INDU Committee Report

The financial services industry is made up of a variety of entities, including banks, trust and loan companies, credit unions and caisses populaires, life insurance companies, property and casualty insurance companies, securities dealers, and leasing advisers. The industry is one of a small number of key pillars of the economy, playing a critical role in the allocation of capital and the distribution of risk across the economy.

The financial services industry has been growing in terms of its contribution to GDP: in the 1980s, the industry accounted for about 4.5% of GDP; in 2006, it accounted for 6.2% of GDP. The industry also employed about 700,000 Canadians, representing about 4% of national employment. In addition, finance and insurance companies contributed more than 44% of Canada’s direct investment abroad in 2006.

The provision of financial services is dominated by the banking industry, which includes 73 banks: 21 domestic banks (Schedule 1), 24 foreign banks (Schedule 2), 22 foreign full service branches and six foreign lending branches (Schedule 3). The industry is heavily concentrated, as the “big six banks” — RBC Capital Markets, TD Securities, CIBC, BM Capital Markets, Scotia Capital Inc. and Banque Nationale — account for about three-quarters of the assets in the deposit-taking sub-sector in Canada, which is valued at about $1.8 trillion. The provincial entities, such as the caisses populaires and the credit unions, account for about 12% of assets and the foreign banks for about 9%.

In 2007, there were about 100 life insurance companies in Canada. These companies employ about 51,000 people, but the industry accounts for about 120,000 people when including advisers, assessors and adjusters. This industry is also very concentrated. The “big three life insurers” — Manulife, Sun Life and Great-West
Life — account for about 60% of domestic net premiums, followed by 53 foreign life insurers, accounting for 22% of premiums, and other domestic smaller companies, accounting for 18% of premiums.

In 2007, there were about 214 property and casualty insurance companies employing about 110,000 Canadians, 40% of which were directly working for the property and casualty insurers and 60% of which were brokers and adjusters. This industry is not concentrated. The largest entity, ING, accounts for about 11% of net premiums. Foreign companies in Canada account for about 58% of the net premiums earned.

The banking industry believes that they are facing increased competition due to key actions taken by governments elsewhere:

United Kingdom’s financial services authority has moved from detailed/prescriptive rules to principles-based regulation to provide greater flexibility while ensuring strong oversight;
U.S. Treasury has launched a regulatory streamlining initiative, explicitly aimed at enhancing competitiveness;
New York City has undertaken a major study on how it can improve its competitiveness and reverse recent losses of market share to London;
Australia reorganized and simplified its regulatory structure, moving from state-level regulation to one national prudential regulator and one consumer regulator.

Regulations (e.g., a common securities regulator) and capital and corporate taxes are important challenges that governments need to address to ensure the continued competitiveness of the industry.

In addition, the financial services industry, like other industries, is concerned about the impending skills shortages as suggested by simple arithmetic:

retiring baby boomers + declining fertility rates = shrinking labour force.

The life insurance industry also identified two public policy deficiencies: (1) insufficient data on the services sector; and (2) the lack of meaningful commitments to liberalize services trade in the WTO’s DOHA round of negotiations.

Property and casualty insurers were concerned about aging inner city and municipality infrastructure, like sewage and water systems.

Real Estate, Rental and Leasing Industry

Since 1990 the federal government has been reviewing the banking industry’s impaired-loans-to-total-loans ratio. At first blush, it appears that the banks are getting better at executing their intermediation function, though the apparent good results could be a function of the strong economy. Both banks and insurers have very strong capital positions vis-à-vis the requirements that the Office of the Superintendent of Financial Institutions (OSFI) requires of them.

The real estate, rental and leasing industry contributed $148 billion to Canadian GDP and employed 245,725 Canadians in 2006. The real estate, rental and leasing industry is the largest contributor by far to Canadian GDP in the services sector; it contributes almost two times what the second largest industry, healthcare and social services, contributes. Since it is not a labour-intensive industry, however, it is a relatively small employer within the services sector.

Real estate agents assist Canadians in buying and selling real estate, representing buyers, sellers or both in these transactions. They make property evaluations and subsequently advise on appropriate asking and offer prices. The industry is regulated by provincial real estate councils in six of 10 provinces (Alberta, British Columbia, Nova Scotia, Ontario, Quebec and Saskatchewan). In 2005, there were 98,813 people licensed to buy and sell real estate in Canada. Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario and Saskatchewan have signed a mutual recognition agreement whereby agents moving from one province to another or working in more than one province are evaluated only on their knowledge specific to the province in which they wish to work.

The Canadian Real Estate Association (CREA) represents real estate brokers, agents, and salespeople working through more than 100 real estate boards and associations in all provinces and two territories in Canada. CREA owns the MLS trademark as well as the REALTOR trademark. The REALTOR trademark provides an assurance of integrity and can only be used in Canada by members of CREA who accept and respect a strict code of professional conduct. The code requires members to subscribe to free and open competition according to the principles embodied in the Competition Act of Canada.

The real estate database systems, operated under the MLS trademark, provide an inventory of available properties and ensure maximum exposure on the Internet of properties listed for sale across Canada and throughout the world. In 2007, MLS/SIA sales totalled $118.3 billion, an increase of 19.6% over the previous record set in 2006.

CREA expects residential sales to decline somewhat in 2008, but it believes that the Canadian situation is nowhere near as bad as it appears in the United States. The housing crisis in the United States resulted from poor lending standards. Risky loans were made to homebuyers with poor credit, on the assumption that rising prices would make up for any lending mistakes. When buyers began defaulting on these loans and lenders subsequently foreclosed on their mortgages, houses began to flood the market and lenders ended up losing large amounts of money. By contrast, Canada’s housing market is built on strong employment growth and consumer confidence, not easy access to cheap credit. In Canada, only 5% of all mortgages are classified as sub-prime, whereas approximately 20% is so classified in the United States. However, while CREA believes that house ownership activity has been strong, it also believes that rental housing activity has been extremely weak.

The Competition Bureau recently completed a study of the regulated professions (including real estate agents) and did not find any major restrictions in the real estate industry.[4] The Competition Bureau found that barriers to entering the real estate profession are quite low; the supply of real estate agents is large (compared with the supply of other professionals) and that the market was highly competitive. The Competition Bureau did, however, raise a particular concern in the case of Ontario. The Competition Bureau found that Ontario regulations limit price competition in that “there is no opportunity to choose from a menu of services, or to pay a flat rate for some services and a commission on the sale price, to maintain an incentive for the agent to seek the highest possible price”. The Competition Bureau recommended the removal of this restriction.

Professional Services Industry

CREA’s response to the poor rental housing market has been to propose to the federal government to defer the capital gains tax and the recapture of the capital cost allowance when an investment property is sold and the proceeds of the sale are reinvested in another property within one year. CREA believes that such a measure would reduce the cost of rental housing and make it more affordable, as well as increase the housing stock.

Canada combines professional, scientific and technical services into one classification within the services sector. This classification includes legal, accounting, tax preparation, bookkeeping, architectural, engineering, specialized design, computer systems design, management, science, technical consulting, advertising and other professional services. In 2006, Statistics Canada reported employment of 704,909 professional services providers. Architectural, engineering and related service providers accounted for 155,923 employees or 22% of those employed in the professional, scientific and technical services sub-sector; followed by computer system designers at 139,444 or 20%; accounting, tax preparation and bookkeeping at 86,168 or 12%; 83,662 management, scientific and technical consulting or 12%; and 66,874 lawyers and other legal service providers or 10%. These five broad groupings thus represent more than three-quarters of those employed in the professional, scientific and technical services sub-sector.

Professionals are playing an increasing role in Canadian society and its economy. Today’s increasingly integrated and fast-paced world is demanding more advanced, innovative and competitive services from professionals. In fact, some claim that these services are the foundation on which the knowledge-based economy is being built, and that Canada’s professionals are integral to the success of Canadian businesses, goods and services sectors alike. As such, Canada’s professionals are punching above their weight, particularly in terms of their economic contribution which amounted to $57.3 billion in 2007, representing 4.7% of Canadian GDP. In return, these professionals were paid, on average, $19.14 per hour in 2007, which is 10.3% higher than the average of $17.30 paid to those working in the larger services sector.

Some of these professionals are certified, licensed and regulated; notable examples include lawyers and accountants. The economic rationale for regulation of the professions — both direct (provincial or territorial) government regulation and rules of
self-regulation imposed by professional organizations on their members — is to protect consumers and guard the public interest. Both governments and the professions themselves recognize that consumers do not (in a number of circumstances) possess the requisite information to accurately assess the quality of services they need or have received. Certification and entry restrictions into the professions, along with other regulations or rules governing conduct, by and large attempt to correct for the potential for sub-standard service to be delivered in these circumstances. Some regulations, however, may inadvertently stray beyond this public interest purpose — acting as a barrier to entry
and may make collusion among providers more likely — and thus adversely affect competition in terms of price, service price-quality trade-offs, and the breadth of product/service selection.

Three associations of these professions appeared before the Committee: accountants, management consultants and engineers. Beginning with the accountants, although there are generally no legal restrictions on who may practise accounting in Canada, some jurisdictions regulate public accounting. Furthermore, all accountants in Canada are subject to the rules and regulations of their respective designations which, in Canada, there are only three recognized by provincial and territorial statute: Chartered Accountant (CA), Certified General Accountant (CGA) and Certified Management Accountant (CMA). Individuals seeking to become accountants in Canada must have a university degree, pass the required professional education courses and accumulate a certain amount of work experience.

The Canadian Institute of Chartered Accountants, along with the provincial and territorial CA organizations, represent approximately 72,000 CAs in Canada and Bermuda. National, provincial and territorial CGA organizations represent approximately 68,000 CGAs in Canada, Bermuda, the Caribbean, Hong Kong and China. CMA-Canada represents 38,000 CMAs in Canada and around the world. According to Statistics Canada, 154,200 or 81% of 191,200 accountants in Canada are employed by a firm, whereas 36,200 or 19% of all accountants are self-employed.

Somewhat in contrast to accountants, management consultants are not regulated. In part because it is not regulated, according to CMC-Canada, the Canadian management consulting industry is best characterized as “an atomistic market”, whereby there are many players in the marketplace and no one firm is large enough, relative to the market as a whole, to have any appreciable effect on price. Hence, there are no artificially constructed barriers to entry by regulation (however unintended).

Currently, there are 2,400 CMCs practising in Canada and a further 800 members of CMC-Canada who have yet to gain their designation, representing about 13% of an estimated 25,000 management consultants in Canada. In 2006, management consulting industry in Canada generated gross revenues of approximately $9.3 billion.

The various associations representing the professions advanced a number of similar challenges, as well as others which appear to be best characterized as being on “opposite sides of the coin” in terms of the advantages and disadvantages conferred by regulation.

Beginning with the similar challenges, a number of the professions suggested prior consultations between the federal government and the professional representative bodies are required — as they affect their respective rights and obligations — before further negotiations of the WTO General Agreement on Trade in Services (GATS) take place. In a related vein, Canadian management consultants often confront non-tariff barriers while competing for management consulting contracts in some countries, usually in the developing world. Furthermore, despite Canadian management consultants being granted reciprocal temporary entry privileges to the United States under appendix 1603-D-1 of the NAFTA, they are often stopped or detained at the border for what CMC-Canada characterizes as frivolous reasons when working on projects in the United States for Canadian clients.

In terms of challenges that appear to be on “opposite sides of the regulatory coin”, CMC-Canada complains that there is currently no effective way to prevent anyone, including “charlatans (i.e., superficial celebrities and dubious experts) from hanging out a shingle, calling themselves management consultants and offering their services”. CMC-Canada and the provincial institutes devote significant effort to warning potential clients of the dangers of hiring such individuals and to encourage them to hire only those who can demonstrate their qualifications of background, education and experience through their membership in CMC-Canada. Unfortunately, this is only a partial solution, and clients will still have unfortunate experiences with no recourse if the consultant is not a certified management consultant.

Professional bodies of accountants and lawyers control such problems more effectively through regulation; that is, through imposing entry and other restrictions on their members and their conduct. However, unlike CMCs who enjoy reciprocity of services provision not only across the country but in over 25 countries around the world, these same restrictions often inadvertently suppress competition and mobility throughout the country. In fact, the Competition Bureau completed a recent study of the regulated professions (including medical professions) that found numerous instances of regulation that may restrict competition more than necessary. Hence, achieving the appropriate balance between regulation and competition would appear to be at the heart of this challenge.

CMC-Canada has spent significant time trying to make it easier for its members to do their business in other countries by expediting members’ entry into the United States for temporary business purposes, by reconciling the definition of management consultant under GATS and NAFTA with industry practice, and by trying to level the playing field for foreign contracts.

Healthcare Industry

In 2007, Canadians spent $160 billion on healthcare. Healthcare contributed $76.8 billion or 6.3% to Canadian GDP. In 2007, more than 1 million people were employed in the healthcare field. Women filled 80% of jobs in the healthcare industry.

The healthcare field is best characterized as a continuum of services from acute care, home and community care, public health, mental health and family services. These services are delivered in a variety of ways from large teaching hospitals to individual practitioners. Primary health care is generally funded by provincial governments, with some services covered by insurance and private funds. Fields such as dental care or chiropractic services are predominantly private sector funded. For example, $10.8 of the $11.3 billion spent on dental care in 2007 was private sector spending.

Inaccessibility to services was cited as the main challenge in healthcare services. In the publicly funded healthcare field, inaccessibility and long wait times are caused by too few health care professionals or lack of equipment. In private care such as dentistry, problems with access are generally caused by high fees, with some Canadians unable to pay for the high cost of treatment and therefore going without care.

Canada’s aging population will place additional demands on the healthcare system as seniors typically have greater healthcare needs than younger people. At the same time, the health workforce is also aging: approximately 38% of the nursing workforce is more than 50 years old and nearing retirement, and the average age of the health workforce was 41.9 in 2005, 2.3 years older than the general Canadian workforce. In addition, younger professionals are, in general, choosing to work fewer hours than their older colleagues, and parents of young children, particularly women, often prefer shorter work weeks. All of this suggests that, in the absence of additional equipment, significant technological innovation and/or different (possibly streamlined) treatment practices, more than one recruit will be needed to replace each upcoming retiree to provide the same level of healthcare, let alone what might be required to meet the increasing demand that demographic trends imply.

With the industry’s unemployment rate of only 1.2% in 2006 and employers struggling to fill vacant positions, recruitment and retention of healthcare professionals are already major challenges in healthcare. Unless action is taken to address it, the shortage of personnel in healthcare appears likely to get worse.

Chiropractors find it difficult to become involved in mainstream care. Even when they are granted privileges in hospitals, patients often have to pay privately for that care.

4. Industry Response

Some provinces are taking innovative approaches to recruitment by providing bursaries to students in return for signing a return to service agreement. Nunavut offers a nursing program through Nunavut Arctic College, and part of the Nunavut Nurse Recruitment and Retention Strategy involves graduating more Inuit nurses. The Late Career Initiative in Ontario encourages nurses over age 55 to stay in the profession by offering them teaching and mentoring positions, rather than front line duties.

Some dentists are addressing the problem of people not being able to afford care by offering pro-bono services on an informal basis.

Retail Trade Industry

Retail sales totalled $412 billion in 2007, growing by 5.8% in the past year. Retail trade output or value-added was estimated at $72.9 billion in 2007, accounting for 6% of GDP. The retail trade employed more than 1.7 million Canadians in 2007, which represented 10% of Canada’s employed labour force. In all but three provinces (Prince Edward Island, Manitoba and Saskatchewan), the retail trade is the largest employer industry.

There were more than 227,000 retail stores in Canada in 2004, 41,498 of these were chain stores (i.e., defined as four or more locations under one owner). Franchises are another major segment, but they are difficult to quantify.[5] Broadly speaking, there are about six retail outlets per 1,000 persons in Canada.

Food and beverages (22.1%), motor vehicles (22.0%), furniture, home furnishings and electronics (9.1%), health and personal care products (8.4%), and clothing, footwear and accessories (8.4%) are the largest retail industries by sales. Together, these five commodity groupings accounted for 70% of retail sales in 2004. Canada’s 80 largest retailers accounted for more than 35% of non-automotive retail sales.

The rising Canadian dollar has highlighted many price discrepancies between Canadian and U.S. retail sectors, and many Canadians located close to the Canada-U.S. border are choosing to shop in the United States rather than in Canada, simply because of these price differences. Same-day automobile trips to the United States by Canadians were 23.4 million in 2006, while same-day automobile trips to Canada by Americans were 13.7 million. Canadian cross-border shopping in the United States is clearly on the rise, as Canadian same-day automobile trips to the United States have increased by 2.6 million from 20.8 million recorded in 2002, when the Canadian dollar began its ascent.

In general, Canadian retailers incur higher labour costs than U.S. retailers. Also contributing to higher retail prices of similar goods in Canada compared to in the United States are import duties and different Canada-U.S. labelling requirements (i.e., English versus bilingual, Imperial versus metric weights and measures) when sourcing products from the United States.

The retail sector is experiencing labour shortages, particularly acute in Alberta. Annual labour turnover rates across Canada are averaging 30%, whereas they are 60% to 70% in some regions of Alberta.

The retail industry has increased pay rates from 76% of the average industrial wage in 1999 to 88% in 2006. The industry invests in considerable in-house training, building company specific skills but also many transferable skills.

The retail industry is working with universities and colleges to develop certification programs for careers in retail sales. They are also working with Aboriginal communities to prepare people for careers in retail.

Food Services Industry

The food services industry recorded sales of $53 billion in 2006, representing 3.8% of GDP. Over one million people are directly employed in the food services industry, accounting for 6.3% of total Canadian employment, and another 240,000 jobs indirectly depend on the food services industry as suppliers, distributors and consultants. It is further estimated that the food services industry also supports 20% of Canadian agricultural jobs. Between 2007 and 2010, foodservice sales are expected to grow by 0.5% after inflation.

There are 63,000 food services establishments in Canada. About two-thirds of them are locally owned and operated. The industry reports the average tenure of an employee within the industry has increased from 37.6 to 45.4 weeks between 1987 and 2007.

The food services industry is very competitive and operates on small profit margins. For example, the pre-tax profit margin for the average food services operator in 2005 was 3.8%, compared with 8.8% for the average Canadian business.

The decrease in the number of international tourists has adversely affected the food services industry, as have increasing energy, labour and food costs. As a result, there are 1,180 fewer food services operators in 2007 than in 2001.

The food services industry faces labour shortages. Many food service positions are entry level jobs and 45% of employees are under 24 years of age. As the number of youth in Canada decreases in the coming years, the industry expects increasing challenges in filling positions. This labour challenge is especially acute in Alberta where some restaurants have had to turn customers away even though they have empty tables because they do not have enough staff to serve them.

Travel and Tourism Industry

In Alberta, the Canadian Restaurant and Foodservices Association is working with other agencies involved in tourism to advocate expanding tourism studies in high schools and post secondary institutions.

Tourism is a $66.9 billion industry in Canada, accounting for 2.3% of GDP. There are 633,000 full time jobs in the tourism sector, and another one million jobs depend on tourism in some way. In 2006, tourism generated $19.4 billion in tax revenues, including $9.1 billion at the federal level.

There are over 200,000 tourism businesses in Canada, 80% of which are small and medium-sized enterprises. These businesses include accommodations, attractions, tour operators, travel agents and visitor reception centres.

Canada has seen a decrease in international tourists in recent years. About 28.9 million international tourists came to Canada in 2006, down from 40.9 million in 2003. Americans, who make up around 90% of visitors to Canada, account for most of this decline in tourists. Canada’s tourism trade deficit has grown from $1.7 billion in 2002 to $7.2 billion in 2006, and is expected to be more than $8 billion in 2007.

There are a number of reasons for the decline in U.S. tourists. The rising of the value of the Canadian dollar against the U.S. dollar is an important factor, but high fuel prices, lengthy wait times at the border, confusion surrounding passport requirements, and a relative shift towards more exotic holiday destinations have all contributed.

Canada spends less than other countries, such as Australia, marketing to similar audiences. In addition, provincial advertising may be confusing to prospective international tourists, who might not immediately associate Nova Scotia or Alberta, for example, with a holiday in Canada.

The tourism industry is working with the Canadian Tourism Human Resources Council to create awareness of opportunities for skilled professionals in the tourism sector.

The 2010 Winter Olympics and Paralympics in Vancouver and Whistler offer an opportunity to promote Canada to the world, and the industry is working to take advantage of this opportunity.

The Tourism Industry Association has re-branded Canada as “Canada — Keep Exploring”.

Transportation Industry

Commercial transportation industries contributed $45.8 billion or 4.3% to Canadian GDP in 2006.[6] Trucking made the greatest contribution, accounting for $15.1 billion or 1.4% of GDP, followed by rail at $6.0 billion or 0.6% of GDP, air at $4.7 billion or 0.4% of GDP, and urban transport at $3.2 billion or 0.3% of GDP. Other transportation industries include interurban and rural bus, scenic and sightseeing, postal and courier services, as well as support activities for other modes of transportation, such as baggage handling, pilotage, harbour operation and rail car loading and unloading.

A. Trucking Industry

For-hire carriers, private carriers, owner-operators and courier firms make up the trucking industry. This industry generated an estimated $67 billion in revenues in 2005.

In 2005, there were more than 10,000 for-hire motor carriers in Canada that earned $30.4 billion in revenues. The 100 largest for-hire trucking operations in the United States and Canada in 2005 (ranked by revenue) included six Canadian carriers: TransForce Income Fund (22^nd), Montreal, Quebec; Trimac Transportation Services (43^rd), Calgary, Alberta; Day and Ross Transportation group (50^th), Hartland, New Brunswick; Vitran Corp (60^th), Toronto, Ontario; Contrans Income Fund (73^rd), Woodstock, Ontario; and Mullen Group Income Fund (95^th), Aldersyde, Alberta.

In 2005, there were an estimated 36,000 owner-operators who primarily hauled their own freight. Couriers and parcel-delivery firms operated 2,000 trucks, providing some of the same services as for-hire carriers. In 2005, the courier industry generated an estimated $6.4 billion in revenue.

B. Rail Industry

The rail industry generated revenues of $9.8 billion in 2005, with the Class I carriers — CN, CPR and VIA Rail — accounting for about 93% of this revenue. Shortline rail revenues were $455 million in 2005, accounting for 5% of rail industry revenues.

VIA Rail remains the dominant intercity passenger rail company, accounting for almost 94% of total passenger revenues in 2005. Intercity rail passenger services are also provided by CN (former Algoma Central Railway services), Ontario Northland and the Quebec North Shore and Labrador. Seasonal and tourist operations in Canada include The Great Canadian Railtour Company, Alberta Prairie Railway Excursion, White Pass and Yukon, the Hull–Chelsea–Wakefield Railway and Prairie Dog Central. Amtrak, an American corporation, offers service to Montreal, Vancouver and Toronto (the latter in conjunction with VIA Rail).

C. Airline Industry

Air passenger traffic was a record 68.2 million in 2006. Air Canada provided approximately 61% of the Canadian air carrier industry’s overall domestic scheduled capacity, with Jazz providing approximately 96% of Air Canada’s regional air services capacity. WestJet provided approximately 29% of the Canadian air carrier industry’s overall domestic scheduled capacity.

Many air carriers provided charter air services for inclusive package tour operators between Canada and Europe, the United States, the Caribbean and other leisure travel destinations, including Air Canada, Westjet, Canjet, Air Transat, Skyservice, Harmony Airways, Zoom Airlines and Sunwing Airlines. A number of air carriers provided cargo air services for Canada Post, courier companies, freight forwarders, consolidators and shippers, including Cargojet Canada (Mississauga), Kelowna Flightcraft (B.C.) and Morningstar Air Express (Edmonton). The volume of goods carried by Canadian air carriers was 689.3 million metric tonnes in 2005.

The airline and trucking industries share similar challenges when it comes to high and rapidly rising petroleum prices, including the federal excise tax of 4¢ per litre on jet fuel and diesel, but they also face industry-specific challenges.

Both transportation industries are fuel intensive, with the trucking industry reportedly consuming more than 16 billion litres annually. Although motor carriers have been able to pass some of this increase on to their customers through fuel surcharges in the past, current economic conditions within the industry make this increasingly difficult to accomplish. For this reason, both industries complain that the federal excise tax on motor fuels, which was introduced in the 1980s as a deficit-fighting measure, has outlived its stated purpose.

The airline companies also complain of the current airport rent regime. Every year the Government of Canada collects between $200 million and $300 million in rents from not-for-profit airport authorities. In addition to rent, the air traveller security charge represents another critical element of taxation policy deserving of reconsideration. The airline industry claims that, according to the Department of Finance, air transport security charge now has a surplus of more than $80 million and that, since its inception in 2002, it has taken $200 million in excess revenues.

The high value of the Canadian dollar and the general weakening of the U.S. economy have resulted in a reduction of Canadian exports to the United States which, in turn, are having a profound adverse impact on the trucking industry in most parts of the country.

Information and Communications Technologies Industry

Both trucking and airline industries responded to these uncontrollable events through mergers and consolidation. With high fixed costs, low margins and crude oil hovering at around US$100 a barrel, the larger airline companies have been vigilant in ensuring their sustainability through reinventing themselves in response to the new permanent reality of a low-cost air travel business model.

The information and communications technologies (ICT) industry includes telecommunications, cable and satellite television, computer hardware and software, and the Internet. The ICT industry is comprised of 32,000 companies: software and computer services (79%), ICT wholesaling (11%) and ICT manufacturing (7%). The industry contributed $65 billion to Canadian GDP in 2006, accounting for 5.9% of GDP.

There are about 600,000 jobs in ICT companies, about three quarters of them in services, and there are also about 500,000 ICT workers in other sectors of the economy.

In 2006, the ICT industry spent $5.7 billion on R&D, and accounted for 39% of total Canadian industrial research and development expenditure.[7] ICT companies top the list of Canadian industrial spending on R&D: Nortel Networks 2006 spent $2.2 billion and was followed by Bell Canada Enterprises with $1.4 billion (Magna international was third at $650,000).[8] Most ICT research is performed by the manufacturing sub-sector but, in 2006, $2.5 billion was spent on R&D by software and communications services.

Over 97% of ICT companies are small in size. According to Industry Canada, 81% of companies employ one to nine personnel, 14.3% employ 10 to 49 personnel, and 2.6% of companies have 50 to 100 employees. Medium to large size companies account for only 2.4% of the sector. There are approximately 120 large companies with over 500 employees.

Between 16-20% of ICT workers are self employed. In 2006, about 10% of the ICT industry workforce was composed of internationally educated professionals and non-permanent residents.

The ICT sector is facing an acute skills shortage. In 2008, there are expected to be 25,000 vacant ICT jobs in Canada, and only 8,000 new graduates to fill them. This shortage is expected to grow to 100,000 skilled workers by 2009 and to 1 million by 2016.[9] Moreover, despite the low unemployment rates and high wages in the ICT sector, university enrolment in relevant degrees decreased by 11% between 2002 and 2005. The problems can be seen as early as secondary school, with too few people pursuing mathematics and computer sciences.

Canada lacks a strong anti-counterfeiting regime. Piracy rates of Microsoft products in Canada are 33%, which compares with 21% in the United States.

To address the shortage of skilled personnel in Canada, the industry is developing a number of initiatives:

On-shoring, bringing talent to Canada, rather than off-shoring work internationally, particularly to India. For example, Microsoft is hiring internationally, primarily from India and China, to fill vacancies at is new software development site in British Columbia. Canada’s immigration procedures, and quality of life, currently give it an advantage in this regard.
A strong emphasis on internal training (e.g., IBM invests about $350 million per year on internal training).
Microsoft has launched “School of the Future”, including one in the York region of Toronto, which aims to give students the skills they will need for the careers of the future.
IBM has launched “EXCITE”, a program focused on getting 12-13 year-old girls interested in science and engineering.
Microsoft has a program called “Partners in Learning” to train teachers of grades 6 to 12.
Co-op programs at universities, particularly the University of Waterloo.

Cultural Industry

The cultural services industry includes activities such as broadcasting, performing arts, design, bookselling, magazines, newspapers, sound recordings, printed music, visual arts, festivals and sporting events. In 2002, the cultural industry contributed about $39 billion to GDP, or 3.9% of GDP, and employed 597,700 people.[10] Written media was by far the biggest contributor to culture GDP in 2002, accounting for 47% of culture GDP, followed by broadcasting (13%) and the film industry (9%). In term of employment, written media was again the largest sub-sector (158,900), followed by the film industry (88,700), broadcasting (55,200), advertising (48,600), design (43,700), heritage (35,900), libraries (24,600), and the performing arts (23,700).

In 2004, Canada recorded a $500 million trade deficit in cultural services, with imports of $3.5 billion and exports of $3.0 billion.

In 2002, 21% of cultural workers were self employed, and there are many small firms. For example, the bookselling industry is comprised mainly of small businesses, with over 70% of booksellers having less than 1 million dollars of annual sales. Many of these smaller companies are struggling, and 365 small booksellers have closed in Canada since 1996.

Many cultural sectors pay relatively low wages, and because they are often self-employed, cultural sector workers may not have access to Employment Insurance. In addition, many cultural sector workers, such as actors, do not have a steady income and would benefit from a special tax provision that would allow them to average their incomes over an extended period.

Since 1999 there has been a drop in Canadian television productions, making it hard for Canadian actors to find work. Industry participants expressed concern over the potential of foreign ownership of Canadian broadcasting companies.

The high value of the Canadian dollar is adversely affecting the number of Hollywood productions being filmed in Canada.

Industry participants claim that non-licensed booksellers such as Amazon.com are able to sell books at cheaper prices, in part, because they are not subject to the same rules as booksellers that are physically located in Canada.

Booksellers are working to have publishers lower their prices, since it is they, not the booksellers, who determine the book cover price.

Gaming Industry

Legalized gaming is the largest segment of the entertainment industry, with revenues of $14.6 billion in 2006. Gaming revenue is comparable in size to revenues for movie rentals, television, music and professional sports combined. The gaming industry contributes $8.6 billion to government and charities. Gaming is responsible for 135,000 full-time jobs, and another 130,000 depend on gaming in some way.

The gaming industry encompasses a broad range of activities including lotteries, casinos, racetracks, electronic gaming devices (also known as video lottery terminals (VLTs)), and online gaming activities. There are 65 casinos, 38 racinos and racetracks, and over 250 bingo halls across Canada. Recent growth in the industry has been attributed to the expansion of casino facilities and electronic gaming devices.