): Thank you, Madam Chair.

We would like to thank the members of the committee very much indeed for giving us this opportunity to present our brief today. We have tabled our brief in both official languages—French and English. I will not read it, but rather highlight the most important points.

This is the first time we have appeared before this committee, and I would like to say that we are here thanks to the efforts of the member of Parliament for the largest riding in Canada—the member for Abitibi—Baie-James—Nunavik, Mr. Guy St-Julien. We would like to thank him very much.

Kamil and I are the co-presidents of the Quebec Mineral Exploration Association . Our association is made up of more than 500 individual members and 100 corporate members in Quebec.

The association's mission is to develop and promote mineral exploration in Quebec to increase the discovery rate, in harmony with all the occupants of the land and in the context of sustainable development.

Madam Chair, as you know, the mining industry is very important to the Canadian economy. It has always made a positive contribution to the trade balance. For example, in 2002 it contributed over $36 billion to the Canadian economy, or 3.7 per cent of the GDP. In Quebec alone, there are over 15,000 direct jobs in mining, mainly in the resource regions, and over 50,000 jobs if we include the primary processing sector.

Madam Chair, the problem facing the mining industry at the moment is that the resources are not being renewed as quickly as they are being mined; in other words, there are more mines being closed down than new ones being discovered. That is true across Canada. If we do not do any exploration, we cannot find any new resources. It is the cornerstone of the industry.

In Abitibi-Témiscamingue and in northern Quebec, in the year 2000, for example, there were 20 mines in operation. Now there are only 12 left. It could be that in five years, there will only be two left, the Raglan nickel mine, in northern Quebec, and the La Ronde gold mine in Abitibi-Témiscamingue.

In the past decade, between 300 and 400 direct mining jobs have been lost in Abitibi-Témiscamingue and in northern Quebec. These are high quality jobs, where the average salary is approximately $1,000 a week, compared to $650 for the Canadian economy as a whole. So this industry generates a great deal of money, which is reinvested and spent elsewhere in the economy. It generates activity.

If we decide to explore today or if we speed up exploration activities, there will be a five- to eight-year waiting period before any new mine begins production. Since the situation is critical, with mines closing down at an ever-growing rate, we must take action quickly to find new reserves and ensure that the industry does not close down completely.

In Quebec, for example, the current copper reserves will last for less than five years. The Horne Smelter in Rouyn-Noranda and the refining plants in the Montreal region may close if we do not find new reserves of copper quickly.

Madam Chair, in order to renew mineral resources, four factors must come together. There must be a geological potential and hence the possibility of finding mines; there must be exploration expertise; there must be knowledge of the area; and there must be capital input.

As regards the first two factors, we are very lucky in Quebec and Canada. The geological potential of Quebec has been recognized by the Fraser Institute as the second best in the world, after Chile. That means that it is still likely that new mines will be discovered in Quebec.

As regards exploration expertise, Canada is recognized as the world leader in exploration technology, geophysics and geology. This is one of our areas of excellence, and we are proud of it.

The problem lies with the last two factors, knowledge of the area and capital input. To overcome these problems, our association would like to make the following recommendations which are supported unanimously by our industry.

Mr. Khobzi.

Mr. Kamil Khobzi (Co-President, Quebec Mineral Exploration Association): First of all, the association recommends that the temporary "super" flow-through share program, which has a direct impact on the financing available for the industry, including the 15 per cent Investment Tax Credit for Exploration in Canada, be maintained and extended for five years.

Second, we recommend that the Department of Finance of Canada change the cut-off date for fundraising through the “super” flow-through share program to February 28. At the moment, the rules provide that all public funds must be raised by December 31. Consequently, the association and the industry are asking that this deadline be moved to February 28, given that most fundraising activities occur in January and February in Canada.

Third, the association recommends that the federal Department of Finance take the necessary steps to have the Canada Customs and Revenue Agency review its position and confirm that the cost of the consultations held with the community, particularly with aboriginal groups, may be included as Canadian exploration expenses.

The Canadian exploration expenses include all the costs incurred in this field for research work, drilling, geophysical activities, sampling, and so on. However, in some regions, particularly the northern regions, companies have to negotiate with the local and aboriginal communities—and this is something they do well—in order to gain access to the land and be able to work there. These costs, which are directly related to the project itself, are not included at the moment in what is known as Canadian exploration expenses. We therefore recommend to the Minister of Finance that we be allowed to include these expenses. When a company has to go to the north with a team of lawyers and other experts, the costs can be quite high. For small companies with minimal working capital, these costs have to be paid for directly out of their working capital. That hurts. We would therefore like these costs to be included in the exploration expenses.

Fourth, the association recommends that the federal Minister of Finance take the necessary steps to have the Canada Customs and Revenue Agency review its position and confirm that share-issuing costs related to financing with the “super” flow-through share program can be considered as Canadian exploration expenses.

Another irritant has to do with the cost of financing, generally through a prospectus or private financing. All companies in the mining industry, particularly the small ones, use this way of finding capital. The financing costs vary between $50,000 and $200,000 and are paid directly to government agencies for the share issues or to the entire system surrounding the financing, namely, lawyers, tax experts and so on. Understandably, every time there is a public financing campaign, these individuals receive a considerable share of the financing that is raised. The figure can go as high as 20 per cent of a company's working capital. The rule is that mining companies cannot spend more than 80 per cent on work in the field; at least 20 per cent must go to the working capital. The companies pay the financing cost out of this 20 per cent. We find this very high. Consequently, this irritant must be removed.

Fifth, the Quebec Mineral Exploration Association recommends that a five-year Canada-Quebec agreement be established, with estimated federal participation of $125 million, for targeted activities that can lead to conclusive short- and medium-term results in areas such as copper, deep drilling in well-established mining camps, regional geoscience surveys and assistance for prospectors. You will find a good description of these activities in the document we distributed. This Canada-Quebec agreement would be of great of assistance to us, not only for finding targets, but also to improve our knowledge of the area, which is an essential component for discovering mines in Quebec.

À (1035)

Mr. Pierre Bérubé: Thank you, Mr. Khobzi.

If nothing is done, Madam Chair, mining companies will continue to lose interest in Quebec. In the last decade, Inco, Teck Cominco, Hudson Bay, Cameco, Barrick Gold and Placer Dome have closed down mines, and plants will continue to close down. The Horne Smelter will probably close if a copper plan is not introduced. In addition, there is a danger that we will see the disappearance, in the short-term, of all the economic spinoffs provided by an industry that is crucial to the regions and economy of this country.

Once the plants have closed down and the expertise has more or less disappeared, Madam Chair, it will be too late to act. The regions will die and we will see an exodus to the major urban centres.

The current climate is really favourable to action. As you know, the price of gold is rising. It is at its highest level since 1996. The cost of nickel is also rising. The potential for diamond mining is increasing in Canada. World exploration budgets are increasing. Canada and Quebec must really try to get a larger share of these budgets, because the mining companies have a set budget and will spend it in places where the conditions are most favourable to them.

À (1040)

[English]

The Chair: Thank you very much, and welcome to this process. One of the things you should know is that our Hansards of these meetings are read by many officials inside the Department of Finance. Not only do we hope to write our report, unless somehow we are disbanded by something I don't know about at this point in time, but I appreciate your coming for the first time, and I think you've made some good points today.

With that, we'll move on to our next presenter, the Coopérative fédérée de Quebec. Monsieur, commencez.

[Translation]

Mr. Denis Richard (President, Coopérative fédérée de Québec): Good morning, Madam Chair. Ladies and gentlemen members of the Standing Committee on Finance, first and foremost, I would like to thank you for giving me this opportunity to speak to you about an issue that is a primary concern for all Canadian agricultural cooperatives.

As you will see throughout this presentation, Canadian agricultural cooperatives are currently facing an immense challenge and must overcome constraints that call upon the government's accountability. And this is particularly the case with capitalization.

My presentation will be broken down into four parts: who we are; what we want; why we want it; and our conclusions.

First, who we are. The Coopérative fédérée du Québec is a federation comprising 93 regional and local cooperatives and belongs to 37,000 men and women agricultural producers in Quebec.

The Fédérée's cooperative network, as it is commonly referred to, provides employment to some 15,000 people, which makes it the seventh largest employer in Quebec.

Furthermore, with revenues over $4 billion, the Fédérée's network has ranked fifth among Quebec companies.

There is a map of Quebec in the folders we distributed at the beginning of our presentation. It shows each of the cooperatives owned by the Coopérative fédérée. The map shows all the places where there are transaction points.

As you can see, the Coopérative fédérée and its network of agricultural cooperatives are located in the regions. There are very few located in major centres.

Who we are. The paramount position occupied by agricultural cooperation within the agri-food industry is probably one of the best-kept secrets of the Canadian economy and society.

For close to a century now, Canadian agricultural cooperatives have been at the heart of the development of one of the most important manufacturing industries in Canada. Cooperatives such as the Saskatchewan Wheat Pool, the United Farmers of Alberta, Co-op Atlantique, Agropur, Gay Lea and Lilydale, to name just a few, illustrate the magnitude of this nearly century-old movement.

In fact, there are over 1,300 agricultural cooperatives all over Canada, bringing together more than 400,000 independent member-producers who employ about 30,000 people.

Finally, agricultural cooperatives enjoy a 15 per cent to 20 per cent market share of the farm procurement industry as well as the farm product processing and marketing fields.

In Quebec, agricultural cooperatives represent about 60 per cent of the farm input market and over 50 per cent of the agricultural product processing market.

Now, what do we want? Well, ladies and gentlemen, members of the Standing Committee on Finance, the reason we are here before you today is not to ask for charity. We represent responsible companies, companies that belong to independent agricultural producers, companies that are rooted in their rural communities. Not only do they play a determining role in the economy, they also carry out an important social mission.

Year after year, cooperatives give back tens of millions of dollars to their members as well as their communities. And in many rural communities they are the last vestige of active economic development. Too often they are the last grocery store, the last gas station or the last hardware store in town to display the Co-op sign, which means they are owned by the agricultural producers.

If cooperatives only listen to their competitors, as share-companies often do, many cooperative outlets would have been sacrificed in the name of profits at any cost.

In fact, what we are asking for is a little help in facilitating the capitalization of agricultural cooperatives. This helping hand would act as a form of acknowledgment on the part of Canadian society of the fundamental role played by agricultural cooperatives. It could take two forms: a postponement of the income tax on the rebate that agricultural producers decide to leave in their cooperative, and the establishment of a cooperative investment plan that would encourage members and workers to invest in their cooperatives.

À (1045)

Let's look at what motivates this request. Two of the determining aspects of the current agri-food system are globalization and the processing of value-added products, which are very demanding in terms in investment.

Agriculture cooperatives, we all know, must deal with significant capitalization constraints when compared to their competitors in the agri-food industry. This is primarily due to the fact that, if a cooperative is to be cost-effective, its primary mission and reason for being actually limit it. This is because of smaller production units, the need to maintain local employment, etc. All of these examples mean that agricultural cooperatives, despite any economic obligations, have even greater social commitments to their owners.

Members' capital stock does not appreciate in a cooperative. The money invested by producers in their cooperatives remains at face value. It cannot grow along with the profitability of the business, but could easily decrease in value when times are hard. Cooperatives have little or no access to external sources of capital, especially venture capital.

The agricultural population is aging and this represents another challenge. In fact, agricultural producers will be retiring soon and will withdraw their share of capital, and thus, another constraint will be added. In the context of trade globalization, capitalization constraints limit agricultural cooperatives in their strategic investments, making them vulnerable to the competition. Taking into account their economic and social importance for a large number of rural communities in Canada, this vulnerability has consequences for those who have made the choice to live in rural areas.

It's important to focus on the problem of capitalization faced by agricultural cooperatives and more particularly, to shed some light on this famous capitalization constraint that Lyle Vanclief, Minister of Agriculture and Agri-Food, made public last February 2002 when he granted a budget allowance. This is what he said: “These funds will serve to seek, to find solutions to the capitalization problem faced by cooperatives”. And Ernst & Young was granted this mandate.

In the report submitted in November 2002, the experts at Ernst & Young proceeded with an in-depth analysis of what is at stake and of the situation experienced by cooperatives in Canada, the United States, Europe and Australia. The report described and confirmed the existence of the capitalization constraints affecting agricultural cooperatives and Ernst & Young have made a series of recommendations dealing with the tax situation of agricultural cooperatives in Canada, some of which we are requesting today.

Obviously, the report produced by the public accounting firm, Ernst & Young, whose reputation is world-renowned, explains in detail the reasons for each recommendation, and evaluates all related costs to the public purse, as well as considering the question of fiscal equity. We welcome the opportunity to provide more insight when answering your questions.

In closing, in addition to the fact that several years ago the Speech from the Throne stated that the Canadian government's priority was rural development, a sector directly related to the actions of agriculture cooperatives, two important reports were recently submitted to federal authorities.

In its report entitled Securing Agriculture's Future: Invest Today—Prosper Tomorrow, the prime minister's caucus Task Force on Future Opportunities In Farming, chaired by member of Parliament Mr. Bob Speller, recommends that:

Finance Canada be directed to review, with a view to elimination, any legislation or other impediments to farmer-owned enterprises in Canada.

As well, the advisory committee on cooperatives, in May 2002, submitted to the Hon. Andy Mitchell, Secretary of State for Rural Development, a report entitled The cooperative option: A natural fit for public policy in agriculture, a report that places a lot of importance on the proposals we presented to you today.

À (1050)

[English]

The Chair: Mr. Richard, we have the rest of the brief, which we will read. I'm sorry our time doesn't allow more, but we have five panels today. We appreciate your testimony and we have your recommendations, which I have reviewed personally and my colleagues will review also. We'll get to you more in questions.

Now we will go to our final presenter. Go ahead, sir.

[Translation]

Mr. Michel Lessard (Treasurer, Confédération des syndicats nationaux): Thank you, madam Chair, and thank you also to the members of the Standing Committee on Finance for inviting us to express our opinions during this round of consultations.

I would like to begin by saying a few words about our organization. We are an umbrella organization for some 2,700 unions with over 275,000 members. The union members work in every branch of the public and private sectors, the vast majority of them in Quebec.

There are both French and English versions of our brief. We will be dealing mainly with pages 20, 21 and 22 of the French version, and pages 17 and 18 of the English text.

That said, madam Chair, for the purposes of these consultations, the CSN has identified the public policies that it considers most likely to stimulate economic, social and regional development in Quebec and in Canada. There are various aspects, including the management of public finances.

The CSN has indicated a preference for increased program spending rather than tax reduction and debt re-payment, the latter two objectives having received too much attention in recent years. That is what the Confédération des syndicats nationaux and its members would prefer.

The CSN has also raised the issue of funding in the area of health and social services, where under-funding persists and re-investment remains essential. The CSN expects the federal government to provide the additional $2 billion promised in the February 2003 federal-provincial arrangement on health care. We feel that these promises should no longer be conditional and that funding must be forthcoming.

Just this morning, in Le Devoir, Quebec's Minister of Health and Social Services, Mr. Couillard, said that these funds had already been provided for in the budget and may even have been spent already. The situation is pressing, particularly since the Romanow Commission and the provinces are recommending that the federal government increase its share of health and social service costs to 25%. I need not remind you that the federal government has been investing less in health and social services over the past years. All of this can be found in our brief.

With respect to the fiscal imbalance, in the CSN's view, this additional funding must not be taken from the resources provided by the government for post-secondary education and social assistance.

The social assistance funding formula must be overhaulled alled to correct the inequity whereby transfer amounts are based on the province's population, regardless of how heavily the people of that province rely on social assistance. We feel that the government should find a more equitable formula for all citizens of this country, particularly in regions or provinces where the need for social assistance funding is greater.

Concerning equalization, the CSN believes that the government has more than enough of a cushion to cover the programs' normal operations without having to put a ceiling on payments. Moreover, there is currently a genuine opportunity to improve the program, and the CSN urges the federal government to work with the provinces in this area in order to reduce provincial inequalities.

In employment insurance, the CSN is of the opinion that the remaining annual surpluses should be used to increase coverage rate, replacement rate and benefit period. Institutional reform of the employment insurance program is also needed to prevent a recurrence of the government's appropriation of the EI surpluses. We do not want this to happen again.

I would remind you that the CSN took the federal government to court for a decision as to whether the government appropriated these surpluses illegally, thereby doubly penalizing workers. Besides paying their taxes, workers are contributing directly to paying down the debt through their employment insurance premiums. We feel that this should be changed and a new structure, based on the Quebec CSST (the Commission de la santé et de la sécurité au travail), should be established.

À (1055)

On the matter of a family policy, there are two important points: parental insurance and the cost of child care services. We feel that there is a broad consensus on parental insurance in Quebec and that the federal government should allow Quebec to assume the responsibility for its own parental insurance programs, since the Employment Insurance Act explicitly permits the transfer of the responsibility sought by Quebec. Quebec must be allowed to provide parental insurance according to its own responsibilities and the wishes of the citizens that it represents.

Concerning child care services, the federal government should stop saving money at the expense of Quebec parents. The fact that day care fees are highly subsidized by the Quebec government should not lead to savings for the federal government, which should provide the same support to Quebec parents as it does to parents in the rest of Canada. The federal government should restore equity to the situation by reaching an administrative agreement with the Quebec government. This is in fact a tax credit issue, and we will come back to it later on.

In the area of regional development, the CSN believes that government intervention must be structured—in fact, this is essential. The central government should tailor its activities to fit the regional development strategies chosen by the provinces and local communities. It is vital for Canada to institute a policy promoting the creation of more value added in the regions, since they depend too heavily on unprocessed natural resources, as was said earlier.

In addition, major investments are needed in urban areas; sewer systems, waste water treatment, waste treatment and recycling, and public transportation are areas that urgently require attention. In the CSN's opinion, investment in public transportation is critical in view of Canada's ratification of the Kyoto accords. A number of large cities are also facing a housing crisis and the problem of homelessness.

In conclusion, Madam Chair, the CSN believes that the government must continue to play an important role in our society, not only by ensuring that markets function properly but also by implementing social programs and public services that reduce any inequality. We live in a society, and society has meaning. The market place alone cannot guarantee equitable redistribution of income and wealth, anymore than it can develop social safety nets. The responsibility belongs to the State.

That is the end of my presentation, Madam Chair.

[English]

The Chair: Merci, monsieur. Thank you very much for your contribution to our debate.

I will start with Mr. Paquette, for seven minutes.

[Translation]

Mr. Pierre Paquette: Thank you, Madam Chair.

Thank you for all your presentations. This is a tremendous amount of material, and there are many questions that should be asked. Unfortunately, we have very little time.

I will start by asking a question of the Conseil du patronat du Québec and the CSN, two extremely well-respected institutions in Quebec society, as everyone knows.

You have two priorities that are diametrically opposed. The Conseil du patronat du Québec says that its first priority is to set a debt-to-GDP ratio of 25 per cent by 2010. Its priority is therefore to pay down the debt.

By the way, I am wondering in passing, Mr. Taillon, why you are now talking about 25 per cent, whereas the last time you met with us, the figure was 30 per cent. Is that because you are afraid of being higher than the target identified by Mr. Martin in his presentation to the Chamber of Commerce? Is it also because you know that now Canada is no longer in third place, as it was last time we met, but rather second place? It has passed the United States, and only Great Britain has a better performance.

For its part, the CSN has called for an increase in program expenditures. When you talk about programs, am I correct to assume that you are not talking about the operation of departments? Let me give you the example of health. From 1997 to 2001, the expenditures for health increased by 70.4 per cent, but we did not have one extra nurse or doctor. There may be some researchers, officials or bureaucrats, but they do not provide direct service to the public. I therefore want to be sure you are talking about an increase in program expenditures, and hence transfers or services to the public.

I would also like to draw committee members' attention to the table in the appendix, which I find extremely interesting. I would also point it out to the representatives from the Conseil du patronat du Québec. Your assessment of the way in which the fiscal dividend has been used shows that close to 86.5 per cent has been spent to pay down the debt and reduce taxes, while only 13.5 per cent was used to increase program spending, even though the Liberals promised in 2000 to have a 50/50 split.

I would like you to comment further on these two priorities, because I think this could lead us to a significant debate among committee members.

Á (1100)

[English]

The Chair: Mr. Taillon.

[Translation]

Mr. Gilles Taillon: Thank you very much, Madam Chair.

I do not think you will be surprised to hear that the CSN and the CPQ are not on the same wavelength, Mr. Paquette.

Mr. Pierre Paquette: I always hope for consensus. Since we defend this approach in Ottawa, there must be some of this in Quebec as well.

Mr. Gilles Taillon: It is clear that we want the burden of the debt to be lessened. We have targeted a debt-to-GDP ratio of 25 per cent. Last year, we were talking of 30 per cent and we expect that things will continue improving. We want to be the champions of paying down the debt and to free ourselves as quickly as possible from this mortgage, as it were.

We must not forget, however, with respect to our recommendations, that reducing the tax burden on both businesses and individuals is just as important as paying down the debt. Our objective here is simple: we want to improve our productivity and our standard of living and we hope that Canada, as a G-7 country, will be admired for its management of public finances, the performance of its economic management, its standard of living and the quality of life enjoyed by its citizens.

With respect to federal spending programs, we feel that the rather large increases over the past three years, namely 21 per cent, is exaggerated. We think that this should be brought back down to a level much closer to that of our economic growth, in order to implement the measures which we are recommending for the areas of employment insurance, taxation and paying down the debt.

Mr. Michel Lessard: It is only the federal government which thinks we do not have a fiscal imbalance in our society. The Séguin Commission, the Conference Board of Canada—which is not our best friend but which we nevertheless regularly quote—as well as the series of studies carried out by the provinces show that there is a fiscal imbalance and that it is due in part to the fact that the federal government considerably cut back transfers to the provinces during the 90s.

Mr. Paquette, it is thus clear to the CSN that direct services to the public in the areas of health, post-secondary education and social assistance must be improved. This should not add to the bureaucracy, however.

The provinces are clearly showing their desire to manage this situation as a whole. It is impossible that everyone should be wrong at the same time: thus we think that the federal government should invest more, whether through tax points or an increase in cash transfers. For our part, we would be in favour of an increase in tax points for the provinces, but in the short term, an increase in transfer payments would at least improve the situation.

With respect to the debt, we can of course pay it down, but it is rather interesting to note that in Canada, the debt increasingly belongs to Canadians. There is less and less external debt, as can be seen by the proportion of domestic debt which is held by Canadians in the form of bond issues or other such instruments. Thus Canada has fewer obligations to foreign countries, and we think this is to our advantage.

Mr. Pierre Paquette: The students, however, have suggested we propose abolishing the Canadian Foundation for Innovation so that its funding can be transferred to the funds which already exist. I would like to know your opinion of this idea.

For their part, they are calling for coherency in research and are criticizing the fact that the Foundation does not have to report to anyone. That is one of the strategies, but not the only strategy, of the federal government. I would like you to tell me, Madam, if you have thought about this question.

Ms. Denise Pelletier: As a matter of fact, we thought about it primarily before the Foundation was set up. Had we been consulted on the subject at that point, we would certainly have indicated that we would prefer the money to be channeled through existing centres of expertise which are recognized internationally for the quality of their assessments and their very great knowledge of Canadian research circles.

Since that time, however, a modus operandi has been established. The Foundation exists and it has learned to work in close cooperation with the federal councils. I think that these exchanges are quite acceptable and appropriate.

In my opinion, the universities take it for granted that the Foundation exists. They hope that the government will continue to fund it adequately, and that it will also remember the federal councils which, in the area of research, provide the bread and butter for Canadian university researchers. A great deal of work must be done to cultivate and develop excellence. In this respect, if the CFI, with its considerable budget, were to concentrate rather on champions, the federal councils, for their part, could cultivate the nurseries where talents are grown.

Finally, to answer your question, I would say that I do not think we would go over all this again, given that things are in place and a mechanism for cooperation has been established.

Á (1105)

The Vice-Chair (Mr. Nick Discepola): Thank you, Ms. Pelletier.

Mr. Murphy, you have seven minutes.

[English]

Mr. Shawn Murphy: Thank you very much, Mr. Chair.

First of all, I want to thank all the presenters for these presentations here this morning.

My first question is to the Confédération des syndicats nationaux.

Mr. Lessard, I read your brief, and there's quite an extensive list of recommendations dealing with increased funding for health care, increased funding for post-secondary education, increased payments to equalization, reductions of EI premiums, increased funding for infrastructure, a correction of the fiscal imbalance, and the transfer of tax points from the federal government to the provincial governments.

In developing the brief, have you done any costing on how much these recommendations would cost the federal government?

[Translation]

Mr. Vincent Dagenais (Assistant to the Executive Committee, Confédération des syndicats nationaux): For the purposes of presenting our brief, we did not provide a detailed estimate of the costs as a whole because we felt it would be more useful for the standing committee to try to deal with major trends and the problems related to preparing the federal government's budget.

In the brief's conclusions, we identify a certain number of basic problems which we would like the government to attack directly, for example the question of the fiscal imbalance. We did not want to get into a debate over figures, but we hope that the federal government will finally acknowledge that this problem exists and will agree to sit down with the provinces to thrash out this question. That is why there are no detailed figures in the recommendations as a whole.

This gives me an opportunity to say something about the accuracy of the figures. One of the problems related to discussing the federal budget is the fact that the figures before us may be somewhat misleading. The federal government's presentations leave us in some uncertainty about the actual level of the deficit or lack of deficit, or of the surplus or lack of surplus. As a result, the real debate is a bit misleading. How can we cost proposals when we do not know where we are at? Furthermore, this creates uncertainty at the provincial level.

I also feel that it should be possible to establish figures, but we feel that is the primary responsibility of the federal government.

Once again this week, we heard Mr. Manley tell the provinces that the sum of $2 billion was not yet certain, that it was conditional and that he could not make a promise because the figures were not yet definite.

I think that this question of figures is an important one, but the responsibility rests first with the federal government.

[English]

Mr. Shawn Murphy: Madam Chair, I honestly think there's not a lot of extra money in the federal government this year, with all the problems we've had with SARS and BSE and Hurricane Juan. But again, I agree with your point that there has been some uncertainty as to previous forecasts.

I believe the federal government is going forward. Whether or not you agree with this fiscal imbalance, going forward, the federal government will have to go through a process of re-examining its priorities, of reallocating its priorities, because it really hasn't done this for quite some time.

Of course, every submission we have had here today, except perhaps one, and every submission we heard earlier this morning called for increased federal government funding, although this one here was quite substantial, I would submit.

Does anyone have any suggestions of areas that perhaps the federal government is involved in now, that they're funding at this present time, that perhaps should not be a priority for the Government of Canada and perhaps they should get out of?

Á (1110)

The Chair: I'll take a brief answer from Mr. Dagenais and I'll go to--

Mr. Shawn Murphy: Perhaps I could clarify the question. I'm looking for a reduction of expenditures. Just the transfer of more money to the provinces is not the answer I'm looking for.

[Translation]

Mr. Vincent Dagenais: In actual fact, in our brief, we clearly identify a change in priorities. We feel that the federal government must stop assigning priority to paying down the debt. We believe that the present debt level is financially sound and that the government should therefore change its priorities. At the present time the priorities are to pay down the debt and reduce the tax burden. We feel very strongly that these priorities must be changed.

[English]

Mr. Shawn Murphy: I take it Mr. Taillon does not agree with that.

The Chair: Mr. Taillon.

[Translation]

Mr. Gilles Taillon: Thank you very much, Ms. Barnes.

Of course, I disagree totally. I think that there is a need at the federal level for budgetary reallocations especially regarding the federal public service, which has begun to grow again. Major work needs to be done to reduce the number of federal public servants. Moreover, there has been a spending increase of 6 or 7 per cent over the past three years. We believe that you can easily cut that increase to 2.5 or 3 per cent. Then there will be substantial amounts available in order to cut taxes, pay down the debt and assume your customary obligations.

[English]

The Chair: Go ahead.

[Translation]

Mr. Pierre Bérubé: I would just like to say that there is a need not only to reduce spending but also to increase revenues.

Let us come back to the mining industry. If we let the mining industry disappear, there will be less revenue for Canada. On the other hand, if we give it a boost, which is what it needs right now, and we discover new mines, there will be between $100 million and $200 million reinvested directly into the economy each year for each new mine. And I am not talking about the indirect effects, which can be calculated in various ways, depending on our standpoint, our hopes, our optimism or our pessimism. Each mine that is discovered results in a great deal of money being reinvested in the economy. The boost that the mining industry needs right now is to make new discoveries, to discover new mining camps. When a new mining camp is discovered, the companies no longer need incentives or need them at a much lower level. Once they have discovered a first deposit, other people come to the area looking for more deposits. Then there is a snowball effect and the problems are over.

We do not want our industry to be subsidized for ever and supported by the government. That is impossible. We just want a boost so that we can get going again and make our country as attractive for investment as other countries are. The mining industry has become very globalized, and Canada has lost a major share, which we want to get back.

Thank you.

[English]

The Chair: And I'm sure you're aware that this committee, in its last piece of legislative work, helped the mining industry, and I think that's now in the Senate.

Anyway, we'll go to Madame Judy Wasylycia-Leis for seven minutes.

[Translation]

Ms. Judy Wasylycia-Leis: Thank you, Madam Chair.

My first question is for Denise Pelletier. In your presentation, you mentioned that Paul Martin made a speech here in Montreal on September 18, in which he promised to invest in research. But Mr. Martin also said in that speech that the current fiscal approach had to be maintained and that the debt-to-GDP ratio had to be brought down to 25 per cent.

I would like to know how the federal government can do what you are recommending. You have made six very good recommendations. How can they be implemented, given the direction indicated by Paul Martin?

Á (1115)

Ms. Denise Pelletier: I obviously cannot speak for Mr. Martin. These recommendations were drawn up before Mr. Manley gave his economic update on Monday.

When we want to see how we rank in the world, we always come back to the major development indicators that define quality of life, of which the most basic values are health and education. Those are the basic human development indicators around the world.

I cannot tell you what priority he will give to them when he is in office, but we strongly hope that, if the international position that he wants to give Canada with the innovation strategy remains a major objective, he will stick to the objectives that enable us to rank with the other great nations of the world.

Ms. Judy Wasylycia-Leis: Thank you.

It seems to me that Paul Martin will have to change his mind so that we can invest in education, health, the cooperative sector, etc.

My question is for the CSN representatives. How can we, like Mr. Taillon, persuade Paul Martin to change direction? How can we help them change their vision of things, so that we can achieve very important goals for our society? I will have a question for Mr. Taillon as well.

The Chair: Mr. Taillon and Mr. Dagenais.

Mr. Gilles Taillon: Thank you very much, Madam Chair. I hope that I am not answering your question before you ask it.

Our objective is not to persuade Mr. Martin, but rather the Standing Committee on Finance. I simply give—

Ms. Judy Wasylycia-Leis: You have already persuaded Paul Martin. There is no difference between your respective positions.

Mr. Gilles Taillon: Between 2000 and 2005, tax revenues in Canada are expected to increase by 19 per cent in the case of income tax and 44 per cent in the case of GST or QST, while at the same time there are major tax cuts that are projected to total $100 billion but are currently at around $70 billion.

So the federal government has considerably higher revenues, which allows it to develop programs, along with considerably lower taxes and a reduced debt. We find that the most attractive approach.

The Chair: Mr. Dagenais.

Mr. Vincent Dagenais: To convince Mr. Martin to change direction, we need to appeal to his common sense. Setting debt level targets is ideological to some extent—and I say this with respect—in that it does not deal with the concrete problem.

Is the current debt level a fiscal problem for Canada? The answer is no. The answer is that the debt is gradually going down, whereas there are crying social problems in Canada—we have mentioned some of them—that need to be dealt with.

So from a strictly pragmatic standpoint, rather than aiming at targets that have nothing to do with real problems, Mr. Martin should really look at the concrete problems and try to adjust his budget to resolve them.

Ms. Judy Wasylycia-Leis: Mr. Taillon.

Mr. Gilles Taillon: Madam Chair, to continue this debate, I would say to my colleague from the CSN that if he thinks that debt has no impact, he just has to look at the cost of debt servicing to Canadians right now, because it takes up over 20 cents of every dollar that is sent to Ottawa. We feel that this cost is very high. It means fewer programs.

Á (1120)

Ms. Judy Wasylycia-Leis: I am sorry, Mr. Taillon, but I do not agree with you at all. With the statistics that he gave us last Monday, Mr. Manley showed us that if we put money directly into debt reduction, there will not be much difference in the result—

[English]

How can I say this? There's hardly any difference in terms of final product, final end result, if you invest directly, pay down the debt now, or you let it roll according to the growth in the economy.

So why in the world wouldn't you take the money that we need so desperately now and invest it in the programs that will actually grow the economy and help our debt to be reduced, and the ratio will go down on its own?

[Translation]

Mr. Gilles Taillon: Madam Chair, we feel that it is important not to put all our eggs in one basket and earmark all the money for debt reduction, but we need to pay attention to the debt and bring the debt-to-GDP ratio down to an acceptable level.

We will benefit by doing that. We already saved $2 billion or $3 billion a year in debt servicing, and if we continue to cut taxes, the government will be in an extremely favourable revenue situation. So we will be able to afford programs that meet our needs.

[English]

The Chair: Thank you very much.

I'll give you the last word.

[Translation]

Mr. Michel Lessard: I would like to express our opposition to what Mr. Taillon has said.

There were tax cuts in Ontario, and we see the damage that was caused by them. If that is the choice he wants to make, he can do it, but it would not be very responsible from a social standpoint. That is our view.

The Chair: Mr. Discepola, you have seven minutes. Please go ahead.

Mr. Nick Discepola: Thank you, Madam Chair.

In my opinion, Ontario is not a good example. Mr. Harris favoured tax cuts, but they were impossible without increasing the debt.

I feel that the debt is important, but the debate needs to continue. If I asked you each to give me $50,000, in return for which I would pay you $4,000 for the rest of your life, your children's lives, your grandchildren's lives, and so on until the end of time, I do not think that anyone would refuse that offer. That, Mr. Dagenais, is the benefit of having reduced the debt by $50 billion : we are saving $3 or $4 billion every year, for an indefinite period, and that can be invested in our priorities.

The debate should continue, but where do we stop? I am pleased to see, Mr. Taillon, that you are saying the same thing to the Bloc Québécois as you did when you made a presentation to our caucus. But I did want to ask you why you went down from 30 to 25 per cent.

To get back to the debt issue, although we do need to get the percentage down, we also need to stimulate economic growth. But if we can reduce the debt by $3 billion a year, we reduce that percentage by around 0.5 per cent.

So I wonder where these magic numbers of 25 per cent and 30 per cent are taking us. Would it not be better just to talk about a reasonable level, do everything we can and promote economic growth, rather than always paying down the debt with the surplus?

Mr. Gilles Taillon: If you were to ask us which of our recommendations is our number one priority, it would not be paying down the debt. We strongly favour tax cuts in order to stimulate productivity. But it is important not to neglect the debt either.

The percentage is between 25 per cent and 30 per cent—at one point we were talking about 30 per cent and in February 2003 we were talking about 25 per cent—and that seems to us to be a widely favoured figure. According to Mr. Manley's economic update at the beginning of the week, if we keep a contingency reserve of $3 billion, the debt-to-GDP ratio in 2008 will be 31 per cent. That gives an idea of what needs to be done.

Our most important priority, however, is to stimulate productivity. That requires cutting taxes in order to be able to invest more in the knowledge economy, that is, research, development and innovation. Those are our priorities, but we must not forget about the debt. It is hanging over our heads and will become an increasing problem as our society ages. Out of fairness to the younger generations, we must not forget our concern with the debt.

Á (1125)

Mr. Nick Discepola: Thank you.

I have another question for the Conseil du patronat.

On Monday, Minister Manley said that he was ready to spend up to $2 billion of the surplus because of the government's obligation to invest in health, although there are some conditions. For the first time in five or six years, we are throwing caution to the wind. However, our analysis has shown that we now have only $300 million to work with.

With that in mind, I agree with one of your recommendations, namely, that we must always be cautious when preparing a budget. This is borne out by the mad cow crisis and other very costly catastrophes that no one could have predicted.

Nevertheless, as I have already said, the minister has decided to abandon this practice. I would like to know whether or not you agree with his decision. The minister has decided that in order to avoid a budget deficit at any cost, he is prepared to use the operating budget to cover any possible shortfall.

It seems to me that in making this political decision he is putting future budgets in jeopardy. I feel that caution is essential if we want to avoid the ups and downs and uncertainties.

I would like to know if you have an opinion on that.

Mr. Gilles Taillon: Madam Chair, we would like this decision to be a temporary one. It might apply for a year, in view of already agreed-upon political commitments, but the federal treasury will soon have to recover a reserve of at least $3 billion to $4 billion. Expenditures will have to be cut in order to do that. We have to look at the expenditure side of the equation. In our view, a spending increase that is three times greater than our economic growth would be unacceptable.

Mr. Nick Discepola: Thank you.

I have a question for the CSN representative. How much time do I have left?

[English]

The Chair: A minute and a half.

[Translation]

Mr. Nick Discepola: My question is for Ms. Pelletier. You have suggested something that I am extremely interested in: the creation of a Canadian education transfer.

Alberta is the only province that itemizes its expenditures in health, education and social services. It has been shown that most provinces that received transfers have chosen to invest most, if not all of the funds in health, to the detriment of education.

I think that your recommendation to enact post-secondary education legislation modeled on the Canada Health Act is excellent. I could not agree more. Perhaps we should divide the Canada Health and Social Transfer into sections for health, education and post-secondary education.

There are five pillars in the Canada Health Act. What conditions, if any, would you like to see in a post-secondary education act?

Ms. Denise Pelletier: We have not given the matter any extensive consideration. We believe that the model should respect provincial jurisdictions and allow for discussion.

You mentioned Alberta. We might point out that Quebec is also particularly sensitive to these issues.

This proposal comes from the Canadian Association of University Teachers. They were the first ones to put forward this recommendation and I believe they share the concerns that you have raised.

In some Canadian universities, in spite of globalization, language departments are shutting down. A number of very worrisome things are happening.

In our brief, we recommend an education transfer along with social assistance and social services, which would include early childhood development, all of this in a separate envelope to be called “Canadian social programs transfer”.

As I have said, this is our position, but it may evolve because we have not had any in-debt discussions about the details of such a transfer.

Á (1130)

La présidente: Thank you.

All of the committee members are grateful for your presentations. Thank you for being here.

We will now hear another group of witnesses.

[English]

We'll suspend for a few minutes. Thank you.

Á (1131)

Á (1138)

The Chair: I would like to call the meeting back to order, please.

Bienvenue à tous. This is the third panel in Montreal on the morning of November 5. We are in pre-budget consultations, pursuant to Standing Order 83.1.

There are some changes, colleagues, to the panel, so we'll go through the witnesses.

[Translation]

We will now hear from the Association du transport urbain du Québec represented by Monique Léveillé, Secretary General, and by the President, Jean-Jacques Beldié. Welcome.

[English]

From Health Partners International of Canada we have the chairman, the Honourable Jake Epp. Welcome. And we have Christine Lancing, who is the director of development. So welcome to you both.

The next association has cancelled. The Chibougamau Chamber of Commerce is on their way, and we will add him to the end of our list when he arrives.

From the St. Lawrence Economic Development Council we have Guy Véronneau, the president. Welcome.

[Translation]

We also have Marc Gagnon, Director General. Welcome, sir.

From the Association nationale des éditeurs de livres we have Pierre Bourdon, Vice-President, General Edition, and Jean Canac-Marquis, who is also a Vice-President. Welcome, gentlemen.

We will begin with the first group. You have seven minutes and you may begin, sir.

Á (1140)

Mr. Jean-Jacques Beldié (President, Association du transport urbain du Québec): Thank you Madam Chair, Mr. Vice-Chair, honourable members.

Allow me to first say a few words about the ATUQ, the organization that I represent. It is a not-for-profit organization created in 1983, that is comprised of the nine transit corporations that have all been governed by the same legislation since 2001.

It is, first, an organization for discussion and political representation with a mandate to ensure the promotion of public transit and to defend the interests of its members in their dealings with industry representatives and various levels of government. It is also an exchange and information forum for sharing experience and developing expertise, namely through its eight sectoral committees. Finally, it is an association that promotes the pooling of services, such as the unified management of bus contracts and bundled procurement programs.

I will now turn to public transit as an essential strategic public service. We simply wish to illustrate the economic, environmental and social aspects of the contribution that public transit makes.

In terms of economic aspects, public transit reduces household spending. The average cost per passenger-kilometer is $0.46 by automobile, compared with $0.12 by public transit. This represents several thousands of dollars in savings annually per household. It also reduces the costs of traffic congestion for businesses and motorists. For example, Federal Express and UPS report that an additional five minutes of traffic congestion per day costs them $40 million per year.

Public transit has a large impact on the environment. It reduces energy consumption and greenhouse gas emissions. It contributes to the improvement of health in Quebec. We now know that one bus can carry as many passengers as 50 vehicles, but pollutes up to 18 times less.

Public transit also plays a social role that cannot be overlooked. It ensures mobility for low-income citizens who cannot afford vehicles, seniors and students, helping them to get to work, school and recreational activities.

I will now turn to the underfunding of public transit, and discuss the current acute crisis and chronic underfunding for public transit in Quebec.

In 1991, in what we call the Ryan Reform in Quebec, the government withdrew its funding for the operation of public transit, and kept only the capital assistance program. This forced the transit corporations to increase fares, decrease service and reduce their spending.

Other factors have also contributed to a significant variation in the revenue structure, which we will mention very briefly. In 1997, the government also reduced the subsidy for purchasing new buses from 60 per cent to 50 per cent, with a mandatory, very expensive choice of bus, the low floor system, and supplier, Nova Bus. Setting up the AMT in the Montreal area incurred additional expenses of several million dollars for the three transit corporations in the urban community. The Trudel Reform imposed cutbacks of 6 per cent on all the transit corporations. Partial repayment of the QST was abolished in 1997. The sales tax was increased by 1 per cent in 1998.

Three findings result from this situation. First, the main stakeholders in public transit in Quebec are the municipalities and the riders. But the needs are so great that the riders and the municipalities will not be able to continue to meet the demand. The financial situation of the municipalities in Quebec is a major concern. According to a study conducted by the Conference Board of Canada for the Union des municipalités du Québec, “unless we do something soon, the fiscal burden born by taxpayers in Quebec's municipalities could increase by 90 per cent over five years.” Money is tight.

Secondly, the situation is similar for the transit corporations, which have had to postpone major investments that can no longer wait. The investment requirements for public transit infrastructures for the next 10 years are estimated at about $2.6 billion just to maintain the current assets, including $1.6 billion to replace stationary equipment and first-generation subway cars in Montreal.

Á (1145)

In such a dramatic context, it is normal for all the levels of government to be and feel involved. We know that the federal government is already aware of the problem and that is has shown its concern for all the urban issues, especially transportation and housing, for several years.

Ladies and gentlemen, it is urgent that action be taken. If an agreement is reached between the federal and provincial, meaning Quebec, governments on a federal public transit assistance program, the ATUQ would like this agreement to fall within the framework of the following guiding principles. Federal involvement must guarantee a contribution of new money and not result in a decrease in the assistance from Quebec. The program must be simple to administer, with clear, transparent and equitable rules. Quebec must have adequate managerial levers for this program, which should be decentralized. Federal commitments must be for the long-term to ensure funding stability. Federal involvement must be incorporated into an effective global financial framework in which the contribution of each partner is clearly established.

We do not wish to dilute our message. It is paramount and a priority for the survival of public transit in Quebec that an agreement be reached between the federal and Quebec governments to set up a major investment program for public transit as early as 2004.

Ladies and gentlemen, thank you for your time and consideration. We would be pleased to answer any questions.

[English]

The Chair: Thank you very much.

Je donne maintenant la parole à l'honorable M. Epp.

Hon. Jake Epp (Chairman, Health Partners International of Canada): Madam Chair and members of the committee, my name is Jake Epp and I'm chairman of Health Partners International of Canada.

Permit me to introduce my colleague, Christine Lancing, who is our director of development and formerly director of finance and administration.

Normally, our president, John Kelsall, would also be sitting here, but he is in Africa as we speak, monitoring programs in Swaziland, Madagascar, and South Africa, and exploring how we might contribute to the alleviation of the HIV/AIDS crisis in that continent. We are here at the suggestion of Dr. Bernard Patry, who recently shared with Mr. Kelsall his enthusiasm for the proposal we are presenting to you today.

Our goal this morning is to present to you a concept that achieves a number of public policy objectives, both economic and humanitarian. As we all know, Canada is a major player on the world stage; we enjoy an enviable reputation as a blessed, compassionate, and peace-loving nation. As Canadians, we are mindful of our responsibilities in helping the less fortunate around the world to meet the most basic of human needs.

HPIC is an innovative and rapidly growing organization. We're headquartered here in Montreal and our distribution centre is in Toronto, but we like to think of ourselves as Canadian.

We are pleased and honoured to be part of the solution that Canada presents to some of the world's most daunting humanitarian challenges. Our particular contribution is in the area of health care. Health Partners International of Canada receives medicines and vaccines donated by Canadian pharmaceutical and biotech companies and then organizes them in our own facilities before distributing them as needed into the hands of hundreds of Canadian physicians and non-governmental organizations who work tirelessly in the developing world.

To date, millions of the world's poorest people have been helped or healed thanks to more than $120 million worth of vital medicines made available through us by the Canadian health care industry. In your appendix you have an example of the growth, not of HPIC necessarily, but of the contributions that people have generously given us.

Sadly, the need is far greater than our current capacity to provide medicines through philanthropic programs. While we readily acknowledge that the Canadian health care industry is wonderful support, we know all too well the extent of suffering that occurs in the world's poorest nations. That is why we're here today.

We know that the Canadian government wants to help these people. Our government, for instance, actively supports development in the poorest parts of the world in order to reduce poverty and to contribute to a more secure, equitable, and prosperous world. We know that development is a complex, long-term process that involves partners in the private and public sectors in Canada, in those developing countries, and with international organizations and those agencies.

The ultimate objective is to work with developing countries and countries in transition to develop the tools to enable them to eventually meet their own needs in health, as well as in other fields basic to human existence. HPIC wants to bring its activities more into line with this goal by gaining access to greater and more consistent sources of product.

Our current model, which depends entirely on the philanthropic programs of Canadian industry, is clearly not sufficient. Our proposal invites the government to provide, in its next budget, innovative tax incentives to encourage those companies to provide, and if necessary manufacture, significant quantities of the long-dated medicines that are most urgently required, in accordance with World Health Organization guidelines.

Health care is a key ingredient of any development program, and Canada can play a more dynamic role in the care and treatment of the legions of poor who would otherwise die of preventable or treatable diseases.

In a nutshell, Madam Chair, this is what we propose. First, a tax incentive should be given to companies for donations of inventories made to Canadian charities for medical humanitarian purposes in the two-thirds world. This would include medicines, vaccines, medical supplies and devices, and related consumables.

Second, this tax incentive should be given in the form of a deduction of the cost base of the inventory, plus an additional tax deduction comparable to that offered in the United States.

Third, certain parameters must be met in order to qualify for the additional tax deduction. Our brief has the details, and I won't bother you with those.

Á (1150)

Let me then invite Christine, who has been instrumental in formulating the brief, to draw a few details to your attention. I will then have a few concluding remarks and we'll be open to your questions.

Mrs. Christine Lancing (Director of Development, Health Partners International of Canada): Before I begin, it must be noted that there is currently no economic incentive for companies to give gift-in-kind donations out of their inventory outside a philanthropic motivation. In fact, it is easier, more cost-effective, and less risky for companies to simply destroy high-quality, in-date medicines than to give them to charity.

As for the nuts and bolts of our recommendation, the proposed incentive is carefully structured with a view to maximizing impact while minimizing compliance problems and administrative burdens. Here is how it could work.

The tax incentive would take the form of a deduction in determining taxable income. The donor company would be able to deduct the cost base of inventories donated to charity, as is already done under the current provision. In addition, it would be able to deduct one-half of the gains that would have been realized if the inventory had been sold at its fair market value, up to a maximum of twice the donated inventory's cost bases. This is similar to the deduction that is allowed in the United States.

In addition, we recommend that certain parameters be set in order for the donation to qualify for this incentive. This would include that the donation must be made by the company who manufactures or sells the products in the regular course of its business, i.e. no third-party donations. The donation must be needed and useful to the charity and the charity reserves the right to refuse any donations. The donations must meet World Health Organization drug donation guidelines. These provide that donations must be able to be used in country before they expire, the receiving country must approve the donation in advance, and there must be no double standard in quality.

Because this tax incentive is designed for the purpose of achieving specific Canadian foreign policy health objectives, it would be offered for donations of medicines, vaccines, medical supplies and devices, and related consumables. Why these types of products? They are by their nature easily consumable and highly needed in overseas aid programs. There are well-established international standards already in place for appropriate donation of these types of goods. These types of products also have objectively verifiable and often regulated prices for purposes of valuation.

I don't need to remind you that there are many precedents under current Canadian tax law for directed incentives, which are limited in reach to certain types of supplies or certain objectives. Such incentives are incorporated into our system because they achieve clear and desirable public policy objectives. Examples include research and development tax credits and tax benefits resulting from the donation of publicly traded shares to charities.

In our case, these limitations help to achieve foreign policy, cost containment, and compliance objectives.

You have heard recently from groups like the Voluntary Sector Initiative task force about the need for new approaches to help charities access funding and resources. This proposed incentive would not only give charities access to desperately needed resources, but at the same time would engage the private sector to share in the mission and the cost. Of course, there will be a modest cost shared by government as well, but it is one that is highly leveraged through this partnership.

Over the course of the past few months we have consulted numerous experts in various fields. They have generally agreed that this concept is both feasible and important. Many agreed that it would put Canada in a much stronger position to deliver the most needed medicines to people who need them the most.

Thank you.

Á (1155)

Hon. Jake Epp: Madam Chair, with the benefit of only the few minutes at our disposal—but we thank you for them—we have given you but a few highlights of a proposal that is designed to move Canada into a new level of humanitarian aid by making available much larger quantities of life-saving medicines, vaccines, and other health supplies.

In recent weeks, HPIC has signed two important agreements with the Canadian government. The first will provide $15 million worth of medicines to Cuba on a regular and sustained basis. That goes all the way back to Mr. Trudeau, when a program was established at that time. It's amazing what's happening, especially with Chernobyl children,which seems a long way from Cuba and Canada, but Canada is contributing to that purpose.

The second will result in a $2 million shipment of needed medicines to the people of Afghanistan, which again, I think, underpins Canada's foreign policy.

To meet these commitments and others, including potentially a new program to deal with HIV/AIDS in Africa, HPIC simply needs your support. Tangentially, Madam Chair, we're working with a number of people, including Stephen Lewis.

How can we use our disparate activities, all well intentioned? How can we bundle or bind them for more impact vis-à-vis Africa? This is not an easy proposition, but we're working at it, and hopefully with some government direction, which we're receiving, we might have some success.

Philanthropy programs alone are not enough. We invite the government to introduce into its next budget a bold policy that would have the effect of making the most needed medicines and vaccines available to the most needy nations.

We know Canada's humanitarian programs are an important part of our country's sacred trust. Canadians are a just and compassionate people. They want their government to give a helping hand to those who cannot access the most basic necessities of life, such as basic medicine, which we often take for granted.

Thank you, Madam Chair and members of the committee, for your time and for listening to us.

The Chair: Thank you very much. I thought this was a very interesting brief. I want to draw my colleagues' attention to your examples on page 31 of problems with drug donations. I thought that was a useful thing to have in mind as we look at this. I also appreciate the guidelines that were brought into this brief, so we can make ourselves knowledgeable in a fast way, or at least become a little more knowledgeable.

L'hon. Jake Epp: Madam Chair, may I just take one example of a volunteer?

I met a man in Calgary the other day—we were in the van taking us back from getting our cars serviced—and the driver said to me, “Jake, how are you doing?” because we'd been talking about this in the past. This man said, “What do you do?”

To make a long story short, the next day he showed up with a CD-ROM. They have a hostel in Malawi, this little group. He said, “Do you think you would help us?”

I phoned Montreal, and we put together I don't know how many pallets. British Air out of Toronto took them to London and off to Africa. But one of our World Health rules is somebody very responsible has to be there to see that it isn't diverted. He said, “I'm a volunteer; I'll go. I'm leaving on Wednesday. The shipment's going Thursday; I'll be in Malawi on Friday. I'll be there.”

We had lunch, and he said, “Jake, I can't go.” I said, “Are you wimping out on me? Come on, this doesn't work.” He said, “I just had my visa cancelled because I'm coming from a SARS-infected area.” I said, “What's wrong with this picture? We're giving aid, it's free, you're a volunteer, and you're passing through Toronto. There's something wrong.”

Apparently Canadian officials someplace at some conference had talked about Africa and AIDS, and I guess there had been some negative comments on it. To make a long story short, I said, “Look, I'm not an MP any more; this is not professional advice. Forget about the visa. Go.”

He came back a few weeks later. Nobody had even asked. But that, in a very practical form, is how tough it is to move anything.

Â (1200)

The Chair: Thank you.

I will now go to the St. Lawrence Economic Development Council.

Mr. Véronneau, commencez, s'il vous plaît. I'm being a little more generous with the time because I've just been notified that the plane for the Chamber of Commerce from Chibougamau is not available to transport him to us. Colleagues, you will have that brief, but not the individual.

Go ahead, sir.

[Translation]

Mr. Guy Véronneau (President, St. Lawrence Economic development Council): We will try not to take it all.

Madam Chair, Mr. Vice-Chair, honourable members, on behalf of the SODES, which we are representing here today, I would like to thank you for giving us an opportunity to speak to you about marine transportation in Canada and more particularly in the St. Lawrence River.

The SODES was created almost 15 years ago to protect and promote the economic interests of the St. Lawrence. It brings together many hundreds of members from all segments of our marine community. It includes shippers, ports, stevedores, municipalities as well as international and Canadian shipowners.

The contribution of Canada's marine industry to our country's prosperity cannot be overlooked. In the St. Lawrence and Great Lakes region alone, the economic spinoffs from marine activities total billions of dollars. In Quebec, according to a study done by the Quebec Department of Transport in 1999, these annual benefits represent about $3.2 billion, and marine activities alone are directly or indirectly responsible for the creation of some 26,000 jobs. To that we would add industrial activities that depend upon the marine sector, namely forestry, pulp and paper, the aluminum industry and commodities such as grain.

Thanks to the cooperation between Transport Canada and Canada's marine industry through the National Marine and Industrial Coalition, a comprehensive study on the advantages of marine transportation in Canada is now underway. This study will allow for a true evaluation of the contribution made by marine transport to our national economy and help industry representatives to outline to political decision-makers the importance of its role and the need to give marine transportation the attention that it deserves as a strategic tool for our Canadian economy.

This idea has been lacking in Canada for decades now, and if we are not careful, it will continue to be neglected for years to come. This must stop. The economy and our country's environment depends on it.

Marine transportation represents the cornerstone of our overseas trade. Even though Canada shares a land border with one neighbour, the United States, towards which flow 87 per cent of our exports and from which we received 65 per cent of everything that we import, our trade with the rest of the world nevertheless represents $180 billion, and most if not all of those goods are carried by ship.

While marine transport increased by 600 per cent internationally over the past 30 years and the annual traffic on the Mississippi rose from 450 to 700 million tonnes, transport on the St. Lawrence dropped from 120 million tonnes in the early 1980s to about 100 million tonnes today.

Inland marine transport was particularly hard hit during that time. The tonnage carried by the Canadian fleet dropped from 70 million tonnes in 1988 to 55 million in 2000. A good part of the cargo lost by Canadian ships was recovered by other modes of transport, particularly trucks, which is truly an economic and environmental aberration.

Cost is a central issue in the stagnation of our sector today. There are some 20 different Canadian government regulated fees and tariffs that must be paid by any ship navigating the St. Lawrence. According to a study made by the Treasury Board in 2002, the Canadian marine industry pays close to $500 million per year in government-related fees.

The treatment of marine transport is directly related to the absence of a coherent national policy based on economic development.

Fierce competition exists between marine transportation on the St. Lawrence and the Great Lakes and transportation on other waterways as well as with other modes of transport such as rail and road. For that reason, it makes no sense for the Canadian government to have set revenue objectives in a world where volumes fluctuate so quickly and so radically.

Â (1205)

In the United States, which is Canada's marine industry's biggest competitor, the government ensures the maintenance and development of the infrastructures that are required by the industry. Besides the Jones Act, massive marine infrastructure program investments have been announced over the past years.

According to Statistics Canada, direct subsidies and contributions to rail and road transportation are clearly higher than contributions to marine transportation. For example, the trucking industry does not have to pay any direct fees to maintain the highways, nor does it have to pay for snow removal, signage or traffic control. For each passage, a ship must pay for the navigation and marine traffic system, channel maintenance and ice breaking.

In 2002, the National Marine and Industrial Coalition, which brings together most of Canada's marine associations, tabled a draft for a long-term agreement to settle once and for all the issue of fees for marine services, since they have served to undermine the development of this industry in Canada for almost a decade. So far, despite a number of announcements to that affect, the Minister of Fisheries and Oceans has yet to respond.

In its report to the Minister of Transport, tabled in June 2003, the Canadian Marine Act Review Panel states its agreement with the National Marine and Industrial Coalition as to the necessity to eliminate the fees for marine services in Canada.

Therefore, our first recommendation is that the Government of Canada undertake to negotiate a long-term agreement with Canada's marine industry to progressively eliminate the Canadian Coast Guard fees for marine services.

Second, we recommend that the government recognize its responsibility for the dredging of the navigable waterways as defined by the Fisheries and Oceans Act.

The safety of our harbours and marine transportation has become a major concern for the federal government. New requirements that the government has begun to impose in response to national security standards often require the investment of considerable sums of money. These requirements, whether for the harbours or their users, are extremely expensive and some companies simply cannot afford them.

It would be unacceptable to put the Canadian shipping companies, harbours and carriers at a disadvantage with their American competitors by forcing them to assume locally the costs arising from national non-marine policies, particularly since we know that, for reasons of national security, the American government will invest what is required to ensure their own security. Therefore, we recommend that funding necessary for compliance be granted with every new Canadian government security requirement.

An analysis of federal infrastructure budgets shows that marine assets are practically non-existent as a Canadian priority. Highways represent the largest part of the government expenditures. Without denying the need to maintain our highway network, we feel that neglecting marine infrastructures will inevitably lead to a weakening of Canada's transportation system.

One of the best examples of this situation is the fact that Canada's port authorities are not eligible for the infrastructure program. The national ports do not have access to the program because Canada's marine legislation prohibits the federal government from investing in them. Development of the large Canadian harbours is therefore at a standstill, without even mentioning the restrictions imposed by the legislation that prevents them from seeking private funding.

The Canadian Marine Act Review Panel's report, that was submitted the Minister of Transport last June, makes a number of recommendations in that area and is an excellent starting point to correct this situation. Therefore, we recommend that the Canadian ports, including the CPA, be eligible for the federal infrastructure programs.

In the aftermath of the 1995 national marine policy, the federal government created a program to dispose of its public ports. Out of 549 public ports and harbour facilities, 436 were disposed of, declassified or demolished.

Â (1210)

In the St. Lawrence, with the exception of the ferry terminals that were taken over by the Quebec government, no regional commercial ports covered by the program have yet been transferred.

The failure of this disposal program means that the plight of the regional commercial ports along the St. Lawrence remains unresolved a situation that is harmful since government investment and maintenance has been slashed and they cannot begin to do what would be necessary for their recovery.

Therefore, we recommend:

That the Government of Canada recognize the strategic importance of regional ports for Canada's economy and the fact that the regions and their populations absolutely depend on them.

For ports for which it is still responsible, the government should immediately launch a recovery program with sufficient funding to bring the maintenance up to standard and ensure the viability of the infrastructures.

That the federal government rescind its decision to increase the port tariff by 10 per cent for public facilities as of January 2004.

To reverse the trend, Canada must agree to include industrial greenhouse gas in the transportation chapter of the Kyoto Protocol compensation framework. Thus a shipper who chooses to use a less polluting mode of transport to move his goods could be eligible for exchangeable emission credits or a tax credit.

We therefore recommend that the Canadian government agree to include transportation among the greenhouse gas industries in implementing the Kyoto Protocol.

Thank you, Madam Chair.

[English]

The Chair: I've gone to nearly twelve minutes, and we have to have time for people to question. We have the written brief in French with your eight recommendations. We'll take note of it, and then perhaps there'll be other people who will ask you some questions to help them better understand. Thank you.

We will go now to l'Association nationale des éditeurs de livres. Commencez, monsieur.

[Translation]

Mr. Jean Canac-Marquis (Vice-President, Academic Edition, Association nationale des éditeurs de livres): Madam Chair, honorable members, I don't think you have our brief. We sent it to you a month ago and I don't know if... You have it. Good.

Our presentation was drafted on the assumption that you had read the brief.

[English]

The Chair: We also had it before at our Ottawa offices. We have just a limited number of copies here, though.

[Translation]

Mr. Jean Canac-Marquis: Very well.

Thank you for having us here. I would like to introduce my colleague, who is Vice-President of the Association nationale des éditeurs de livres and heads up the general publishing section. He is also director of Éditions de l'Homme, one of the largest publishing houses in Quebec.

My name is Jean Canac-Marquis and I am Vice-President of the Association nationale des éditeurs de livres and responsible for educational, scientific and technical publishing. When I have time, I also look after the business of Éditions du Phare and Mondia Éditeurs.

We would like to talk to you about culture this morning. You have already heard from the ACP, in September I believe, which is our anglophone counterpart. We intend to speak to you about the publishing industry in French.

The ANEL represents 110 French-language publishers located in four provinces: Quebec, Ontario, Manitoba and New Brunswick. In its different incarnations, the association has represented French-language publishers for 30 years and, as the ANEL, for the past 12 years.

The French-book industry in Canada comprises over 10,000 authors who generate 5,000 direct jobs and more than twice that many indirect jobs. Those figures are important in helping you make recommendations regarding the next budget, which may have a major impact on those jobs and the publishing industry as a whole.

One of the main thrusts of the ANEL's mission is to ensure that publishing in Canada is a viable activity.

Our domestic market is small—there are 7.2 million francophones in Canada—and foreign competition is very strong. Government support is essential to preserve a solid, high-quality publishing industry in Canada that can also achieve international market penetration.

The major Canadian organization supporting publishing are the Canada Council for the Arts and the Department of Canadian Heritage through its Book Publishing Industry Development Program, or BPIDP.

In that connection, we would like to reiterate what Jean-Louis Roux said recently, when he was still Chair of the Canada Council. He said that the Council needed additional financial resources in order to provide the services that artists, arts organizations and the Canadian public deserved. We support that plea and we would like to see the special envelopes from Treasury Board renewed and increased.

For its part, the BPIDP is very valuable because it help the industry. That means that it helps publishers. It also has more far-reaching benefits that Mr. Bourdon will describe in greater detail later.

Since the purpose of the committee's consultations is to come up with fiscal proposals to invest more in the well-being of all members of Canadian society and ensure the country's prosperity, we feel that it is important to take into consideration the investment made in book publishing, since it contributes to the well-being of the public and plays a major role in society's development, from both an economic and a human standpoint.

Books are essential tools in a society dependent on knowledge and communications.

Â (1215)

They foster talent and creativity among Canadians and they are the ideal vehicle for transmitting our society's culture and values, both here and around the world.

For those reasons, the ANEL urges the federal government to maintain or increase its current financial support.

Mr. Bourdon.

Mr. Pierre Bourdon (Vice-President, General Edition, Association nationale des éditeurs de livres): To give you some context, I will provide a quick overview of the financial situation in the French-language publishing industry in Canada.

As Mr. Canac-Marquis has already mentioned, our market is very small: a population of barely 7 million. In contrast, the anglophone market in Canada is 22 million people and, of course, there is the American market next door. The French-language book industry is necessarily export-oriented. Our main export markets are European countries such as France, Belgium and the French-speaking areas of Switzerland. The fact that those markets are a long distance away complicates our lives considerably when we export our products.

Of course, foreign competition is also a problem for us. Twenty-five years ago, when I started out in the industry, Canadian-published books in French accounted for 15 per cent of the domestic market. In one generation and thanks to government programs, that market share has doubled: it is now at around 30 per cent and, if we include educational publishing, approximately 40 per cent.

Changes over the past 25 years include significant stagnation in the last decade, probably for macroeconomic reasons. I do not want to go out on a limb by giving more details on that. However, it is important to point out that government assistance has helped to double our market share, but if that assistance is not maintained or increased, the growth of our industry may be checked. The ANEL has set as its objective to increase our market share by 10 per cent over the next 10 years.

The stagnation that I mentioned is reflected by the fact that, over the past five or six years, total sales for French books published in Canada, excluding indirect sales, have not exceeded $145 million.

So we need increased support from federal programs for promotion, international fairs, and export activities. Active support is critical because production has been steadily increasing. The Canada Council has programs that encourage creation by authors, translators and artists. We therefore need to continue to support the industry whose role it is, obviously, to make available what those people produce.

There are also export barriers, given that our main market is far away, as I already mentioned. I was listening to Mr. Véronneau earlier, and I agree with him that transportation issues are crucial. It is clear that exporting books to France is more costly than sending them to New York or Detroit from Toronto.

In addition to transportation challenges, we face ideological barriers, because we are North Americans and that shows up in the way our books are designed; our foreign market, however, is composed of Europeans. There are major exports barriers. All the support programs, whether under Canadian Heritage or the Association for the Export of Canadian Books, the AECB, need to support us, not only for the startup of our export program and marketing, but also, in a more sustained way, for our activities as a whole.

I will conclude by commenting on the importance of the book industry for Canada. It goes without saying that Canadian-owned organizations that publish Canadian-based authors and translators and provide work to creators, editors, artists, printers and distributors, not to mention the transportation industry, designers, book sellers and librarians, contribute to cultural diversity.

As you know, that is an important aspect of the GATT agreements. The ANEL is working not only to increase our market share by 10 per cent over the next 10 years, but also to ensure diversity in the book industry. The variety of books that we publish and make available on the market is an extraordinary contribution to Canada's cultural diversity. Thank you for your attention.

Â (1220)

[English]

The Chair: You may have just one last minute, and then that's it. You're over time right now.

[Translation]

Mr. Jean Canac-Marquis: I will try to do like Mr. Bourdon and speak quickly—

[English]

The Chair: I don't think that's the idea.

You might want to hit your key points.

[Translation]

Mr. Jean Canac-Marquis: I will quickly mention two programs.

The Canada Council Program is aimed mainly at authors. As I was saying earlier, when I cited Mr. Roux's comments, that program needs to be maintained and even expanded.

The Book Publishing Industry Development Program, or BPIDB, is more directed at publishers, although it also helps authors and artists. Its purpose is to make the industry competitive and facilitate its development.

To end my minute, I would like to thank you for your attention.

[English]

The Chair: Thank you very much.

Now I will go to six-minute rounds to keep within our time limits, and I will be strict with my colleagues.

Go ahead.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Madam Chair, and thanks to all the presenters here this morning.

I guess with the time I have I'll start with Mr. Epp, if I may.

I too am very impressed with your brief, and I believe it's going in the right direction when it comes to some of the initiatives that Canada already has for continuing to pursue foreign aid and helping especially in the area of health internationally.

One of the things in your tax proposal at least to consider here in Canada is that if it currently exists, as was mentioned, in the United States, I'd like to know what sort of buy-in the companies there have had, what sort of participation. Has it been quite successful? Obviously I would assume it has, because you're proposing it here. But how has that basically evolved in the United States, and what sort of buy-in rate do you have there that you could share with us here?

Â (1225)

Hon. Jake Epp: Mr. Jaffer, I'm going to ask Christine to answer that, but let me just give it to you kind of colloquially, as the chairman of the board.

That is, on the amount of impact when you have that kind of a program, the Americans, quite apart from economy of scale of 10 to 1, or whatever scale you want to use, are able to exceed that kind of an impact from us. So I think that's one question we have to address, and I'll ask Christine to do that.

Mrs. Christine Lancing: The NGO community in the U.S. has benefited a lot from their tax legislation. They have access to much larger quantities of needed, good quality, good dated medicine to use in their overseas programs. Certain charities have told us that if there was a change to their incentive, it would drastically reduce their impact overseas.

It should also be noted that a lot of the companies in the pharmaceutical industry are international companies and are large players in the United States. So they will often do a large program of donations through the U.S., because they can have more impact and because there's a benefit to them.

Mr. Rahim Jaffer: This is all done, as you said, through the guidelines of the World Health Organization, and then is it channelled through the various NGOs that are on the ground? Is that how it's being done, or is it through the arms of the World Health Organization? Or is it a combination of both of those?

Mrs. Christine Lancing: It's a combination. There are certainly NGOs in the United States, similar to ours, who gather these donations and are able to disseminate them to the parties working on the ground. Often they're large-scale programs that work with the WHO, as we also do on certain of our programs.

Mr. Rahim Jaffer: You mentioned the issue that there would obviously be a cost to the government as well. Have you costed that out with potentially what it has been in the U.S. or here, so that we could have an idea?

Hon. Jake Epp: No, we haven't, and we knew that question was going to be asked of us. I am somewhat sensitive to what you call “revenue bleed”.

I would suggest, and this is a suggestion only, that as officials look at this proposal, rather than necessarily say the proposal “needs more study” or “is not practical”, that either through the price review mechanism and/or the associations--that is, the Rx&D and generic pharmaceutical associations--you sit down with them and put forward a pilot under the tax act, let's say with a review mechanism and a date mechanism that would protect the government and the public sector.

What we don't want to get into is repeating experiences of the past on certain--let's be blunt about it--innovation programs or flips with art. History is rife with these things. We don't want to get caught in that at all, but I would suggest very strongly that maybe that type of approach--restricted, limited, and controlled--might be a way that the Department of Finance would want to look at that.

Mr. Rahim Jaffer: Thank you for your response.

[Translation]

I would like to continue by turning to the associations working in the shipping industry. I would appreciate some explanations about the sections in your brief dealing with security. I would simply like to know what obstacles your members have encountered in dealing with the United States, given the changes with respect to security. I agree with your suggestion: all Canadian initiatives should include the budgets required to ensure compliance in the shipping industry. I would like you to give me some examples of obstacles encountered by your members in continuing to ship to and from the United States, so that we can understand the problem. Maybe we need to study this more carefully.

[English]

The Chair: You may give a brief response.

[Translation]

Mr. Guy Véronneau: The Americans have implemented very strict security measures, and they have had a major impact on the Canadian shipping industry. This is particularly true in the Great Lakes, where ships are continually crossing the border from one country to the other. The Americans ask questions about the containers and the ships' crew; we also have to let them know ahead of time—a certain number of hours is specified—that a ship is preparing to enter American waters. It goes without saying that Canadian ships are affected by this.

There are also visa issues, and in certain cases the Canada Customs and Revenue Agency gets involved. One issue is the amount of cash onboard the ships. That has major repercussions for passenger liners and cruise ships. The Americans are imposing numerous requirements of that kind.

Transport Canada is adapting to the situation by imposing a number of requirements of its own on Canadian shipowners and ports. Of course, the International Maritime Organization in London is trying to coordinate all this. The system is working right now, but it is very stringent on the Canadian shipping industry. If such requirements continue to be imposed, funding will be needed to compensate.

Â (1230)

[English]

The Chair: Mr. Discepola, you have six minutes.

Mr. Nick Discepola: Thank you, Madam Chair.

My first question is to Mr. Epp.

[Translation]

Or rather, go ahead. I would prefer to go after you.

[English]

The Chair: That was my mistake.

Madame Picard, you have six minutes.

[Translation]

Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair. I would like to thank our witnesses who have all given us very interesting presentations about their various areas. I would like to address my question, which deals with public transit, to Mr. Beldié.

I agree with you that public transit is an increasingly essential service. I believe that that applies not only in major cities but also in small municipalities. I come from Drummondville, where the economy is growing strongly. Moreover, Drummondville—and this situation is not unique, is surrounded by rural municipalities. The city would really like to set up service points in those small municipalities, especially because that would prevent young people from flocking to the city.

I would like to know why you never talk about the small municipalities, especially since, from what I know, the association represents public transport across Quebec. Your organization has appeared a number of times before our committee to talk about the needs in this area. But I have never heard you talk about small municipalities.

Mr. Jean-Jacques Beldié: Thank you, Ms. Picard.

In the document that we have provided you, we talk about 39 public transport authorities in urban and suburban areas.

We represent the nine largest transit authorities in Quebec. They provide services in Montreal, Laval, the South Shore, Quebec City, Lévis, Gatineau, Sherbrooke, Trois-Rivières and the Saguenay. So we do not talk about problems that affect Quebec as a whole.

It is quite common for intermunicipal transport authorities to provide services to your areas. They share collection points or intermodal stations with other transit authorities. In your case, the South Shore Transit Authority probably has a collection point or an intermodal station to serve people from your area.

That said, all the transit authorities in Quebec are having problems. Last Friday, I attended a symposium organized by the AMT for the inter municipal transit authorities. It turns out that they are also suffering from the under-finding of public transport in Quebec: their grant has been frozen. However, we feel that they are comparatively lucky. The funding that we receive from Quebec City pays for about 9 per cent of our capital assets. In their case, even their grant has been frozen, it accounts for approximately 29 per cent. That is nearly one-third of the cost. The second-third is no doubt assumed by the cities and the remaining third by the users.

There is no doubt that a growing city like yours has an increasing demand for these services. The intermunicipal authority cannot meet the entire demand. For that reason, we absolutely need help from the federal government to fund public transit in Quebec, both for our aging infrastructure and new services, such as intermodal stations.

We really need that additional help.

Â (1235)

Ms. Pauline Picard: Do you believe that a tax credit for individuals would be helpful to public transit, in that it would act an incentive for them to use that kind of transportation?

Mr. Jean-Jacques Beldié: Yes. That is one thing that we are asking for. However, that measure is aimed at increasing the customer base for public transit. Of course, more customers mean that new buses have to be bought, and we only receive 50 per cent funding for that. Moreover, our infrastructure has to be able to meet that demand.

Of course, it would still be a positive development. Quebec City had announced that measure, but I think that it has been put aside. It would be good news for users, but right now the most pressing thing for us is to keep our transit authorities as viable as possible.

Take the example of buses. In 1991, a bus cost $175,000, and we received a 75 per cent subsidy for that. Now, buses cost $460,000, and we receive only 50 per cent funding. As a result, all the transit authorities are seeing their debt level rise substantially. Moreover, the maintenance on the new buses costs a lot more.

Finally, such a measure would increase crowding on our buses, especially at rush hour. Some people are telling us that our buses are empty: that is not true. There are standards in place; so at rush hour the buses are filled to capacity.

[English]

The Chair: Thank you very much.

Mr. Discepola.

Mr. Nick Discepola: Merci, madame le président.

I'd like to ask Mr. Epp a few questions.

Is there a cost to the end user of your services? Do they have to pay for any of the medication or is it strictly free?

Hon. Jake Epp: The answer is no, they do not pay. Here's our situation. I'll give it to you very bluntly.

Our numbers of donations have increased dramatically, if you look at the charts. The ability to raise funding in Canada to service that increased volume gets more and more difficult. We keep doing it as a charity. The leverage is good.

I'll give you an example. We have, for instance, physician travel packs. Physicians--and there have also been members of Parliament as physicians--have taken these travel packs. They can literally go on a plane to wherever and within hours or days they are operational. A typical travel pack will be either two boxes or one of the big hockey duffle bags the kids now have. It has a value of approximately $5,000 wholesale, depending on what's in it, but that's a rule of thumb. It weighs about 70 pounds. I've taken them into a women's hospital, for example, in Iraq.

We have been charging about $565 to a donor to meet our costs of distribution packaging. Obviously, it doesn't cover the cost, but that's what we do. Those numbers might be a little different now, but that gives you about a 10 to 1 ratio.

The best way I can describe it is—and Madam Wasylycia-Leis will know this group—back in Manitoba we had what we used to call the Mennonite mafia. I sat down with 13 of them the other day—I think it was almost in her riding. The chairman simply said this was a 10 to 1 ratio. It was better than the concrete business he was in. He said we needed $50,000 divided by 13. In my Mennonite figuring, that's about $5,000 each. It's one of the ways we raise funds. We asked them who was out, and everyone was in.

The problem is it's good for us to get travel packs going, but we need the right medicines for those travel packs. What we have now often is a “push us” issue with the pharmaceutical companies rather than, from our perspective, a “pull you” issue.

Â (1240)

Mr. Nick Discepola: In that case, would you not think that one of the recommendations should be that we should give tax incentives to a prescribed list of medications that you absolutely need, but not a carte blanche on everything they choose to divest?

Hon. Jake Epp: That's another derivative of our idea, yes. We're trying to convey to the government that the government's doing a lot of things right. The government could do more by different leverage.

The government obviously has to control its costs and what we call leakage, as we have to. But in all of that we believe there is a good incentive that, with some proper consultation, we could get to a better system.

Mr. Nick Discepola: With the greatest respect to the finance officials who are in the room listening to your presentation, you made a suggestion that we should probably introduce a pilot project. I think time is of the essence. We don't have time to engage finance officials, Parliament, and everything.

Do we not have enough data to learn from the U.S. model? They've been doing it for so many years. Why would we not copy their model?

Hon. Jake Epp: I'll let Christine answer that.

Mrs. Christine Lancing: Certainly, we can learn a lot from their example in terms of how they handle their structure, some of the pitfalls that have arisen from the way in which they have done things, and some of the changes they have made over time to resolve those issues. We have the ability of hindsight and can potentially do it better the first time.

Hon. Jake Epp: Sir, may I add that what I don't want, as a Canadian, are Canadian companies where generally—and this is a criticism I have of the pharmaceutical industry—their boards are often not reflective of Canadian needs. They are international board members, particularly from Europe, and some from the U.S. They are very seldom Canadian.

When there is an international program, they either do it through Europe or the U.S. As Canadians, in my mind, we often do not get credit for what Canadians can do and have done.

That may sound self-serving for HPIC. I'm not specifically talking about HPIC. I'm talking about Canadians. It's why I think we have to take a look very carefully at what others are doing, why aren't we doing it, or can we do it better.

The Chair: Your last question.

Mr. Nick Discepola: All right.

[Translation]

Mr. Beldié, I agree completely with your recommendations. To begin with, public transit is not a problem only in Quebec. We have heard about similar problems in Western Canada. One of their concerns is that, even if an agreement were negotiated with the provinces, the money would have to be transferred directly to the transit authorities and not to the municipalities. One possibility would be a 2¢ share of the fuel costs. The concern was that this money would go directly to the municipalities rather than to transit authorities providing service to several municipalities.

You represent nine organizations. It seems to me that, in negotiating the agreement, as you have said—and I fully agree with you—it would be important to ensure that the money really does go to pubic transit, but also that it goes to the public transit authorities and not to the municipalities, who may not put it toward that purpose.

Mr. Jean-Jacques Beldié: I completely agree with you. If money is given to the municipalities, it is absolutely essential that it be put into mass transit.

Mr. Nick Discepola: I would like to make one final comment. As you pointed out in your preamble, it will be difficult negotiating with the provinces, including Quebec, I'm convinced, because every time that we try to set conditions, the provinces back off. So I think that we will need your help, particularly when Mr. Martin is running the government, because this is certainly a commitment that he has made. However, I'm hearing increasingly from all parts of Canada that we must negotiate with the provinces, establish better cooperation and set minimum conditions; however, we need to resolve problems as quickly as possible. So we are counting on your organization to support us.

Â (1245)

Mr. Jean-Jacques Beldié: You can rest assured that we will do all that we can to encourage our government to come to an agreement with Mr. Martin, who appears to be more willing to share with the provinces and municipalities. Given the crisis that we are currently experiencing, I think that if the Government of Quebec can count on support from the federal government to find a solution, it would be much more open than it has been in the past. This would be very welcome.

[English]

The Chair: Mr. Murphy, for six minutes, and then we'll go to Mr. Brison and Ms. Wasylycia-Leis.

Mr. Shawn Murphy: Thank you very much, Madam Chair.

I just have a few questions for the St. Lawrence Economic Development Council. In talking about competing modes of transportation, this committee gets quite a few submissions from the airline industry, and all of its derivatives, complaining that the government is taking too much out in airport rents and NavCan fees and security charges. Of course, the road industry is saying the gas tax is quite a bit more than governments are putting back into road maintenance and road construction. I don't think the same arguments are there with the rail industry.

I didn't quite understand this from translation, so my first question is, has the tonnage been down over the last four or five years on the St. Lawrence Seaway?

Mr. Guy Véronneau: It has.

Mr. Shawn Murphy: It has. Is there any reason you can identify for that?

Mr. Guy Véronneau: There are a number of reasons. It was studied in depth. It starts with just-in-time delivery. It goes to different sectors, obviously. Today if you want delivery just in time, you want a certain quantity. If it's coming by ship, it might be too much for what you can use during the day or during the week.

There are all sorts of obstacles, such that at the end of the day you come to the conclusion—and you see the results—that this is the only traffic that is going down. Trucking is up and rail is up. We are dealing with commodities where a cent or two makes a big difference. They will come down the St. Lawrence or they will come down the Mississippi River for a difference of a cent a bushel.

Mr. Shawn Murphy: You're saying you're actually competing with the—

Mr. Guy Véronneau: The Mississippi River, yes, is one of the big competitors.

Mr. Shawn Murphy: And is their tonnage going up?

Mr. Guy Véronneau: Their tonnage is going up. In the last 10 years I think it has gone up by about 55% to 60%. It's not as much as the international traffic, which is up by 600%.

Mr. Shawn Murphy: And your business...?

Mr. Guy Véronneau: We've gone down by about 25%.

Mr. Shawn Murphy: The gist of your proposals is that there are too many government fees in the seaway.

Mr. Guy Véronneau: I must say, philosophically, that you pay for the services you receive is something I agree with. But then we look at what is happening with our competitors, and instead of that you have the Army Corps of Engineers, which does all of the dredging and maintenance of infrastructure in the U.S. It's not a cost to the expediters. When they come to Canada, obviously it is.

If it's an American ship, they don't pay; if it's a Canadian ship, they pay. They are at a disadvantage against Americans. For us it is a question of what the competition is doing and what the effect is of the Canadian government getting maybe $100 million more a year if they're going to drive the short-sea shipping and land shipping out of business. I don't think it is a gain for Canada. I don't think it is a gain for our environment.

Â (1250)

The Vice-Chair (Mr. Nick Discepola): Thank you.

Mr. Scott Brison, please.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Chair. Where's the other chair?

Thank you very much for all your presentations today. I have a question to Mr. Epp on his proposal, which I think has great potential. What I like about it is that it would help facilitate ensuring that life-saving drugs reach the developing world.

There doesn't seem to be any attack on patent protection. We've seen proposals before in Canada that would facilitate delivery of cheaper drugs and needed drugs to the third world, but in many cases there were elements that would potentially compromise Canada's patent protection, which is an important part of the environment for our successful R and D industry—which is important for Canada. The R and D pharmaceutical industry is particularly important in the province of Quebec.

My question is, what is big pharma's response to this proposal? What are their views? Also, is there an opinion from the generic industry in Canada on this proposal?

Hon. Jake Epp: Mr. Brison, let me take the last question first, and then I'll have Christine give you the specifics.

Mr. Chairman, way back I believed we needed both a generic industry and a strong type of what then was called a PMAC and now an Rx and D industry. I believe we have both, but I do not believe yet that the relationship is positive enough, if I can put it that way, between those two sectors to give Canada the full benefit that I think Canada deserves and should have.

What is happening as well is that a number of Rx and D companies are forming their own generic companies, so the field is getting much more muddled in terms of who's in charge and whose interests are being best served. But it is my experience, as head of HPIC on the board, that both companies, whether generic or Rx and D, are very keen to contribute.

One can be cynical and say they have to do it for public relations, or there's controversy.... That's not our game. That may be somebody else's game. Our game is to ask, are they willing to contribute? Are they willing to be citizens with a social responsibility? That's where I come from.

I'll ask Christine to answer the first half of your question.

Mrs. Christine Lancing: As Mr. Epp said, we are interested in getting the right products that are needed overseas, whether they be Rx and D, generic, or other. We have spoken to partners—we have partners in all of those groups—and their answer, by and large, has been that it would change everything.

Our interpretation of this, from our point of view, is that it would give us the opportunity to get the products we really need most. Rather than scraps, or leftovers, or products that are going out of the market, it would allow us to get the products that are needed overseas.

Mr. Scott Brison: This committee has proposed, among other things, in the last several reports an elimination of capital gains tax from the list of securities as an example of finding ways through the tax system to reward and encourage philanthropy, and I view this as being consistent with that. It would be the kind of proposal that I believe we ought to embrace as a committee, and as you mentioned, it's consistent with what the government is articulating as an end game in terms of trying to play a more important role as a country in the developing world and dealing with these issues.

I thank you very much for your proposal.

The Chair: You have a minute and a half.

Mr. Scott Brison: As you know, Madam Chair, I am rarely verbose.

Voices: Oh, oh!

Mr. Scott Brison: That's one thing we learn in maritime politics, Madam Chair: you never are verbose, never.

Â (1255)

The Chair: Judy, I think he is giving you that time. What you don't know is that yesterday the NDP gave him that minute and a half, so you are getting it back today, Judy.

[Translation]

Ms. Judy Wasylycia-Leis: Thank you, Madam Chair.

First of all, I would like to put a question to the representatives from the National Book Publishers Association. Could you give our committee some idea of what your sector contributes to our economy? For example, is there a return on each dollar invested in the publishing, author and general arts sector? Could you give us a figure?

[English]

The Chair: Mr. Bourdon.

[Translation]

Mr. Pierre Bourdon: Thank you for your question. I will be speaking about francophone publishers. I am aware of the statistics for the English Canadian publishers, but I would imagine that you have already asked them this question when you met with them.

In the case of francophone publishing houses, government aid represents between 8 and 10 per cent of revenues, and we generate in excess of $250 million for the economy. If we are talking about the retail prices that the public pays, we are talking about more than $1 billion for government contributions of less than $20 million. If we put that as a percentage, it is a chain that is activated once there is creation.

You have to understand that in our industry and in the cultural industry in general, people are paid very modest salaries and are often working two or three jobs. This is especially true for creators.

In the publishing sector and in other cultural sectors, we are more or less like the record or film producers, except that the publishing house wears two hats, namely that of the producer and director. We, along with the author, create the book and then we produce it. So the money that is invested results not only in an active creation, but also the industrial act which results in the production of a book, namely the layout, printing and distribution, etc.

I will not refer to the creation programs under the Council for the Arts, but the federal programs under BPIDP, Heritage Canada, were set up when the government started charging GST. Many governments throughout the world refused to tax cultural goods. The Government of Canada had opted to tax books whereas the provincial government, including Quebec chose not to, and instead a significant percentage of the GST on books was put back into the industry to revitalize it.

According to our figures, we are talking about more than $100 million, even $120 million of GST levied on books, and we're talking about a Heritage Canada contribution of some $20 million. So the difference between what has already been announced and what we contribute to the economy work out to be the same, of course.

Ms. Judy Wasylycia-Leis: Thank you for this answer.

As regards the GST, we waged a battle against GST in general and, in particular, against GST on books more than 10 years ago. What gives you hope now? Why do you think that is now possible to change the situation?

Mr. Jean Canac-Marquis: If I may, I would simply like to say that today's presentation focused on two programs, the BPIDP and the Council for the Arts Program. As far as we are concerned, it is very important to maintain and enhance these programs.

Let's talk about the GST. Ten years ago, we had adopted the following slogan: “Imposing a tax on books is like imposing ignorance.” Unfortunately, 10 years later, we have won nothing. If the government were to overturn this decision, we could certainly work on a GST program, but that's not necessarily what we are saying. This will be additional support, of course. The tax credit could be used as additional support. You know that in Quebec, we are entitled to a tax credit, just as in Ontario and in British Columbia.

· (1300)

[English]

Ms. Judy Wasylycia-Leis: Merci.

Finally, I'd like to ask my friend from Manitoba, Jake Epp, a question about his proposal.

Needless to say, I have some concerns about it. I think anything we can do as a country to increase our aid to developing nations is important. But I worry that this could become an excuse for the government not to do what I think is its mandate and its job, this being to ensure that there is a reasonable policy with respect to patents and that we actually do what Roy Romanow recommended and review patent policy so that we might make it easier for generics to get onto the market and we might lower the costs generally in terms of drugs for whatever purpose.

That's one concern. The other is I have a real reticence about giving another tax break to some large corporations, which have been the recipients of some pretty great largesse from the federal government. There has been $100 billion in tax breaks since 1997. It will mean some drain on federal revenue and take money away from perhaps dealing with some of those critical health and social problems we're talking about.

So that's a wide open question to you about public policy.

Hon. Jake Epp: In fairness, a person will come from whatever perspective they come from, and I understand your position.

Let me take it from ours. First of all, in terms of patent policy protection, whatever the government will do is a governmental decision. For us as a charity, we want to take pharmaceuticals both from the generics as well as Rx and D. That's our job, number one.

Number two, we are finding--from our perspective--that the federal government is willing, and wants to, and does contribute to international development that we're involved in.

Does the government do enough? You can always make the argument that they could do more, but you also have to live within your means, and there are various competing requests.

I personally--and you might be a little surprised at my saying this--believe that this government, and the governments in the past, would like to do more for international aid. They would like to get to the threshold, be it now 0.7% of GDP or whatever, if all other competing interests could also be reconciled.

For us as a charity, our issue is not with the government on policy, Patent Act versus generics. For instance, the move they've tried to make now on the generic issue relative to AIDS.... We do not have all the policy instruments in our hands--for example, how to deal with a company based in another country, in this case the United States, making certain HIV/AIDS products available to us as Canadians. That's a governmental issue. All we know is that we believe we could have a better method of getting pharmaceuticals. We believe the government, in terms of its national goals and international goals, could be enhanced. Would there be a cost? There's a cost to everything.

But we believe there is a reconciliation of public policy, international policy, tax policy, and charitable volunteerism. I suppose while I have certain personal views of some of the points you raised, that's for another day and not at this table for me representing HPIC.

[Translation]

The Chair: I will now conclude this session.

On behalf of my colleagues, I would like to thank you for your testimony and your participation in this budget process.

Thank you very much.

[English]

Colleagues, we are adjourned until 55 minutes from now.