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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 21, 1995

.1537

[English]

The Chairman: Order. We welcome the minister to give us a two-for-one on two different bills. I suspect he will find some creative way of weaving the story in and out between....

Bills C-88 and C-99 are both divisible by 11. That's the interesting thing. Beyond that there may be other deeper, deeper connections you're going to point out to us. I suspect what we'll do is bounce backwards and forwards in the questioning between the two, if you don't mind.

Mr. Minister, the floor is yours. Welcome.

Hon. John Manley (Minister of Industry): Thank you. Although I was a major in mathematics, all my life I've felt rather bruised by my grade in number theory, so I won't embark on a commentary on whether Bills C-88 and C-99 bear some relation to my past experience as a math student. I'll pass on that invitation, Mr. Chairman.

The Chairman: As long as neither is the number of the beast. I suppose that's the -

Mr. Manley: No, we'll have to sit quite a long time before we get to that number.

Let me just say I appreciate very much the fact that the committee has been kind enough to hear me on both bills at once. We ran into some rather difficult scheduling problems in order to get me here on two separate occasions, so I appreciate this chance to discuss both bills.

I think I'll do them in numerical order. I'll start with Bill C-88, which is the Agreement on Internal Trade implementation bill. There's been, as you know, Mr. Chairman, a good deal of debate on this bill in the House and I would have to say quite a bit of it was based on erroneous information.

As the committee will be aware, in recent years the issue of barriers and impediments to internal trade and mobility has been a major matter of concern to Canadians generally, and to Canadian business in particular.

[Translation]

Internal trade barriers harm the Canadian economy in several ways. Discriminating procurement practices create ineffectiveness and force taxpayers to pay millions of dollars in unnecessary costs.

Overlaps and duplication in regulatory and standard related measures pose significant costs to business and prevent firms from reaching the optimal size necessary to penetrate international markets.

[English]

The unquantifiable cost in opportunities lost or denied to individual Canadians looking for jobs or to businesses both large and small seeking to develop their abilities to compete effectively in the international economy, and in the damage done to our national fabric, is even greater.

It is quite simply wrong for any government in this country, no matter how strong local political pressures may be, to discriminate against people, goods, services, or investments from other parts of Canada. It's quite clear that, on the basis of the Constitution alone, the federal government does have the power to regulate interprovincial trade. The letter of the law, however, is different from today's increasingly complex reality, where the provinces are increasingly important actors on trade and economic questions.

.1540

It might be theoretically possible for the federal government to act unilaterally on the internal trade issue. It would not, however, be practical if the objectives are to achieve lasting results and to do so within a framework of cooperative and productive federalism.

[Translation]

That is why the federal government led the way in pressing for the Agreement on Internal Trade, a collective consensual accord which has been negotiated with and agreed to by all the provincial and territorial governments.

There are many things that federal officials proposed during the negotiations and that the federal government would like to see in this legislation. Some examples are better disciplines on incentives, fewer exceptions and stronger dispute settlement provisions.

These provisions are not in the agreement, however, because some - and often during the negotiations, all - of the provinces were not prepared to accept them and the basis for the agreement was, after all, consensus.

[English]

The agreement does, nonetheless, provide an important beginning and a sound framework for dealing with internal trade issues and for managing the domestic market on a cooperative basis in the future. It is the government's intention to continue to press for improvements and for full implementation of what has been agreed.

[Translation]

Bill C-88 provides the authorities necessary to meet the obligations and commitments the federal government has undertaken in the agreement. It does that, and nothing more.

The committee has been provided with notes that explain the purpose of each of the bill's clauses. I would be happy to respond to any specific questions in due course.

I noted earlier that the bill had been criticized in second reading. It was, quite incorrectly, characterized as a federal power grab and as an attempt to bend the provinces to the federal will.

I have responded to those criticisms at length and in detail in the House. I have made it clear that I view them as alarmist and as motivated by a separate, intellectually untenable, agenda.

In my view, the concerns that have been raised about the government's intentions are unwarranted. Nonetheless, I have already indicated, both to parliamentarians and to some of my provincial colleagues, that I intend to introduce amendments to the bill to make clear the limitations of action we might take under the agreement's dispute settlement mechanism.

[English]

Time does not permit me now to go into detail on the proposed amendments, but the texts of two amendments will be made available to the committee this afternoon so that you will be able to see the nature of the amendments that we're prepared to put forward during clause-by-clause consideration.

The agreement on internal trade is now in force. All Canadian governments, including the federal government, are now bound by the obligations they freely accepted in signing it. Two provinces, Alberta and Newfoundland, have already passed their implementing legislation.

As I indicated earlier, the federal government has always led on the internal trade issue. I will, in fact, be co-chairing further discussions on the agreement and on issues left to be resolved when the committee of ministers on internal trade meets in Toronto on November 28 and 29.

Bill C-88 enables us to comply with our obligations and to live up to our responsibilities under the agreement. Bill C-88 also makes it possible for the federal level of government to continue to play its role in leading the cooperative intergovernmental process.

I believe it is important that we, on the federal side, now proceed expeditiously in our consideration of this legislation.

I'll now speak briefly on Bill C-99, which deals with a few modest changes to the SBLA. At this point I'll introduce Peter Sagar from Industry Canada, who is with me to help with any technical matters arising with respect to Bill C-99.

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The changes proposed represent improvements for small business borrowers and the government, including moving the program to cost recovery. This objective is in line with the principles that I believe we all share. It was this committee that recommended the SBLA be reviewed from a cost aspect.

Without the administration changes contained in the bill, the SBLA program would cost the government over $100 million at the 1994-95 level of lending. With the cost recovery system in place, the SBLA should no longer be a contributor to the deficit.

Mr. Chairman, let me address three concerns that were raised when officials appeared before you on October 19.

First, members of the committee asked the Industry Canada officials whether the goal of cost recovery has been explicitly stated in Bill C-99. It has not nor do we believe it would be desirable to have a clause to this effect placed in the bill.

I am sure that members of the committee will understand that it would be difficult to verify at any given moment whether the program is in surplus or in deficit. The loss and recovery rates are variable and a significant lag in time exists between the stream of revenues and claims. This makes it impossible to know on any given day whether the program is in surplus or deficit.

That's why we're seeking authority to adjust, as required by circumstances, the program pricing elements from time to time so as to enable the program to reflect changing market circumstances.

A second concern that was raised was whether the government would reconsider its decision to move the guarantee rate from the act to the regulations. Members of the Reform Party in particular wanted to see the guarantee rate remain in the act, and I've indicated to Mr. Schmidt that I'm willing to accept such an amendment.

The committee should bear in mind that the guarantee rate is but one of three pricing elements or levers available to encourage or discourage program lending. The other two are the interest and the program fees. Both these levers are now subject to change by regulation.

As economic and program lending patterns change, we may need to adjust one or more of these levers if we want to maintain cost recovery. We may have to move quickly so as to best serve the interests of small businesses and not to burden taxpayers. Of course, any regulatory changes are subject to consultations and I would reassure the committee that you'll be informed well in advance of any changes being implemented.

[Translation]

Third, this committee has raised questions about the government's overall exposure due to the Small Business Loans Act.

As of March 31, 1995, the government had a contingent liability of over $1.1 billion. This represents the maximum amount that the government is liable for, given the $6 billion in outstanding loans as of March 31, 1995.

This, however, is not a figure that reflects normal bank practices in estimating exposure - it is far higher.

[English]

The members of the committee will understand that our actual claims experience suggests that losses may total no more than 5.5% of the $6 billion portfolio. This would reduce the estimate of future claim payments over the next 10 years to approximately $300 million. This reflects the portfolio of loans made prior to April 1, 1995.

We expect to manage the program in future to achieve the goal of cost recovery so that future claims payments and program revenues are in balance.

Mr. Chairman, the government has consulted widely concerning the potential changes and the administrative changes to the SBLA, and I would say that of the great quantity of advice we've received from many sources, advice received from this committee was of particular importance.

Thank you very much, and I'll be happy to take questions.

The Chairman: Thank you, Minister.

[Translation]

Mr. Rocheleau, you have approximately ten minutes.

Mr. Rocheleau (Trois-Rivières): Good afternoon, Minister. I have two questions concerning Bill C-88.

Judging from what has been written about the talks and the negotiations between the provinces and the federal government, it seems the general consensus was that, in the event of disputes, settlements would be achieved through amicable agreements, rather than through legal mechanisms, the implication being that such mechanisms would be binding.

.1550

Moreover, we have been critical of the federal government for intervening with somewhat excessive zeal in this area, because at the meeting held in Calgary prior to the tabling of the bill - one month prior to this date if my memory serves me correctly - there was apparently no mention of the federal government bringing in clause 9 in particular.

What is the federal government's position on the view expressed by the parties that disputes should be resolved amicably and consensually, perhaps after lengthy negotiations, but after negotiations nevertheless?

Mr. Manley: Mr. Rocheleau, to answer your question properly, could you tell me if it is really clause 9 that worries you? This clause refers to Article 1710 of the Agreement on Internal Trade. Dispute resolution procedures are set out in Article 1700 of the same agreement. Which provision do you have a problem with?

Mr. Rocheleau: Well, I recall that the federal government's legislative action was criticized generally because it went against that which had been agreed to bona fide during the talks between the provinces and the federal government. We still feel the same way.

[English]

Mr. Manley: Let me take you very slowly through this so that perhaps you can understand it, and you'll excuse me if I explain it to you in English so that it's clear.

The bill itself, which I believe you have with you, does set out a direct reference to the agreement on internal trade.

I'll take some time for this, Mr. Chairman, so that it's well understood.

In the bill -

The Chairman: We should be reading these together? In other words, the agreement and the bill.

Mr. Manly: The bill and the agreement must be read together. If you look in the bill, you will find several references directly to the Agreement on Internal Trade that was signed between the federal government and the provinces and territories. Clause 7 of the bill refers to the approval of the agreement. This is essentially a political statement saying that the Government of Canada supports the agreement. Clause 5 renders it binding on Her Majesty in right of Canada, which is a fundamental part of making the agreement effective.

Clause 9, which has given rise to the controversy, specifically starts with these words,

[Translation]

[English]

In other words, the provisions of clause 9 are specifically made in reference to article 1710 of the agreement. This is the very same agreement that all of the provinces signed. There is nothing in clause 9 that in any way implies that the federal government has any intention of extending outside that clause, otherwise we wouldn't have made the reference to the clause in the bill.

Let me take you through, in any event, when action under article 1710 would arise. If you look in the agreement to article 1710, I think you'll realize that it's not that easy to get under article 1710 to begin with, anyway. To get there, you have to start with a dispute. You really start in article 1701 of the accord, which says, first of all, that where there's a matter in dispute, you have to go to the particular chapter in the agreement under which a dispute might have arisen. For example, if it's one that's relating to labour mobility, you'd go to the dispute settlement process that's in chapter 7.

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If you've exhausted that and the dispute still isn't resolved, then you get into article 1702, government-to-government dispute-resolution consultations. There's a consultative phase built into it.

Once you're through that, you go to article 1703 and you can request the assistance of the committee of ministers on internal trade.

Where you haven't had your dispute resolved, you go from there to article 1704 and request a panel.

Where you've got a dispute under article 1704 and the request for a panel, understand that this is between parties to the agreement. In almost every case those parties are going to be two provincial governments, but it is possible under article 1704(8) that one of the parties could be the federal government.

So article 1710, which is adopted in clause 9, comes into play only after you've gone through all of that and the federal government is a party.

Why would the federal government be a party? Article 1710(8) is where the federal government is deemed to have a substantial and direct connection with a person where the person has suffered economic injury or denial of benefit as a result of being treated inconsistently with the agreement by reason of (1) its status as a federally constituted entity or (2) its carrying on business that is a work undertaking business or service that is under federal regulatory authority.

So there is a very narrow definition of companies that could be represented by the federal government under the agreement. It's only to those, first of all, that it applies.

If the federal government agrees to take on the case and establishes a panel under article 1705, the panel considers the case and makes a report under article 1707. We then get to the implementation of a panel report.

So we've gone by a long road now. The federal government has taken a case; it has gone all the way through the system; the panel has reported; and the party making the complaint, which was represented by the federal government, has got a favourable report from the panel.

What happens next? Now we see whether or not it will be implemented.

If it's implemented, case closed. Fine. There's no further response.

If it's not implemented, then the first thing you do is have non-implementation publicity, article 1709. In other words, you let the world know that somebody has failed to comply with the internal trade agreement.

If after a year there's still no compliance with the internal trade agreement, then, and only then, do we get to article 1710, where some measures could be taken, and they're qualified.

First, you can have a suspension of benefits under the agreement. Clause 9 refers to article 1710, so we're not outside of that.

What kind of benefits to suspend? Article 1710(4):

(a) suspend benefits or impose retaliatory measures in the same sector as the measure found to be inconsistent with this Agreement; and,

(b) only if such suspension or imposition would be impracticable or ineffective, suspend benefits or impose retaliatory measures in other sectors covered by this Agreement.

I don't know if Mr. Rocheleau knows of a provincial government whose intention it is to take a party all the way through this process and still refuse to implement the recommendation of a panel under the agreement. If he does, then I hope he will tell me which one it is, and I'll take it up with the appropriate minister.

Frankly, I think this whole issue on clause 9 arose out of a failure on the part of members of the Bloc Québécois to read the agreement and the bill implementing it.

Thank you.

.1600

Mr. Mills (Broadview - Greenwood): Minister, I just want to make a short interjection. You will have this in householder format for us?

Mr. Manley: With pictures.

[Translation]

The Chairman: Mr. Rocheleau asked the first question. It has taken approximately ten minutes. Do you wish to end with his question and then wait until the second turn, or do you want to continue?

Mr. Rocheleau: I would simply like to say to the Minister that the Government of Quebec, like other provincial governments, has formally expressed its opposition of clause 9. The Bloc Québécois doesn't imagine things.

The Chairman: Have some provincial governments denounced this clause?

Mr. Rocheleau: Yes, Mr. Paillé has written to you.

Mr. Manley: I did indeed receive a letter from Mr. Paillé. I tried to explain the situation to him. What we are discussing here is an existing interpretation. You may be able to convince me by giving me another interpretation. Thus far, no one has argued that this clause isn't clear.

However, because we have tried to work out a consensual agreement, I have already indicated that I am prepared to bring in amendments to clarify these provisions for those who are unable to read them or even understand them. I believe these amendments are fairly clear.

[English]

Mr. Schmidt (Okanagan Centre): On a matter of procedure, we do have a proposed amendment from the minister.

The Chairman: To clause 9?

Mr. Schmidt: Yes, clause 9, the one that's being questioned on at the moment. I'm wondering if the minister might clarify for us exactly what that amendment does, because it might lay to rest the point I think he's trying to make. There must be a reason for the amendment.

The Chairman: Would that help us with this discussion, Minister?

Mr. Manley: Certainly members are most welcome to take a look through the amendments. I put them forward -

Mr. Schmidt: It is the one on clause 9. I was just wondering if it would allay the concern.

Mr. Manley: I think it should further clarify.

Mr. Schmidt: I think it does, and that's really why I raised it.

[Translation]

The Chairman: Perhaps Mr. Rocheleau could examine the proposed amendment in the meantime and see if it contains the clarifications he is seeking. We can come back to him later. For the moment,

[English]

I think we had better go on to Mr. Schmidt.

Mr. Schmidt: I'd like to move to another clause, if I might.

The Chairman: It's on the same bill, though?

Mr. Schmidt: Oh yes.

This is under the related and consequential amendments. I believe it is clause 17, having to do with the Interest Act. I wonder if the minister could clarify just why the changes from the existing bill are being proposed here. I think it has to do particularly with the percentage rate that is to be found on certain kinds of loan agreements, and then the subsequent section, which empowers the Governor in Council to make such regulations, and then there is the section relating to that, which is clause 18 in the bill and the sections that are underlined there as changes from the existing legislation.

I wonder if he could clarify the reasons for those particular changes in the new bill. They relate not to the internal trade agreement but to other acts.

Mr. Manley: Yes, changes to the Interest Act -

Mr. Schmidt: Yes, specifically.

Mr. Manley: They're both changes to the Interest Act.

The best thing is to ask the lawyer to explain it directly, if Konrad von Finckenstein would be kind enough to do it.

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Mr. Konrad von Finckenstein (Assistant Deputy Minister, Business Law, Department of Justice): Take internal trade in chapter 8, on consumer-related measures. One of the undertakings is that the provinces agree on a harmonization of cost of credit disclosures. Once such harmonization is worked out by the provinces and becomes effective, it has to be implemented.

The Interest Act, as it stands right now, might make such implementation impossible, because it specifies the specific interest rate. So what we're doing here is amending the interest rate so that it's as prescribed by regulation. So once this agreement on cost of credit disclosure between all the provinces is implemented, the federal government will make the necessary regulations under the Interest Act to allow the implementation.

The provinces' reach should not be jeopardized by the fact that there is an inability by the federal government to make the necessary changes to the Interest Act to implement that agreement.

Mr. Schmidt: Mr. Chairman, I'd like to look at that a little more closely. If I heard correctly, you talked of cost of credit disclosure.

Mr. von Finckenstein: Yes.

Mr. Schmidt: The cost of credit and cost of credit disclosure are two different things, are they not? The cost of credit would be the interest that's paid on the particular amount of money, while disclosure is the cost of making that information available to other persons, is that not right? What's the connection between the cost of credit and the cost of credit disclosure?

Mr. von Finckenstein: The consumer is supposed to know how much he is paying for the credit he's getting from a financial institution. It should be uniform in every province. Therefore, the idea is that the provinces will get together, harmonize it, and agree on certain rules as to how this cost of credit will be disclosed.

Obviously, financial institutions located in provinces are subject to provincial regulations and acts. They're also subject to the federal Interest Act. What we are trying to make sure of is that whatever agreements the provinces reach can be implemented and that the Interest Act won't stand in the way of implementing them.

Mr. Schmidt: I understand that, but I'll compare what you've just said to the existing clause. If this is correctly stated in our information here, I fail to understand why that section, which is the existing section 4 of the Interest Act, does not, I don't think, address the question of credit cost disclosure.

It addresses instances in which a loan agreement has been reached, but the loan agreement itself doesn't stipulate what the interest rate should be. This provision in the Interest Act allows a certain percentage to be fixed at 5%. What has that got to do with disclosure?

Mr. von Finckenstein: If the other provinces, as part of the harmonization, agree that the rate to be stipulated in such instances shall be 6%, then it shouldn't be a federal act that prescribes a different rate.

I can't foresee what the harmonization agreement between the provinces will entail and how far it will go. I don't know whether it will just deal with disclosure or also with this instance you have pointed out in which the rate is not stipulated. So the legislation will stipulate one.

If the agreement the provinces work out covers this point and comes up with a different rate, then we will be able to implement that by our act.

Mr. Manley: Just for a point of reference, Mr. Chairman, the provision of the agreement is in annex 807.1, article 7, which in fact requires provincial harmonization in respect of the disclosure of cost of credit.

Mr. Schmidt: I have no question in regard to what is intended here. My contention is that doing this - amending the existing Interest Act in this way - doesn't do what is being proposed. That's my interpretation of this. I'd like to understand why it is so. What is being talked about in the agreement is the cost of credit disclosure.

Disclosure is quite different from the actual credit rate. It seems to me that the Interest Act does not cover the cost of disclosure at all.

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Mr. Manley: The problem you've got here, Werner, is that interest is a federal power under section 91 of the Constitution. The agreement between a customer and a lending institution is a matter of private contract. Therefore, legislation that deals with disclosure is very often in the provincial sphere.

In fact, what gave rise to this portion of the agreement is that you have different formats and different arrangements among different provinces. So that where they have legislation requiring the cost of credit disclosure....

You remember that a few years ago it was so complicated that nobody knew what their rates were or how it was compounded. Everything made it very confusing. This streamlines and reduces costs for consumers by ensuring that when the financial institutions, many of which are national, comply with cost of disclosure legislation, either in their lending agreements or in their other documentation, they're able to comply with the harmonized requirement among all the provinces.

As with the rest of the agreement, we're trying to facilitate the common practice. Even though this is clearly within provincial jurisdiction, the result of it is harmonization.

The trick is that there's one little piece of this that is federal, which is the Interest Act itself. We're making this fairly minor change to the act to ensure that we don't create an obstacle to provincial disclosure harmonization.

Mr. Schmidt: I understand the rationale, Mr. Chairman. I guess I'll have to talk in more length and detail. Quite frankly, as for the explanation so far, I'm either not following it or I don't understand it, because I think there's a problem with it. I really do. I want to discuss it in some more detail.

Mr. Mills: Maybe you could meet with the officials.

Mr. Manley: We can follow up on this.

Mr. Schmidt: I think the minister and the lawyer understand what my concern is.

The Chairman: Anything you can do to help clarify that would be appreciated.

Mr. Schmidt: That's the next step; we're on clause by clause. We'll deal with the other issues.

The Chairman: We'll come back, then.

Mr. Mills.

Mr. Mills: If possible, I'd like to move on to Bill C-99, unless there are other members that have a deep interest in -

The Chairman: We can keep going backward and forward.

Mr. Mills: Fair enough.

Mr. Schmidt: I have one more question on Bill C-88, but it's up to you, Mr. Chairman.

The Chairman: Is it going to take long?

Mr. Schmidt: No, this won't take long.

The Chairman: Fine, go for it.

Mr. Schmidt: This has to do with clause 20, which deals with the act coming into force. Why wouldn't this bill come into force on the day it receives assent in the Senate?

Mr. von Finckenstein: The different parts of the agreement come into force at different times. There are different triggering dates because there are negotiations yet to be completed, such as consumer credit, which I told you about, transportation, etc. Therefore, portions of this act will be proclaimed as those agreements are reached and as the portions come into effect. Not everything came into effect on July 1; some things come into effect in later years.

Do you want me to give you instances?

Mr. Schmidt: Yes, please.

The Chairman: Has this particular schedule been schematized so one can see in a handy-dandy place when various things kick in?

Mr. Schmidt: How does the act...? The act either implements this agreement or it doesn't.

Mr. von Finckenstein: I refer you to page 111 of the agreement. It's the cost of credit disclosure, which we just spoke about. It says that:

So 1997 is really when the harmonized legislation on the cost of credit comes into effect.

Therefore, clause 20 would allow us, for instance, to proclaim the changes to the Interest Act as of January 1, 1997, because that's when they're needed, not prior thereto. There are various instances within the agreement where certain portions only kick in at a later date.

.1615

Mr. Mills: Minister, in my judgment we have been amending the Small Business Loans Act in a very effective way over the last few years. It continues to be one of the main catalysts to cause the major financial institutions to get back into the small business access to capital game. I applaud the fact that this bill has a very special focus in terms of cost recovery.

Over the last two years, however, as we've been listening to various avenues of opportunity for new envelopes of capital, we've heard on more than one occasion from the Canadian Finance and Leasing Association. It has large pools of capital and would very much like to participate in providing portions of this capital to small business.

It has repeatedly asked our committee for some consideration under the Small Business Loans Act so it could not only be on the same level playing field as our five or six major banks, but also, in a real way, be a form of competition to the banks.

Mr. Sagar has met with these officials from the Canadian Finance and Leasing Association on more than one occasion over the past two or three months, and I know the association appreciates the discussions they've had. This has been a three-year discussion for them, and whenever the banks want amendments to the Small Business Loans Act, or in various constructive ideas we have, we somehow manage to be accommodating. I wonder if there is some way we could design this bill so, once we have a mechanism for accommodating the Canadian Finance and Leasing Association, we could attach it to the bill so it could get into the game.

Mr. Manley: First, let me say I'm very sympathetic to the notion that we find a way to extend the intent of the SBLA to leasing arrangements if we can do it in a fashion that both maintains the cost recovery mode and is effective in helping small businesses. As you know, leasing is increasingly becoming the financing vehicle of choice for a lot of SMEs, so to attempt to achieve that would be a very positive thing, not just for the leasing association but also for the companies.

We're at the stage where we're trying to determine whether there is a way to do it at all. You've asked a different question, which is whether we can do something to the act that would enable us to essentially do leasing later on, once we find a satisfactory mode of operation.

Mr. Mills: Regulation amendment.

Mr. Manley: Frankly, it's not something I've thought of. I don't know if that's feasible within the purview and intent of the act, or if it would require a separate piece of legislation. But I will say we're anxious to see if there is a way we can accommodate the leasing vehicle as part of the guarantee structure under the SBLA.

Mr. Mills: In the preamble to the bill, there's a clause where if specific proposals are brought to you that meet the basic thrust of the bill, you have the authority by Order in Council to approve them.

I realize we don't have that mechanism or a specific proposal today, but it would provide some hope and we'd be able to put some pressure on the discussion if it thought that within two or three months or something, if something came forward, you'd be able to do this by Order in Council.

Mr. Manley: I'm not sure, Dennis, which clause you're referring to.

Mr. Mills: I don't have the bill in front of me, but there's a specific -

Mr. Manley: Clearly, there's a will to do it if there's a way.

Mr. Mills: Okay. Fair enough. I think that's all we need to hear.

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The Chairman: That took about five minutes. Are there any other questions on this side, defining Mr. Ianno as this side, from metaphysical grounds?

Mr. Bélanger (Ottawa - Vanier): Mr. Minister, one of the requests for information raised when your officials were here was a history -

Mr. Manley: Could you identify your bill, please?

Mr. Bélanger: Sorry. It's Bill C-99. Good point, although I don't think officials have been here for Bill C-88.

The request was for a history of actual requests for amendments to the act from the department, and what happened to those various requests. In other words, was the desire of the department to amend the act frustrated at any given time in an undue manner by the legislative side of things? As you've identified in your remarks, concern was shared not only by the Reform members but by some members of the government at least, that the last purview of legislative authority is being removed here in favour of the administrative authority, and perhaps unduly so.

I wish to have your comments on that, Minister.

Mr. Manley: I'm not sure about the request for a history. In looking at the pricing mechanisms, I think you have to understand that in trying to achieve cost recovery the pattern of losses is quite variable depending on conditions in the economy and other factors, so there can be a need to change the parameters in order to reflect different conditions.

That doesn't apply only to cost recovery, for that matter. There may be times in the economic cycle when it's believed that cost recovery should not be the objective, but rather the SBLA vehicles should be used to simply increase lending. If that decision is within the fiscal framework it could be pursued.

That means you may want to move fairly quickly in order to adjust as things go along. For that reason, it is desirable to leave some of the levers, in terms of revenue generation, in the hands of the executive so that kind of response can be made in a relatively timely and flexible fashion.

With respect to the guarantee, it can be more of a fixed point, and in a sense it has an important symbolic and representative effect for the borrowers. Therefore, putting it back into the statute seemed to me to be a logical thing to do while maintaining some of the other flexibilities. You can have one fixed point, but if you fix them all it could be quite problematic in terms of timing.

Mr. Bélanger: Aren't we removing the setting of the guarantee rate from the act now to regulations?

Mr. Manley: What I said in my remarks is I have informed Mr. Schmidt that I would accept an amendment that would put the guarantee rate back into the act.

Mr. Bélanger: Thank you.

The Chairman: Are these the amendments you're referring to?

Mr. Schmidt: They're the ones I sent some time ago.

The Chairman: Yes, they are the amendments to Bill C-99.

Minister, if I hear you correctly, you said you would accept some amendments. Have you had a chance to look at these particular ones of Mr. Schmidt? Do they do the job, or do they have to be amended further?

Mr. Manley: We accept the one on the guarantee rate.

The other one was about the coming into effect date. I don't think it matters now, does it?

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Mr. Peter Sagar (Director General, Entrepreneurship and Small Business Office, Department of Industry): We'd be happy to accept that amendment.

Mr. Manly: The coming into effect date reflected a potentially different enactment schedule from what we have realized, because the bill was given first reading in June and at the time it could be anticipated that it could be enacted much more quickly. But now that we're into November in any event, it really doesn't matter. So the amendment is perfectly acceptable.

Mr. Mills: Mr. Chairman -

The Chairman: On that same point?

Mr. Mills: On the point we talked about before. I would just like to read it into the record. ``Lender'' means...and of course they describe a member of the Canadian Payments Association, a local cooperative credit society, etc. But then under paragraph (c) in clause 2 -

The Chairman: Where are you on this?

Mr. Mills: This is on the Small Business Loans Act - the prime act, the foundation act. It says:

I just wanted to put that on the record.

Mr. Manly: I understand what you're saying. That is part of the definition of ``lender''. But of course the rest of the framework of the proposed act is directed to loans rather than leases. So there's no question that would give the power to the minister to designate a leasing company as a lender. But it wouldn't pertain to the financing vehicle that was being used, which would still have to comply with the rest of the proposed act. So I don't think we've solved it with that one.

[Translation]

Mr. Rocheleau: As the minister responsible for implementing this legislation, could you tell us what role you foresee the federal government playing with respect to Bill C-88?

In your view, can the federal government impose retaliatory measures only when it is a party to the dispute, or can it take such action against the party identified as being at fault, even though it itself, that is the federal government, is not involved?

Mr. Manley: The provisions of this bill and of the Agreement on Internal Trade apply to the federal government only when it is a party to a dispute.

Mr. Rocheleau: Only in such instances?

Mr. Manley: Yes, according to the bill and the Agreement.

Mr. Rocheleau: That is your interpretation. There seems to be a grey area when it comes to interpreting these provisions.

Mr. Manley: I disagree with you. In any case, that's how I interpret the Agreement. That is what we negotiated. Understandably, I am not necessarily pleased with the dispute resolution procedures set out in the Agreement. In my view, we would be better off having a much quicker, effective and direct dispute resolution mechanism.

The dispute resolution procedures in international trade agreements are much simpler than the mechanisms outlined in the Agreement on Internal Trade. Nevertheless, I did try to find a way to come up with a consensual accord.

If you truly have at heart the interests of the private sector which continues to be the victim of trade barriers, I believe you would prefer a much more efficient dispute resolution process. Personally, I would prefer one that could be strengthened by the judicial system. However, when an accord is as complex as this one, there is always a need for compromise.

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Mr. Rocheleau: I don't dispute your contention that Canada is a difficult country to administer. Perhaps that is why we feel as we do in Quebec.

Mr. Manley: Yes, but you have to understand that if you want to conclude agreements with other political bodies, you must always make some compromises. One of the parties to an agreement such as this cannot impose on the other parties its own version of an accord or of regulations.

That's how I approached the negotiations leading up to this Agreement. It was not easy for me, because I believe that we should have much simpler and stronger dispute resolution procedures.

As a member of the Bloc Québécois, do you feel that it would be possible for an independent Quebec to say: "We will keep this; we will not accept that; we want NAFTA, we want...whatever"? That is not how negotiations work, Mr. Rocheleau. It is always necessary to make some compromises.

Mr. Rocheleau: We will have to find some way to be good partners.

Mr. Manley: This Agreement provides us with a means of resolving trade barriers within Canada. It is based on the principle of consensus. It's truly an agreement between partners. We were partners before this Agreement was concluded and we will remain so after the fact. There is no question that this is an accord between the federal and all provincial governments in Canada.

Mr. Rocheleau: Regarding the amendment that the government is proposing to clause 9, it would virtually strike out paragraphs (b) and (c), that us lines 10 to 16 on page 3. Clause 9 stipulates the following:

Can you explain to us why the department is proposing these amendments which are rather major and which would strike out paragraphs (b) and (c)?

This concludes the Official Opposition's constructive criticisms.

Mr. Manley: Even though I have a good deal of respect for you personally, Mr. Rocheleau, I cannot accept these criticisms. I did discuss these matters with my provincial counterparts in an effort to reassure them.

[English]

The Chairman: Mr. Ianno.

Mr. Ianno (Trinity - Spadina): Thank you, Mr. Chairman.

I want to go to an old story, and regarding the SBLA, the possibility of the BDC being able to utilize the SBLA along with the other lending institutions. Is that a possibility?

Mr. Manley: It is a possibility. I think the way we see the SBLA being most effective, though, is that it's generally used with customers of the financial institution in whose favour the guarantee is being rendered. In other words, it would normally be depositors of a particular bank, or caisse populaire, or credit union, that would draw on the facility of the SBLA.

With the BDC, what we've endeavoured to do is to pursue complementary lending situations, and so their focus.... Also, they are not a deposit-taking institution. Generally speaking, their customers are coming to them for particularized lending requirements they are not able to obtain from their own bank. Every customer of the BDC is also a customer of another financial institution simply because of their deposit requirements.

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At the present time, I don't see it as an area of major interest for the BDC. I think their endeavour to be aggressively complementary to the other financial institutions is going to keep them quite busy without doing SBLA lending to complement it. Frankly, I haven't heard from them either that they feel it would be a useful adjunct to their other practices.

Mr. Ianno: I wasn't going to introduce it because it's not part of the bill in terms of deposit-taking for the BDC, but has that moved along at all considering it would certainly give them the opportunity to leverage the money they have at their disposal with your change so they can actually get more money in the open markets? Of course, as far as deposit-taking goes, since they are servicing many of the clients that otherwise would be theirs, is it at least a possibility?

Mr. Manley: We haven't proposed it. As you know, we didn't propose it in Bill C-91, which changed the mandate and the name of the FBDB. It's not something on the immediate horizon. Is there a possibility? It could be a possibility. I think it would only be looked at in the current parliament in the context of the upcoming review of the Bank Act. It could be considered in that context.

In the meantime, the BDC is not at the moment equipped to undertake that. That would be a major change in its focus. It would require a very significant redirection of its current resources in order to be equipped to receive and maintain deposits and meet with requirements that would be imposed upon it by the Office of the Superintendent of Financial Institutions.

From my point of view, I would prefer to see them directing their energies at the present time to their new mandate rather than being preoccupied with creating a whole new line of business in something that has quite a lot of regulatory burden associated with it.

Mr. Ianno: Will you consider looking at that option when the committee is gathering additional information? To me, that is still not a major improvement in terms of the amount of moneys lent to small business from the major banks. If that doesn't seem to be improving in terms of the absolute numbers, will that be an avenue you will entertain?

Mr. Manley: Absolutely. The Senate committee currently looking at the federal government's financial institutions is also welcome to look at that aspect of the BDC if they wish to, as far as I'm concerned.

Mr. Ianno: Thank you.

The Chairman: I feel like a very unsuccessful auctioneer as I look around the room. Will no one buy this minister?

Sorry, I shouldn't have put it that way.

Mr. Manley: Wait a minute!

Some hon. members: Oh, oh!

Mr. Manley: Who do you raise a point of order with when it's about the chairman?

The Chairman: There's very little chance of success.

Have we any other questions on either of these bills? The committee has shared its concerns, has been listened to and attended to, and before somebody feels inspired to fill the gap with a question, are there any final comments you would like to make...?

Yes, Mr. Schmidt.

Mr. Schmidt: I'd like to thank the minister and his deputies, the experts, for coming and for being frank and honest with us this afternoon.

The Chairman: Thank you. We look forward to working as expeditiously as possible to get them through the committee and back to the House in a timely manner.

Thank you, Minister, and thank you for bringing your team with you.

Mr. Manley: Thank you.

The Chairman: The meeting is adjourned.

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