EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 6, 1996

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[English]

The Chairman: I call the meeting to order.

Welcome and good morning, everybody. I'm pleased that the natural resources committee is here today in Sydney to carry on our study of the issue of rural development.

As some of you may know, the committee began this study in the spring, hearing witnesses first in Ottawa, has continued the study this fall, and we are now in a process of going out and consulting with Canadians in the communities in which they live, to give ourselves the opportunity to hear first-hand those individuals who have to face day to day those challenges that are an ongoing part of rural Canada.

As I said, we are pleased to be here today and to have Mr. Sampson with us, as our first witness, from the Cape Breton Board of Trade. A very warm welcome to you, Mr. Sampson. We appreciate you being here this morning. We would ask you to make an opening statement and then we'll ask the committee members to ask some questions. Please proceed.

Mr. Robert Sampson (President, Industrial Cape Breton Board of Trade): Thank you, Mr. Chairman.

As was noted, my name is Robert Sampson, and I have the pleasure at the present time of serving as president of the board of trade. My day job, if you will, or I try to make it my day job, is as a practising solicitor. I have been doing this for the past 15 years in this area. I, as well as members of our firm, have spent a considerable amount of time involved in community development.

Of the few things in which we can honestly stand up and say we've led the way, I think we've led the way strongly in terms of community development initiatives. There are a number of examples that you may well hear about throughout the day, which are truly success stories. Unfortunately, they haven't been of the magnitude to solve the problems we have experienced in this area in terms of unemployment. So I am very appreciative of the interaction and the need for interaction of the community and the kinds of results that can be derived from that. There will be a few things I will touch on.

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I have passed out a submission of my remarks. It's my best attempt on short notice. I only got notification of this last week. I read a brief document that was given me and I hope I've captured the essence of what this committee is looking for. If I haven't, I hope my words will otherwise be interesting.

I've looked for some guidance. I have passed out a paper and I do have some remarks, Mr. Chairman. I guess it's at my discretion to just present those remarks and then see if there are any questions. Is that fine?

The Chairman: Generally speaking, we ask you to keep your remarks to about 10 minutes, which will give us about 20 minutes for questions and answers.

Mr. Sampson: Fair enough.

At the outset, I applaud your efforts, or certainly the federal Parliament's efforts, to put your committee in place. But more importantly, somebody had the foresight to tell you people to leave Ottawa and your offices and go out and listen to the people. I would expect that at the end of your exercise that will probably prove to be one of the most valuable aspects of this whole ordeal.

In terms of our area, my remarks to you are in relation to industrial Cape Breton and the island as a whole. Although arguably North Sydney and Glace Bay, which were the larger centres where you found your banking and commerce, would suggest that they were urban by definition because those who lived around those communities would think about them as being urban, the people who lived outside of those centres would be considered rural.

In many ways, this whole area is urban. And I don't think it's uncharacteristic of a lot of places in this country in recent years. We've seen, through governments' efforts and corporations' efforts, the notion that centralization was where it was at. The scales of economy were such that we've developed strong centres such as Ottawa, Toronto, Vancouver, Calgary and Halifax and as a result of that the other areas that were more identifiable as urban have now become quasi-rural. There were a lot of things that existed in this community ten years ago that don't exist now.

I'm not suggesting that we're all in the back woods, but my comments today are relative to all of our community. Quite frankly, the federal government through some of the initiatives.... One was the creation a number of years ago of a Canada Business Development Corporation, which was a rural initiative. In fact, the only one of those that exists in this country in, by definition, an urban area is in Sydney. That is because of the high unemployment that existed for many years and the number of different ways people have tried to attack the problem, usually through government initiatives, and of course the lack of success.

Please accept my presentation. It's not dealing with rural Glace Bay. It's about Sydney, Glace Bay, and it's about the island as a whole.

In terms of natural resources, I suspect the history of this community is well known. Certainly at the turn of the century coal and steel were the predominant industries and they were strengthened even further with the advent of the war. Prior to that, and during the same time, fishing and farming were prominent but they were never thought of as being as predominant.

Coal and steel became interdependent. The coal supplied the steel plant. It all worked. We would have a steel plant of a population and employing upwards of 5,000 people. Quite frankly, from a site point of view the steel plant always seemed to be the predominant industry but in fact the coal industry also employed a substantial number of people.

There was nothing wrong about that. You have to understand that the benefits that would flow from that large industry would flow into what you would probably think of as a rural area. There were lots of people who were able to leave the traditional farming way of life. Their fathers may still have farmed, but they went to the steel plant. It may have been a longer drive to work, but they could retain their homes and so on. So there were substantial benefits that would flow from your large industry and really affect everything in the community.

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After the war and in more recent years, particularly in the last 20 years, markets have shifted. The global economy has changed. The notion of centralization and the ability for other people to compete because they're closer to markets have - arguably - simply made the steel plant not as economically feasible. It's not that we make a product that isn't as good. With coal, I guess the problems would arguably be different because you're dealing with a resource where you don't always have control of the environment. You don't have control over how safe the mine is at any particular time and whether it floods.

But let's talk about the steel plant for a second. What I've seen occur in my time here is that governments tend to react - it's political nature - to the cry of the people. My father worked at the steel plant for 47 years. He's still alive, so he would remember the good times, and so would many businessmen who still are in business. The steel plant fumbled - the main industry. If you close your eyes you can think of all kinds of different communities across the country where main industries existed - they may not have been steel. The instinctive reaction was to shore up that industry when it fumbled, without wanting to accept the reality that you can shore it up all you want but the fact is there are people who can compete because they're closer to the marketplace now, or the manner in which transportation has developed means you simply can't compete on the bottom line.

The politicians would respond to that cry and they would invest more money into a plant where, at the end of the day, the real question, no matter how modernized or efficient you made it, was whether you could compete. So the politicians, in fairness, would react to that. This is not a question of placing blame; it's trying to understand why we fumbled so much in the last 20 years and why so much energy has been put in, but none of it has proven to result in any degree of success.

The alternative suggestion would be, once there was a slow realization, that we needed another main industry. My memories are fond that if we had one main industry the benefits that flowed from that made everything crack. So then we went into the mode - we, as a community, not unlike many communities, and you, as the government, not unlike governments before you - that energy would be put into creating another megaproject because people felt that was the only way. All the while you would avoid any kind of cottage industry concept. That wasn't a buzzword that existed there; it was all about ``mega'' because that's what we had experienced.

Quite frankly, the same business problems that applied to the steel plant - it was never about making steel, it was relative to channels of distribution to the shifting marketplace - would likely apply to any other mega-industry. Nevertheless, the government would respond to a community cry, so we went through that kind of phase for a while here.

It seems to me that only in recent years has somebody grabbed hold of the notion of community development. I don't look to you people to come here and solve my problems. It's just like when I run my house: if I have a problem, I have to solve it myself. I think finally there's a realization that maybe we shouldn't try to develop solutions in Ottawa for a community we don't live in when we really don't know how it interacts. We really don't have a feeling for its pulse or history. Maybe we should go down there and have the people develop their own solutions. It's the old adage that there tends to be more respect for something you've made yourself - you tend to care for it and want to succeed.

So there's the history. Of course we've had bumps just like everybody else. The fishing industry remained strong until recent years when measures have had to be taken to sustain it, hopefully for my children. Of course we've had problems with the mines here that have wounded, if you will, that industry. I wouldn't say the channels of distribution argument applies so much to that because of the ability to ship to European markets. But it's been difficult in terms of the actual mine and the condition of the mine.

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Right now, folks - I'm not an alarmist, I think I'm a realist - I know the economy in this community is incredibly flat. If you had told me I could do business with 5% interest rates five years ago, I would have gone out and found an idea even if I hadn't been thinking about it, I would have been so excited. Here we're faced with a situation - and across the country, quite frankly - where your interest rates are clearly in a range where you can afford to do business, but people aren't doing business. I'm not sure why that is, but the reasons are complex.

We live in very uncertain times and with uncertainty I always say that means someone else is in control, because when I'm in control I'm certain. I'm either certain I'm going to lose, certain I'm going to win, or certain of calculating the risk. But uncertainty is when my life or my decision depends on somebody else.

Again, I make those comments because the overall theme is that people have to get away from the mindset of dependency on a government that's going to come in and do something for them. You can facilitate and assist; I think it's important. I think this task is important and some of the comments as to what your committee can do are important. But you shouldn't be seen as a catalyst or the predominant figure. I should respect you for your assistance. I should know what your assistance can be in terms of business development, but if we don't want to do it, don't come in and do it. That's self-inflicted punishment, but that's the reality. People have to tighten their own buckles and get on with it.

In terms of positive change in rural development, it has to come from within that particular community. There has to be a process of identifying alternatives that exist that offer long-term sustainable employment. I guess that's my second buzzword, if you will. If you remember anything I say, it's economic development and long-term sustainable employment. It goes without saying that everybody's looking for that.

In every community there are natural resources, which is a fairly broad phrase. Quite frankly, you may find in our community as well that you may have an expertise or access to expertise that can identify natural resources that we haven't identified. So the role of facilitating is a positive one. There are lots of people who are able to run businesses but for whatever reason haven't been able to conceptualize the idea.

That goes back to the notion of the need for entrepreneurial skills. Can you make an entrepreneur? I think you can, because there's a fallacy in this world that an entrepreneur is a businessman and a businessman is an entrepreneur. They're two separate beasts altogether. I have lots of clients who have briefcases full of ideas and they can take those ideas to kicking the doors open, but they can't run the businesses. They just don't have what it takes to do the day-to-day stuff. Alternatively, I have all kinds of people who are terrific day-to-day people who don't have the ability to see beyond their doors to diversify their businesses.

We always think a businessman is automatically an entrepreneur, but that's not the case. If I'm a good businessman you don't have to make me an entrepreneur, but you can assist in terms of the ideas. So when you talk about rural development, part of the process that has to occur in the very beginning is an identification process as to what diversification works.

I also believe, along that line, you don't have to reinvent the wheel. If something works well elsewhere, it's okay to suggest it and do it here. When everyone talks about innovative and new, they think about something that doesn't exist in the world. When I say innovative and new, it's something that doesn't exist right here, but it may well exist everywhere else. That should be drawn out to people and they should be told that. I think this process, in itself, is part of economic development.

I would ask you to be prepared to recognize up front that there's no question there's a greater cost to economic development in rural areas. When you develop a business closer to an urban centre, the resources are handy. The transportation costs to get the raw materials to start up and the proper phone lines are right there. So you have to realize in the beginning that it may be a process of giving to get.

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The government has been on the infrastructure trail. Along that line, I think it's critical. I think the notion of infrastructure, including the idea of intellectual infrastructure, is an important thing. But I can't do that. If I live in a rural community, I can't afford - nor would I even consider it - to put the necessary fibre optics or phone line into my community. At the same time, I want to live in my community, and I may very well be able to create a job that will sustain a number of employees in that particular community.

So where the government can play a role is not so much in starting my business or in giving me the idea. I have the tools and I'm prepared to take the risk and invest the money, but there are infrastructure items that are simply beyond my reach. I think the government is on the right track, but I don't know where it's going to go with this infrastructure. From what I hear, the Prime Minister seems to be fumbling on it a bit right now. He's wondering if that's where the dollars should go or if there's some other alternative.

I guess I say to you that if there's a sincere effort to deal with rural economic development, then that has to be your starting point. Identify the resources, and if there's a business opportunity, then identify what infrastructure is required to extract that business opportunity from the community.

I guess it's acknowledging that the cost of doing business initially is greater simply because of the infrastructure costs. Assuming that it costs me no more to call you from Mabou than it does from Toronto, I can compete with the guy in Toronto. The only difference is that it costs him a hell of a lot less to get his phone line than it costs me to get mine. Phone lines, postal service - there are lots of things that you people, in terms of the government, are already in business doing. I think they they will justify your existence more if you look at them closely.

Let me just give you an example that is closer to home in terms of this community. I don't know how many of the committee members have been here or have had an opportunity to come here before, but we have a resource here called the Bras d'Or Lake. It's the largest inland salt-water lake in North America and it's basically undeveloped.

A good friend of mine, a colleague at the office, used to wonder about Florida. He would think about how one could possibly hope to compete against Florida for tourist seasons. Well, when you think of their tourist season, it only runs from December to April. You guys have all been there. People pull out in May. Here in Nova Scotia, or even in Ottawa, let's forget May. May's kind of an iffy month down here. But June, July, August, September and October.... People here would argue that October is the nicest month. Now, we have different weather, but we have five solid months and they have five solid months. And I'm not trying to be ridiculous by saying that we can compete head-on; what I am saying is that people psychologically think that unless you have the warm sun, you can't compete. But we can.

Think, for example, of the number of people who go to Florida to play golf. It doesn't have to be 90 degrees out. In fact, arguably, our weather's better for golf than theirs. In terms of sailing and boating and fishing, people don't want to be out under a 90-degree sun. That's the thing lots of people hate about Florida. But we haven't really recognized that and developed our resources.

So we have the Bras d'Or Lake here. The lake touches virtually every community on this island. If you look at the map and see where it's situated, it touches almost all of rural Cape Breton. If, for example, that type of natural resource was developed.... I think it's only in the last couple of years that we've identified - and I guess I'm saying this to you as president of the board of trade - and advocated the natural resource that truly will bring us through this spin via tourism. We have the beauty, we have the beaches, we have the highlands, and you can't take those things away from us. It can rain, it can snow, and they're going to be there and be sustainable. The problem is that the cost of developing these natural resources is where it gets difficult, and that goes back to this infrastructure.

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If I live on one corner of the Bras d'Or Lake, what can I do on a larger scale? I can't stock the lake because I can't afford that. I can't buy a fleet of boats so that when people from Toronto want to get out of town just as much as I do down here, they will come down here and spend Canadian dollars instead of going down to the British Virgin Islands. Those are the types of situations in which, if somebody really took the time....

Of course you should always look to get the best bang for your buck, but what can we do to get the greatest benefit to so many areas? I therefore offer that as an example of the type of rural development in which, if somebody was really serious in channelling dollars to infrastructure, large effects could be felt by people who have cottage industries because they could establish fishing camps or rent boats or small motels. This is a good buy for the Americans from a tourist point of view. Our problem is that we're so damn embarrassed to sell ourselves.

The other thing, Mr. Chairman, is that for eleven years now I've been involved in a community economic development corporation that they established here in Sydney. When I got asked to join it, I didn't know what the devil it was. Anyway, the long and the short of it is that these were creatures.... You know, you guys - when I say you guys, I mean the politicians - seem to always want to change the name of this beast so it'll be thought of as yours. I don't know what they were called in the beginning, but I think they're known now as community economic development corporations. But I want to tell you that I've been a volunteer on that for eleven years. They also picked an architect and an engineer, and I guess we all thought it was a bigger deal. We all said we'd go on it, but nobody really knew what it was.

At the end of the day, what the government did was supply money for investment and a smaller amount for operations, and we have had three people employed for those eleven years - a couple of MBAs and some support staff. The board has been completely volunteer. I get my $50 gift certificate at Christmas time for a free lunch somewhere. Other than that, that's it.

We have meetings every month. In terms of revenue, we have been paid $7 million since that time, all from the government. Here's what we've done with it: We have loaned to 260 businesses. As of last month, in terms of going out and being able to physically touch 800 people, we have created 800 jobs. Our net cost per job was $3,005. Our actual cost per job was $8,800, but we subtract from that the payback because these are not gifts. The odd time we take an equity position, but lots of times we structure it on preferred shares or dividends, and we've been in business now for eleven years. This year, for example, our operating and administration costs are $330,000 and our revenue is $344,000. So we've kind of turned that corner. In addition, our completely volunteer corporation administers individual self-start programs as a third party for HRDC.

I say to you that this is a bit off track, but when you people report at the end of the day, you're going to have to say what you think you can do. You're also going to have to deal with who's going to administer it, who's going to do it. So I guess what I'm saying to you is that my experience on this particular corporation has been extremely positive.

If you come in for a loan, Mr. Chairman, somebody on our board knows you. Somebody lives in the community that you live in. I might not, but somebody on the board does, and they're able to have a hands-on, better, sixth sense. We're lucky that there's nothing personal. You might be sitting there wondering what happens if the guy knows me and doesn't like me, but to my knowledge we haven't experienced that. But because of that kind of input, you'll hear comments around our table that a guy might be bang on with the idea, but really he can't do it. In that case, we'll take our staff and tell him that as a condition of the loan he has to hold our hand for six months.

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We'll take our staff there - we have two MBAs - in terms of getting our bang for a buck and we'll have them hold that person's hand; because a lot of times the start-up is the critical..... The start-up is where you're going to spend all your capital dollars, making the right equipment buys...the right locations. People don't understand being on the right side of the street is important in business.

Anyway, I mention that to you as a vehicle that works, in our experience. You're going to need a vehicle. You have community people who have a good sixth sense of what their community needs are and what is legitimate and who the people are in the community with the ability. Because there is no pay, there's nothing for me to gain or lose from the fact that I'm sitting there.

Let me say that the other thing I personally believe in.... We experienced the Cape Breton tax credit. We experienced it for a short period, Enterprise Cape Breton, which is a corporation, a kind of wing of ACOA, that exists here, was established here to try to assist this community in getting over the dramatic fallout of industry or whatever. You'll read all kinds of reports about the tax credit, and your conclusion will be that at best the reviews are mixed.

When it was introduced, there were a huge number of large corporations from away. I don't need to tell you folks, if you have worked for a large corporation, there are vice-presidents who are in charge of looking how to get a tax incentive. They came down here and dropped millions. They built buildings. I could take you for a drive and show you huge plants, gorgeous plants, as nice as you have in Ottawa or Toronto or wherever.

The problem is that it was designed such that it was a drop in the bucket. There was a qualifying time where you stayed here for two years, but at the end of the day you could afford to build the plant, stay for two years, get your tax credit, and just walk away, and you would still be ahead. Somebody was on some serious drugs when they thought up that plan, because the safety valves weren't in it.

I can also take you around and show you a large percentage of local people who during the end of that phase caught on. They said, gee, this is something I can do. I can take you around and show you a large percentage of those businesses which are still operating, with sustainable employment.

If I live in this community, I'm not going to want anyone to think of me or my children as having pulled a fast one, having established a kind of fly-by-night business just for the purposes of.... We're all human. It's different for the person in Ontario. There is no real person. It's a large corporation and it's run by nobody who owns the business, nobody who is connected to this community.

As a result, that was a terrific program. Unfortunately, the people in this community only grasped the ability to use that program towards the end. By that time all the energy, in my view, was concentrated on the big guys.

Remember what I said at the outset. We were still in a mode of, gee, we have to get a mega-industry to take the place of the steel plant. In fairness, that was what the people were trying to do. They didn't know the difference. We have to get something to replace the steel industry and the coal. So government, though its agencies, was reacting to that. So their energy went to the big guys in Ontario. But quite frankly, the big guys were interested only because there were big tax credits.

I feel bad because politically people are scared now to mention that; and I don't say it just for this area. I say it for rural areas. Everybody has a rural area. I know when you do things in your report you can't single out areas. There's this notion of fairness. If we're going to treat one area the same, we should look at the whole country.

Maybe one of the things you can speak to Mr. Martin about in your report, and we hope it will shake some change out of his pocket, is in fact some kind of earned tax incentive for rural areas. Nothing works better. The only thing is you have to set it up so someone gets it as a reward for success. Don't front-load it. Don't give them the money up front.

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We should be living in an environment where we get what we earn, and we must have Revenue Canada to administer it. These days, we live in a world where people don't fear much, but I think we still fear Revenue Canada. There has to be a perception that the government is serious about the administration of this. I don't think you should create secondary agencies to administer tax incentives. Revenue Canada is the vehicle that's there. It's in the process of beefing itself up in terms of enforcement.

But don't shy away from recommending that people can earn tax incentives. Be bold enough to understand that if I get a tax incentive because I've employed fifteen people sustainably, for whatever you've given me you have it back twofold because those people aren't dependent on your system. And not only aren't they dependent, they're contributing to a rural economy.

That said, the other thing I'll say to you in terms of rural development is that the banks aren't a player. They'll tell you they are, but the banks are.... Listen, they'll loan to the blue-chip person with their personal guarantee, their mother's personal guarantee, twenty mortgages against everything that's unmortgaged...and ``I'll loan you $300,000 if you put $100,000 in yourself''. It's absolutely ridiculous. Then they'll get these corporate vice-presidents in the banks to say ``Yes, we're onside with the government.''

Every once in a while the federal government hammers the banks, lowers the interest rate and figures that the government's job is done.

I don't have any difficulty with banks making profit. They're businesses. What you should do is dare to compete. Why do you keep beating the banks? You have your own bank. You have the Federal Business Development Bank, which is the business development bank of Canada now. Use it. Say to hell with the banks then. Compete against them. You'll want to see how quick they come around then.

Instead, you use your bank. And when I say your bank, nothing here is personal because I realize none of you people have been on the ballot; but when I say your bank, from my personal experience, yes, I can deal with your bank and you offer a variety of services that the traditional bank doesn't. But it costs more. I pay at least a point or two more to do business with your bank. Are you trying to defy logic? Why would I do business at two points more? So someone's going to say ``I have to pay more to do business there, and these other guys won't loan me the money, so I'm not going to do business.''

I'm saying to you that in terms of this whole fix, in terms of rural development, you should compete against the banks if you want them to belly up to the bar. Never mind the rhetoric that goes on about slapping them on the wrist every once in awhile. God, it hasn't worked in twenty years. Somebody should wake up and realize it's not going work next year.

In conclusion, if you deliver any of my messages this last one is the one I want you to deliver to someone who hopefully will listen. The federal government is asking all of us very aggressively to buy into the need for them to get their financial house in order. To some extent, everyone has felt that. And fair enough...I have no trouble with that. The federal government is also saying that with the advent of technology times have changed. I'm sure part of your report is going to say that we can do business in rural areas now because of the technology infrastructure that can be applied.

But there's an old adage that you can't suck and blow at the same time. Ten years ago the notion of decentralization was discounted because centrally locating everything was economically feasible. It made sense. You can't say now that with the advent of technology you can do business anywhere and at the same time have the government not accepting the same premise. It doesn't make sense.

Frank McKenna believes it. He's doing business in this part of the country, business that ten years ago wouldn't even have been thought of here. So what you have now is a political problem again. You have politicians who are scared to death to even whisper ``decentralization'', because the people who scream the loudest when it's whispered are those from urban centres who now enjoy the benefits of having a very solid, sustainable industry in their community. That's who screams the loudest, through editorials, through the politicians who represent those areas.

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But what you have to appreciate is that the value.... Government is being scaled down, and what's going to be left is what is necessary. Government is thought of as being the most stable industry. It's a good employer. Do you have any idea what that would do to this community, for example, as the beginning of a foundation? I don't ask you to move something here as a political plum. But do you appreciate the value of the psychological effect of having a sustainable long-term facility?

Lots of facilities operate out of Ottawa and arguably, ten years later, with technology, are not feasible to operate out of Ottawa, because most of their business is done in other parts of the country. Take the national parks. Most national parks are at both ends of the country. You guys operate them out of Ottawa. I don't know why. The argument is why could that not be operated out of here? With technology, with e-mail and whatever, you can communicate with the rest of the country.

What I'm saying is if the government wants to put up, they have to put everything on the table for negotiation; and that's one of them. As it does that, facilities exist here, such as the Canadian Coast Guard College and other natural resources, which should be identified and which can be enhanced through that.

The way to do it for diversification.... I just don't think it's politically feasible; I have enough sense to know it's just not winnable. But one of the things the government can buy into is incremental diversification, so we don't diversify what exists but we prepare to commit to diversify what doesn't exist. Government is always evolving. It's always identifying needs. If it buys into the concept that, okay, we will leave what's there, but from now on, on an incremental basis, we will prepare to diversify to rural communities, then that's politically doable, it's economically feasible, and it's a practical solution.

The Chairman: Thank you very much, Mr. Sampson. I must say I almost had the feeling that you've been travelling with us and decided to take an opportunity to summarize the testimony we've heard across the country, because indeed that's pretty well what you've done.

Mr. Deshaies.

Mr. Deshaies (Abitibi): I have more a commentary than a question, because I don't have a lot of time for your answer.

You've said a lot of things we've heard before. It looks the same as in my area in northwest Quebec and in New Brunswick. Do you think you need more tools from the federal government than fixed programs? You have a budget there. Are you able to do more with this budget than with fixed programs?

Mr. Sampson: You mean in terms of a one-shot payment?

Mr. Deshaies: Not necessarily. Between getting it in a fixed program, with certain conditions.... Would you prefer that for this area you would receive $100,000, choose your goals and do the best you can? Is this a better way than to receive a program and work within this program?

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Mr. Sampson: I think basically the goal should be for you and me not to have any association as quickly after we start our association as possible. In other words, you would want me to be as independent and to acquire an independent status from any government connection as quickly as possible. That's my feeling.

Hopefully, I may only need you in the beginning, and then periodically from time to time I will always need some government resources when I have problems with trade or whatever. But in terms of establishing my job and getting me up and running and self-sufficient, the quicker you and I part company - and I say that in a friendly way - the longer I'm likely to survive.

This constant interdependence is part of the big problem. It's like young people who finally have to be kicked out of the house by their parents. Once young people are out and on their own, they're fine - it's just getting them out of the house. I don't know if that helps or not.

Mr. Ringma (Nanaimo - Cowichan): I almost don't know where to start, but I've made a summary here. You're talking about a bottom-up process rather than a top-down process.

Mr. Sampson: Absolutely.

Mr. Ringma: We've heard that before. I've heard it even in other provinces, and not just with this committee. I've heard it on the human resources side where people in the community have said ``For goodness sake, leave it to us. We can deliver much more because we know the situation here better than you do in Ottawa.''

My summation of your thesis that government should be a facilitator rather than a provider is that you should create the atmosphere for it being done here. We should get into communications of the -

Mr. Sampson: Infrastructure.

Mr. Ringma: Well, yes, you said physical and intellectual infrastructure to provide expertise. In finance you said for goodness sake use the Federal Business Development Bank or whatever. Get in competition with the commercial banks. You also mentioned decentralization and tax incentives. What have I missed as the main points? I have them and I'm going to....

Mr. Sampson: I guess there's the concept of the community development corporation.

Mr. Ringma: Yes, I did haul that aboard.

Mr. Sampson: Otherwise you're on the money.

Mr. Ringma: Okay, thank you.

The Chairman: Mrs. Cowling.

Mrs. Cowling (Dauphin - Swan River): Thanks, Mr. Chairman.

You were absolutely right when you indicated that this committee is checking out the pulse of rural areas of the country. That's exactly why we're here.

I want to say to you that when we came into Sydney today and when I walked into this room I saw something that was quite different from a number of other meetings we have attended. We are in a very large room but we also have a very small table, which indicates to me the warmth of this particular community.

At the end of the day, this committee is going to have to come up with some specific recommendations to our government. One of the things we have heard about over and over again is infrastructure and some questions around that, and I think you raised that today.

You touched on tourism. Would that be one of the priorities you would like us to take back to the government of the day?

Mr. Sampson: There's no question. I think this community, from every different aspect, has identified tourism because it's an obvious natural resource. I think people are bright enough to understand that if you have a sustainable resource, you have a much greater chance of success in establishing a sustainable business. People realize there has to be diversification away from the traditional steel plant, mining, and of course fishing. There's no question that in this community those are the largest resources.

We also have a university. I've spent a considerable amount of time at Dalhousie and I taught at the university here for a number of years. This university is more intertwined with this community than most universities. People have bought into what the university can do in terms of lending high-end support. So in addition to tourism is the sustainability of that university, and I think it's doing okay, quite frankly.

.0915

Mr. Reed (Halton - Peel): Could I make a very brief comment?

The Chairman: Absolutely, Mr. Reed.

Mr. Reed: I just don't want to get left out.

I can't get over the fact that Canadians all across the country, in the more rural parts of this country, are presenting a very common thread. What you've presented to us this morning - and I think our chairman summed it up - sums up well the common thread we've been receiving.

Mr. Sampson: I would be happy to attend and give it to the minister directly.

The Chairman: I would like to thank you very much, Mr. Sampson, and I too would like to congratulate you. We operate three of the Community Futures development corporations in my riding. I know exactly how much hard work the volunteers put in. For you to have stuck with it for eleven years is amazing. In our area we tend to burn our volunteers out after two or three years on the board, because a lot of work and a lot of dedication are involved in that. My congratulations to you on doing that.

I agree with you on how important an engine that is. In my particular area I think they have $2 million outstanding right now and they're supporting about 180 jobs. It's a great organization, one I very much support - and we've heard the same thing across the country - as one of the delivery vehicles.

We just finished negotiating an agreement in Ontario between one of the chartered banks and the Community Futures group. The bank is providing the funding, additional capital, to them, under prime, for them to lend out to small businesses as they see fit. It's really marrying somebody with capital with somebody who has the delivery network for small business.

Let me congratulate you on that, and again, I thank you for your testimony before the committee. It has certainly been very worth while.

Mr. Sampson: Thank you for coming to Sydney.

The Chairman: I now call our next witnesses, from the Strait Highlands Regional Development Agency, René Aucoin and Mr. Gillies.

Welcome, gentlemen. I will ask you to make an opening statement, and then we'll open it for questions.

[Translation]

Mr. René Aucoin (Economic Development Officer, Strait Highlands Regional Development Agency): Good day. My name is René Aucoin and I am from the village of Cheticamp, on the West coast of Cape Breton Island, a village that is well-known all over Canada and especially among Francophones, I hope.

Although I work in an urban area, I still live in my village because I am deeply attached to it. I think we are all here for the same reason: we want to see our villages prosper rather than decline. Il will ask Francis to introduce himself.

[English]

Mr. A. Francis Gillies (Natural Resources Development, Strait Highlands Regional Development Agency): I'm on the western side of Cape Breton. I'm from a Scottish community called Port Hood, the home of Al McGinnis of the St. Louis Blues. It's also a neighbouring community to the Rankin Family, Natalie McMaster and Ashley MacIsaac.

René is going to continue with our introduction.

[Translation]

Mr. Aucoin: We represent an economic development agency that covers five rural municipalities: Inverness county, Victoria county, Richmond county, the city of Port Hawkesbury and the city of Mulgrave.

[English]

You will find our analysis here is limited at best, given the time we've had to do it, but we hope you will find some of the suggestions and recommendations are hitting the mark.

[Translation]

Our presentation will be somewhat different from the others. I will do part of it in French and Francis will do the other part in English.

[English]

We offer no translation either in our written text or in what we are going to be saying.

[Translation]

Can we start right away?

[English]

The Chairman: Please proceed.

[Translation]

Mr. Aucoin: Thank you very much.

Rural communities in Canada are faced with fundamental changes brought about by cumulative trends at the regional, national and global levels. For example, the transfer of government services from rural communities to urban areas has many side effects.

.0920

Once a client of those services has to go to the city, why not also do some shopping there, have the car repaired or make use of other services that used to be offered in small villages?

In the past, rural communities could always rely on primary resource industries such as the fisheries or forestry.

Due to policies that have been inadequate and lacking vision, very often developed in Ottawa and Halifax, we are faced today with a disastrous situation in the fishery, for example. Just like the alcoholic who must first admit to the fact that he is sick before he can overcome his problem, governments, and maybe also the public, must admit their share of responsibility in the decline of the natural resources sector.

In the 1990s, we have witnessed the collapse of the fisheries sector. What will prevent the same thing happening in the forestry sector or the agricultural sector?

Please, do not interpret this as an attack on the government, because it is not. It is simply a social analysis to show that cosmetic changes will not be sufficient to solve the economic problems of rural communities.

Rural Canada and urban Canada do not rely on the same development systems or dance to the same tune. A classical example is this whole debate on the firearms registration legislation. Rural citizens are generally opposed to this legislation while urban communities see it as a positive step.

I will now give the floor to Francis for the English part.

[English]

Mr. Gillies: In our presentation, our first point is about flexible policies with consideration for rural areas. Federal and provincial policies concerning the natural resource sector should reflect the differences between urban and rural areas. These policies are generally established at regional or head offices, and are often inflexible and do not respond to the needs of either the business or the non-profit sectors in rural communities.

As an example, with the demise of the Atlantic cod stocks a moratorium was placed by the federal and provincial governments on new fish plant licences. The Strait-Highlands RDA had, during the same period, been working with a Faroese-Canadian venture to set up a shrimp-processing operation in Mulgrave. Although this venture was totally unrelated to the cod fishery, the licensing was delayed for more than nine months and required intense lobbying efforts before it was finally signed off by the respective governments. Fortunately the investors were willing to wait and a $2 million investment and the resulting 25 jobs were not lost. If we compare the impact of this investment to one of similar proportions for a city the size of Toronto, it means approximately 2,500 jobs would have been created in Toronto.

Our organization, along with a local community development association, is at present looking at the feasibility of a golf links project on the west coast of Cape Breton Island. Once again we are faced with another regional policy set by ACOA. Since access to venture capital is now very limited, as will be discussed in point two, and since ACOA, because of their regional policy, is unwilling to support the project, it means that another excellent job creation opportunity may be lost.

Point two of our presentation deals with access to capital. Access to capital, particularly venture capital, is generally very poor in Atlantic Canada and more so in the rural areas. In Ontario a $5 million project might be levered with as little as a few hundred thousand dollars, the balance being made up of a combination of public, private, banking and venture capital. A similar project in our area would probably require a lever in the range of $2 million to $3 million. As a result, many good projects requiring amounts far below that just mentioned will simply never get off the ground.

It is therefore crucial that agencies like Enterprise Cape Breton Corporation and ACOA continue their roles in assisting enterprise creation in rural areas and that policies be adjusted and developed to reflect the particular needs of rural areas.

Point three in our presentation deals with the fishing sector. Until very recently, the fishery has been considered a renewable resource. That view has certainly changed today, but it has not brought about any shifts in core government policies.

In a reopened fishery much of this resource will continue to be shipped unprocessed, with no value added, to markets in the U.S. and around the world. The emphasis is thus on quantity, not quality.

.0925

Policies necessitating the processing of fish within a certain radius of the landing area would automatically limit the catch rate since local processing plants can only handle a limited number of fish. This would increase the quality of the product and dramatically increase the number of jobs in the industry.

The fish, like many other natural resources, are presently going to the highest bidder. These, of course, are usually located in larger centres in other countries or provinces. Since small rural companies do not have the financial resources to adequately compete with larger firms, they become the losers in a bidding war.

This is the way it has been developing over the last twenty years, but please be reminded that something very basic has changed. We now know that these resources are limited and are not as easily renewable as we once thought. Should this new realization not change the logic behind previous policies regarding harvesting of natural resources? And as a consequence, if the logic behind policies has changed, should not the policies themselves be changed?

[Translation]

Mr. Aucoin: Forestry shows many of the same symptoms as the fisheries. It is a natural resource that is placed under enormous pressures. We are just beginning to discover that this resource is not as renewable as we thought.

The key word, once again, is added value. As long as our natural resources are sold outside our region or outside our country without having value added to them, rural communities will continue to lose their economic base.

We should encourage the private sector to invest locally in value-added projects. In Nova Scotia, we have had since the summer a community investment program. A similar program at the federal level would certainly encourage community development.

Agriculture and aquaculture: in 1920, over 130,000 acres of land were cultivated in Inverness county, one of our five municipal entities. Today, this has dropped to 13,000 acres.

The dairy industry is the only strong agricultural sector in our economy. Today, it is threatened by the free trade agreement between Canada and the United States. We could lose, because of a few cents less per litre of milk, a whole sector of our rural economy.

Aquaculture is faced with other problems, the most serious being the maze of provincial and federal regulations and departments that have to be dealt with before one can even start a project. We are told that nowadays it takes over two years to implement a project in the agricultural sector.

A rationalization of the federal and provincial regulatory process would be a positive step towards the development of the aquaculture industry.

Easier access to capital is crucial for this industry as well as for agriculture and would be an essential aspect of any program.

[English]

The next point is about mineral activity.

Mr. Gillies: Cape Breton has been blessed with significant mineral deposits, particularly in gypsum and coal. The mining of these minerals continues to provide strong year-round employment in many of our communities. Please do not confuse these with the DEVCO operations. These are totally private operations, which have been around for many years and are an integral part of the rural economy of the Strait-Highlands region.

Mining is not the black sheep that it once was. Today's operation are very environmentally friendly, and mining officials are only too aware of the negative publicity brought about by the Westray disaster and others.

Despite a positive image in our rural areas, mining is perceived much more negatively in the urban areas where mines are not as common. The environmental lobby is very powerful and of course dead-set against any mining initiatives.

In 1995 a committee established by the Nova Scotia government proposed the establishment of 31 protected national areas in the province. Unfortunately, at least one of these areas is also unique in base metal potential, in gold, copper, silver, etc. The local development association, with almost 100% support from the local community, has been lobbying the government since that time to release this candidate natural area from the plan for parks and protected areas.

.0930

Millions of dollars in past and future mineral exploration investment may be lost, as well as any potential for 75 to 150 jobs that could happen should a small mining operation become feasible.

As with many similar projects in developed countries, we see well-intentioned but misinformed and in some cases misguided extremists carrying weight with governments disproportionate to the numbers and arguments.

Enhancing and developing the present infrastucture, be it paved highways or information highways, is also important for the economy of the rural areas. With fewer voters, even maintenance of existing infrastructure becomes a challenge. The federal and provincial cooperation agreements have been manna sent from heaven. They should be continued and even developed further. Cancellation of some of these agreements, e.g. the forestry agreements, will certainly have short- and long-term negative impacts on industry and rural communities in Nova Scotia.

Mr. Aucoin: I'll do the conclusion in English.

The analysis, arguments and suggestions we've made here are cursory at best, but we believe we have captured some of the fundamental flaws of the present system as it relates to natural resources.

The solutions we have suggested to many of the problems described are not as easily implemented as we may have implied. The changes suggested in the policies in some cases would be relatively simple, but they would require a fundamental change in present government philosophies relating to natural resources in Canada. Therein lies the greatest challenge facing not only rural Canada but Canada as a whole.

Thank you very much for having given us the opportunity to present our views on this most important subject.

[Translation]

We appreciate this opportunity to express our views on a subject of such importance to our rural communities.

[English]

The Chairman: Thank you very much, gentlemen.

Mr. Deshaies.

[Translation]

Mr. Deshaies: Mr. Aucoin, we have heard many witnesses and they all basically come back to the same thing. What hurts the most in your area? Is it the fact that you do not have a local garage, a corner store, a post office? One witness asked: "If the government leaves, how will we be able to feel safe?"

Mr. Aucoin: As far as we are concerned, we have never had any governmental presence. Therefore, this is not something that affects us. What we had in the past and what we no longer have is the value-added that I talked about. Thirty years ago, all the fish that was unloaded was processed locally. We had what you might call a small industry here. But the development of the industry brought demand. Today, in the fishery, 60, 70 or perhaps even 90% of the resource is sent elsewhere for processing. This is why we saw the jobs disappear.

Mr. Deshaies: What efforts should be made to recreate tools for development?

Mr. Aucoin: Today, it is the market that rules. The person who has the most money will be able to buy the fish. What the government could do is change its policies. But it is not that easy to do. Policy changes require a change of philosophy. I took the example of the fishery, but it could be something else.

Mr. Deshaies: With free trade, the United States have imposed quotas on us. But if we open our market so as to be more competitive on the milk market, my producers, in the Abitibi region, will lose 2 cents and a good many jobs will disappear.

Mr. Aucoin: Precisely. For us, the issue is the processing industry. If the fish were processed locally, that would prevent the decline of the fishery because, on the one hand, there would be fewer fish taken and, on the other, it would solve the jobs problem. It is obvious that once the fishery resumes operations, the problems will crop up again.

Mr. Deshaies: So we must make decisions.

Mr. Aucoin: I believe so.

.0935

[English]

We are caught basically having to answer to the largest dollar. The fishermen, for example, will sell to whoever gives the most money. Unless some form of federal or provincial policy is devised that says, for instance - and I use fishing as an example - the value-added component has to be done locally, then there's really very little chance for rural communities to survive.

One point we tried to make here is that there has been a fundamental realization that something has changed: the fishery is not an unlimited resource, as it was once thought to be, nor is the forestry, nor is agriculture. I think we're still going on the old premise that these are renewable and they'll always be there. If we get away from that and say they are not, then we can look at those resources differently in our own little areas and say we have to make 100% use of that resource in our area before it's shipped out anywhere else.

That's the main point I've been trying to get across here, and that's where the loss of jobs has happened for the rural communities. That's part of it: the shift in value-added from the rural area to other areas and other countries.

Mr. Deshaies: Thanks.

The Chairman: Mr. Ringma.

[Translation]

Mr. Ringma: So as to better understand the relationship that you see between the government and your region, I would like to come back to the example of the fishery and to look at it more closely.

[English]

Because I'd really like to get you involved, Mr. Gillies, I'll do this in English. It will be easier. I think Mr. Aucoin understands English perfectly.

Let's look at the fisheries. Both of you have made verbal criticisms of the fisheries. You're saying it's no longer a renewable resource and you have to do much more in processing value-added here in the area. Partly I can't see why you cannot take some of those initiatives yourself.

In fact I saw, I think in yesterday's Saint John Telegraph-Journal, a full-page article on business generally in Atlantic Canada. It said that on the side of the fisheries, you're making a lot of progress yourself, by your own initiative here. I'm trying to zero in on saying fine, there's so much you can do on your own, but there's so much you depend on government for.

If we look at fisheries, I wonder about a couple of things. One is that DFO is located in Ottawa. I happen to be from British Columbia, and I see that as a bit of a hindrance to the west coast fisheries, because the head of it is in Ottawa rather than on the coast.

Another quote from you is: ``It's crucial that agencies like ECBC and ACOA continue their policies but reflect the particular needs of the rural areas''. We've also heard from previous witnesses about decentralization from Ottawa. I'd like your opinion directly on the fisheries thing. Could we achieve more by decentralizing fisheries from Ottawa to both coasts? Would that facilitate other things, such as the financial assistance and how it's provided to the fishing industry?

Mr. Aucoin: Maybe I can answer one part of that question and I'll let Francis answer the other part.

Unless you have lived in a small fishing community, as I have, to see how the system presently works.... It's quite simple, actually. The fishermen go out to sea and bring their catch to the wharf. At the wharf they have 20 buyers and it's sold to the highest bidder. Those 20 buyers - and this is where the problem lies - represent a company in Boston, a company in Japan, a company here and a company there. There's freedom to sell to whoever you want, and the shipment is obviously taken out.

.0940

When you spoke, you asked whether we can do something about that. It's very difficult. What we could do, I guess, is go and kick a few of those off the wharf. That's what I'm saying. Really, having been born in a fishing community and raised in a fishing community all my life, I see no other option. We can work towards other ways, but they are cosmetic solutions, they are not real solutions.

That's why I say the philosophy has to change. The solutions are really simple, but the philosophy, which is not simple, has to change.

Mr. Ringma: But let's go beyond philosophy and get down to very pragmatic things. If DFO's and Fisheries and Oceans' philosophy changes and they say yes, what could they specifically do to correct that problem of having the buyers down here just buying the raw fish?

Mr. Gillies: I guess if they tap the free market.... If you're a local buyer and an outside buyer from either Japan or New Brunswick, as happens in our area, comes in and offers a price 50¢ higher and the local buyer cannot match that or cannot get the capital to buy that product because.... On several occasions the fishermen have been left high and dry when they did sell to new buyers that were trying to get established but couldn't because of the markets. They lost money and couldn't pay the fishermen.

I know last year the fish plant in Inverness and the one in Cheticamp could not get enough local crab even though a lot of it was coming to the docks. It was being shipped directly to New Brunswick the same day, with nothing being done to it in Inverness County. We run into those problems.

We have run into the argument that.... Our fishermen claim they are not getting their fair share of the crab quota because of the mid-shore licences. Only 2 of 189 licences in the gulf region belong to Nova Scotia. There are none in Prince Edward Island. The crab is probably the most lucrative fishery in the gulf right now. Even though it is being fished in waters twenty miles off our coast, our fishermen can't get into that mid-shore fleet.

Mr. Aucoin: I would add that these are not accidents of nature. These inequities, 189 for as against.... I don't know who is from New Brunswick here, but I think Roméo LeBlanc was the Minister of Fisheries at the time and that's why New Brunswick got all the licences. We know that.

To answer a question you posed about decentralization of DFO, I think you hit it right on the button. It's very difficult to get a sense of what a community wants and needs if you're in Ottawa. Decentralization in that sense, from one coast to the other.... There's no doubt in my mind that the farther you are from the centre of things, the less influence you have on that thing. You're 100% right. We would certainly say that as well.

Mr. Ringma: Did I understand it was implicit in your argument that maybe a marketing board should be established for the whole range of products, from aquaculture through crab through lobster, cod, and everything else, or would you not go in that direction?

Mr. Gillies: You're tied into another situation there, in that the marketing board would be controlling the price on all commodities or all species in the fishing industry, and I don't know if that would be the proper solution. It's hard putting more people to work in the fish plants. If the crab were coming in on a spaced basis....

That's part of the problem. All the local fishermen want to go out on day one. They can catch their quota in the crab industry in ten days and bring in a glut for those ten days, whereas if it were spread over six weeks and different parts of the fleet were allowed to go out at different times it would provide more crab for the processing industry for a longer period.

As for marketing boards, I think there would be a lot of opposition to a marketing board in the fishery.

The Chairman: Mrs. Cowling.

Mrs. Cowling: Thank you, Mr. Chairman.

You indicated in your presentation that we as a government and as local individuals need to start changing our philosophy. I want to touch on aquaculture, because we did have a group of people come in from the Atlantic provinces to the House of Commons and give us a lot of information on aquaculture.

.0945

One of the things we have heard about from a number of witnesses, right across the country, is the duplication of services and that we should perhaps be looking at harmonization of some of the services that are out there. I would like to know what you think about that, and whether you think we should be recommending a single-window approach to our government.

Mr. Aucoin: I think harmonization is difficult to address because it's a very large question. But I can relate one little experience that I had when I started working with the RDA, which is the regional development agency. I found with both provincial and federal governments that it was very difficult to get information. Unless you knew who to talk to, what he did and had his phone number, it was extremely difficult, either federally or provincially, to get things done.

I think the term I would use is user-friendly. I see that used in computers now a lot, but I think it applies to bureaucracy as well. In aquaculture, for example, you can go to one place and do things. I don't have to run to 15 different departments to see 15 different people.

The information is often not available, so I don't know who to go to. Sometimes it's only a matter of producing brochures to inform people what they have to do, who they have to see, and what permit they need. So the two parts to it are informing the people, and making it more user-friendly in a harmonization act. That would certainly be a very positive step. Since I've been working with the RDA, I've seen a very dramatic shift in that direction over the last three or four years, but I think it still needs a push.

Mrs. Cowling: Thank you.

Mr. Aucoin: Thank you.

The Chairman: Thank you very much, gentlemen. We very much appreciate you providing the testimony and particularly the discussion on the value-added aspects of it. It's been an important part of our study as we've travelled across the country, so we appreciate your additions. Thank you very much.

Mr. Gillies: One comment I would like to make is that when we first got the notice we were very surprised that even though it was about the rural economy and natural resources, you were holding this meeting in an urban area. There are many rural areas in Cape Breton that could have handled this. I've made my complaints known to Ottawa, but....

The Chairman: It is a good point. We've balanced our strategic needs, to try to do nine cities from one end of Canada to the other, with our ability to get into specific rural areas. We respect that, and we appreciate the fact that people are travelling to us in this community. The point is well taken.

Mr. Gillies: Thank you.

The Chairman: Thank you.

I'd like to call on our next witness: from the United Mine Workers of America, Mr. Steven Drake. Welcome, Mr. Drake.

Mr. Steven Drake (President, United Mine Workers of America): How are you this morning?

The Chairman: Not too bad. Yourself?

Mr. Drake: Not bad.

The Chairman: Good. I will ask you to make an opening statement and then we'll turn it over to the committee members for questions.

.0950

Mr. Drake: What we're attempting to do here today is to impress upon the committee and the federal government that indeed the information we got in the backgrounder for this committee, where it suggests that rural regions of the country face a unique set of economic challenges, is true. Therefore we need a unique set of solutions to some of the problems we have.

It also suggests that we're still dependent on mining and fishing, the traditional industries, and we are. In Cape Breton the traditional industries of fishing, farming, coal mining, and steel are basically in a position of devastation right now. What we're looking for from the federal government is a way to stabilize and perhaps expand these industries in the future.

What we're suggesting is that the federal government has spent $80 million in tax money on a new coal mine, a project called the Donkin-Morien Colliery, in the early 1980s. The engineering studies that were done on the Donkin facility are still valid today. Nothing has changed over there. We have 1.5 billion tonnes of coal reserves in the Donkin block. That's almost double what we've been mining in the Sydney coal fields for the past 300 years. According to engineering studies the Department of Natural Resources has in its possession, 50% of that is recoverable with present-day mining technology; and it's mentioned in the report.

What we're suggesting to the federal government is that if they are serious about stimulating the economy of Cape Breton Island, they should get serious about stimulating the coal mining industry in Cape Breton Island. We've tried many other approaches. They've been unsuccessful here. If we're going to bring in new jobs, it doesn't make sense to eliminate 715 jobs in the coal mining industry and replace them with 300 jobs, $7- or $8-an-hour jobs. Stabilize what we have here right now with the Cape Breton Development Corporation and anything else will be a net gain. Any other thing and there will be no net gain.

We're going to make some recommendations, but first I'll briefly go through these overheads.

The first one is on mineral production employment in Nova Scotia. In 1994 2,320 people were employed in the coal mining industry. At that time DEVCO was approximately 2,000 to 2,100 of that number. According to economic studies by the Cape Breton Development Corporation, our industry injected approximately $1 billion into the economy, and that happens on a regular basis. Direct jobs and spin-off jobs in the coal mining industry have a heavy impact on the economy of Nova Scotia in general.

The next one is on the fossil fuel reserve estimates worldwide. If you look at oil, it's approximately 48 years of reserves. If you look at natural gas, it's somewhere around 60 years. If you look at coal, it's close to 250 years of reserves worldwide at the present rate of production. It's more than double oil and natural gas combined. We're suggesting, and it's backed up by studies from the Coal Association of Canada and various other think-tanks that are working in conjunction with the coal mining industry, that coal will be and should be the fuel of the future.

The next one is on world thermal coal imports. This is the part of the market we're talking about. We're largely an exporting company: 50% of our product was exported in 1991, I believe. Since that time we've been curtailing our exports.

The graph shows that in 1994-95 world thermal coal imports will be somewhere around 235 million tonnes. What the Cape Breton Development Corporation requires of that is two million tonnes. If we can bring our production levels back up to what we were, at four million tonnes per year, we can get on this market once again.

.0955

In conjunction with this, and again according to the Coal Association of Canada and Statistics Canada, last year Canada imported 9.29 million tonnes of bituminous coal. That's what we sell. Canadian coal miners are on unemployment and Canada is importing coal from countries like the United States and Colombia. We say this isn't a fair process. If we're going to be Canadian, we should buy Canadian, and that means buying Canadian coal and curtailing the importation of foreign coal.

The next graph shows the markets of the Cape Breton Development Corporation for the past ten years. Cape Breton, Nova Scotia, on the left of the chart, is in close proximity to and one of the closest suppliers to western Europe. We've been in this market in Sweden, Finland, Denmark, The Netherlands, Germany, Belgium, France and the U.K. Those people who have come to Cape Breton Island have been very satisfied with our product. They've been satisfied with the fact that they know when they get here our product will be available. We have a very stable workforce and a very stable political atmosphere.

The last graph shows the future of coal in Cape Breton. The total picture shows the coal reserves in Nova Scotia, and where it shows the ``remaining 278'' - that's outside the Sydney coal fields - it means that in the whole province of Nova Scotia we have 278 million tonnes of coal. That's what we've been mining for approximately 300 years. The other lines that show Sydney with 850 million tonnes, that's what we've been mining in the Sydney coal field in Cape Breton Island for approximately 300 years. We're still mining that other Sydney block.

Down below that, you'll see Donkin Mine at 1.578 million. If you look at the graph, it's very impressive. That's the Donkin block. We're suggesting that if we're talking about fully utilizing the natural resources in Cape Breton Island and in rural Canada, you have to seriously consider Donkin Mine. That's the message we're trying to send to the federal government. If this coal mining industry is to survive, the Donkin Mine has to be opened and it should have been started yesterday.

We're going to make three recommendations and then I'll just finish up.

First, the federal government should take immediate action on the start-up of the Donkin-Morien Colliery. We have a $15 million export facility strategically located near proven markets in western Europe. Incidentally, France, one of our proven customers, is getting out of the coal mining industry. They'll be importing all their coal for their electrical generation by the year 2004.

There's a process available to produce methanol or clean-burning diesel fuel at a clean-burning diesel fuel refinery at the Donkin Mine. Here's a quote from a report by the Nova Scotia coal gas venture company on Donkin Mine in November 1990: ``The Sydney coal field is host to an immense methane resource.'' Methane is a natural by-product of coal production. Once again, using this methane would further capitalize on our natural resources here in Cape Breton.

Second, the federal government should take the necessary steps to curtail the importation of foreign coal into Canada. We have coal miners on unemployment.

Two weeks ago a coal boat pulled into Belledune, New Brunswick. We have coal miners working in New Brunswick. The boat had 80,000 tonnes of Colombian coal on it. There were young children working on that boat who were 12 years and 13 years old. I don't know what they make a day, but the hourly wage is somewhere around 58¢.

Canadian workers can't compete with things like that. We don't want to compete with things like that. This coal boat unloaded 80,000 tonnes of coal in the same week that New Brunswick Power - New Brunswick coal - announced 58 coal miners were losing their jobs. That's a third of the workforce. That coal boat left with a cheque for approximately $2 million and went back and put it in a Colombian bank. That cheque wasn't put into a Canadian bank. That cheque did not stimulate the Canadian economy. This shouldn't be happening in this country. If we want to stimulate the economy, we have to keep Canadians working.

Third, the federal government should move towards developing research programs or pilot projects similar to those planned or in operation in other coal-producing nations, such as Australia, Germany, the United Kingdom, the United States and Japan. These people are overtaking us. We've developed technologies in this country that were firsts for the coal mining industry.

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The first methane-producing plant was built in Cape Breton about 10 miles from here. It was the latest technology. It was never utilized. That technology was exported everywhere else. They're using that technology today.

For example, consider some of the research projects. Coal can be used for coking and by-products from the coking process, such as ammonia or light oils. Ontario, according to the Coal Association of Canada, has four coking plants in production right now.

The liquefication of coal has been a viable process since the 18th century. Chemicals such as methanol, ammonia and aviation fuel are produced in the United States, Germany and Japan. If they can do it there, we can do it here in Cape Breton and in Canada.

Methane is a direct by-product of coal mining and can be utilized through direct sales, the production of electricity or micro co-generation.

Once again, there's information in here that suggests that United Mine Workers have made representations to Natural Resources on co-generation and the utilization of methane as a by-product. It's a natural resource and we own it, so we should be using it. Right now, we're just letting it fly off into the atmosphere.

There are many more issues that we could discuss here on the coal mining industry in Cape Breton to do with the importance and economic impact of it. Every bit of that information has been given to Natural Resources. Every bit of that information has been given to the Senate committee. There's no need to go through it here today. We don't have time today, I suppose. It's all available if this committee will look into it. Anne McLellan is quite aware of where we're coming from.

This is a book called Creating Opportunity: A Plan For Cape Breton. Once again, it's included in your information.

We put together a plan that we think can stabilize this industry. We've given it freely. We're experts in the field. We have 300 years of coal mining experience. We're not just here raving and ranting about opening a coal mine. We have solutions to the problems today in the coal mining industry in Cape Breton, and we want our representatives in Ottawa to listen to us.

If there's one message that you might take back to Ottawa today, it's that the Donkin Mine has to be part of the future of the Cape Breton coal mining industry.

I will quote David Dingwall: ``Canadians right now are pissed off at the federal government.''

The bottom line is that we want to work. That's all. We're not looking for anything else. We're not looking for charity from the federal government. We want work.

Cape Breton, as you are well aware, has a posted unemployment rate of 24%. Realistically, it's 50%. Glace Bay was the largest mining community, the largest coal town in North America at one time. It has 50% unemployment right now. If the federal government is serious about securing work here, it has to be serious about ensuring that the coal mining industry remains viable and is expanded.

Thank you.

The Chairman: Thank you very much.

Mr. Deshaies.

Mr. Deshaies: I have a quick question. From what you're espousing here, your needs are really precise.

I come from a mining area in northwest Quebec, but I know little about coal mining. What will your industry do to inform the public about this industry? You know, you do not have a good reputation among environmental causes. I don't mean specifically whether or not you are a good industry, but what will your industry do to inform the rest of Canada about the environment? The important thing is the impression the public has of your industry.

Mr. Drake: Let me put it this way. The information is available to anyone who wants to read it. As for what the coal mining industry does to benefit the environment, look at this detailed report from the Coal Association of Canada that comes out on a yearly basis. It's public information. Natural Resources gets a copy of this every year.

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This is one thing that you can look at; we've attempted to change the image of coal mining from a dirty, environment-polluting monster to exactly what it is - it's a job creator, and it's a highly technical industry. Coal miners don't mine coal with picks and shovels any more. We use high technology. We can actually repair things - electronic items.

What we're talking about here is burning cleaner, low-sulphur coal. We have a washing facility here in Cape Breton. We have technology for select mining that we're looking at right now that was researched by Public Works Canada approximately a year and a half ago. That process involves leaving the bad coal and taking the good coal, so you're burning a better product. Reducing and capturing emissions, scrubbers for instance - there are certain scrubbers now that were developed in the United States and are being utilized there and in Europe and Japan right now, and they remove approximately 95% of sulphur dioxides.

Fluidized bed combustion is another process for burning coal more cleanly and not contributing to environmental problems. We have a fluidized bed combustion generating station at Point Aconi here in Cape Breton, and also an integrated gasification combined cycle burning process. That's also a process for utilizing coal where the emissions are less volatile, less harmful to the environment.

All these things are public information, and to change the image of coal mining in Canada from an environmental polluter to an economic stimulator that is environmentally responsible - that's a position the federal government could certainly undertake, I believe, and I think the Department of Natural Resources could help immensely in that area.

The technology is there. I believe the coal mining industry is very environmentally responsible.

Mr. Deshaies: Yes. I said that because I'm official critic for mining. I want the industry to develop, and I think it's important that these results be made more known throughout the population. It's just a suggestion. The perception amongst the population here needs to change in the near future.

Mr. Drake: There's a neat little chart, also from the Coal Association of Canada. It says ``Coal is more than a fuel'' - and this is available through Natural Resources. There's a tree, and the centre portion is a block of coal. It shows how coal is used for producing gas, for producing tires, producing coke, light oil, heavy fuel, airplane fuel, paint thinner, photo developer, perfume, batteries, photography, bleaching, roofing. It's not just a fuel. These technologies are in place and they're being utilized worldwide.

Canada at one time was on the leading edge of these technologies, and we're not any more. Coal, according to the researchers and according to the statistical information, is going to be the fuel of the future. If we back away from it now in favour of the big oil companies and the big gas companies, we're making a tragic, dreadful mistake.

The Chairman: Mr. Ringma.

Mr. Ringma: Mr. Drake, the main thing your presentation did for me was to underline how ignorant I am about the whole coal business. Perhaps I'm just typical of the Canadian public, but my mouth was practically hanging open as you delivered some of your.... I did not know, for example, that we were importing coal in Canada.

Mr. Drake: Last year, in 1995, it was 9.29 million tonnes.

Mr. Ringma: I'm from B.C., and we have a whole load of coal in the Rockies that we're exporting. That's all I see.

Mr. Drake: You're expanding your industry also, in British Columbia.

Mr. Ringma: Tell me, why are we importing it? Is it straight market...? Your example of the Colombian freighter - is it because it's cheap coal and it's needed somewhere that we're importing it?

Mr. Drake: The answer to that question is it's cheap. A friend of mine stood on the deck of this Colombian coal boat two weeks ago and saw a 12- or 13-year-old little boy working on this boat. That's child labour, by anyone's interpretation. Canadians can't compete with that. We won't compete with that. Our kids should go to school, not go to work on a coal boat or in a coal mine. That's one thing.

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If they say it's cheaper, I disagree. It might be cheaper by the tonne when we get it here; it might be $40 a tonne or something like that. However, there is another cost involved. If we take that Colombian coal boat - or wherever it's coming from - it's coming into Canada from another country. It's not stimulating our economy, when that money goes outside Canada. If that $2 million goes out of Canada and we have coal miners on lay-off, there is a cost to this economy. First, those coal miners aren't contributing to the economy through the economic spin-offs they would be creating if they were spending their pay cheques in Canada. Second, they're drawing from the system. They're on unemployment. If they can't find another job, and they're coal miners.... Some of these guys have 25 years. What are you going to train a 25-year veteran of the coal mining industry to do who is 50 or 52 years old? They're not stimulating the economy.

The cost to Canada of importing this cheap coal isn't cheaper; it's costing more. There's a human cost in here. Canada is Canada; that's why we live here. Canada looks after Canadians. That cheaper product that's coming here as far as we are concerned isn't cheaper. There's another cost. That money is going outside Canada. It's not stimulating our economy.

Mr. Ringma: I've simply got to choke back on questions, because I could stand here all morning and ask you questions.

Mr. Drake: You go right ahead. I can answer them all morning.

Mr. Ringma: Give me a real quickie here now. Why is France getting out of the business?

Mr. Drake: I think it's the product. It's difficult; I have the information, and I brought as much as I could today. France is getting out of coal production, I think, because they can get it cheaper elsewhere. Also, their coal product is high in sulphur and high in ash, and it's difficult to burn that because it's damaging to the electrical generation - the turbines and such. Their product isn't as good as our product.

We've been in France, as I said. It's in your information there. They have been very satisfied with our product and we're right across the door. We have an open doorway from Cape Breton over to France. That's beneficial for the Canadian coal mining industry. If they do get out of the mining industry - and they're planning it - that's an open market for us.

To move away from our export market now would be a dreadful mistake, because if we did that we'd be tied to one customer - Nova Scotia Power. In any business, if you're tied to one customer, you're at the mercy of those customers for prices.

Mr. Ringma: Thank you very much. I'll just conclude by saying I'll be doing some homework to get better informed.

Mr. Drake: I'd appreciate hearing from you if you come up with anything.

The Chairman: Mr. Reed.

Mr. Reed: Thank you, Mr. Chairman.

I'm peripherally familiar with the technologies and the spin-offs from producing coal. Many of them had their development in the Second World War, and so on. I have a kind of basic question. If these technologies are viable now, in today's market, why aren't they happening?

Mr. Drake: Let me put it this way: they are happening. I just mentioned, as a matter of fact, three or four. Liquification of coal is happening right now. It's a viable process in the United States, Germany and Japan. They are utilizing those things right now.

Mr. Reed: I guess my question is why aren't they happening here?

Mr. Drake: Why aren't they happening in Canada? That's the $60,000 question. I don't think I can answer that one. That's what we've been doing for the last two years - pushing the fact that coal isn't just coal. Coal creates jobs in other areas - in the technology field, in the engineering field.

I tried to say this before; I kind of stumbled. Our coal miners work underground now with $2 million and $3 million machines that are remote-controlled. It's mostly electronic now, and if that machine breaks down, our people can repair it. They can troubleshoot it and repair it. It's a high-tech industry.

Mr. Reed: Surely there are entrepreneurs who can see the potential that you outline in your paper -

Mr. Drake: Most definitely.

Mr. Reed: - for the liquefication, the production of aviation fuel, etc. I go back to my question. Why not? Why has it not happened?

Mr. Drake: Let's put the $60,000 question to the federal government. Alastair Gillespie has been looking for the syn fuels project in the Port Hawkesbury area for more than 15 years - that's my understanding - and he's still looking for it. He appeared before the Senate committee. That project would burn approximately 400,000 tonnes of Donkin coal. Why hasn't that project been explored? Why hasn't that project been given serious consideration by the federal government? I can't answer that question. Only the federal government can answer that question.

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Mr. Reed: Would that be because it would require a large amount of government intervention?

Mr. Drake: By ``government intervention'' do you mean -

Mr. Reed: Money.

Mr. Drake: - money? You could check the minutes in the Senate report when Mr. Gillespie appeared. I don't believe Mr. Gillespie is looking for a whole lot of financial input from the federal government. You would probably get a better answer to that question from the Senate hearing minutes, but I don't think he's looking for a whole lot of government money.

We aren't either. We put a proposal to the federal government whereby we we could adopt improved mining methods, improved labour-management relations, improved purchasing, improved utilization of our product, such as methane co-generation or methane direct sales. We've put all those things to the federal government. Each one of those items reduces our cost per tonne; and cost per tonne is where this problem is. If our cost is $80 or $90 a tonne, that's too much money to be competitive, but if we can utilize all these proposals to drop our cost per tonne to $50 or $52 or $32, whatever the case might be, we can be competitive with anyone else. Ladies and gentlemen, in Cape Breton we have the best coal miners in the world.

Mr. Reed: I have no doubt about that. The question is why there has not been a race of private money to develop it, or even with the unions. What about the labour-sponsored venture funds? The Canadian Labour Congress has $800 million sitting in a pot.

Mr. Drake: Let's go back to this gentleman's original question on the image of the coal mining industry. The image of the coal mining industry has to be changed, and the federal government has to help change that image. If the image of the coal mining industry is one of a big money pit - I disagree with that, but if that image is out there and that impression is out there - it's going to be very hard to get private investors investing in the coal mining industry.

On another aside on your question, private enterprise is fine - no problem. But the main function of private enterprise is to make a profit. In the coal mining industry, with a crown corporation as we're faced with here with DEVCO, if we have 2,000 people working and we can show the federal government how to make this industry viable and break even and keep those 2,000 working, why would the federal government move away from crown ownership? There's no reason. It's not costing the taxpayers any money. On the other hand, if private investors come in and they want their profits, those profits, every million dollars they take out of this industry and don't put directly back into it, costs us jobs.

So why would we push for any kind of private concern here? I won't. I can't.

If we can show the federal government...and we've shown them. Give us an opportunity to prove this industry can be viable and self-sufficient with no tax dollars. Give us an opportunity to show you that and we'll try our best. And if we can show you that, keep DEVCO as a crown corporation and keep the remaining people employed here in Cape Breton. That's our option.

The Chairman: Mrs. Cowling.

Mrs. Cowling: Welcome to our committee, Mr. Drake.

Mr. Drake: Thank you. It's a pleasure to be here.

Mrs. Cowling: One of the things we have heard from a number of witnesses right across the country is that jobs and economic growth should come from local initiative and should be driven not from the top down but from the bottom up. I want to indicate for the record that Minister McLellan is committed to the sustainable development of rural Canada and its economic survival, and of course that is why we are going through this exercise of listening to people such as yourself.

When the federal government approved DEVCO's corporate plan in May 1996, it provided DEVCO with a loan to meet its financial shortfalls through to 1999. It's expected that DEVCO be in a position to begin those repayments in 1999 through to 2000.

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I want to come back to a question Mr. Reed posed, because I think it is extremely important. I'm going to choose one of the phrases you used.

If the coal miners of the area are the best in the world - and there is no reason why we shouldn't believe that as a committee - why can you not prove that you can compete with those other areas? Clearly, the minister is committed to help, through research and what not. But it is in your hands to prove that you can create that kind of business climate to improve and bring jobs to this area.

Mr. Drake: First, the statement I used that Cape Breton coal miners are the best in the world is documented. We've broken every single submarine mining record imaginable in the past 50 years - and that's in the record books of Canada. Any time you read anything about the Cape Breton Development Corporation, other than the things we're going through right now, you see DEVCO breaks another record, Lingan miners break another record, Prince Colliery miners break another record, Phalen coal miners produce 80,000 tonnes in one week. They're worldwide submarine mine records. You can't compare us with a strip mine - there's no comparison. You can't compare us with a mine that goes right into the side of a mountain where they have optimum mining conditions. You have to compare apples and apples, not apples and oranges. That's the first thing.

Second, why can't we prove it? The record speaks for itself. Right now we're in the worst mining conditions we've ever had.

Have you ever been underground in a Cape Breton coal mine, in a submarine mine?

Mrs. Cowling: No.

Mr. Drake: We are suffering from the worst geological conditions that we've ever had in the mining industry here. Our guys are proving every single day that they can be competitive. Mother Nature is against us right now, and we need a break - and that break is Donkin Mine. I hope that answers your question.

Mrs. Cowling: With the interim financial support we are providing as a federal government, we wish you the very best.

Mr. Drake: Tell the federal government to take some of that $79 million - they're the bosses and they pull the strings - and plug it into Donkin Mine. It's a good investment in Canada's future.

Mrs. Cowling: I think it's important for the witness to understand what we've heard from several other witnesses across this country, and I'll say it again. I think I'm fairly accurate in saying that the majority of those witnesses clearly said that it should come from the local people - the local initiatives should happen here - and we should not be a driving force from the top down.

Your message seems to be somewhat different. Your message seems to be that we should be driving this down from a federal perspective, and not from the grassroots up. I think we have to be fairly clear on that, because when we do our report, we need to know, if we're going to be representative of the people we've listened to, what your feelings are.

I think your feelings are very mixed. You compare apples and oranges, but I also think your presentation is a mixed presentation. It's not giving us some specifics, and that's what we need, as a committee.

Mr. Drake: I don't know what you mean when you say my message is mixed. My message was very clear: If you're going to stimulate the economy in Cape Breton Island, you have to stimulate the coal mining industry.

As far as what you said about the representations you had across Canada, it depends on who you talk to. If you talk to an economic think tank that's being funded largely through government contracts, it's going to give government answers. If you talk to big business, it's going to give you that side of the story.

What I'm giving you here today represents average working Canadians. We're in rural Canada in a situation with 24% unemployment. What the people you're talking about right now who made those representations said hasn't worked here in Cape Breton. We're still at 24% unemployment, and that's as reported by Stats Canada. That's not the true picture. The true picture here is 50% unemployment.

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We need something from our government that we elect and give the power to utilize our tax dollars to the best benefit of average working Canadians. In Cape Breton, right now, we need the government to continue helping the Cape Breton economy through the Cape Breton Development Corporation.

We've put forward options here. Natural Resources has them, the Prime Minister's office has them, the Senate has them and now you people have them here today. We're putting forward options suggesting that DEVCO, over the five-year term, could be viable and not cost the taxpayers any further money. I don't see anything mixed about that and I don't see anything wrong with that message.

When you go around with a committee like this, you're going to get a mixed bag of messages from everyone. You can't get the same message. If you're looking for a certain message to take back before you go somewhere, there's no purpose in having a committee. This message, as I said, once again comes from average working Canadians. We want to work and we think we have a way to do it. We have a plan.

Mrs. Cowling: Perhaps I'll leave it up to the chairman to indicate to you who we have actually listened to.

Mr. Drake: Sure. I'd appreciate that.

The Chairman: We've listened to a wide variety of people. When we've been out on our tour we've listened to everyday Canadians - not big business, think-tanks, etc. - including the people involved in the production of our natural resources in various parts of the country. But that's neither here nor there.

I think I understand what you're saying, and correct me if I'm wrong. The best bang for the buck in Cape Breton is the coal industry and that's where the resources ought to be put because it can create the most jobs in the quickest way. Is that what you're saying?

Mr. Drake: In a sense, yes, but you have to understand we're not saying to put all of your eggs in that coal mining basket. We're suggesting there are almost 2,000 people working in that industry, and that's a great benefactor to this island right now.

To continue to dwindle that economic cornerstone industry, that economic foundation, with what's going on right now - the federal government gave us this mandate to eliminate 715 jobs - won't do a thing for Cape Breton Island. The jobs you're talking about creating will not pay $17, $18, or $19 an hour - they will pay $7, $8, or $9 an hour. It's history here. It's history right across the country.

We're suggesting you stimulate that, shore it up, and leave those jobs here. We can do that. Then anything that comes in will be a net gain. That's what I said when I first sat down. If we get 350 or 450 extra jobs here from the private sector, from decentralization of government services - which was another government promise here in Cape Breton Island that didn't materialize - they're extra jobs on top of what we have. Does it make sense to eliminate 700 jobs and then take 350 jobs and put them into Cape Breton? Would that make sense? Would that help our economy? I'm posing a question.

The Chairman: I understand where you're coming from. I have another question for you. There's a dilemma here and I'd like you to address it.

Mr. Drake: Yes, there sure is.

The Chairman: On the one side, you're suggesting that to be viable you need to be able to export your product. You need markets around the world, and the more markets you have, obviously, the more you can sell and the more viable the business is going to be. That makes a lot of sense.

On the other side, though, I think you're suggesting we need to restrict the imports of coal into Canada. It would probably be a difficult public policy to go into the international community and say we want to have access to their markets, but we're going to restrict their ability to come into our market. I suspect the international community would take great umbrage to that approach.

I don't know if that's exactly what you're suggesting. If it is, I'd like you to explain how, on a public policy basis, we could proceed down that route.

Mr. Drake: I don't set public policy, but I suppose as a taxpayer and a voter I have some say in this. We're looking at the exportation of coal first, and you're right that it is a viable part of our industry. If we can export two million tonnes of coal, we won't have to restrict imports into Canada. But if we can't export coal.... And I think it was in January 1996 that the federal government endorsed the Cape Breton Development Corporation's plan calling for the elimination of exports for the next four years, which put us in a very bad position. We were tied to one customer, Nova Scotia Power.

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It makes no sense whatsoever to eliminate the export market for the Cape Breton Development Corporation and at the same time be importing coal into Canada. We have to have a market for our coal in order to keep our coal miners working. If that market is inside Canada, fantastic. Buy Canadian coal. That's what Canadian producers and power generators should be doing. If not, we need to be on the export market.

I don't know if you saw the report on the Cape Breton Development Corporation from Natural Resources, but for the next four years, it shows no exports. That effectively cut two million tonnes of our productivity, which effectively cut jobs related to that two million tonnes of production.

As I said, I don't set policy, but it's an either/or situation. We have to have something here in the coal mining industry. We can't be restricted to one customer and we can't be restricted to two million tonnes of coal.

The Chairman: So essentially what you're saying is if you have access to foreign markets, you don't have a problem if people have access to our market.

Mr. Drake: Well, let me put it this way. I'll try to clear that up. I didn't realize I was being confusing when I was making those statements earlier.

I disagree wholeheartedly with Colombian coal coming into Canada and 12-year-old kids working on those boats instead of going to school - wholeheartedly, 100%. I don't think the Canadian government should be allowing that, period. That's as clear as I can make it, flat out.

The Chairman: Well, you still haven't addressed the question of whether or not you believe we should set up controls on the importation of foreign coal.

Mr. Drake: I believe NAFTA should be reassessed. I think that was another promise of the federal government. I think Dave Dingwall said he was going to scrap NAFTA, did he not?

The Chairman: I have no idea what Dave said when he was down here.

Mr. Drake: That was a see-saw, was it? Okay.

The Chairman: You're a skilled politician, Mr. Drake.

Mr. Drake: Thank you very much. I hope I can take that as a compliment.

Some hon. members: Oh, oh!

The Chairman: Yes, it's meant as a compliment.

One of the reasons we've come to Cape Breton is the importance of the coal industry. This is an important part of rural Canada. In coming here, it was very important to hear your perspective and the perspective of the men and women you represent.

I had an opportunity in a previous life to live in Elliot Lake and had extensive dealings with the United Steelworkers, who represented the people who mined uranium. I know how hard those individuals worked to represent the people who worked in those mines. Over a period of 30 years, they took that industry from a very dangerous and difficult industry to one that had the safety the workers deserved and a better work environment.

I suspect you represent your constituency and the men and women who work in your union as well as they did up there. I know it's a tough job, and I appreciate that you took the time to provide your perspective to this committee.

Mrs. Cowling: Mr. Chairman, I would like to personally thank Mr. Drake for coming.

I also want to indicate the commitment of our minister. She is so committed to this particular area that she has sent along her legislative assistant, who is actually sitting in the back of the room. She's committed to the renewal of rural Canada. It is through her that we are actually doing this exercise. So we are clearly committed to the economic viability of rural Canada.

Mr. Drake: We at the UMW appreciate that the committee came here in the first place, and we understand the importance of it. I suppose in the spring, when you do make your representations, everyone who made presentations to the committee across Canada will be represented in that final report.

I'd just like to reiterate one thing. The coal mining industry in Cape Breton is a very vital part of our economy. From the perspective of the rank-and-file, average worker down on the coal face today - and this is an average, taxpaying Canadian - if the coal mining industry is to survive in Cape Breton, Donkin mine has to be a part of that picture in the immediate future.

If some of these things were a bit confusing, that may be my fault; I don't know. But if you get one message here today, let it be that Donkin mine has to be a part of our future.

I thank you for the opportunity for speaking and I wish you the best of luck.

The Chairman: Thank you very much.

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I'd like to call on our next witness: from the Inverness and Victoria County Federation of Agriculture, Mr. Fraser Hunter. Welcome, Mr. Hunter. I'd ask you to make an opening statement and then we'll turn it over to the committee for questions.

Mr. Fraser Hunter (Director, Inverness and Victoria Federation of Agriculture): My name is Fraser Hunter. I'm a dairy farmer from Inverness County near Mabou in Cape Bretton. I'm here today representing the Federation of Agriculture for Inverness and Victoria Counties.

We appreciate this opportunity to submit some of our views to the committee at this time. It was through Francis Gillies of the RDA, who was already up here, that we were made known that the committee was coming to this area. We appreciate the opportunity to come before you to express our views in connection with rural development.

It was very important when we looked at your work plan and study objectives over in Inverness and Victoria Counties - we call that area really rural Cape Bretton. Mr. Gillies made that point earlier to you - they said the committee hopes to raise the profile of the resource sectors in the eyes of the Canadian public, the contribution of which has not always been understood or recognized. From our aspect in our agricultural industry over on that side of the island we feel this greatly.

Turning to the prepared script I have given you, the Inverness and Victoria Counties Federation of Agriculture has an active membership of some 105 farms. The industry in these two counties is small in terms of the Nova Scotia agricultural industry, but is one of the backbone industries, along with forestry and fishing, in our area.

The industry has a farm-gate value in our counties of about $5 million. The agricultural industry in the counties is very diverse and its commodity groups include dairy; poultry in the form of egg production; beef; sheep; small fruit, mainly blueberries, raspberries and strawberries; maple syrup; fox and mink; grain and forage; and vegetables.

The industry as such is made up basically of family farming operations and not large operations in that area. Most full-time operations are dairy, with the part-time operations supplementing their income from school bus driving, highway work, fishing, forestry and tourism.

The important point about the agricultural industry in our area is that it does not rely on the EI system or the old UI system to supplement income, so it's very much a 12-month, year-round operation.

The Federation of Agriculture strongly agrees with many statements to be found in the background of your committee's work related to the rural economy. The awareness of the urban economy that the rural economy is important has only come to notice. If you look in the U.K., it was indeed interesting to note the increased profile agriculture obtained with the BST crisis in cattle. The urban population in that country has been made harshly aware of the primary resources industry and its importance to the economy.

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In this submission the federation does not wish to dwell on statistics. I'm sure your committee can readily obtain those. In this submission the federation wishes to outline specifics related to agriculture in our own area's micro-economy, which we are sure will be relative to the macro-economy in rural Canada.

Often these days we use ``in'' terms in relation to the economy. One of the ``in'' terms we talk about is small business and entrepreneurship. This area of the economy is heralded as one aspect of the new economy. Farmers sit back and contemplate that this is nothing new. We farmers have been running small businesses for years. Why isn't it recognized?

With little or no recognition of our role in the economy, government programs bypass our sector. We can't get interest-free loans. We can't get loan guarantees. We can't get interest buy-downs, which are made available to many other sectors of our economy. These programs are not available to primary producers in any sector - agriculture, forestry or fishing.

The primary product must be produced before the secondary industry can process it. If you don't produce it at the primary stage, nobody is going to process it. You can't add value to it. You can't do anything to it. The resource sector - fishing, farming and forestry - has been forgotten. Everything in programs is geared to the secondary industries.

Adding value is another ``in'' concept. We have been doing it for years. What adds value more than converting soil to grass, feeding it to a cow and producing milk, which you're all now partaking of? That surely is adding value. Sure, the raw product leaves our farms as milk, but we've added an awful lot of value to that basic soil before it gets to the stage of milk. That seems to be forgotten.

As a little aside to this, Canada is world-renowned for its sale and export of cattle. It's because of our health status. We add value by producing high-quality genetic animals. Government programs to support that production by obtaining records are being removed. No, we don't want to be a parasite, but they have to be removed slowly so we can maintain the recording that is so necessary to produce those high-quality genetic animals.

Diversification is another ``in'' term. The agricultural industry has again been instituting this concept in its business strategy as we look for new and sustainable cropping programs to produce food for man and beast.

As for technology, what other industry made up of small business entrepreneurs applies advances in technology more rapidly than the agricultural industry, with biotech to plants and animals? Think of embryo transfer, etc. We've certainly been at the forefront. The latest technology of course is computer satellite technology, by which we can now record yields on our tractors from certain areas of the fields so we can apply our inputs more strategically.

Chairperson, yes, we agree that the profile of agriculture, along with forestry, fishing and primary producers, must be raised. The rural areas must have their profile somewhat increased.

As for the road ahead, rural industries are not stand-alone industries, but very much interdependent. When stand-alone industries are created, they are doomed to failure.

In the rural areas, the primary inputs in the production of the product we market are land and water. When we go back to the stand-alone industries, we just have to look back in history to see we still have people in our own areas doing it. When they made an income from forestry, fishing and farming, they had a very viable income, and they still have a very viable income. If you look at fishing as stand-alone, then you have problems. You just have to relate back to the Kirby report of the mid-1980s. Where fishermen relied totally on that resource, they had problems.

The stewards of land and water are the farmers, fishermen and foresters, and in many cases it's the same person. How these inputs have value added to them will result in the economic well-being and sustainability of the rural areas. Without good stewardship of these inputs, failure in economic sustainability will result. We must look after these two inputs to the best of our ability.

Think of our native people. They look at the land and the water in a spiritual sense. We, as Canadians, have to get back to having the same awareness of our land and water. We can't take it with us, and if it's not looked after now, then we are going to have problems. In too many cases we've been raping these resources. It was mentioned by the RDA, fisheries and forestry. Something similar can happen in agriculture.

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At present the returns to the steward are poor. An example there I've looked at is a milk primary producer with a $650,000 investment. He has a $140,000 gross return per annum. Milk leaves his farm at 52¢ a litre and 24 to 48 hours later it's wholesaled to the retailer at $1.30 a litre. The retailer receives a 19% rebate, or 25¢ a litre. The retailer turns over $1.30 a hundred times a year with a gross profit of $25 for a $1.30 investment. The primary producer, the steward, is not getting a return on his investment.

You can go similarly to the pulp cutter in the woods where he's probably earning $12 an hour on stumpage at $12 a cord. That guy has to produce it before anybody adds value to it. We're not getting a fair return.

The primary producer must obtain more control of marketing their product, whether in agriculture, fisheries or forestry. The first gentleman who presented a report to you mentioned the federal government has to create the environment. We want an environment created where the primary producer can get back some of that control of marketing his own product.

It has become very much centralized. You talked earlier about decentralization of government services. The processing industry is becoming more and more centralized. With decentralization of that back to the rural areas we can add value. In our own area there used to be creameries. There used to be small processing plants. If we go to other areas of the world today we can see these small processing plants being put in place to decentralize the processing, and it means then we're trucking a finished product instead of a raw product. If you just look at the milk you drank, some of it is Farmers and some of it should be Cape Breton Dairymen. The Farmers milk is produced in Antigonish. If you know this province, some of it's produced in Antigonish, trucked to Halifax and trucked back here. The Farmers milk at least is produced in Cape Breton and trucked to Sydney for process. But we're trucking raw product all over the place.

Interaction between urban and rural areas was one aspect that came up in your work plan. The primary industries of agriculture, forestry, and fishing are wealth-creating industries, so necessary to sustain an urban economy. But take one aspect of this. In our two counties, we have roughly a population of about 26,000 people supporting 11 high schools. These 11 high schools graduate approximately 275 students annually. Our drop-out rate is low; one, because it's very much a family affair in these high schools, but also we don't have many McDonald's, Burger Kings or Wendy's for students to go and work at if they drop out of school early.

The majority of these students go on to further education, which on average will last three years. Therefore, at any one time from these counties approximately 825 students are in further education. With an average cost of $10,000 per year for tuition and board, this means that we have about $8.25 million leaving our economy to the urban areas every year. This is money going out that is not being reinvested. It is a big benefit to the urban economy, whether that be in Sydney, Halifax, or Antigonish.

The urban areas also require rural areas for leisure pursuits and waste disposal. Government can be part of a development team. Financially, it can ensure equality of programs between the primary and secondary industries. The first gentleman mentioned that the Cape Breton investment tax credit certainly was a great help to the agricultural industry in our area in that it helped us to retool from profits. It was a program that was put in place. If you made money, you got money back. It worked. Up-front programs, as that gentleman said, very often don't work because there's no accountability.

We'd also like a secondary education tax credit so that we could get some benefit from the $8.25 million. This is half the tax dollars that are going out of our area. We would like some money coming back into our area for spending that money elsewhere.

In R and D, government certainly has to play a role there. We haven't the resources locally to do it. Review the programs in Finland and the EEC related to less favoured areas and the relative stature placed on rural areas within their overall economy.

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We appreciate being able to present these few notes here. The other topics that are raised in your committee's work plan are many and varied, and we could comment on them all.

In terms of transportation and the cost of it, in our own area we produce beef cows, which have to be marketed into Truro or Moncton. It costs us $50 to get those to the marketplace. That $50 represents 10¢ to 15¢ a pound dead weight. We're only receiving 85¢ for them now. So by the time we've paid that there's no margin in it for us at all.

Communications are poor. You talk about high tech, E-mail and everything else, but we still have party lines. We can't use the computer. We can't use the E-mail. Government should put that infrastructure in place so at least we are competitive. That would be one role I would say where government should hand over the dollars. Put it in and you'd get an instant response.

In fact I do have a computer and we do fax things in and out. We applied for a private line and we were given a private line. I phoned my neighbour to congratulate him on getting a private line as well, but all they'd done was taken him off my line and put him somewhere else, with somebody else on a party line.

We go back to the G-7 in Halifax. MT&T and other leaders in the world in telecommunications were there. Come down to Mabou in Cape Breton and you can listen in on the phone and find out everything that's going on. At least we're communicating if nothing else.

In this brief we have outlined our views as 105 farms in Inverness and Victoria counties in Cape Breton Island. We see ourselves as stewards along with the foresters and fishermen of two, if managed correctly, sustainable inputs: land and water. Without these stewards sustainability of the economy is in jeopardy, not only the agricultural, fishing and forestry industries, but also the tourism industry. In your work plan it mentions that this could be the real winner and push things along.

One of our neighbours calls tourism offshore oil come ashore. We've waited for years and years for the offshore oil coming ashore in Cape Breton and Nova Scotia, and we keep pumping money into the offshore oil. Certainly we have been pumping money into tourism for years and years. If we don't have the fishermen, foresters and farmers in our area looking after the land and water there's going to be nothing for the tourists to come and see. Agriculture, remember, is twelve months a year. Tourism is four months a year.

The areas are fishing, forestry, and agriculture, and also tourism, which is in fact another means of adding value to the three aforementioned industries.

Mr. Chairman, I thank you on behalf of the Inverness and Victoria County Federation of Agriculture for this opportunity to express our views to you.

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

Mr. Deshaies.

Mr. Deshaies: I want to say thank you for reminding us that the basic economy is based on agriculture, because where I live we have the same problems as what you explained. We have farmers who have some trouble with the production of beef because the price is very low. At the same time, we have a stable price for people who produce milk, because in Quebec we have a policy where the price of milk is fixed. I think you have the same.

Mr. Hunter: We have that also.

Mr. Deshaies: But you explained that your needs go beyond this. You said that you need specialized policies for the people who live on the land. Is that right?

Mr. Hunter: One particular one is that we just have equality in policies. If we look at it through development agreements, at the moment there is very little coming into the resource industry. It's all being put into industries that are establishing themselves in the urban areas. That means our young people are leaving those areas for those jobs, and they go to the urban areas. This just starts the whole cycle going again: fewer and fewer people so we can't support our infrastructure, which is education, roads, etc.

We don't necessarily need special policies, but similar policies. If we could just get the same break in terms of interest-free loans, interest buy-downs, and loan guarantees then we're in a competitive situation when it comes to trying to expand our industries in competition with other industries in the urban areas.

As you know, agriculture, forestry and fishing are very highly capital-intensive industries. I look at my own farm, which I mentioned, where it takes us four and a half years' income to realize the capital we've put into the process. Capital must be cheap.

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The country has to realize that we need those stewards in the rural areas. It is going to cost the country to keep those people in the rural areas to create the wealth that we can then add value to and have the jobs later on down the road.

Mr. Deshaies: Can I condense your idea then? If you receive equality in the tools, your industry can do the same or better than any other one.

Mr. Hunter: We feel in the agricultural industry that if we are given the same tools.... It's like you're taking a nut off a wheel. If a guy is given a three-quarter-inch wrench to take off a three-quarter-inch stud, while we are only given a quarter-inch wrench, we have a real problem.

In many instances, our young people are leaving because they see gold down in other areas. They hear us saying that we're not getting an equal chance at the bit. From that point of view, they keep leaving our area. If we all got the same tools and there was equality in all aspects of all industries, then I think agriculture in Canada could compete as well as anywhere mentioned earlier.

We are beginning to compete. We've got NAFTA. With GATT, yes, we have five to ten years to come up to speed. We were given that with the tariffs that are there. The dairy industry has taken the initiative to move toward that. Look at the P6. We're now marketing within six provinces of Canada east of Manitoba. We're beginning to take down the interprovincial barriers, and we're beginning to move on. We've been given that time.

We can compete with the Americans or anybody in the world as long as we're given the same tools as anybody else in the world. If we're given the same tools, they work within our own country when we're dealing with other industries, but also outside our country.

Mr. Deshaies: Before I pass to my neighbour, do you think the perception is that through time, the government forgot to treat your industry like an industry?

Mr. Hunter: Yes, it certainly forgot us. Because we are not major vote producers, it forgot us completely. They've forgotten in many cases around the world. They forgot the resource industries. It's interesting in the U.K. that with this BST crisis it was suddenly remembered that beef creates a lot of jobs through the system. Go back to economists. They say that every agricultural dollar creates another six dollars. There are a lot of jobs out there that have been created by agricultural, forestry and fishing dollars.

Mr. Ringma: Mr. Hunter, certainly the general impact of your statement has registered, which is that you want fairness and people to listen. But I'd like to take away a few more specifics to help remember your case here.

The specific that I did haul aboard was a point well made about the exodus of students and the amount of money this costs your community and tax breaks. But let's zero in on R and D as one thing. What sort of R and D programs would you see in the dairy or agricultural industry around here?

Mr. Hunter: Look at the rural aspect rather than even specifically agriculture. I think we have to be made aware of what's happening in our competitor countries. Look at Finland. They have come up with programs whereby they're aiding people to live in an area.

Yes, we had a no-investment tax credit for a while for people living in those areas. They're getting paid money to be the stewards of that land. Look at the EEC and the less-favoured areas. They get benefits financially for putting in place some physical assets. A dairy barn for 40 or 50 cows now costs $400,000. We need some incentives from the point of view of - not necessarily grants - tax incentives, guaranteed loans and interest-free loans to put that infrastructure in place.

Mr. Ringma: So when you talk about R and D, you are really talking about social research rather than technological research. I get it. Thanks.

The Chairman: Mr. Reed.

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Mr. Reed: Thank you, Mr. Chairman. At the risk of being ruled out of order, the first thing I want to do is thank the farmers of Cape Breton for essentially saving our family in 1834, when they first came to these shores and the farmers of Cape Breton came out to the ship with milk and vegetables. The immigrants had run out of food because of the length of the crossing, and the captain had attempted to sell rotten fish eggs to them, so they were most grateful. I have a soft spot in my heart for them.

Mr. Hunter: I saw the same situation arising this morning, so I provided you with the milk.

Mr. Reed: I thank you.

I'm interested in your comments about the communications infrastructure, because it's a common thread we've heard right across the country. Rural Canada has not caught up, so progressive farmers like you don't have Internet tools yet. I know that where those tools are available, farmers are the biggest per capita users, so we get that message loud and clear.

We're encouraged that wireless cable technology has now been licensed in parts of rural Canada, and we'll be encouraging the expansion of that. When the first licences were issued, which was very recently, they were issued only to urban areas, but there was interest in our caucus in making sure a farm licence would get out into rural Canada, and we look forward to that expansion.

I'm not familiar with what happens in Cape Breton regarding the marketing of milk, but I take it you have a milk marketing board.

Mr. Hunter: We have the Nova Scotia Dairy Commission, which is similar to but different from a milk monitoring board.

Mr. Reed: Is its performance satisfactory to you? Do you feel farmers are in control of the marketing?

Mr. Hunter: Personally, I don't feel we're in control of marketing our products. When you look at the mark-up that occurs in 48 hours.... We don't have any milk stores where we market directly to the consumer. The process put in was necessary at that time - cooperatives were set up to market it - but I think we have to become more entrepreneurial in the marketing and development of our product so that the farmer is dealing directly with the consumer. In many instances the farmer isn't dealing directly with the consumer. In Ontario, one small aspect of agricultural marketing is the farm markets, where the consumer actually deals directly with the farmer.

Mr. Reed: That's true.

Mr. Hunter: In all of our products the producer and consumer have to get closer together, because the consumer does not realize where the product comes from. Whether in fish, farming or forestry, many consumers do not realize that the guy cutting pulp in the woods is getting $12 an hour, and if you're doing that during May and June when the mosquitoes are nearly as big as those in Manitoba, it gets pretty rough.

Mr. Reed: Some of us come from areas where direct marketing does take place. I come from around the periphery of Metropolitan Toronto, for instance, and the direct marketing of vegetables and fruits and so on is increasing in popularity. But you are at a certain disadvantage here in that you're at a distance.

Mr. Hunter: The lack of people a big difference. Our closest major market is the New England states rather than central Canada, but we're talking transportation costs to get it there. We can produce it, but it's getting it to market where we definitely need some assistance.

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Mr. Reed: How about new kinds of cropping? Have you looked at non-food agriculture as an option?

Mr. Hunter: By non-food do you mean the aspect of tourism?

Mr. Reed: No. This year the Senate and House of Commons passed legislation that separates the production of industrial hemp from the growing of marijuana, and by next year a farmer will be able to be licensed to grow industrial hemp.

Mr. Hunter: You see, we can't get that communication to us because we don't have the communication system in place. I did read in an article somewhere that they're producing hemp in the U.K., but I didn't realize the legislation had changed. If you can get on the Internet at night instead of watching television, that's when you start picking up these ideas. We are so divorced from that in rural Canada because we just can't get on it.

Mr. Reed: Your points are well taken and you do express a theme that we are hearing repeatedly.

Mr. Hunter: I appreciate that.

The Chairman: Thank you, Mr. Hunter. We appreciate your taking the time to provide your testimony as well as being here all morning listening to the testimony of others. Thank you.

Mr. Hunter: Thank you for the opportunity.

The Chairman: The committee will take a break.

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The Chairman: I call the meeting back to order.

Our next witness is Mr. MacDonald from the Guysborough County Regional Development Authority. Welcome. I'd ask you to make an opening statement and then we'll turn it over to committee members for questions.

Mr. Gordon MacDonald (Executive Director, Guysborough County Regional Development Authority): Mr. Chairman and committee members, I'm pleased to be here today.

Given the purpose of the meeting today, of all counties in Nova Scotia, I think Guysborough County is as rural a county as you'll find. We have over 4,000 square kilometres and a population of about 11,000 people. No community in the county is larger than 1,000. We have a very strong dependence on the resource sector - traditionally, forestry and fishery. Hopefully over the next 25 to 40 years and beyond you'll know us as the location of the Sable offshore energy project, which has a lot of hope for our area.

I'd like to begin by giving a bit of an overview of Guysborough County, and then move on to some points of interest to us and to a conclusion.

To understand and appreciate the magnitude of the challenges facing rural communities in Nova Scotia and throughout Canada, one must first look at how this situation developed. As we make the transformation from the old economy, with its dependence on non-renewable natural resources, to the new economy and its reliance on information-based technologies, the actions of our federal and provincial governments on policy development will be crucial to the sustainability of these rural communities. For rural communities such as Guysborough County, the outlook is bleak if we continue over the course of the past two or three decades.

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A brief overview of the current situation paints a pretty grim picture. Guysborough County consists of 4,136 households, with a population base of 11,488. The current labour force is 5,093. Total personal income for the county is $161.8 million, supporting employment of 3,944. The average annual household income, which is in the neighbourhood of $17,700, is the lowest of any county in the province of Nova Scotia.

From 1991 to 1996 the population of Guysborough County declined by 2.43%. Employment growth has seen a decline of 4.75%, and employment income growth has declined by 13.3% The current unemployment rate is in excess of 26%, and the real rate is certainly much higher than that when you take in the TAGS and SARs recipients.

The out-migration of county residents is the worst of any county in Canada. The county structure is different in Newfoundland, but of counties we have the highest out-migration rate in Canada.

We also have the highest illiteracy rate in the province. The level of education of the labour force is below the provincial average: 27% of the labour force has not completed grade 9, 8% has completed high school, and only 25% has completed trades and technical training. There's extremely high dependence on resource-based industries such as forestry and fishery to earn a living. Some 700 residents of Guysborough County are presently in receipt of TAGS funding, which as you know runs out in 1998.

The long-range forecast for Guysborough County is one of modest loss, a slow struggle scenario. Canmac Economics, an economic forecasting company, predicts the unemployment rate will be 35.4% by the year 2006, and the total population will be 11,245.

There are many reasons for the economy of Guysborough County lagging behind other regions. The current situation did not always exist in this manner. In the early 1900s Guysborough had a vibrant economy and was very active in the mineral industry. More gold was taken out of Guysborough County that out of the Yukon. The population of Guysborough County in the early 1900s exceeded 20,000.

What prevented us from growing in relation to the communities surrounding us, I think, was infrastructure. Rail service, which served as a crucial link to markets throughout Canada and the New England states, became a political football in Guysborough County until it was abandoned in 1933. At the time it was abandoned, it was two-thirds complete. In addition to rail service, highway infrastructure lagged far behind. All highway systems in Guysborough County were designed in a manner that directed people out of the county. There was no east-west link between the major population regions of the county. In all of Guysborough County we have 0.8 kilometres of 100-series highway, and we're the second biggest county in Nova Scotia.

If Guysborough County and other rural communities throughout this country are to avoid falling into the vortex that has plagued us for the past 50 years, we must avoid making the same mistakes. Disparities between rural and urban communities must not be allowed to continue unabated. The opportunities related to the new economy are becoming disproportionately skewed in favour of urban centres. On-line communications and information technology are crucial to tapping into the new economy, but the playing field here is not level. What we fear is that we will miss out on the connections to the new economy for the same reasons we missed out on the connections to the old economy.

Access to on-line communications is very limited. We have a telephone system with 14 exchanges, of which no more than 4 have a common toll-free destination point, and all this serves, as I mentioned, slightly over 11,000 people. As a result, many areas still being served by the old analogue system do not have toll-free access to the Internet.

Maritime Tel & Tel would have you believe that they are providing state-of-the-art telecommunications within Nova Scotia, but this is true only in urban centres in general, and downtown Halifax in particular. At the same time, MT&T recently applied to the CRTC for a rate increase, ostensibly to create a fairer rate for customers. If passed by the CRTC, this would see rate increases in rural areas. The intent of this rate increase is for urban centres not to have to subsidize rates in rural areas - the same rate for the same service. If rural areas had the same level of service, the principle would be quite acceptable. Clearly this is not the case.

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Among the many areas important for future development in Guysborough County is aquaculture. We have approximately 513 kilometres of pristine coastline, and we are seeing some real growth in the aquaculture industry. There is an opportunity here for Guysborough County to take a lead role within the province in the industry. For this to happen a much greater emphasis must be placed on training and marketing.

Aquaculture differs markedly from the traditional fishery. It is more closely correlated to farming, and there's a requirement for a great deal more science and business knowledge to be a successful aquaculture operator. Training should be hands-on, combining classroom theory with practical application. This is an opportunity to bring sustainable development to a rural region.

Regional development authorities were established in response to a change in philosophy, no doubt combined with the fiscal realities facing all governments within this country. We have gone through a period of throwing money at problems, hoping they would go away. In Guysborough County, like other areas, this produced little in the way of positive results. Currently the federal and provincial governments' philosophy is that community economic development must emanate from the community. The community must implement a strategic plan identifying goals and objectives, and work toward its implementation.

This is a philosophy that Guysborough County Regional Development Authority supports. Guysborough County has developed a strong organization of community volunteers committed to addressing the many challenges facing our county. The GCRDA operates under a subcommittee structure. We have more than 200 volunteers serving on our various subcommittees: infrastructure/technology, fisheries/RADAC, business recruitment, tourism, and education.

The degree of public input is critical. In the past year subcommittee members have witnessed results from their input. The Sable offshore energy project is an example of a project in which our infrastructure/technology subcommittee has played a significant role.

The problem we have witnessed is that while the philosophy espoused by government departments stresses a bottom-up approach to community economic development, this is seldom borne out in the funding of government programs. For us there are many cases in point, including Human Resources Development Canada's transitional jobs fund, and the RDAs' special project funding, which is cost-shared by the Nova Scotia Economic Renewal Agency and ACOA. There seems to be a lack of trust in the stated philosophy - that the community knows best the manner in which it should develop - as well as a reluctance to let go and thereby empower communities to address their particular challenges. We seem to be constantly ``going for the home run''. Rather than focusing on helping create five to ten jobs at a time, we go for the big hit.

The other thing I'd like to add here is that all these programs seem to be tied to population. For a county like ours, which has an extremely high out-migration rate, this perpetuates the problem, because we are constantly losing our people.

Guysborough County has witnessed this many times over, the most recent being the scallop operation in Whitehead. A major multinational company received approximately $6 million to open this facility. Two years later when the free money ran out, the operation ceased and 19 people were out of work.

At the same time, we are encountering difficulties within our RDAs convincing the federal and provincial governments that we are capable of administering $150,000 in special project funding. This sends volunteer board members a very disconcerting message that runs totally contrary to the stated philosophy.

For communities such as Guysborough County, lifestyle is becoming an increasingly attractive opportunity to capitalize on. People are more and more interested in raising their families in a safe, peaceful environment. We have witnessed an influx of people looking to develop businesses to showcase the pristine environment, clean waters, and trail development throughout the county. Tourism in general, and ecotourism in particular, are becoming increasingly important components of our economy.

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An increased emphasis must be placed on adding value to the products we produce. Fish products must be filleted, smoked, canned, etc., prior to leaving a community. Forest products must better utilize the resource to add value prior to shipping. Harvesting techniques in the forestry sector are stripping away the resource in a manner very similar to the trawlers' impact on the fishery. This mechanization of the industry has also significantly reduced the number of people required to harvest the wood supply.

In conclusion, it is most pleasing to us to see the priority that the government is putting on rural development and identifying the important issues to rural communities. It is time the federal and provincial governments recognize the importance of addressing the needs of these rural communities by appointing a cabinet minister with responsibilities to represent their concerns.

One thing people are realizing is that there is a real interdependence between urban and rural communities. One cannot continue to exist without the other. There also seems to be a lack of understanding of the impacts of opportunities that may appear insignificant to urban areas but that would bring real benefits to a rural community such as Guysborough County. Even this event today being held in an urban setting underscores the misunderstanding of issues related to rural development. Holding this event in the village of Guysborough or Sherbrooke or in the town of Canso would in all likelihood have filled the available accommodations and had a significant impact on service-related businesses that are struggling to survive.

In conclusion, we wish you well in your work and would be happy to participate further in working jointly towards creating sustainable development opportunities for rural Canada.

The Chairman: Thank you, Mr. MacDonald.

Mr. Deshaies.

Mr. Deshaies: Thank you. Can you try to explain to me a few sentences in your exposé? You explain that a scallop operation in Whitehead, a multinational company, was given approximately $6 million to open and after two years it closed. Did the market collapse?

Mr. MacDonald: What we've been told to date is this. It was a scallop operation using a new, untried gluing system to hold the scallops in the water, and it didn't work very well. When it was first tried, it was in a controlled environment and it worked well. But when they put it in the water, all of a sudden it became feedstock for starfish and other species they didn't have to worry about in the controlled environment. From what I understand, the cost of production for scallops was somewhere in the area of $22 per pound. It never got under control at all.

Mr. Deshaies: Coming from business

[Inaudible - Editor], I sold scallops but it wasn't that expensive.

Mr. MacDonald: You didn't pay $22 a pound?

Some hon. members: Oh, oh!

Mr. Deshaies: You say further on that this sends a very disconcerting message to volunteers. I didn't catch -

Mr. MacDonald: Going back to the beginning of our regional development authority's fiscal year last year, it had been committed, or at least suggested, that we were going to have $150,000 in project funding per regional development authority. What I'm saying there is that for these board members, who we ask an awful lot of and who commit an awful lot of their time on a volunteer basis, when a lot of money is put into one operation like that.... They put $6 million into that, but all of a sudden these same people who commit all their time -

Mr. Deshaies: It wasn't the choice of the community to inject $6 million into one operation?

Mr. MacDonald: No.

Mr. Deshaies: What was your choice?

Mr. MacDonald: This operation began before the evolution of the regional development authorities, so I don't know how much input the community really had in the opening of the operation in Whitehead.

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Mr. Deshaies: But it's not a good goal to put so much money into just one project. We heard from other witnesses that small communities want to receive money and decide what they can best do with the amount. They said they are able to decide and do better than just receiving a program.

Mr. MacDonald: Exactly. For $6 million our volunteer board members would have created a lot more than 19 jobs.

Mr. Deshaies: You have to tell the government that if in the future they have enough money to give, they should let the rural community give the direction. They can do it better than Montreal, Toronto or Ottawa can.

Mr. MacDonald: It's really sticking to the philosophy that the priorities of the community and the development priorities should emanate from the community upward instead of from the top downward.

The Chairman: Mr. Ringma.

Mr. Ringma: Mr. MacDonald, I wonder if you'd bear with me and maybe try to help me work out an idea. It seems to me maybe the political system is failing you. I don't want to talk blatantly about politics here; that's not my intention. But if the political system is failing and you're not getting the responsiveness of the government....

We have other witnesses saying they need the presence of the federal government there, such as post offices and those sorts of thing. An idea has been going through my head. I wonder if we need some change here, some sort of non-political representation of the federal government in areas such as this so the local people can work directly to it, and the individual or office could have some empowerment to talk directly to ministers.

I see that one of your suggestions in your conclusion was appointing a cabinet minister. Well, Anne McLellan is probably the closest we have to a cabinet minister, because she's in charge of natural resources. But again, I'm concerned that maybe the political system as such is the thing that jeopardizes the system.

Is there some possibility in your mind that we can take away and work on the idea of a new way of getting federal representation, other than political, down at the community level?

Mr. MacDonald: We've seen a real removal of presence of both federal and provincial governments. There's been a lot of regionalization and decentralizing. Within in our area the shift has been mainly to the regional departments, and as a result it's been the service communities, which are already fairly sound, that have seemed to benefit. Even the Department of Fisheries, correctional facilities and everything else have been moving out of the area and moving to more of a regional approach.

The danger and impact for us is not only an economic one; it's a social one as well. Besides losing the number of people we're losing, the people we're losing are generally the most highly educated, the people with the highest incomes and the people with the most to offer the community in terms of their involvement within the community, whether it's in a Lions Club, the church or whatever. Even in the education system, a lot of the people employed there travel from one of the more populous centres to our area, work and then go back home.

Anything, I guess, to put jobs in a place...and as you mentioned, they don't have to be political jobs. The GST centre in Summerside - anything of that type would put some people in the community who would contribute not only economically, but as well the community would benefit socially.

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Mr. Ringma: I wasn't thinking just of decentralizing federal offices to regional areas. I was thinking of some other system.

When I put myself in your position, I wonder who you talk to. You have recourse to this committee and this committee hopefully will take some of these ideas back, put them in a report and the government may well act on them. But what other recourse do you have? I'm asking whether there is some better way of doing business.

Mr. MacDonald: We've mentioned already that providing assistance to the community is a good way, even through ACOA. A number of years ago in Guysborough County they joined the crisis at the Canso fish plant. The government established a $6 million fund to try to do some things in those communities to create some employment. The effectiveness of that has been limited, so it's not always a funding question either.

That particular community development fund was set up such in a manner that 70% of it had to be within the Canso community and only 30% throughout the rest of the county on a yearly basis. In some cases you had to fund bad projects in the community in the 70% sector so that you could spend good money throughout the rest of the community to make it sustainable.

Mr. Ringma: I'm going to take away with me as a kind of conclusion that what you really want is to make the bottom-up philosophy work.

Mr. MacDonald: Yes, but if we're to be successful we need infrastructure. That's what it all comes down to, whether it be through highway improvements or information technology.

We constantly seem to be getting to the point where we're five to ten years late in the technology. If we had the same sort of access in rural communities that the urban areas have, I'm sure an awful lot of people running the businesses out of Toronto and Montreal and everywhere else would sooner live in a rural community. Certainly the tax rate is much better and you don't have to rush through an hour's traffic every day. We've seen some of that already in some pockets of Guysborough County. We have some people who moved there from Switzerland who are creating computer software and selling it all over the world from the main street in Guysborough. But the access to on-line communications is very limited.

That sort of thing is what would help more than anything else, plus always the highway improvements and infrastructure. Hopefully we'll see a second round of the infrastructure program that will be effective as well.

The Chairman: Mrs. Cowling.

Mrs. Cowling: Mr. MacDonald, I represent a rural constituency in rural Manitoba and have been around this issue for a long time. You indicated in your presentation about throwing money at a project and sort of hoping that it would succeed. In my view, that's a short-term fix for something we should be looking at in the long term. What we're looking for with this committee is the long-term viability and sustainability of rural Canada and how we can renew rural Canada.

It seems to me that we have to get from here to there. There is a bridging that has to happen, and there is a transition that has to take place because we are moving from one mode to another.

We've heard from other witnesses that there should be some accountability from the government to the people who are going to be making that transition, and there should be a reward as well. If in fact we create a climate for economic growth and jobs, and people in rural Canada pick up on that and run with it, there should be a reward such as a tax incentive. I'm wondering what your thoughts are on that, and how we get from here to there.

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I know what it is like right now in rural Canada, and we have to move fairly quickly. But we can't expect people to take a leap off the end of the diving board without some sort of support base or something to help them through that transition. I'd like your comments on that.

Mr. MacDonald: You've made some good points, certainly given the situation now. Going back a number of years in Nova Scotia, in providing somewhat equitable access to power lines and transmission lines, there was a government program that helped ensure that this happened. To me one of the ways certainly would be to do the same sort of thing for telecommunications. Tax incentives for business to locate in rural communities would certainly be attractive. I guess we're hoping something will come along such as what happened for us with the Sable project. We're hoping it will provide the impetus for a lot of these infrastructure improvements as well.

I don't have any real suggestions as to how those tax incentives would be structured. It's something we've never really discussed. Anything, whether it be tax relief or incentives for business to locate in rural communities, would help.

The other big component is the need for training for those businesses as well.

I'm sorry. I don't have any real suggestions or thoughts as to the type of tax incentive that would be useful.

Mrs. Cowling: You mentioned infrastructure and tourism in your presentation. One of the things that was extremely well received back home in my riding was the infrastructure program, because it helped to build strong partnerships between all levels of government. When you mentioned tourism, I wondered whether we should be looking at another infrastructure program. I'm wondering what the possibilities are and whether you would recommend that we tie tourism into infrastructure.

Mr. MacDonald: I think we're certainly hoping you will. Particularly with the culture of tourism, we feel we have several things that will fit well within the culture side of it. Throughout all of Nova Scotia music is a real opportunity, especially here in Cape Breton. I think this is so for mainland Nova Scotia as well and in Guysborough County. We have some ideas around cultural tourism that would be beneficial.

Plus there is ecotourism. We've seen trail developments that have begun for us. I was happy to read in the paper today about the links through Air Canada to Frankfurt. We've seen a real increase in visitation from Germany, and I think that goes well for us. We can begin to do a little more with ecotourism and put a little more infrastructure in place, such as trails.

With the diving clubs alone, we've done a coastal mapping project in Guysborough County, and I think Shelburne is the only other area in Nova Scotia that has completed one. We've put that in CD-ROM format and we're sending it now to Germany. We're beginning to see some benefits and developments around that.

Last year in Guysborough County we had over 200 properties bought by people from Germany. They're not just buying the properties; they're doing things with them. That's a positive thing for us as well.

The Chairman: Mr. Reed.

Mr. Reed: Thank you, Mr. Chairman. Just a point of information: what year was the scallop project implemented here?

Mr. MacDonald: It was 1994, just a little over two years that it was been operational.

Mr. Reed: I wonder when the decision would have been made to go ahead with that.

Mr. MacDonald: It was opened in 1994, and I think it was mid- to late 1993 that the decision was made. It was operational in 1994.

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Mr. Reed: I see the obvious dilemma that you face here. You present the need for on-line communications and so on as being critical. This has been pointed out to us almost everywhere in the country.

Mr. MacDonald: It's the recurring theme.

Mr. Reed: It's the recurring theme everywhere.

Also, you talked about the growing importance of aquaculture. Both of those things require training. Obviously to utilize on-line communications requires training, yet you have the dilemma of the literacy rate being so low. Is anything happening in recognition of that in the schools to try to bring those who can up to speed so that they will be able to make use of these tools?

Mr. MacDonald: There is. The difficulty again is with the size of the county and the population. There are almost four corners of population pockets in the county. It makes it difficult to get the numbers in one school to provide the number of programs that are necessary today to come up with a good education curriculum for the students.

There is a proposal that the school board has developed here. The unfortunate thing is that it could very well lead to closure of some schools. That is not very popular, certainly. It's the balancing act of the impact of a loss of a school to the community versus trying to come up with a better curriculum for training.

For us the problem has been with the out-migration. I don't think the education system is that lacking. It's just that given the tradition, whether fishery or forestry, the education level attainment wasn't critical. During the time I went to school, by the time you got to grade 9 or 10 if maybe one of your classmates knew he was going to be fishing with his father and thought he knew what he was going to be doing for the rest of his life, education just wasn't important. He was actually losing years of income-earning time.

There's not as much problem with the education system within the county as there is with the lack of opportunities for people when they are educated. There are seven in my family and I'm the only one who still lives in the county. That's a commonality in the counties.

Mr. Reed: That's right. The question is whether there should be some involvement by business and industry in that training process. That's Mrs. Cowling's question, I expect.

Mr. MacDonald: Yes, there is beginning to be more of that. We're seeing it in the tourism industry particularly, where they're much more involved in training employees.

The biggest employer in the entire county employs only 300 people, and that's a fish plant.

Mr. Reed: Do you think there is a stronger recognition now among the citizens of Guysborough County that higher education levels are essential?

Mr. MacDonald: Oh, yes. There's no doubt about that now, as opposed to 10 or 15 years ago.

The Chairman: Thank you. I have a couple of questions, Mr. MacDonald.

One of the concerns you noted here that my colleagues have talked about is the outward migration. There is a strategy that's been employed in some other areas with that problem, and I'm wondering if you do it. It is to track the individuals who have left your county who have become successful in the business world. Often these individuals have left not because they've wanted to. They like the quality of life and they like where they were brought up. The idea is to identify those who have been successful in business elsewhere and try to encourage them to come back. Have you pursued that type of initiative?

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Mr. MacDonald: We haven't. Again, it's one of the little challenges we face in the county with most of the information that's available, whether it's from Statistics Canada or from HRDC, being on a regional basis. There's nothing specific to the county alone.

With the Sable project in mind, what we are trying to put together right now is a detailed skills inventory of the entire county, going house to house to do this. At the same time, we will do the field inventory not only of those presently living in the county, but of those who were educated in the county and those who have families that have moved and are working in Alberta or B.C., wherever. We'll design that program in such a manner that it will be in CD-ROM format and you can glean that type of information from it. It's just not there currently through either Statistics Canada or HRDC.

The Chairman: On the issue of the telecommunications, you've mentioned that it's lacking. I want to explore your vision of the federal government's involvement in that. Should we be legislating, in your opinion, that the private telephone companies have to provide a certain level of service?

Mr. MacDonald: I don't see any other way it will ever happen. We've been struggling for six months to even get a meeting with the telephone company.

The Chairman: They won't even meet with you.

Would you envision public dollars going towards the actual construction of that infrastructure, or do you envision it being a private investment?

Mr. MacDonald: I envision that it would be similar to what was done with the power when it was provided. I think there may be a requirement for some public investment there as well. Otherwise I don't see it happening in Nova Scotia.

The Chairman: I notice in your brief that your local MT&T has asked for a rate increase, which is basically a balancing exercise between rural and urban areas, which Bell Canada in central Canada has done. Bell Canada in central Canada has done something in addition to that. They've put together a capital improvement plan for the rural areas; I think it's a $180 million investment. They've asked for a rate increase to be paid for specifically by the rural subscribers. Would you support that if you could be convinced that the money gained from the rate increase would be used strictly to make that investment in the infrastructure in the rural area?

Mr. MacDonald: I would if there were time commitments attached to it for when those improvements would be completed.

The Chairman: You've mentioned aquaculture and the potential of that. Do you see it being strictly a private investment that has to take place? Do you see it as a public investment? Do you see it as a partnership? What role would the federal government play in encouraging the creation of that industry in your county?

Mr. MacDonald: We've developed a proposal right now, actually, that is being considered through the cooperation agreement, which if funded would create 204 jobs in Guysborough County. It would address what we see as a problem for the whole province in that it would institute a training program for aquaculturists. In that manner, anybody in the province of Nova Scotia who is looking to be trained in aquaculture would come to Guysborough County to be trained.

We've worked with the provincial Department of Fisheries in putting together that program. That is something that would be cost-shared. We would certainly have an investment in it, and some of the people involved in the industry would also have an investment in it.

The Chairman: In conclusion, I'm going to make a comment that my colleagues might or might not agree with. I think your page 1 and the statistics you provide clearly demonstrate why this committee is undertaking this study, and the urgency and priority that this committee and this government need to place on the whole issue of rural development. The story told by those statistics is horrendous, and unfortunately it is not limited just to your county. There is an obligation, I believe, and a great desire as well, on the part federal government to address the specific issues demonstrated by those statistics.

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I want to thank you for your presentation today. It was very enlightening to the committee, and we appreciate your taking the time.

Mr. MacDonald: Thank you for hearing us. We had the same opportunity some time ago with the provincial caucus, and even within the province I think the caucus was somewhat surprised at the numbers. Thank you.

The Chairman: Thank you very much.

The committee is adjourned for a five-minute break.

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.1317

The Chairman: I'd like to call the meeting back in session and to welcome our next witnesses, from New Dawn Enterprises. We have Mr. MacSween and Ms Jacobs here. Welcome. I understand there might be somebody joining you in a couple of minutes. Please proceed with your opening statement, and then we'll go to questions with the committee members.

Mr. Rankin MacSween (President, New Dawn Enterprises): Thank you very much. It's good to be here with you.

First of all, we'd like to tell you a bit about who we are. As you noted, Mr. Chairman, we represent New Dawn Enterprises Ltd., which is based here in Cape Breton. New Dawn is a community development corporation. Essentially that means it is structured similarly to a corporation with the exception that any profits have to go back into the corporation or the community. The board of directors is a voluntary board and is not able to derive any material benefit from participating on the board.

New Dawn has been around for 20 years. Its claim to fame is that it's the oldest and one of the largest community development corporations in Canada.

As noted in our brief, some of the accomplishments of the organization are that it's private...we refer to a ``third sector''. That is to say, we try to take some of the characteristics of the private sector in terms of the methodology, particularly with respect to things like business efficiency and preoccupation with the bottom line, while at the same time borrowing some of the characteristics of the public sector, such things as being accountable. We try to combine those things.

What's interesting to note, Mr. Chairman, is that in large measure it was the Government of Canada that triggered New Dawn's establishment. As you might recall, back in the late 1960s and 1970s one of the perspectives of the Government of Canada was the growth-pole concept. Essentially what was prescribed at that time was that a number of urban centres in Canada would be designated as being the centres where growth would take place. Cape Breton, at least this area of Cape Breton, was not designated as one of those centres.

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New Dawn was created in reaction to that. Essentially, it became clear that if this community was going to have a future, then we had to find new instruments whereby this community could try to take hold of its own destiny.

I think there are two pieces of good news. It seems to me that maybe the very existence of this committee gives testimony to the fact that the growth-pole concept worked, in the sense that urban Canada seems to be doing reasonably well and rural Canada is not. The other piece of good news is that New Dawn survived after 20 years, which in the context of a contracting community, a depleted community, is quite an accomplishment.

Rather than address particular tactics here today, we would like to share with you our concept of what's going to be critical with respect to revitalizing rural Canada.

The other thing I want to be clear about is that from our perspective, there are really two Canadas: urban Canada and rural Canada. When you look at urban Canada, economically it seems to be doing relatively well. At least that's my experience when I visit Toronto. When you look at rural Canada, and I would include all of Cape Breton as being rural, then there are some pretty serious problems.

A number of years ago when the Mulroney government was in power, we had a visit from John Crosbie here in Sydney. John Crosbie gave a speech and then afterwards there was a press conference, which some of us had the opportunity to attend. At that press conference someone asked Minister Crosbie how it was that in Nova Scotia the majority of the funding distributed by ACOA was going into Halifax, notwithstanding that Halifax had an unemployment rate lower than the national average, while most other areas of the province, including Cape Breton, had an average rate of unemployment that was extremely higher than anywhere else in the country.

I thought the minister's response was rather interesting. The minister said that it was absolutely true, and he was witnessing the same thing in Newfoundland, where most of the ACOA funding was going into St. John's. The only thing he could figure was that there were a lot more applications coming in from Halifax and from St. John's, and the ACOA structure could only respond to applications.

But I think this pattern continues up to this day, 1996. Essentially government money still seems to flow into the urban centres, where it's not as critical an issue in terms of economic vitality or it's not as much of a problem. So what's going on? What's that all about?

The explanation I find most helpful is the explanation that Alexis de Tocqueville gave in 1832. Alexis de Tocqueville, as you know, had grave misgivings about democracy because on the basis of his experience in France he couldn't see how it could work. His concern was who was going to be preoccupied with the public good. In France it was the nobility who worried about the private good. Everybody else was so busy trying to figure how to survive that they didn't have time to worry about the public good. So he asked who in America was going to worry about the public good because there would be no more nobility anymore.

He went over to America, and much to his surprise he found this new phenomenon called associations. Whenever people wanted to do anything in America, he found that they formed an association. If they wanted to build a church they formed an association. If they wanted to build a school they formed an association. If they wanted to start a business they started an association. He told himself that this was the answer; this was how democracy was going to work. The stronger the democracy is, the more associations it has and the stronger those associations need to be.

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It seems to me that in terms of the delineation between urban Canada and rural Canada, in urban Canada you find a lot of strong associations manifested by way of the private sector. The private sector is strong. The Government of Canada therefore has business groups to partner with to get things done. If you move into the rural communities, you don't have private sector associations. As a matter of fact, you don't have many associations at all. I would defy anybody here to name one strong community-based association on Cape Breton Island with the capacity to get things done other than a handful, and New Dawn is a part of that handful.

It seems to me that if the Government of Canada is truly serious about attempting to reckon with the problems in rural Canada, it has to be understood that the 21st century is going to be the century of organizations. The world is too complicated. The individual standing alone can't get anything done anymore. You need to be part of an association with capacity and an array of skills at its disposal. That's what attracted New Dawn to the corporate model. It's a different kind of corporate model, but nevertheless it's the corporate model.

It seems to me that if the Government of Canada is serious about getting at the issue in rural Canada, it has to search for ways in which it can effectively nurture and encourage the development of associations. I don't think it's going to be private sector associations. You have to look at third-sector associations. New Dawn is just one model, one kind of third-sector association. There are an array of other models.

It's interesting that if we look at our American neighbours, this third-sector movement has been gaining momentum for the last 40 years in the United States. You find third-sector organizations in the ghettos, attempting to rebuild those communities that have been so devastated.

What's really interesting about the relationship the American federal government has with these associations is that they say that if they are going to partner in supporting the activities of those third-sector organizations, the third-sector organization has to do the walk as well as the talk. They say that you must demonstrate that you can do a deal and pull off a project, whether it's a real estate project, a business project, or a social development project. Once having effectively demonstrated that you're serious and can get the job done, then you come to the table and they'll figure out an appropriate way to partner with you and support you. What's referred to as block funding then begins to kick in.

To talk about revitalizing rural Canada is a very big issue. In a half hour it would certainly be impossible to get into any detail of how to do it or what particular tactics might be appropriate. Those tactics are probably going to change from province to province, region to region, and rural community to rural community. However, it seems to me that your work here is incredibly important.

We're on the edge of an abyss here. That edge is about whether Canada is going to be a Canada that will simply consist of strong city regions or whether there is going to be a place in the Canada of the 21st century for strong rural communities like Cape Breton as well. That is the big question. If ever federal leadership was needed on an issue, ladies and gentlemen, it is this one. Thank you very much.

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The Chairman: Thank you very much. We'll open it up to questions.

Mr. Deshaies.

Mr. Deshaies: Thank you very much. I appreciate your speech very much because I think there is hope for good development for the future through many kinds of associations. People in a small community or a lot of small communities together are defining....

I live in northwest Quebec. Sometimes they have a little fight for a federal or provincial activity. Some people will have all the offices in the community and there will be nothing for the rest. The goal must be to let the others live and let live too. Do you think rural people globally are ready to associate to obtain this goal?

Mr. MacSween: I'm not sure we're ready, but I don't know what the options are. People are remarkable in terms of what they're able to accomplish when they're given a challenge.

New Dawn was given the challenge when the Government of Canada embarked on the growth-pole concept. Essentially the message was that Cape Breton was out and Halifax was in. It became very clear at that moment in history that we had a challenge. We probably weren't ready, but you do the best you can when you're given the challenge at whatever time you're given the challenge.

The other thing that I want to be clear about is that we're not just talking here about forming a little single-purpose association. We're talking about forming and putting in place associations that have the capacity to get things done.

I was rather taken with the announcement last week made by the government in terms of the interest-free loan provided to Bombardier. That made sense to me. It's a company that has a lot of capacity to get things done and to create jobs and economic development. Well, Bombardier, in my mind, is an association. It's a private sector association that has capacity.

In rural Canada we need associations with capacity. What's exciting for us about New Dawn is that we've demonstrated what the impact of this kind of association can be. It's not that we've saved Cape Breton or that we're going to be able to save Cape Breton, but I think New Dawn is making a significant contribution. It's doing it as an independent, self-supporting entity. So to some extent we see ourselves as pioneering in that new direction. That, for us, is exciting.

Mr. Deshaies: A leader from northwestern Quebec said that we're able to develop our area, but we just need tools maybe. We don't ask for fixed programs that you have to get into.

For example, to have a special program to develop a web page on the Internet, you need about five people from R and D. In northwest Quebec, Rouyn-Noranda, only three persons would work out of the program. But only Montreal or Toronto will receive this program, or they'll send it to Montreal. Why did three persons not have the capacity to do a good job in a rural area? I'm sure you can find one person here who can build something acceptable.

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Are you advised the same way? Are they able to develop themselves if we give them the tools we choose, not the tools Ottawa or Halifax wants to give you? You can note that you want Cape Breton tools. You can produce ten times more than if you have to get into your programs.

Mr. MacSween: A friend of mine used to say that one of the mistakes governments make is that they tend to want to get into a program's retail business; governments should stay in the wholesale business.

When a government gets into a community and tries to align the program in a specific way, that's really problematic. It makes a lot more sense for governments rather to have almost a contractual relationship with the community. So the government partners with the community, but in terms of the particular tactics for developing whatever it is or meeting the objective of whatever is supposed to be met, the community really has to delineate what's appropriate in terms of the specifics.

Mr. Deshaies: You know that Quebec wants to turn around its provincial debt. It has the same needs. People in my riding have said that they want to be able to make a direct phone call to the person who decides and chooses the way to go. I have to finish with a question: do you think the greatest need for people in rural areas is for somebody you can phone directly to have an answer?

Mr. MacSween: Do you want to take that one?

Mr. Ora McManus (Manager, Special Projects, New Dawn Enterprises): No, you take it. You're on a little bit of a roll. I'll make a comment later.

Mr. MacSween: I'm not sure if it's a matter of a phone call or access to a person.

The direction in which I would want the Government of Canada to go with this issue would be to shift perspective. It should begin to try to understand that the only way the Government of Canada can be strong and have a strong country is for it to have strong communities. It now has strong urban communities, but the potential exists to have strong rural communities as well. But those rural communities need to develop capacity. That's not going to happen quickly. That's going to take time. When you're talking about community-building, it's like raising a child. This is long-term stuff.

New Dawn has been at this for 20 years, and we're just, in our minds, in adolescence maybe. So this is long-term stuff. It's an issue of perspective.

I'm not part of government, but as an outsider looking in, I think the Government of Canada has traditionally been inclined to try to solve the problem itself. It usually begins to solve the problem with money. I don't think that's going to take us anywhere anymore. The Government of Canada needs lots of partners to solve the problem, and those partners have to include the communities. But you can't deal with individuals in communities. The Government of Canada is a big institution. It can only deal with other institutions and organizations, which is not something rural Canada has access to right now. It needs its own.

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Mr. McManus: If you had read our document or if we had been given a chance to go through it in detail, you would have found the answer to your question. Basically, the federal government cannot deal with an individual. There's no point in a federal government telephone call to deal with an individual in Dingwall - that's not Mr. Dingwall but Dingwall the community, the fishing port up in northern Cape Breton. There's no point in that.

Mr. Ringma, you've been in federal politics for a while.

Mr. Ringma: Three years to the day, almost.

Mr. McManus: I see, you're a Reformer.

Mr. Ringma: I'm a Reformer.

Mr. McManus: Oh yes, I recognize the name.

The thing is that you cannot deal with individuals. You have to deal, as Rankin said, with communities, if that's what you want to do as the Standing Committee on Natural Resources in trying to relate to rural Canada. I don't even know if you have a mandate to do that. But assuming that you do have some sort of a mandate to figure out how you can influence the strengthening of rural Canada, you can't do it by dealing with individuals. You can deal with the big natural resource companies, as you do, such as the mining, forestry and fishing companies. But if you want to really strengthen rural Canada, then you have to go to the next stage, which is the development of people and communities.

You can only be present in those communities through local community organizations that can sit down at the table and talk to you as we're talking. We're an organization that's talking to a big organization, but we're an organization. There's no point in talking to individuals, because individuals cannot help you. It may make you feel good for the moment, but you can't help them and they can't help you.

Mr. Deshaies: My question was not about individuals, but about groups. When you speak you speak for a group, a community, not for yourself. Maybe it was badly explained.

Mr. McManus: I understood that you were saying it was important to have a phone call to the individual.

Mr. Deshaies: Not to the individual, no. We're speaking about definitions.

Mr. Ringma: I'll start with a statement, Mr. MacSween, Mr. McManus, and Ms Jacobs. First of all, this committee, even in just a few days, has heard quite a lot of testimony to the effect that the government should cease to be the provider and should instead be the facilitator. That encapsulates part of what you're doing.

Here's my direct question. You talked about the genesis of your own third-sector organization and how it started. I'm wondering if there is a tendency for these to form in rural communities as opposed to the cities? Is there a spontaneous movement to do that elsewhere, such as in the United States - and I think you mentioned that - as well as Canada?

Mr. MacSween: As for the experience in the United States, these kinds of organizations are clustered in the ghettos in the big cities. They're in the southern United States, particularly where poverty is rampant.

In Canada very few of these kinds of organizations have emerged. That's beginning to change. A number have been attempted, but they haven't succeeded. They've usually bit the dust because of economic problems. There have been exceptions over the last several years. There are a couple of fascinating organizations beginning to develop on reserves in certain native communities. That seems to be where it's starting in Canada.

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Now there are some exceptions. There's an interesting one out in La Ronge, Saskatchewan. There's also a group in Halifax, HRDA, which tends to look into the north end of Halifax and concentrate on social assistance recipients. But it's more like that of the Americans, with a focus on a particular constituency within an urban area. For the most part in the United States, the predominant number would be in the poor areas of the big cities.

Mr. Ringma: For these organizations to succeed they obviously need local support. Maybe you can give us a few words on what your own experience is.

Again, we hear that the public out there is interested in their own community. There are a lot of volunteers available, and we've had a lot of them as witnesses for the committee. The thing, I guess, needs some critical mass or something to get rolling.

Mr. MacSween: It certainly needs a leader. There always has to be a leader to launch it.

I look at this organization like a business organization. You need a strong leader to start it off. New Dawn was launched by Dr. Greg MacLeod, who I think is going to be appearing before you on another matter later this afternoon.

New Dawn has been honoured to receive good community support. I think in large measure, however, that was derived because New Dawn tends to solve problems. Let me give you an example. When New Dawn started in the late 1960s, one of the big problems here was that there were three dentists. When I came back to Cape Breton in 1977 from Ontario, there were two or three dentists practising in what's referred to as the industrial area. I went looking for a dentist. My options were to wait for three years for an appointment or to go to Halifax.

New Dawn had started working long before I was associated with it, so I'm telling the stories I've heard. I wasn't part of this particular program.

What New Dawn did was typical of the New Dawn way. It looked at the problem and it went out to build a dental clinic. It equipped it. Then it went off to Dalhousie and began to recruit graduating dentists. It offered them a fairly attractive deal in terms of a lease to purchase the clinic. They brought in a dentist that way. Then they built another clinic and brought in another dentist. Then they built another clinic and brought in another dentist. Gradually, the thing developed a momentum.

New Dawn's approach tends to be to ask what the problem is, and then ask what is a businesslike way of trying to solve the problem, do the deal and evaluate the results afterward. There has been a whole array of other things that New Dawn has tackled like that. It tends to work from this question all the time: what's the community problem? Cape Breton has a lot of problems, but you try to say, of this big piece of problems, of this mountain of problems, what's one thing that's important that we have the capability to try to solve right now? Let's go do it.

A lot of community groups begin to look at the big problem. It becomes overwhelming. The more you talk about it, the more de-energizing it is. After a while you talk yourself out of doing anything. New Dawn has always stuck to the strategy of being very practical. Solve this. Take this step now. We're in this for the long run. No, we're not solving all the problems, but we're making things a little bit better by doing this now.

Mr. Ringma: I would just conclude, then, with the observation that there seems to be a lot of merit in this sort of organization, but it cannot be imposed from the top down. There's no sense in you saying to the feds that they should be establishing this. What has to happen, I presume, is that once you establish it, you have to be listened to. Is that it?

Ms Lisa Jacobs (Researcher, New Dawn Enterprises): While it's important for community development to begin with the community itself, I think the federal government has a real opportunity to play a leadership role and put out the call to rural communities that don't currently have an existing infrastructure to start developing their own communities.

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I don't think that means the federal government can actually dictate to the communities what has to be done, but it can begin to approach communities. In a way, if communities heard from the federal government that it would be willing to work with them, that might be an incentive for communities to begin to organize themselves.

Mr. Ringma: But in a sense you have the beginning of that right here.

Ms Jacobs: Yes.

Mr. McManus: If I may, this is a very complicated political and constitutional issue. I don't know myself whether this has been thought through. It boggles my mind to think that the federal government can even think of going into rural municipalities that are owned by the provincial government. In other words, the federal government deals with the province, and the province deals with municipalities. It has no right to jump over the province and go directly in.

Mr. Ringma: That happens with organizations.

Mr. McManus: Maybe so. I'm not saying it doesn't happen. People can make mistakes or do things for good reason. I'm not challenging that. I'm just saying that you can't have that policy - you may do it on occasion - because you're going to tear the country apart on another provincial-federal issue.

Lisa said you've got an important leadership role to play. You can find all kinds of instances throughout the country in which the federal government could provide a leadership role. It's not a top-down thing, but co-partnering, sitting down at the table.

Name an area in which the federal government has a presence where the provincial government is not heavily involved. It's there. Take, for example, provincial parks. There's no reason why the federal government couldn't recognize that it's important for them as an institution in a given region to have a good, partnering, quality relationship with the local rural community. We know that traditionally this has not been the case. I know there are little PR committees set up here and there, but it's not policy to be a good neighbour and partner who's able to sit down and share to help the local community.

Let's face it - the educated people are in the federal government. They go into provincial parks. They all have master's degrees. They're well-educated, trained, quality people. Yet there is no way to have a supportive relationship in a community that many times has very few people who are professional. Rather than dominating them, there are nice ways of moving in to provide support, encourage them to organize and help them along the way.

So there are all kinds of things the federal government can do without having a top-down policy imposed. A lot of it is PR. A lot of it is good judgment. As Rankin implied before, it's basically attitude. It's a way of relating to one's neighbour.

I don't know if any of you are historians or what your background is academically, but if you go back to the time of Confederation, Sir John A. and the other fellows did not want strong municipal governments. They did not want the people to come together, associate and dictate to them, because they were horrified by the Civil War in the United States and all that happened there. So the whole thing was to control the people. The right of assembly and all that was really put in its place. I won't get into it, but you understand. It's an important piece of our history, and the rural areas in regions of the country are still suffering from that initial fear of the central government of small communities, cities and towns assembling and becoming strong.

As Rankin said, if the small towns and cities in rural municipalities don't become strong, they'll have nothing. They will not be feeding into the few big urban areas in this country. If there is no feed into the big urban areas, whether it's over 50 years or 100 years, it will be like every other big urban centre, whether it's Rome or whatever: it will go downhill. You have to really nourish the roots of the country if you're going to have a strong, powerful urban area, and therefore a strong, powerful country.

The Chairman: Mr. Reed.

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Mr. Reed: Mr. McManus, just to put your mind at rest, I don't think there's any desire on the part of the federal government to involve itself in what are historically provincial issues under the Constitution or anything like that.

There are some things, though, that are under federal jurisdiction. One is that we have a federally regulated communications system in this country. One of the objectives we have as a committee is to identify those areas in which the federal government has a responsibility and to find out how it can deliver on that responsibility. Specifically in this case, that means rural areas. That's specifically why we've gone across Canada as a committee to talk with citizens everywhere.

Interestingly enough, one of the messages that was bounced out at us was the need for an updated communications infrastructure along with the weaknesses that exist in it at the present time. Maybe we can bring an end to party-line phone systems so that farmers, for instance, can get access to the Internet. The regulation of those and the issuing of licences are all federal in nature.

Mr. McManus: I thought this was the natural resources committee.

Mr. Reed: Yes.

Mr. McManus: And you're talking about -

Mr. Reed: Rural development.

Mr. McManus: - communications. Is that part of your mandate?

Mr. Reed: It's part of the federal mandate, certainly, and we would be remiss if it wasn't part of our discussion.

Mr. McManus: I'm just confused.

Mr. Reed: In my own opinion, the ministry of natural resources, of course, connects with forestry, mines, energy, secondarily with agriculture and so on. Most of those resource bases are rural. This is where we tie in. What do you do when a mine closes? You have a one-industry town in northern Ontario where the mine runs for 25 years and then winds down. How do we counteract the negative impact of that? Those are some of the things we're trying to look at.

Mr. MacSween, you brought up a very important point. You said that for associations to be strong, they have to have leadership. We had a submission here today that demonstrated that the most highly educated people in a particular area are exiting that area. There is a very high rate of illiteracy in given areas. I wonder if you see that as a problem. If so, do you have any thoughts on how you'll go through that transition so that the leaders will emerge?

Mr. MacSween: We tend to define Cape Breton as a depleted community. The characteristics of that depletion include things like economic depletion in terms of the level of participation of the labour force. It's socially depleted, in that you don't find anywhere near the same level of social infrastructure that you'd find in a vital community of this population. There's a depletion in terms of human resources, to which you just referred. That's the problem in and of itself. To some extent, that's the raison d'être for New Dawn.

You don't tend to find community development organizations or community development corporations in communities where there is a vital economy, a good social infrastructure and where the young people are staying. There's usually a private sector that makes things happen. Part of what we're struggling with is those big issues and questions.

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A couple of years ago I was talking with a good friend of mine about the state of the country, and at that time there was a fair bit of discussion about the Constitution. The consensus in our discussion was that the federal government had to begin to attend to the economy, so I asked what he would have them do. He said they don't necessarily have to do anything; they just have to begin talking about it and send a signal that the economy is important.

It seems to me that since the late 1960s and early 1970s, the signal given by the Government of Canada is that the urban centres are important. You started off with the growth centres. I think there is an array of things the Government of Canada can do to say that rural Canada is important. Just to start saying that would have an incredible symbolic impact in this country. One way or another you're implicitly - and I'm using it in a pejorative sense here - telling young people that their future is in the urban centres. That's the message - that is the place to go. Go and get your career on track.

I think we can begin to send an array of other signals to people in terms of affirming that staying in your own community and building a community is important and rewarding work.

The Chairman: Thank you. I have a couple of comments to make.

I absolutely agree with your last statement, and that's why in the throne speech in March the Prime Minister spoke directly about and to rural Canada. I'll have to paraphrase it because I don't have the quote in front of me, but it called for the government to concentrate on the revitalization of rural Canada, and it must recognize that in order to do this, rural Canada faces challenges - both in its human and other resources - that are different from urban Canada. Any solutions have to respect those differences.

At the beginning, it talked about the need to recognize the importance of it. That was an important recognition. You're all familiar with the political system in Canada, so you know there is a lot of vying for what will be included in a throne speech, which is basically a statement of first principles by a government. So I think that was important.

Mr. McManus, I think you inadvertently made the point excellently when you asked why the natural resources committee is dealing with rural development. One of the concerns, of course, is who should do it. Should it be the agriculture committee? Should it be the committee that deals with communication? Should it be the natural resources committee? Should it be the industry committee? That's one of our difficulties as a federal government - the need to concentrate and to assign responsibility for the rural file. Right now it's totally diffused throughout the government, and it gets buried in ministry after ministry with urban concerns.

The third point I'd like to make, and I think it's an important one, is that you've presented the committee with a structure that works, one that I think you're saying can be replicated in other areas. What the federal government needs to do, I believe - and what this committee is trying to explore - is to provide the levers that the rural development structure can pull on in a given set of circumstances.

In your brief you provided a good example of that, which has to do with your desire to have a community investment strategy negotiated with the Canadian chartered banks. That's one of the levers that the federal government can, if it so chooses, provide to structures like yours in rural Canada. So that's how the correlation is trying to take place.

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I'll read the exact quotation:

The Government is committed to the economic renewal of rural Canada. The Government will address the problems facing rural Canadians in a way that is tailored to their needs. Rural Canada is rich in natural and human resources and faces different challenges than urban areas. The Government will move forward in the coming session to make sure that all Canadians benefit from economic prosperity.

That was the Prime Minister in the throne speech, and that was the call to arms for rural Canada.

Mr. McManus: I must come back to this point: you have to think it through. There is no way that I understand that the federal government can get directly involved in a comprehensive, sea-to-sea responsibility for building strong communities and people in the rural areas. I may be wrong in that. I'd like to hear anyone speak to that and give me bible and verse. I don't think you can do it. It can't happen that way. It has to flow ahead of the responsibility that provincial governments have for the people in their provinces. That's a starting point.

If you want a starting point, it's not how you build a strong rural Canada. You can put a mine in there and do all that sort of stuff, but that doesn't build a strong community. That's a specific task to extract ore, to do something, and as soon as it's over, being a one-horse town with no community infrastructure, it collapses. So that's not the issue. The big issue is how you build a sustainable social and economic environment for people in rural Canada.

The Chairman: Absolutely, Mr. McManus. But if the federal government does not provide the strategies and the levers, the communities themselves will have difficulty doing it. For example, if we do not pursue strategies to allow the export of our natural resources, then those rural communities that depend on natural resources will find it very difficult to survive. If we don't provide an environment within which the financial institutions of this country support rural entrepreneurs, then they will have great difficulty.

Nobody is suggesting that your role, what you do in a community, can be done by the federal government. What we are suggesting is that the federal government can pursue policies that will give you tools so that you can more effectively do your job.

On that point, I have other witnesses waiting. You and I could probably have a wonderful conversation for several hours.

Mr. McManus: I hope we will, because you've raised a big issue here and the country is looking to you for leadership. This seemed to be an opening, but I saw you always moving away from the organizational approach, which is basically a change-in-attitude approach.

Some hon. members: No, no, no.

Mr. McManus: I'll stick to my guns until I'm proven otherwise, but when I see a change in attitude, when you're prepared to sit down with the provincial person, the municipal person and your quality resource people and all together work for the common good, that will be a sign that something really good is happening.

The Chairman: We'll look for that to come to fruition. Thank you.

Mr. McManus: Thank you very much.

The Acting Chairman (Mr. Reed): It looks as if I've been relegated to the chair.

Our next witness is Dr. Greg MacLeod from BCA Holdings. We welcome you, sir, and invite you to give us an introductory statement.

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Dr. Greg MacLeod (Director, Tompkins Institute, University College of Cape Breton): I'm president of a community finance company that raises money to invest. I'm also involved in economic development in Mexico in non-metropolitan areas, in community groups. I was a speaker at the Prairie Forum in Saskatchewan last week. I have a one-page brief to which is attached a paper I gave at the Prairie Forum; the topic is related to this group.

[Translation]

You may ask me questions in English or in French.

[English]

I would like the federal government to jump in and deal directly with municipalities. In fact, I would prefer that we had a federal government and only municipalities. I can say this because I'm not a politician, but I don't have great confidence in the provinces. It has not been good for the rural economy.

I'd like to make some points. I was involved in an OECD study mission in Europe a number of years ago to look at job creation in non-metropolitan areas. A main point I want to make is the distinction between metropolitan and non-metropolitan areas.

A metropolitan area, I would understand, is at least 200,000 people within 400 square miles. Everything else is non-metropolitan. The definition is not just numbers. It usually means you have your financial, university and political institutions centred in the metropolis. In Nova Scotia and maybe Atlantic Canada we only have one metropolis, and that's Halifax.

Up to now, the government has viewed Canada as one economic system, but there are two clear economies: the metropolitan economy and the non-metropolitan economy. The non-metropolitan economy is obviously resource-based and always has been resource-based. We are suffering from depletion and out-migration in non-metropolitan Canada, and that's bad for non-metropolitan Canada and for metropolitan overcrowding.

If we look at Nova Scotia, Halifax is the metro area. It has unemployment of about 8% lower than the national average. In the rest of Nova Scotia, Cape Breton and Yarmouth have about 22%, maybe two or three times higher, and much higher than the national levels. You may see in other provinces that the metropolitan is fine. In policy in Atlantic Canada, ACOA and the federal agencies view it as one. Most of the grants in Nova Scotia go to Halifax because that's where all the accountants, lawyers and specialists are. They're better at dealing with government and getting everything and applying. So it's not a level playing field. You have to compete, but we cannot compete with the metropolitan area. We always lose whenever it is a competitive situation. And the western diversification fund is likely the same.

I want to make a number of specific recommendations. One is the recognition of two economies. This means two government programs geared differently. Two, I would like specific points like community quotas for fisheries to enable the coastal communities to survive. I'm strong on that idea.

The third is encouragement of value-added industry in non-metropolitan areas, such as food products from fish and vegetables, furniture from wood, gyprock from gypsum. The federal government gave a lot of money to a United States gypsum company to dredge so they could take bigger ships in to take our gypsum. They're taking it out now. I would want to encourage them to do more value added and produce gyprock here rather than just take it out. I'm happy to have some jobs in the mining, but a preference would be to do more value added.

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Fourth, I would like to see investment funds for non-metropolitan areas. Industry Canada set up a program and we competed for it, but Halifax wins out. You cannot beat them because they have the banks, they have the lawyers, they have everything. So many of these government funds go to the metropolitan areas, as I say, so there has to be a separate category for the non-metropolitan.

Fifth, I would like to see policy to help promote community-based commercial corporations such as community businesses and/or cooperatives, because they're very similar. I'm part of the cooperative movement and what I call the new community business movement, like New Dawn and our finance company.

These are my main points and this is just another idea. I'm involved in the Great Northern Peninsula Development Corporation in northern Newfoundland. I see people up there living in these tiny, tiny places. They build their own houses and they freeze the fish and they hunt, and I see them surviving in decency on maybe $10,000 a year. My idea is that if there was some way of giving people an isolation allowance, $10,000, $12,000, it would be cheaper for the federal government than trying to move fishermen and woodsmen to Toronto or Halifax and expect them to survive. They end up in ghettos and those places. I think it's crazy what they've been doing, taking fishermen who are 45 and teaching them to use a computer, sending them to Toronto or Halifax and expecting them to compete with a high school student or university student. I prefer to see some sort of special allowance.

The paper I passed to you was a little more in detail, but I point out in the paper what you all know already. In 2020 or so, 90% of Canadians will be in the major metropolitan areas. I don't think this is good for the country. I was on a study tour by OECD, and I remember Austria, where we met with the Government of Austria. They have little villages up in the mountains, and the policy of the government was to accept that they have to subsidize these villages in places. They said that if they allowed simple free market economics to work, all those villages would be gone and Austria would be maybe two cities and one big city. They said that this would not be Austria. The character, personality and essence of Austria is to have a rural, non-metropolitan population, and they recognized that.

My thing is that if Canada recognizes that the nature of Canada requires a non-metropolitan population, we'll make the adjustments to make it possible. I thank you.

The Chairman: Thank you, Doctor. Mr. Deshaies.

[Translation]

Mr. Deshaies: Having heard you and the previous witnesses, one might wonder to what extent grants must be provided to maintain a population in a given area, and in a way that is viable. Let me give you an example. To what extent must we subsidize the price of milk so as to not kill our industry and then have to go and buy our milk from the United States? Someone who spoke just before you told us that the solution must come from the people here and that we must give them the tools they need.

Are you talking about tools or something else? This is very tricky, because the government is being told that it must not provide grants, that markets are being globalized, that we must live and let live, whereas we all know that it would be stupid to not give 2 cents a litre for milk when you want to benefit from the millions of dollars in economic spin-offs generated by the dairy industry.

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Mr. MacLeod: For my part, I always think of economic development in "organic" terms. I do not believe that it is possible for us to change the system overnight. It may be easier in the case of an industrial system.

Today, agriculture in Europe is faced with the same problems, but in Europe, things work much better, because they are trying to make their changes more progressively. Here, we have free trade. In Europe, they still have social funds and they are able to make little adjustments. It is a complex problem. I do not agree with what you said, because it strikes me as being too simple. It is not simply a matter of 2 or 3 cents' worth of subsidies. I believe that we should have five-year plans.

It is virtually impossible for Canada to maintain a subsidization system. In all the other countries, changes are being made. I do not agree that we should simply be opening up the Canadian system to the free market. I believe it should be more subtle. Here, I like our tax credit system. I believe that we should have a combination of things. Perhaps that in agriculture, it is too simple, but I am convinced that we must go step by step. It is interesting to see that in the West, in Saskatchewan and in other provinces, there are systems of control,

[English]

wheat boards and Saskatchewan Wheat Pool.

[Translation]

I am strongly in favour of that. There is a movement against the wheat boards. We can have changes, but we must find the real answers.

I maintain that it is the federal government's duty and responsibility to establish a policy and strategic systems aimed at retaining our rural population, because I believe that Canada needs its rural people.

[English]

The Chairman: Mr. Ringma.

Mr. Ringma: Dr. MacLeod, you've made a very clear case for saying there are two worlds here -

Dr. MacLeod: Economies.

Mr. Ringma: - metropolitan and non-metropolitan. Others will describe it in other ways. For example, an earlier witness was saying it's a matter of pressure groups. He didn't use the term ``pressure group'', but you can say that the money will go to associations, and the strong associations exist in the city. It's tantamount to saying what you're saying, except in a different way. You say that the cities, Halifax in this case, have the biggest and strongest associations; therefore, ACOA's policy, which you mentioned, is directed at one problem in Nova Scotia rather than -

Dr. MacLeod: The global.

Mr. Ringma: Yes. I could describe the inequity perhaps in political terms, saying that ACOA and others go according to what the political pressure is.

I wonder, because you're very expert in this area, if you can resolve these. Can you say, here's the metropolitan and non-metropolitan, and here are the other ways of describing this? Can you rationalize all of these or not? Would you stick to saying it is metropolitan and non-metropolitan, or are there shades?

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Dr. MacLeod: No question, there are always the other factors of political and pressure groups.

Let me jump to the economic. For a multinational corporation, when it has a branch plant in different places, it is of no particular benefit to the corporation to maintain one here or there or the other place. If I'm in rural Saskatchewan or in Newfoundland or Cape Breton, it's in my interest to keep that company there, so obviously our interests do not coincide.

I'm saying that for survival in non-metropolitan places we have to set up these new business structures. We have to dream up something new. In political terms there's no question that the larger centres will carry the day. I would like Halifax to prosper and I would like Toronto and Montreal to prosper, but there's a built-in bias just with the numbers.

In Canada we tried to correct that. It used to be that we had the idea - this always came up - to get a balance by going by territory or region. We tried not to get into just per-capita politics, because that would be really the extreme. That would mean Toronto and a few cities would run the whole thing, and culturally we recognize that in Canada.

So I recognize that it is this way, and I try to argue with politicians and even with people. I gave a workshop in Halifax last week, and I tried to argue that it's to the benefit of Halifax if we develop in the non-metropolitan area. Otherwise, we'll go into Halifax and we'll be welfare cases and problems, and in Toronto too. It's to the benefit of these major urban centres, metropolitan centres, to promote development in the other places.

In Canada, for instance, the fact that we recognize different levels in unemployment insurance is a recognition of our difference. I disagreed with the changes in unemployment insurance because I consider that the non-metropolitan economy is usually seasonal, and the unemployment insurance was used generally - there were abuses, certainly - as a buffer for seasonal economies. That didn't apply to industrial economies. Therefore, I thought that in Canada we should have two unemployment insurance systems, one for the metropolitan and another for the non-metropolitan.

I think we recognize a bit of that in Canada in some of our programs, but this is my major point. Once you accept that there are two different major economic systems, you've accepted that there have to be two strategies and two different programming systems. As I noted about Austria, there it is recognized as part of the nature of the country that they have villages. I think that in Canada more than the United States, people in the cities would recognize that it is in the nature of Canada to have a non-metropolitan culture.

Mr. Ringma: It's easy for me to accept your two systems, two strategies. They're free. But the big point is how we do something about it. How do we force the central government to recognize this? This committee is part of the answer. I hope that by hearing testimony like this, the realization will be reinforced in Ottawa that indeed there is something going on out there and they have to react to it. What in your mind is the biggest lever to get the government involved?

Dr. MacLeod: I still think that for governments, money and finance is a terrific way of influencing things, especially through tax policy. For instance, because in Saskatchewan there were people up from the midwestern states, I know that in the United States the farming organizations are going into value added. The corn farmers are going into chicken raising and things like that. I think it's a very interesting development.

One way in which the government could encourage value-added agriculture in Canada is through tax credits. For instance, someone running a big farm could get very attractive tax credits for adding this other kind of operation. I think tax credits are an important lever.

.1430

You don't influence land tax. One thing people are talking about is land trusts, putting land together to help younger farmers get into the business. I was talking to one group about this. The people have a lot of land and they lease a section to a community business. This would simplify a younger farmer starting without having to put out all that capital outlay. All those kinds of things can be facilitated through tax systems.

The Chairman: Okay, thanks very much.

Mrs. Cowling.

Mrs. Cowling: Dr. MacLeod, I represent a riding in rural Manitoba that runs right along the Saskatchewan border. We have made a living traditionally from farming. It's a third-generation grain farm. What has happened in that particular area, which is likely very similar to what you saw in Saskatchewan, is depopulation and movement away from the rural community.

I like your recommendations. However, recommendation 6 with respect to an isolation allowance for families living in isolated communities concerns me. I think of polarization. Because people in rural communities already feel isolated, it may well leave them feeling intimidated and still out there by themselves. I'd like your comments on that.

I know that as we look at the renewal of rural Canada, we have to move from point A to point B, and there is a transition and a bridge we need to build to help these communities revitalize. I'm not sure if in fact it is possible to revitalize some of the rural communities out there. Could you make some comments with respect to polarization?

Dr. MacLeod: When you say polarization, do you mean that within rural areas you get some people well off and some people not well off?

Mrs. Cowling: Yes.

Dr. MacLeod: I normally get invited to non-metropolitan areas because I work in some of these things. When I gave a workshop in northern Alberta two years ago, I was very pleased to see how some of the big, wealthy farmers were concerned about losing the population and were willing to bend over backwards to make it possible for more people to stay. It was a different attitude from what you would find in an urban area, where a big industrialist would say, I made it; I'm self-made. It's like poker - I win, you lose, that sort of thing. Some of these farmers are big business people, as you know; they have millions of dollars' worth of equipment. So I found a very different cultural attitude, which is very encouraging.

I'm strong on organization and setting up structures. Maybe one of the most important things for all people is to belong to something, to be part of something. In a way there's a disadvantage in rural communities because we're far from everything, yet an advantage is the social side. One of the things I've been involved in is turning the social into a financial asset.

I'm chairman of a finance company, and in Cape Breton we've raised money. We go around and ask people to invest some money. We appeal to them by saying, you're a Cape Bretoner - put some money in and we'll do something together. I find that I can't use this argument in Toronto. It might be the nature of it. Most of us here know everybody, and we have cousins and we went to school together, while even in Halifax most of the people weren't born there. They've come from somewhere else.

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My suggestion about some of this stuff is that we turn our social solidarity into an economic asset. I'm interested in financial organizations.

With what I said about land trusts, I found it interesting that there were older farmers willing to lease a section of land to a group. They won't give it away - they don't like giving things away - but they'll lease it for a number of years. In the big city, to ask people running industrial businesses whether they could turn over their factory, if they don't need it, to this community group and let them produce chairs or something...I don't think you'd find that.

So there are assets in the rural, non-metropolitan area. The social is the main one you can tap into. You get people to volunteer a lot more easily and to give their expertise and get something going. There's a terrific economic resource there. By encouraging that, you're giving dignity too, because people are doing it themselves. On that side I agree with Rankin and Ora.

I'm stronger on the need for government strategy and government tax policies. I travel around a lot and I've found that you can't do it without government. It has to be a partnership. It's a question of finding a balance. I think it changes historically; what might have worked in one period won't work in another. We have to remake it and change it all the time.

A hotel went bankrupt and our finance company bought it. A rope company went bankrupt and we bought that. People said we couldn't make it work and it would go bankrupt, but we're selling 30% of our rope in British Columbia. We were told that it had to be in Halifax. They said it wasn't working here because we were too far from everything, and it had to be in Halifax where everything is central. We fought against it and we got it going here. We sell about 30% of our rope in British Columbia and maybe 25% in the New England states. It doesn't make any difference.

I have a great example in the Basque country, in Spain. The biggest producer of fridges and stoves in Spain is in Mondragon, in the Basque area. They produce furniture, numerical boxes for General Electric in the United States, and they just built a turnkey factory in Brazil. The town where they're centred has a population of 20,000. It's really a rural county; there's no railway, no airport, no port. It's all little mountainous roads and everything is by truck.

Here in Nova Scotia everybody was telling us that in Cape Breton the economic laws say you can't develop business or industry here; you have to be in the major metropolitan centre. So I made a point of looking for counter-examples.

They said our little rope company couldn't work. Our little finance company is also working. We just bought a radio station. An outside company owned all the radio stations around, and the last independent went bankrupt. There was tremendous community support. We said, we can't lose everything here, so we developed a group and took over the radio station.

I'm saying we can do things if we see the people as a resource. It's something we have that big metropolitan areas don't. They have the banks and they have all the big stuff, but they don't have the kind of solidarity we can tap into.

I'd like government policy to encourage and favour these kinds of things. As I say, tax credits can help us a lot towards making these kinds of things available. Whether you get money from people.... Nova Scotia is doing a bit of that, and you had the growth funds in Manitoba and things like that. I'd like to see more of that.

The Chairman: Thank you very much, Dr. MacLeod. We very much appreciate your providing us testimony.

Dr. MacLeod: Thank you.

The Chairman: I would now ask Mike Gurstein to come forward.

Thank you for being here today. I would ask you to make an opening statement and then we'll turn it over to questions.

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Dr. Michael Gurstein (Director, Centre for Community and Enterprise Networking, University College of Cape Breton): Thank you. I learned that I was going be here only about an hour ago. I've been travelling a lot and I think it has made me confused. I apologize for any flustering that I might present. Thank you for the opportunity.

I'll give you a bit of background on myself and what I do. I think that would be useful. I have what's called a chair in the management of technology at the University College of Cape Breton. The Government of Canada, through NSERC and SSHRC, in order to promote the management of technology as a discipline in schools of business, established a program in schools of business across Canada to promote the management of technology. There were twelve chairs.

My chair is the only one in a non-metropolitan area and the only one not associated with one of the major industrial complexes in the country - the banking industry, the petrochemical industry and so on. I think it's revealing that in the area of the management of technology, there are eleven chairs concerned with metropolitan areas and metropolitan-oriented businesses, and only one chair concerned with the other 50% of the population and all those people who aren't linked into the major industrial complexes.

I tell my colleagues when I go to meetings that we're looking after the problems they create. One of the other chairs is working with the banking industry helping them to figure out how to have more efficient ATM machines. One of the problems is that there aren't banks in many of the rural communities around Cape Breton, so they have banking machines. As this fellow in Guelph is figuring out how to make ever more efficient banking machines, we have to figure out how to get credit to people in small communities who don't have access to anyone to talk about how to obtain credit. I think that's broadly indicative of some of the problems that other people like Greg MacLeod were pointing to.

I grew up in a small town in Saskatchewan. I don't know where you're from, but I grew up in a place called Melfort. I find a lot of similarities to Cape Breton - some differences, but a lot of similarities.

Since I've been here I've been working in an area to promote community access. My own background is as a management consultant working with technology. What I've begun to do here is to work to facilitate access to the Internet, especially for rural communities throughout Cape Breton and to a lesser degree Nova Scotia.

We have been finding tremendous interest in all communities in the possibility of access to information and communications technology as an alternative to a rapidly declining and disappearing economic base. We set up a centre here called the Centre for Community and Enterprise Networking. It is a bit overwhelming because so many activities are flowing to us because there's such a tremendous gap. There seems to be a tremendous need on the part of rural communities for the opportunities that the Internet and that kind of global networking provides, but there are almost no institutions in the country in a position to provide it. The major universities in Nova Scotia are uninterested in the rural areas.

We were asked by the provincial community access committee to organize a small program to train local people in community access. Suddenly that program became 60 students during the summer in community access sites, and it's about to become 200 people in 200 community access sites around Nova Scotia. There's talk of making this into several thousand people across the country.

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Community Internet access is one of the real opportunities these rural communities have available to them. It's a way for them to acquire information and distribute information, to strengthen local institutions, and to become an equal partner in the emerging economy.

If I have one specific recommendation, it would be that the community access program and the facilitation of community access in rural areas become a major thrust of the Canadian government. It's a way of equalizing the playing field for rural communities, because you can be anywhere and through access to the Internet you can still participate in the global information economy and the global information network.

I have a couple of other anecdotes with respect to community access. One of the elements of the Department of Industry's community access program is what's called the community access project. I was talking to an official in that department about the difficulties we were having finding funds to support these projects in some rural areas, and the fellow said we should get private sector partners. I said, sure, but where are we going to find the private sector partners? He said, the people who are trying to sell services or supplies. But in a community of 400 or 500 people, 250 of whom are unemployed fishermen, who exactly in the private sector is going to be interested in partnering with those people to provide community access? The notion of partnering doesn't make a lot of sense in areas where there's effectively no private sector.

My particular chair is co-sponsored. The notion of co-sponsorship of the chairs is that an industrial partner will be the co-sponsor. My colleague's industrial sponsors are all in the process of collapse. Fortunately, my industrial sponsor is the Enterprise Cape Breton Corporation, so my chair and activities will be sustained, I hope, in the future.

There are no industrial partners of the kind that make sense in metropolitan areas, in the heartland of the country. IBM is not interested in partnering with the enterprise centre in L'Ardoise, which is a fishing village 60 miles from here with 40% unemployment. IBM is not interested and the Bank of Montreal is not interested. No one is particularly interested in partnering with them.

I'd like to send you some documents about the things we've been doing. I think they would be useful background for when you write your report.

I'll open myself up to questions. I guess my own particular interest is in the use of technology as a way of equalizing the playing field for rural areas.

The Chairman: Thank you. We would encourage you to table those documents.

Dr. Gurstein: I will.

The Chairman: Mr. Ringma.

Mr. Ringma: I don't think you will have any problem convincing people at this table that there has to be an opening up of access to the Internet to rural areas and all of the residents there. The big trick is how to do it. You've said the industrial partner is simply non-existent in this area, so I presume the only way is through the infusion of financial support from federal and provincial governments. We can get your comments on that.

We've also had testimony to the effect that MT&T is simply not living up to what some people consider to be its obligations. Therefore, what might be needed is legislation to tell them that they will, as part of their overall obligation here.... I'd like to get your reaction on that.

Dr. Gurstein: There is tremendous energy, creativity and ability in rural communities, and through sweat equity they can provide the kind of partnering that's required. But they need the minimum amount of funds to allow them to carry that forward. The issue of looking for industrial partners, as Greg MacLeod mentioned, really has to do with...the partnership really comes from the community taking responsibility for its own efforts.

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The trend in telecommunications is towards reducing the subsidy required to maintain a relative equity of access. Without equity of access to telecommunications, I think it would absolutely represent the death of rural Canada. The degree to which all information-associated activities, including the distribution of government information, is rapidly migrating to electronic form is astounding. Unless people have equal access to that throughout the country, you're going to have tremendous inequalities. I think the need for legislation to ensure that is primary.

With respect to MT&T, I have horror stories like everyone else, but I don't think they're any better or worse than anyone else. The question is to establish a legislative and regulatory framework within which they would operate to ensure equity of access throughout the country. There has been equity of access for electrical distribution and telephone distribution. The danger is that in privatization and deregulation, inequities begin to emerge. The concern from non-metropolitan areas, I think, has to be that as you are deregulating, you're still ensuring a regulatory framework that allows for equity of access.

The Chairman: Thank you, Mr. Ringma. Mr. Reed.

Mr. Reed: Professor Gurstein, I think we've clearly identified that one of the challenges we have is the communications system. It shouldn't be impossible to overcome. We did it before. We did it with rural electrification and we did it with roads. It seems to me that what we're dealing with is another kind of highway, and this message has got to this committee very solidly over the days we've been on the road.

However, is there another impediment to be overcome - the impediment of illiteracy? We were presented with some statistics that shook us up a bit. There are areas - in this case in Cape Breton, but it's not uncommon to other parts of Canada - where the people with higher education have left the community and as a result, statistically at least, the literacy rate is not a happy message. Have you dealt with that at all?

Dr. Gurstein: There are a variety of different kinds of literacy. There's -

Mr. Reed: You're right. I'm computer-illiterate.

Dr. Gurstein: Right, exactly, and I'm illiterate in cooking.

There are different kinds of illiteracy. We've been trying to deal with some of the technical illiteracy. We're trying to create opportunities for some of the energies of young people to be used to bridge the gap between the technology, which is foreign to an awful lot of people, and the general community.

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We found tremendous success this summer with our student program. We took students with tremendous creativity and energy and imagination, put them into a context where they were supported and trained, and gave them an opportunity to work in their communities doing outreach into the community, bringing the community into the room with the box.

We had a tremendous response. We have just been doing the tallies and we've found that the 60 students had been in touch with, had probably trained, 5,000 people in rural Nova Scotia on using the Internet, and about 350 businesses. This was all done putting together money from a variety of sources, and these were students who were working for just above minimum wage but getting a tremendous experience from that.

I think the model from this is that there is tremendous energy in young people. What they need is an appropriate framework to carry that forward. We're talking about computer literacy, but it's a similar kind of thing in language literacy. It's really a question of setting up appropriate structures to work within. Frontier College, for example, which I had some involvement with a number of years ago, had a formula that was very effective. The question may be to find ways of extending that formula into these areas. We're actually looking to work with Frontier College in that particular area.

Mr. Reed: Well, you're to be commended for the work you've done.

The Chairman: Mrs. Cowling.

Mrs. Cowling: As we've moved across the country, we've found that we have a very large first nations population in the northern and remote areas of this country. How do we help them build on some of the strengths that they have, like their culture? We all know that we cannot fit everybody into the same sort of mould. With technology, how do we address their concerns?

Dr. Gurstein: If I'd had warning, I would have.... I got a note last night on the Internet from Iqaluit, announcing very proudly that they had just gotten connected to the Internet and that they had a group of high school students in the process of training the community in how to use it. It was an amazing message, and I sent it out to a whole bunch of people because I thought it was an amazing message. It was actually from Rankin...very far north.

I don't want to say that the Internet is going to save the world. It happens to be what I work on, so I think about it a lot. I think that first nations Canadians can use technology in a way.... My image of technology is not as a saviour, but as a lever, as a tool, as an enabler, and the technology is available to be used.

I actually just met today with the person from the Mi'kMaq Education Authority and we were talking about doing some work together. They are talking about creating a curriculum in Mi'kmaq that can be introduced into the Mi'kmaq schools across the province. They want to develop CD-ROMs. There's a discussion about their doing a CD-ROM on Mi'kmaq fishing practices. The cost of reproduction is minimal. It would then be available to schools across the country, to introduce them to how to use those traditional practices. There is the possibility of using the web as a way of preserving the language and even teaching the language.

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My observation would be to encourage those kinds of efforts, and make sure that those efforts that are happening - and they are happening - in fact are recognized as being an appropriate way in which financial support can be directed, and that the structures are set up to recognize them.

I guess we have to trust that the people will use the tools once they're taught how to use them. What we have to do is set up ways of ensuring that the tools are available and they're taught how to use them. I think that's broadly true.

I don't know if I answered your question. I guess what I'm saying is that I think interesting and useful things are happening and that there are ways of encouraging them and making them part of ongoing government support.

One important area is to recognize that government itself can begin to think of itself in a decentralized way. There is no reason why a Mi'kmaq curriculum can't be created in the fourteen Mi'kmaq-language schools around the province, nor why it has to be created in Halifax or in Sydney. There's no reason why health documentation for first nations reserves needs to be created in the Department of Health in Ottawa. It can be created here or in Regina or in Red Deer. It can be created anywhere and consolidated and put together in appropriate ways.

If you're looking for ways of revitalizing and maintaining the vitality of rural areas, begin to think about the way we can start recreating these institutions by decentralizing them, by transferring the responsibility and the resources for doing these kinds of creative activities to the rural areas.

That's really what we're trying to do here. I'm trying to grab some of that activity and get it going here, because it can be done here. There are the human resources and the technical resources here. If we can get the financial resources and the support, then it can be done here. If it can be done here, it can be done in Truro or in Melfort, where I'm from, or in any of the thousands of communities across the country. It's really a question of beginning to think about the possibility of transferring responsibility and the resources to do those kinds of things into rural areas.

I know it's difficult when you're in Ottawa. I lived in Ottawa for a long time, so I know it's difficult to think about those things from Ottawa.

Mr. Reed: That's why we're here.

Dr. Gurstein: Good.

The Chairman: Thank you very much, Professor. We appreciate your taking the opportunity to provide this to us, particularly on the short notice that you had.

Dr. Gurstein: That's fine. I'm always pleased to talk to you.

The Chairman: We look forward to having you table those facts.

Dr. Gurstein: I will.

The Chairman: We stand adjourned until tomorrow in Goose Bay.

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