Assemblée législative de l'Ontario

1991-92 BUDGET

SUBCOMMITTEE REPORT

AFTERNOON SITTING

CONTENTS

Thursday 3 October 1991

1991-92 budget

Subcommittee report

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair: Hansen, Ron (Lincoln NDP)

Vice-Chair: Sutherland, Kimble (Oxford NDP)

Christopherson, David (Hamilton Centre NDP)

Jamison, Norm (Norfolk NDP)

Kwinter, Monte (Wilson Heights L)

Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

Stockwell, Chris (Etobicoke West PC)

Sullivan, Barbara (Halton Centre L)

Ward, Brad (Brantford NDP)

Ward, Margery (Don Mills NDP)

Wiseman, Jim (Durham West NDP)

Substitution: Harrington, Margaret H. (Niagara Falls NDP) for Mr Wiseman

Clerk: Decker, Todd

Staff: Anderson, Anne, Research Officer, Legislative Research Service

The committee met at 1118 in committee room 1.

1991-92 BUDGET

Resuming consideration of the 1991-92 provincial budget.

SUBCOMMITTEE REPORT

The Chair: Could we start off with the subcommittee report.

Mr Sutherland: The subcommittee met. Several options were discussed in terms of how we are going to deal with the report on the hearings we had over the summer. I think there is a general consensus that we did not want to spend a lot of time on it. Probably each group would submit its recommendations or its comments. We would go over a final draft of the general portion done by research, but we would each submit our own report and try and get that done and out of the way.

Then we had discussion about what our next topic would be. There were some wide-ranging views on that in terms of looking at taxation issues in comparison with surrounding jurisdictions. There was talk of sovereignty issues when you are entering into trade agreements and looking at the European Community and what individual countries are giving up there. There was a look at North American free trade. I believe there was some discussion about interprovincial trade and barriers there.

That is where the subcommittee was at. I believe each of us was going to go back to his own group and see exactly what issues it wanted to deal with and go from there.

The Chair: Mr Kwinter, is there anything you would like to add to that?

Mr Kwinter: I just wanted to comment on the report. I think we have an obligation to table a report that reflects the views of the people who appeared before our committee. Having said that, we as a caucus do not want to spend a great deal of time on it, for the reasons we stated at the subcommittee. We think the premises of the budget have changed and also that, notwithstanding that there were people who appeared before the committee, the general tenor of the people who were there was supportive of the budget, when in fact in the real world two polls have shown that almost 70% of the people are not in favour of the budget. I do not think it would do anybody any service to issue a report saying the people of Ontario overwhelmingly support this budget. That is the concern we have. I think we have an obligation to table the comments that have been prepared by the staff and the research people, but we are going to add a comment to express our particular views. That is where we are.

Mr Stockwell: How about where we are going? Any thoughts about which issue we will be dealing with next?

The Chair: That is all part of it. You have been talking to Mr Sterling and your party. Could you explain about the next direction this committee would take, so we have all the recommendations?

Mr Stockwell: I was just curious about whether the Liberals had any thoughts on where we should be going.

The Chair: Mr Kwinter, since Mr Stockwell is not on the subcommittee, could you highlight?

Mr Kwinter: I admit I have not had a chance to really discuss this with our caucus. It was my feeling that the buzzword of the 1990s is "competitiveness." I think it would be worth while for this committee to really get a definitive comparison as to how we compare in the areas of taxation and labour legislation, all the things that could influence investment and economic activity in this province.

There are studies. I have seen a couple where different groups have done certain things, but I find they are not really definitive. They talk about things but they also qualify them by saying, "We haven't looked at this and we haven't looked at that." I think that would be a worthwhile exercise. We can in fact use it almost as a road map as to where we are going, so that any time any kind of new tax or new legislation comes down, we can compare as to what that is going to do to our competitiveness. To me, that would be a worthwhile exercise, but I am certainly in the hands of the committee as to what it wants to do.

Mr Stockwell: The budget hearing exercise was, I think, more an exercise in political science than a budget and finance. It became clear early on when you saw the list that this particular budget, was generally special-interest groups with axes to grind, which we heard from on both sides of the equation, probably more so on the government's side of the equation.

It seems to me it would be a rather colossal waste of time spending any more time outlining what labour thinks of the budget. Of the groups we heard from, the majority supporting the budget were friends of the government. It was an exercise in political science and how to stack a committee hearing process. I would prefer to file the report and talk about what people said. Next time, though, if I could go on the record, if in fact this ever happens again or if it becomes policy that we do do this, we should try a little harder to find people who are a little less biased and not so much from special-interest groups.

I find that we hear from special-interest groups constantly. The pre-budget process is almost the exclusive domain of special-interest groups. They take full advantage of it. If there is one comment I would make -- I do not want to take a tremendous amount of time on it -- it is that in future we will hopefully hear from people who do not belong to any particular group but just have some thoughts on the budget. As Mr Kwinter said, really 70% of the people out there do not support the budget, yet the overwhelming majority of people we heard from supported the budget. It makes you wonder exactly what the process is we use around here and exactly how reflective and accurate it is of public thought.

As far as the issues we tackle in the future are concerned, there are a number I think we could address. The competitiveness angle certainly has great interest. I find it very interesting. It may once again be an exercise in polarization between the opposition parties and the government party, because no matter how many times you can bring forward items or document certain decision-making by companies leaving the country or even the province, it is treated with a grain of salt by the government members.

It would be better be to analyse exactly where we find ourselves to be competitive. We constantly hear about our health care system and so on. Yes, we probably are very competitive in those sectors. Rather than speaking in social terms, and not demeaning them at all and not playing them down, I think we have to deal more so -- we are losing a tremendous amount of business in this province, and a tremendous amount of jobs. We have a great health care system and a great social service net, but we are still losing them. Something else is going into the decision-making besides those issues, because business people are making decisions to leave, to close down and move out. They are fully cognizant of our health care system and our social service net, but they are still making the decision to leave or shut down.

There has to be another angle here. There has to be another set of rationales that we should be examining to determine why they are making those decisions. I ask the government also to think long and hard about this and choose a sector it feels may be of interest to analyse. To ignore the taxation-competitive side of it is to bury your head in the sand. I think it would be both interesting and analytical to determine the competitiveness, the taxation, the labour laws and so on that go into making a business decision. I think it would be very enlightening for the government as well to see what goes into making business decisions, because at this time the feedback I get is that there are a lot of positive benefits from being in this province. There are, but the decisions that are being made take those into account and they still decide to close down and move out.

I think it would be healthy for both sides to review that angle with, I might add, a very open mind. We have disagreements; I understand that. I am just saying that we can analyse this without being too political in the process. It makes no yards for me if they close down a plant in my riding. I do not score any points. I do not want to see that happen. I would really like to know why they are doing it. That would be the greatest thing we could look at right now, and a service to the taxpayer.

The Chair: The one thing this committee could maybe take a look at, and maybe the clerk could get it, is that it has been said that it has all been positive for the budget out there with all the people who came forward. Is it a possibility that we could get a list of everybody who approached to get on? I think we got just about everybody on during the hearings, but let's take a look. We are talking about 70% and yet we are hearing that everybody we listened to approved the budget. When we had these hearings, in order to say that everybody got there, was there somebody who did not get there to represent a certain group? I think if we saw the list of everybody who applied and who did not make it, it would give this whole committee a better insight.

1130

Mr Kwinter: I think -- and I do not have an answer -- that the whole process is flawed. The reason is that when you talk about a budget that is a fait accompli, let's face it, the Treasurer is not going to change his budget. He tabled his budget and the only thing he changed was changed because he got some flak on the gas guzzler tax. Because of the pressure on that, he changed it. The Treasurer has the right to table his budget, and you can comment on it, editorials can comment on it, the opposition can comment on it, but I do not think anybody has the right to force the Treasurer to change his budget. He lives or dies on his budget. He will suffer the political fallout if his budget is not acceptable.

One of the problems that I discerned quite early, if you have this kind of process where you suddenly decide that after the budget has been tabled you are going to go out and get comments from people as to whether or not they think it is good or bad, is that some of the people who appeared had the impression that they in fact could influence the budget, when that just was not the case.

The other thing is that the average person would have no interest. What are they going to do? Are they going to say, "I had to go out and comment on the budget." What for?

What you really do is attract special-interest groups who are looking for a forum in which to put forward their point of view. What you get is every single person who wants to appear, but they are only a certain segment of the population who feel there is some benefit for them to get out there and espouse their views. That is the problem.

In the same way, if you noticed yesterday in the House, the Treasurer has already announced that they are starting to work on next year's budget. I believe that, because that is the way the system works. By the time we get around to pre-budget hearings, the die has been cast and again people come in with the expectation that what they say is going to have some influence.

What we should have been doing probably was having pre-budget hearings at the time we were having post-budget hearings, because the post-budget hearings are really an exercise in futility. What are you going to do about it? The Treasurer is not going to suddenly say: "You know what? I heard that. That's right. I am going to go back and rewrite the whole thing." That is just not going to happen.

That is the problem you have and that is why I am less than enamoured with this process and what came of it.

Mr Jamison: I would just like to set the record as clearly as possible on the issue of the hearings.

One, the hearings that took place were demanded in the House by a particular party, the Conservative Party. To help the House do its business, we agreed to have the hearings across the province.

Two, I believe the vast majority of the people who applied to appear in front of the committee were in fact able to do that and, as a matter of fact, we made room for people who were inadvertently left off or misinformed as to when they were supposed to be heard.

There is a subcommittee that chooses people to be heard in front of the committee, and I may agree with you that you have the special-interest groups appearing there probably in as heavy a fashion as you would any other time. But this budget hearing that has just gone on has been across the province and we have tried to adhere to a recommendation put forward by the Progressive Conservative Party. We have done that and we have followed through on that agreement.

Moving on from that to where we should be going, there is a tremendous number of issues that face us as a province and as politicians who represent the people of this province. Something that speaks above all the things that you have really zeroed in on is competitiveness, trade, globalization of trade, trading blocks. I think it is very important because the process is going on at this very moment to put in place a North American trade system or trading block. This province should be evaluating the effects on this province on the competitiveness basis, because there have certainly been effects on the bilateral end and I expect there will be effects as great as or greater than those concerning the North American free trade agreement.

I think we owe it to the people of this province to really look at that in an in-depth way to assure ourselves that the federal negotiations are going on with recognition of our specific concerns as a province. This is a major step by the Canadian government, to expand to a North American free trade system. That can have a tremendous impact, both short-term and long-term, on the directions we have to take as a province to assure our economic future within that trading bloc.

Therefore, I would say the economic future of this province is going to hinge upon our ability to be ready to deal effectively as a government with the outcome of a North American free trade agreement, and also to look at the impact on certain sectors of our economy that may well be impacted more heavily than others. I think that is a responsibility that all of us have when we are dealing with tough economic times and times of future uncertainty. I believe that is something each and every one of us owes each and every person in this province.

Mr Sutherland: If I could just expand upon that, I think we can deal with some of the other areas that were brought up. For example, Mr Stockwell mentioned looking at a specific sector and how competitive it is. If we were to have North American free trade, which is a good idea, I think one of the areas you would want to look at, after we got an overview, might be some of the federal reps who are involved in negotiations. What are their objectives? I suggest maybe some representatives from the Mexican embassy, that type of thing.

I would certainly like to see some general overviews. But if you dealt sector by sector, obviously some competitiveness issues are going to come up in that discussion from both standpoints. I think of how Mr Kwinter and Mr Stockwell have brought it forward. So I would certainly support Mr Jamison in that type of discussion, because it can be more encompassing and deal with some of the other issues.

Mr Phillips: In terms of the report -- I think I said this to somebody -- I think the biggest waste of time I have ever had in my life is these hearings, frankly.

Mr Stockwell: In your life?

Mr Phillips: In my life, if my memory serves me right. The disappointing thing is that it became very political, in my opinion. I do not have any doubt that the Office of the Premier was orchestrating getting people to appear there. I have no doubt at all. If I am wrong there, I would be happy to be corrected, but I think the calls went out from the Premier's office to come and appear. Rather than being a committee searching for the truth, it became, "Who can get the most witnesses there?"

I was rather offended, I might say, that the NDP issued its own report on August 29, summarizing what happened and saying, "Here's our report," without any discussion by the committee. It is an offence. It just became a useless exercise. I challenge any of the government members to refute my argument. The calls from the Premier's office went out lining the witnesses up. There was not only a similarity to the witnesses, many of their speeches were almost identical, and it made a farce of the whole committee exercise. Then to issue a report on August 29 saying, "Here are the conclusions we reached," without any discussion --

The Chair: I do not have a copy of that.

Mr Phillips: Your name is in it. You do not have a copy of it?

Ms M. Ward: Nor do I.

The Chair: Yes, I would not mind a copy of it for all the committee members.

1140

Mr Phillips: "Committee Finds Widespread Support for Provincial Budget." "An overwhelming majority supported the budget." "Today is the last hearing." "It is the main concern." "Unlike the federal government who has abandoned Ontario," Christopherson says. Norm Jamison says something else. Then you said something. Do you remember what you said?

Ms M. Ward: That is a press release.

Mr Phillips: Well, it is your report on the thing.

Ms M. Ward: Yes, I remember that. I did not consider that a report.

Mr Phillips: And then the conclusions are all out there. What I am driving at is that rather than being an exercise hopefully searching for truth, it made a charade of it all. So I just say it is another little memory I'll keep over here.

As my colleague said, we will have to write our own report, I guess, and spell out why we think it was a charade. The problem I run into is that the Treasurer asked us, I think a year ago, to look at the budget process. I have had one bad taste of this thing and I am not sure this committee can look at the budget in an objective sense. I was sceptical after our prebudget hearings, and I am more sceptical now. Maybe we will take a subject like competitiveness and examine it, but to have an objective, non-partisan look at the budget process, I am not sure we can do that. You remember, Mr Chairman, that was supposed to be one of our mandates.

The Chair: The one thing maybe Mr Stockwell can clarify is, I believe this committee went out because of the request of the third party to go around the province. So that we could have a little peace in the House, we wound up agreeing to it. Is that not the purpose? I am just explaining what the purpose was.

Mr Stockwell: Yes, I think that is correct.

The Chair: This committee did not have a choice.

Mr Stockwell: No, the committee did not have a choice. I agree with you.

The Chair: This committee went on the direction of the House.

Mr Stockwell: You are right. It was our thought; it was our concept. I guess the difference is though, I did not really think it would be so orchestrated either. I know the government members will groan and moan and say: "Oh, it's terrible. You think we orchestrate these things. This was just an honest outpouring of emotion from the public." Do you see any turnip trucks driving down the street? Because I did not fall off one, and it is pretty apparent to me that it was orchestrated. But by the same token, I suppose, when we were asking for this, we should have known better. I say it is more of a political science class than hearings on the budget process.

The other thing is, and I do not blame this committee, I come from municipal government and committees there did really good work, committees were where decisions were made. I think there are some others who come from municipal government. Committee was a very important process in municipal government. They legitimately heard deputations. They weighed their decisions and took votes afterwards, and quite often you did not know how the vote would go because the deputants had a major impact on the decision-making, which was very interesting.

But I do not blame this committee, because I do not really see committees working that way at this level of government. It is not just this committee, it is any committee I have seen. When you are out on the finance tour, you pass through with the committee on the rental hearings. They were just as bad. It was just as much a joke. Everyone was staged there and it was a big play, it was a production. It was Stratford on the road. It just comes down to who is going to stage the most deputants, or witnesses as you call them, and what the press will say in this town and what the press will say in that town. It does not add up to a hill of beans because the government is not changing its position on any of this stuff.

I guess what I would like to say is, yes, we asked for it. I guess we should have known it was going to be rigged, it was going to be fixed. I guess it was rather silly on our part not to have seen that. Again, the groans will come from the government members, but they also honestly believe the standing committee on government agencies that interviews appointments by orders in council, will vote against one of them one day. We will leave that for what it is, the ultimate in naïveté.

I suppose what I am saying is I hate wasting my time, and I suppose I am like Mr Phillips. I think committees at this whole level of government are a colossal waste of time. It is just such a waste of time. You would be better to be picking coffee beans than spending your time here. It would be way more productive, because nothing gets changed and nothing gets accomplished.

If you just said to me, "We're not going to look at competitiveness; we're going to look at whether shoe companies should make more right-footed shoes than left-footed shoes," I could not care less, because what it comes right down to is that we have no impact. Governments are not going to change their decisions. We are going to talk about the budget, and the whole time it rolls around, the Treasurer is going to be up there in his office drafting the budget, meeting with whoever he wants to meet with, and life will go on. In essence, do what you want and pretend there is some importance attached to this process, because there is not.

Let's look at competitiveness. I do not care what Kimble wants to look at. If he wants to examine the free trade agreement or the bilateral free trade agreement or the North American, do it. That is great. But I guess what I am saying is that it seems to me that we spin our wheels here. It is just so frustrating. Maybe I am off topic, but I find it just so frustrating to sit around in committees and do nothing.

As far as the committee's going out is concerned, yes, we asked for it to go out. Maybe we made a mistake and we should have stacked the committee -- and we did not stack the committee. To be perfectly blunt, our party did not stack any people to come before this committee -- not one person. There was a letter sent out to certain interest groups saying, "This committee is coming." We did not force them to come out and hear. We just sent them a letter saying: "Look, this committee is going to be in your town. If you'd like to make an appearance, go right ahead. If you don't, that's life too."

Mr B. Ward: We have finished the post-budget deliberations, so let's move on. Mr Stockwell is concerned about wasting time, talking about that process for the next hour and then possibly again next week. Let's talk about, as a committee, what future projects we would like to undertake.

We have an opportunity with the proposed North American free trade agreement to look at the consequences of this agreement to the Ontario economy on a general basis, and I think we can do it in a non-partisan manner. Sure, we have our different philosophies; that is why we belong to different political parties. But I think we have an opportunity to show Mr Stockwell that committees can work.

By examining what happens or what is going to happen or what could happen with a North American free trade agreement, bringing in Mexico, the impact it has on Ontario, I think we have an opportunity to perhaps make recommendations on where future initiatives should be undertaken as far as sectors are concerned, and I think we can do it in a non-partisan manner, if we can overcome our political differences, and try to develop a consensus that would benefit this government and the people of Ontario.

The Chair: I know we are getting our frustrations out about what happened this summer and the process, but before we leave this morning, the research staff person here would like to have an idea of what the research staff is going to do. Is it reports from the three parties, or reports from the three parties plus a summary of recommendations, or reports from the three parties plus a general section written by legislative research? Maybe we can think about that a little bit as we go along here, to give them a little bit of direction on exactly what is to be done. Anne is sitting here still wondering what this should be.

Mr Stockwell: As far as I am concerned, we should not waste research time writing a report. It was a stacked, biased approach to this, and I think it would be a waste of taxpayers' money to have them write a report on this charade. That is our position.

The Chair: Okay. Mr Kwinter, can you just answer quickly on that?

1150

Mr Kwinter: I feel that we have an obligation to the people who took the trouble to appear before the committee to at least issue a report indicating what happened at the committee. Where I have a problem is with what the recommendation should be, or the endorsement or statement that this reflects what Ontario is thinking. What I suggest is that we have a factual report prepared by the research staff on what happened at the committee -- "This is what happened" -- and then each of the caucuses prepares a document that it wants to accompany that, and leave it at that.

The Chair: Do you still stand the same way, Mr Stockwell? I should be talking to Mr Sterling. He is on the subcommittee.

Mr Sterling: No, I think we all have a contribution to make to the discussion. I think we should just basically take what has been prepared by Anne Anderson, our research and support person, and then attach whatever we want to say to that. Basically, what she has prepared already is her summary of what was presented, and then each party may submit whatever it wants in terms of drawing any conclusions. I do not think we should have her trying to seek a consensus. Because of the nature of these hearings, a consensus does not exist.

Mr Jamison: This group of people here is supposed to be working as a committee. There is always a majority report that comes forward from a committee, and I believe departing from that would almost be precedent-setting. So a majority report should be established, with dissenting reports to be sent from those who wish. Certainly the other parties have the ability to do that, and that is what we believe should happen from this.

Mr Phillips: To correct the record, Mr Chair, your name was not in the press release. I am sorry; it was another. But the problem with that is that you have already issued your conclusions on the hearings. That is already out there, public. It ends up being a frustrating experience for all of us, to have what you would call a debate now, when according to this press release, with your party's name on it, you have already concluded it: -- Unlike the federal government, who has abandoned Ontario," etc. So why continue this charade?

Mr Jamison: That remark was designed to express my opinion during the budget hearings on how they were going.

Mr Phillips: Actually, it was not you; it was Dave Christopherson. Do you remember what you said here?

Mr Jamison: I probably would, yes.

Mr Phillips: What was your conclusion?

Mr Jamison: Do you remember what you said in the House last week, word for word?

Mr Phillips: No, but presumably this was your conclusion on the thing.

Ms M. Ward: And you made no comments to the press at any time since the beginning of the process? No one else on the other side did?

Mr Stockwell: You can make a comment to the press through a press release.

Ms M. Ward: Same idea.

Mr Phillips: "Committee Finds Widespread Support for Provincial Budget." The committee finds that the majority on it have now made their own conclusion, that is all, and I think therefore my colleague's suggestion is the right one, that we now have a summary of the facts and then each of us submit our conclusions and not waste time on a charade.

Mr Sterling: Mr Jamison claims that this is precedent-breaking. We did not break the precedent; the New Democratic Party broke the precedent. They rigged the hearings.

Mr Jamison: I take exception.

Mr B. Ward: Okay, here we go.

Mr Sterling: I have been around here for 14 years. I have never seen such disgusting behaviour on the part of the governing party as before this committee and what it did with regard to this committee. It is absolutely contrary to everything the New Democratic Party ever said in opposition. They continually said when they were in opposition that they wanted open hearings. They wanted to hear from the people, etc. Then when they are on the government side of this whole legislative process, they try to run it like the Gestapo.

They think their majority is such that they use their research staff, they use everything to influence the press coming out of this committee, instead of trying to drive for what the real feeling of the Ontario public might be. I just find it totally disgusting. I think the New Democratic Party has no idea of how the parliamentary system runs or the committee system runs. They have no feeling for the history of this system and therefore they are making a total farce of the committee system by measuring their performance over the past summer with regard to this committee.

To expect from the opposition parties some kind of co-operation at this time in trying to reach a consensus report is an insult to us. We do not want to waste our time with regard to regurgitating what the hacks of the NDP government who were brought in front of the committee have said to this committee, because we know it does not represent the public. We know it represents organized labour. Organized labour actually had people tailing this committee around, getting its people out in each and every jurisdiction. We have never had that in front of a committee, by business, by any other group, where it actually tailed the committee around the province to make certain that its people were being heard and brought them out. The regurgitation of the same arrogant message that the union representatives had and the phoney statistics were, quite frankly, hard to the stomach over the past summer. It was disgusting.

I think the actions of the NDP government with regard to this committee have been a serious breech of the understanding of what committees are used for in this Legislature. We understand how you are going to utilize the system and we hold out little hope that this committee is going to achieve anything in the future because of it.

The Chair: These are the points that you would be putting in your dissenting report. You would have that opportunity then.

Mr Sterling: Of course.

Mr Jamison: Again, I want to clear the record. The record is this; these are the facts. The Progressive Conservative Party held up the House until we would agree to these hearings. Certainly every party has its friends and foes in political life, but the facts are clear that the vast majority of people who applied to be heard in front of this committee were in fact heard, and in a number of cases room was made so that people could be heard.

I might say that room was made and agreed to by this committee to have people heard who were not in favour of the budget. We made sure that every possible avenue was available for people to be heard. If we had got our message out better than Mr Harris's hearings on the budget -- quite frankly, I expected to hear from many of the groups that you heard from in the Harris report on the budget. I was amazed not to have heard from them, considering that nearly every group that applied to be heard in front of the committee was heard. So this does not wash with me at all.

I find it quite amazing certainly that we want to depart from the standard way a committee makes a report. I believe it would be fundamentally wrong for this committee to proceed in that manner. The majority report of the committee should be made, and dissenting reports should follow where they are deemed to be necessary by dissenters.

1200

The Chair: Thank you, Mr Jamison. Mr Ward. I have Mr Stockwell down here again.

Mr Stockwell: No. You can strike me. I think Mr Sterling was tremendous.

Mr B. Ward: I do not believe we have to include this in the main report, but there were some groups that thanked Mike Harris for inviting them to participate in the committee hearings and then came out in support of the budget. It is also my understanding that the call was made from either the Leader of the Opposition's office or the Liberal Party itself to contact the Sudbury and District Chamber of Commerce to ensure that it was on the agenda to give a presentation as well. Those are just two items that I am aware of.

A contact was made, directly or indirectly, by the other two parties in an attempt to get organizations before the committee. As far as substance of the briefings, I think each group did the best it could. The chambers of commerce we heard from were basically the same in content. Places changed, but the content was basically the same. Probably the reason there are similarities is because of the organizations that were involved. Do chambers of commerce use the same text as well? I am not sure. I think we should proceed with finalizing this report and get it out of the way so we can move on to new items.

Ms M. Ward: I want to respond to what Mr Sterling was saying because it upset me. You were talking about there being a waste of time and the organized hacks and so on. I would just like to point out that there are, I think, 11 pages that list all the groups that appeared here and those comments are derogatory to a lot of them. If you look through these lists, I am sure you did not mean that the way that you said it.

Mr Sterling: Derogatory to the organized hacks and to the NDP caucus, I agree.

Ms M. Ward: No. Your comments to me said you were indicating that all these groups did not have validity, that it was not valid for them to appear before us.

Mr Stockwell: You grasped the concept then.

Ms M. Ward: Your comment, I think, slammed them and I do not imagine you meant it that way.

Interjection.

Ms M. Ward: You mean it that way, that the Ontario Nurses' Association message was not valid, that it did not have the right to present its comments? The association of municipalities, northwestern Ontario --

Mr Sterling: I am talking about the unions that run the NDP.

Ms M. Ward: -- Women's Decade Council, the Ontario Association of Interval and Transition Houses, the Ontario Medical Association, all those groups.

Mr Stockwell: The ones that donate to your campaign.

Ms M. Ward: I am sure you would not say that about the Metropolitan Toronto Board of Trade. There have been many comments too about the waste of time. I do not see the difference between the waste of time in the committee and the time that is --

The Chair: We can argue back and forth on this, but the main thing is writing the report. Our comments are coming at the end. All three parties have their comments on what they found. To argue back and forth, we do not get anywhere.

Ms M. Ward: I think I have the right. I think I should be able to make my comments on that.

The Chair: I am looking at the time, Ms Ward. The other thing is that, Mr Sterling, I think you brought one thing up, on discussion of areas to be looking at. I think you were talking about the European Community, about looking over there. You were not here, you were at another meeting there, so I think that was another area that you were looking at Am I putting words in your mouth?

Mr Sterling: I think Mr Kwinter's suggestion is probably the most reasonable. We can actually enter into a situation where we do not have a party doctrine or an ideology on the part of the government and they would be perhaps a less partisan kind of hearings. That would be dealing with an issue to find out what the facts are in terms of the people we are trying to compete against. Probably the easiest and most relevant would be the United States and the jurisdictions closest to us.

It is also important for us to know what the competitive situation is in other jurisdictions as well as those that are close to us. Those would be facts that we would be collecting, and presumably we would not be entering into a free trade debate within this committee which would go nowhere. That is basically what I would support.

The Chair: Do we need any other direction here to the research staff?

Ms Anderson: My understanding is that there will be a general report, which will probably be essentially something like a condensation of the summary recommendations. Then each of the parties will write a report as well, or is the general one going to be also the government one?

Mr Jamison: We believe the majority report of the committee is the majority report; the dissenting reports can accompany it.

Mr Sutherland: I believe we will go through the same process as we have with the other reports.

Mr Sterling: No, we will not.

Mr Sutherland: No? My only sense was that Anne would come back with a written report in terms of the summary.

Mr Sterling: I do not think we should saddle our legislative researcher with doing your work. I think you guys should write your own report.

Mr Kwinter: Your report will effectively be the majority report. We do not have to agree on your report being the majority report. You will write your report, which represents the majority of the members on this committee.

Mr Sutherland: Okay.

Mr Kwinter: We will each write a report, which will in effect be minority reports. There is no reason for you to agree with our minority report or for us to agree with your report, because it is going to be your report.

Mr Sutherland: Fair enough.

Mr Sterling: I think condensing what you have done is really what you are responsible for.

Ms Anderson: Do we have any time lines?

Mr Sutherland: We should set a time line, should we not?

Mr Phillips: You have written yours already. I have got it here. We just need to write ours.

The Chair: What did I say, Mr Phillips?

Mr Phillips: In fairness to you, your name was not here and I corrected that, sir.

The Chair: Do you want to come back next Thursday?

Mr Sutherland: Sure. I apologize for missing. I was supposed to speak in the House and time ran out before I got a chance to. Have we agreed on where we are going with the next topic? My sense of what we wanted to do was that maybe we would leave it a couple of weeks, give each party a couple of weeks to come back and write it, but that we would continue on with whatever our next topic was and try to do some stuff that way.

Mr Kwinter: I will be gone all next week, so I would personally welcome if we could do it the week after.

Mr Sutherland: The report or to start the new topic?

Mr Kwinter: Both.

Mr Sutherland: Okay.

Mr Sterling: Is there any consensus, Mr Chairman, as to where we are going in the next discussions?

The Chair: It sounds like competitiveness is what I hear generally.

Mr Jamison: We have been talking about the North American free trade agreement and the competitive issue that is interwoven in that subject itself.

The Chair: It is a combination of the two then. It all is interwoven there, I believe. Does everybody agree on that? If we can get the clerk here to write down exactly our central thought and that we do not --

Mr B. Ward: Hasn't he already written it down?

The Chair: Let's word exactly what we are going to be doing so that we are not mistaken. We are looking at free trade and Mexican trade and competitiveness all together and how we compete here in North America.

Mr Sutherland: I think we are looking at competitiveness in the North American context in relation to the discussions about North American free trade.

Mr Kwinter: I will tell you the concern we have, and I have just talked to my colleague in the third party. The reason we feel a little uneasy about using the term "free trade," is that the minute you start doing that you start getting involved in the politics of it, as opposed to the economics of it. What I would prefer is that we deal with our competitiveness. Just by the very fact that we are going to be in this competitive situation, we will have to take a look at how we compete with any jurisdiction that impacts on Ontario's competitiveness, whether it is Mexico or Hong Kong or anyone else. I would kind of prefer that we stay away from incorporating the free trade, only because it has political connotations and that is going to get us into some problems.

1210

Mr Sutherland: I understand that concern. I guess the problem we have, and certainly the problem I have, is that when you look at where the next step seems to be going, the next step is North American trade and so that is going to have a significant impact on this province. Then, if we are going to look at it and be helpful, we should be looking at how the competitiveness issue fits in there and, as I think was suggested earlier, we can look at some specific sectors in terms of competitiveness. The information that comes out about how competitive we are there, Canada's level of competitiveness, that information is not going to change whether you do that with a country in Europe or with a Pacific Rim country.

Mr Kwinter: Can I make a suggestion that we stick to the broad topic of competitiveness and as a subheading look at those various things. My concern is that if the topic decided on is that we are going to investigate competitiveness and the North American free trade agreement, we are going to spend a lot of time debating the validity or the pros and cons of a North American free trade agreement, which I do not think we should be discussing, except how it impacts on our competitiveness. I would rather have that as a subheading in the sense that no matter what agreement, whether it is the European Community or some kind of alliance in the Pacific Rim or the North American free trade agreement, that is all going to impact on our competitiveness.

Mr Sutherland: No, I do not think we are going to debate the merits of it because there is not a specific agreement. What we want to know is what the issues are that this province should be concerned about in terms of those discussions. We have a basis to judge if, once a deal is negotiated, you have the basis to go back and judge whether it is a good deal for us or a bad one.

Mr Sterling: That is specifically what I do not want, because that has nothing to do with the provincial Parliament of Ontario. The provincial Parliament deals with labour laws and a lot of other things. You want to get into a federal debate. You want to get into a debate about whether or not we should strike a free trade agreement with Mexico or the United States or whether it was or was not a mistake and that kind of thing.

Mr Sutherland: No, Mr Sterling, that is not what I said.

Mr Sterling: That is all fruitless. That goes for naught. Maybe it is interesting out on the street or politically and all the rest of it, but in terms of what we can do as provincial legislators, it has nothing to do with it. We have to know whether our steelworkers are productive and whether our forestry industry is competitive in terms of dealing with other countries and other jurisdictions. What can we do as provincial legislators or provincial governments to put them in a better competitive position? That is what I want to know. I do not want to know whether the free trade agreement is good or bad, because we do not have any say in that. We are not involved in that debate.

Mr Sutherland: Mr Sterling, when I gave my proposal I was not saying we would get into a debate on the merits of that. I think we need to know what the issues are and out of that discussion will come some discussion about competitiveness. What good is it after having negotiated the agreement to say it is good or bad when we have no basis to really look at it? What are the issues, not whether it is good or bad, because we do not have an agreement. We cannot make that type of discussion. In terms of the Ontario context, we know what the impact of the bilateral free trade agreement is. It should be of concern to everyone in this Legislature. In terms of, "How are we going to make ourselves competitive if we get a North American trade agreement?" I think that is where the focus is. What are those competitive issues in that context?

The Chair: Anne has just handed me a slip from the research staff and the clerk which says, "Canadian-Ontario competitive issues concerning the North American trilateral trade agreement." We have some focus here. That could be interprovincial.

Mr Kwinter: That is where I have a problem. That gives the impression that we are examining the trilateral free trade agreement and how it is going to impact on our competitiveness. What I would like to do is to look at our competitiveness with or without the free trade agreement. If the free trade agreement comes in and it is going to impact, fine. I just do not want the thrust to be that we are looking at how the trilateral free trade agreement is going to impact on Ontario, because there is a faint, remote possibility that they will not have a free trade agreement. I do not expect that will happen, but it is certainly a remote possibility.

On the other hand, the competitiveness factor is impacting on us right now. We keep hearing stories that another major corporation is going to be pulling out of Ontario for no reason other than competitiveness. They just feel they have to go somewhere else; that is happening. Hardly a day goes by where you look in the paper and another plant is not closing down, and these guys are consolidating, these guys are moving or whatever they are doing.

Just to give you an example, I spoke to a major supplier of fixtures yesterday who said to me, "We've moved 20% of our production to the United States and I predict that in three years it'll all be there." I said, "Why are you doing that?" He said: "Because we can make the product cheaper there than we can make it here. It's strictly a matter of dollars and cents."

I would like to know about that. Why is that happening?

The Chair: Mr Kwinter, we are running a little bit late here.

Mr Sutherland: I just make the suggestion that we come back at 4:30.

The Chair: At 3:30.

Mr Sutherland: Give us 4 o'clock.

The Chair: Okay, 4 o'clock.

Mr Sutherland: Can we come back at 4 o'clock to continue the discussion and give us each some more time to think?

The Chair: Let's get some of the subtleties of where we want to go so we can agree as a whole committee. This committee is dismissed until 4.

The committee recessed at 1217.

AFTERNOON SITTING

The committee resumed at 1616.

The Chair: The committee will resume. The standing committee on finance and economic affairs will take a look at the report on the budget hearings. Maybe the members can take a look at it and give some comments on it, starting off with Mr Sutherland.

Mr Sutherland: In terms of some of the introduction and maybe some general, overall stuff on the budget, I think that is good and we are going to need that. I thought we had agreed on the tack we were going to take on this issue.

May I just for a minute move on to the other issue, because I thought that was the issue we came to a standstill on this morning. Having thought about it more and having some discussions about it, it seems to me that we stalled on the issue of where the area of focus should be in terms of comparisons on some of the issues raised this morning by Mr Sterling and Mr Kwinter. They did not seem too keen on making it an issue just within the North American context in terms of involving Mexico, but certainly a comparison with some other jurisdictions.

In suggesting some way of resolving the standstill, we think it may be a good idea to broaden it, in terms of not just leaving it as Ontario and one of the neighbouring states and excluding Mexico, but including Mexico and also taking in either a European country by itself or taking in some comparison with the European Community as a whole and looking at some of the sectoral issues and how we have to deal with that. So we would suggest that maybe we should be broadening the discussion beyond what we were talking about earlier this morning.

Mr Kwinter: I agree that it should be broadened. The concern I have about zeroing in or sort of highlighting Mexico is that there is a perception -- I think it is a wrong perception -- that our greatest threat is because there is cheap labour in Mexico; you know, there goes our whole competitiveness situation. There is lots of cheap labour all over the world that we are competing with right now, whether it is Thailand, Taiwan, Singapore, Hong Kong, South America, Brazil, China; all these places have cheap labour.

Interjection: Cuba.

Mr Kwinter: Cuba, exactly. Our major competition is in the high value added area. It is coming from high-wage countries, West Germany and Japan. My only concern is that we do not sort of zero in on an area because it seems to be politically active. Perhaps we can take a look at our competitiveness, because a lot of the offshore investment is coming from countries like West Germany, the United Kingdom and Japan. We are in a competitive situation. We are competing to attract all sorts of industries and we have to take a look at how that relates. My only concern was that by zeroing in on the North American free trade agreement, we were going to get hung up on the pros and cons of doing it but not deal with our competitiveness.

Mr Sutherland: In terms of what we are also looking at, one of the reasons for bringing in Germany is looking at what it does well attracting, and keeping investment there as well. I think that is what we want to look at.

Let's broaden the focus, but I do not think we can keep Mexico out of the equation because of the nature of what the future impact may be. The people of Ontario would expect us to have some awareness of what some of the issues are revolving around that and to help educate us all to try to be more knowledgeable about what the issues are, not so much what the final outcome is and what is ever negotiated, but knowing what those issues are. I think we should be looking at a relatively low-wage country, Mexico, but let us also look at a high-wage country, and let's bring them both into the equation here and do it in that type of context.

Mr Sterling: After this past summer's experience, I have very little faith that this committee is going to be able to deal with an issue like this in any kind of objective form. I think we are going to be wasting our time. I wish I did not have to come to that conclusion, but the hearings this summer were just so foreign to any kind of work of any legislative committee I have experienced in my 14 years here that I just think we are going to go off on a little bit of an expedition in having people come in and talk and we are not really going to come down with anything of great use.

I would have preferred us to go to a more specific mandate in terms of saying: "Okay, what are the advantages of a company setting up in Quebec? What are the advantages of a company setting up in Michigan? What are the advantages of a company setting up in New York or Ohio?" or whatever it is, and deal with a fairly defined situation where we could really get down. Then we would know what we were talking about when we said the corporation taxes were too high here or too high there, or property taxes were too high here or too high there.

Interprovincial boundaries between Quebec and Ontario are not fair, and I think probably the interprovincial trade barriers between Quebec and Ontario are very important for us to have a clear picture of in the next four or five months, because of the constitutional talks and the spinouts from them. It would be at least helpful for us to have in our pockets some real, hard information on what they are in terms of entering into that debate.

I do not have much faith in going into the whole free trade agreement with Mexico and the United States and the European Community at this time because of the penchant of this government just to blame everything on free trade and not look inwards towards solutions. My bias would be to try to take some very specific mandate so we could complete it, presumably, in the next month or two and then get ready for our pre-budget consultations, which I think are going to be more important than ever to deal with the next budget. There was some criticism with regard to our last pre-budget consultations coming too late in the game.

We know the Treasurer has to make up his mind on 35% of his budget by the end of January, those being the transfer grants to our school boards and to our municipalities and hospitals. Maybe we should be starting to think about that and not be going off into the Never Never Land and giving advice on something that is not going to have any spinouts on what this provincial government can or cannot do except for what rhetoric it can play in the House.

Mr Sutherland: Mr Chair, I want to take exception to his comments about not wanting to look inward. He said we do not want to look inward for solutions. I do not see what is wrong with looking outward. Obviously, Germany has done some very successful things, so let's try to learn a little more about that. What are some of the applications there we can use in terms of how they have been successful, both internationally and within a trade arrangement agreement? Let's bring them back and see whether we can make some applications here to improve the economy. I see nothing wrong with that degree of looking outward. We can learn things from other jurisdictions. I do not think we should be afraid to do that.

Mr Sterling: I guess the only reason I say that is I knew of a former Deputy Minister of Industry, Trade and Technology telling me that two or three years ago a company moved to New York state because it could do business easier with Quebec out of New York state than it could out of Ontario. I imagine that is the case with a number of them and that is a sorry story in terms of our relationship with the people in Quebec.

The issue of the province of Quebec is the biggest issue that is going to be dealt with in the next year and a half and I really believe there is a serious threat to our country in terms of its staying together. That is why I think the competitive situation in close is probably more important than the overall world outlook at this point.

Mr Kwinter: I think we should definitely add interprovincial trade barriers to our list, and also federal policies. We have a situation and at estimates I talked to the minister about it, but the federal government has made a determination that Ontario has the automotive industry and Quebec is to have the aerospace industry. It is quite ironic when you hear government ministers talking about how they have to save de Havilland to save the aerospace industry in Canada. The federal government has made the determination that the space industry is to be centred in Quebec. It located the space agency for that reason when nobody other than Quebec wanted it there. The industry did not want it there. It wanted it in the capital region. They did not mind if it was in Hull, but they wanted it in the capital region.

If you talk to the aerospace people, they will tell you that if they bid on a government contract from Ontario, they will not get it. They must bid that it will be done somewhere other than Ontario, whether the Maritimes, out west or in Quebec, but they say they have not a hope of getting a contract if it comes out of Ontario. That is a very significant factor.

The other thing I would like to comment on is that I agree that we should not be getting involved in the free trade aspects of the trade with Mexico, but we absolutely have to look at Mexico. The reason is that Ontario is so dependent on the automotive industry and it is really, no pun intended, the engine that drives the economy of Ontario.

George Peapples, the president of General Motors, has told me that it has -- I think I have told some of you this -- four engine plants in North America: one in St Catharines, two in the United States and one in Monterrey, Mexico. The plant in Monterrey is the most productive, the most cost-efficient and the best-quality producer they have, and these are all clones of each other. They are identical plants that they have located and Mexico is the best plant they have.

The President of Mexico has told me personally that by the year 2000 they will be building 4.5 million cars in Mexico. Now we build one million cars in Ontario. The United States builds between nine million and 10 million a year, and Mexico is going to be building 4.5 million by the year 2000.

I talked to Frank Stronach, who I am sure you know is the president of Magna International Inc, and he tells me they are wrong -- they are going to be building those by 1997. That volume has to come from somewhere. Here is a country that is really getting into the automotive industry and it is going to impact on Ontario. I think we have to look at that, because if we start to lose that production to Mexico, then we are going to really feel the impact of it.

I think we have to look at the competitiveness of the Mexican situation. I just do not want to get hung up on the politics of the free trade thing. Mexico is a factor whether we have free trade or not, and that is something we should be looking at.

1630

The Chair: What I am hearing from Mr Sutherland is about the same line that you are talking about. Mr Sterling, are you more in agreement with this aspect of it? It seems like the two members on either side are talking about the same book, let's say.

Mr Sterling: I think there is a difference. I think the New Democratic members of the committee are bent and determined to enter into a free trade agreement fight on behalf of labour, and that is the way the hearings in the committee will go. I cannot control that, if that is what the committee wants to do.

Mr Sutherland: I think what we said earlier this morning -- and I think Mr Kwinter has pointed that out quite well -- is that there are issues that we need to be aware of no matter what, and that is the focus we want to see. What are those issues that we are going to be dealing with and what are some of the differences there? I am not only looking at the low end, but we also need to look at the high end. That is why we have also suggested bringing Germany or the European Community as a whole into that equation.

Mr Wiseman: I would like to make a couple of points. The first point is, I agree with Mr Kwinter; I do not think there is any way you can discount Mexico. Anybody who thinks that is not an important factor is turning his back on the reality of what it means to go into a free trade deal with Mexico.

The president of Honda, Mr Suzuki, said not more than four or five weeks ago that if there is a trilateral free trade deal including Mexico, Honda will seriously look at building its future plants in Mexico. Hyundai from Korea, one of the low-wage labour markets in the world, is building in Mexico because the wages there are even lower. To discount Mexico in terms of what they want to do and where they are going I think is a big mistake.

I was fortunate enough to have a briefing with the National Association of Manufacturers in Washington three weeks ago. They were talking about aspects of the Clean Air Act and the cost to American industry in terms of its relationship with Mexico. If they are worried about losing jobs for their low-wage, non-unionized sectors of the economy that have zero health and safety standards, such as those in Alabama, Georgia, Mississippi and so on, then I think we have a very serious concern to be worrying about here.

One of the things we have to look at in terms of the global picture is what is going to happen to environmental issues within the free trade deal. The way the Clean Air Act stands now, the National Association of Manufacturers in the US has made it very clear that it expects to lose jobs to Mexico, which will not have environmental standards.

They are perfectly willing to accept that Mexico will probably put in place boundaries where pollution is allowed, where health and safety standards do not exist. That impacts directly on what we consider here to be the goals and objectives of creating the society we would like.

I agree the high value added jobs that Mr Kwinter is talking about are an important area to look at. But I think one of the things that has been done very successfully in Europe that has not been done here is that they have recognized that not everybody is going to be able to do the high value added jobs, and they recognize that at some point you have to have jobs available for the persons in your economy who cannot acquire the skills to allow them to move into the high value added area.

Currently we do very little research and development in this country. I just attended a dinner for one of those successful firms in my riding where they are averaging 5% to 6% of their gross sales in research and development for new products. I think what we have to do, in looking at this, is to compare ourselves to the very successful jurisdictions. The European economic community has developed and will be moving very quickly in creating international trade with very few barriers. How is it that they are able to incorporate into that community low-wage areas such as Portugal, Spain and Turkey and yet not have the same kind of absorption realities or loss of jobs that potentially exists with trilateral free trade in North America?

I think it is absolutely essential that we look at what is happening internationally and deal with it here from an Ontario perspective, which will allow us to develop strategies and programs that will allow most people to take advantage.

I think your comments, Mr Sterling, about the interprovincial trade barriers are important and will be looked at in the context of the ongoing debate presented by the economic package that comes out of the current constitutional issues. I do not think any of these issues is going to go on to the back burner or be manipulated, as you have suggested, by us. They are of as much concern to us as they are to anybody. What we are saying here is that we need to have a broader scope to include more of the stakeholders in the discussion than has been the case in the past. To do that, we need examples that we can draw on, and we need to be innovative in terms of what we are going to recommend under this. My own personal feeling is that an analysis of how a free trade, free market situation is developing in Europe will be very good for us in offering us examples, offering us ways of dealing with some of the minutiae, whether it is banking issues, monetary issues, transfer of funds or the need to regulate in some way the value of the Canadian dollar that will allow us to be competitive, something which is not happening now, to the detriment of the manufacturers of our country.

I would say it is absolutely essential that we not rule out any source of input into the way we look at trilateral free trade, globalization and what we want to do here in terms of putting in place a program of economic renewal that will allow us to position ourselves in the world market.

Mr Sterling: I think Mr Wiseman has just proved my point. He wants to get into the debate over whether we should enter into a free trade agreement with Mexico, and I agree with Mr Kwinter. He was correct in bringing in the fact that we have to know what is going on in Mexico, but I do not want to get into a debate on whether we should be in a free trade agreement or not, because I do not believe that any member of this committee has any influence on anybody that will make one bit of difference. What I want to know is whether or not our people have to become better trained, whether our environmental standards are too high or too low, whether our health expenditures are too high or too low, what combination we can afford to have if we want to maintain a high standard of living or whether or not we can afford to have people making shoes in this country any more or doing other kinds of jobs. That is basically what we should be getting the facts on. I want to get facts. I do not want to debate international policy on which I have no influence, nor do I suspect that any member of this committee or the Premier of Ontario has any influence on those particular issues. I guess Mr Wiseman has basically got into that debate and I do not want to spend too much of my time getting involved in an argument which has nothing to do with provincial politics, as far as I am concerned.

1640

Mr Wiseman: Mr Chair, I would like to clarify something. I do not agree with Mr Sterling. The point that I am trying to make here is --

The Chair: Mr Wiseman --

Mr Wiseman: Why? You allowed this to happen before. The point that I am trying to make is simply that those who do not know their history are doomed to repeat it. There are some valuable lessons to be learned from the mistakes that were made in the international trade agreements in Europe, and I think we can learn value and learn lessons from those.

The Chair: What I have been trying to do here is to come up with a resolution of the starting point.

Mr Sutherland: I think the issues that need to be discussed have been put forward, and I think we are getting close to a consensus in terms of how we want to deal with it. Trade is going to be there with Mexico and Germany, whatever formal trade arrangements are put on, and we need to be aware of what those issues are, what the impact will be. Whether there is any formal arrangement or not, those are the issues that need to be discussed, and I think what we have here is a way of dealing with the issues we would like to see come out and the issues you would like to see come out.

My only concern about gathering facts is, no matter how we deal with this issue of the information we want, I just do not want it to be solely an academic exercise in which we have everyone come in, we have the professors who study Mexico and Germany, whether solely political science, economics, whatever, come in and present all the information and then we just have information like that. I think we want to try and understand what tangible ideas there are coming out, what methods are being used in certain areas to deal with that.

Germany, even in the European Community context, still has to somehow deal with Mexico. What is going on in other countries, in other low-wage countries around there? What are they doing, and what ideas are they coming up with so that they are still able to deal with that and be competitive in an international context? While we gather the facts, let's also get a little more than the facts and maybe come up with some ideas that we can apply back here in Ontario.

Mr Kwinter: I am a little ambivalent on this thing because I sort of agree with a lot of what was said by the government side and I certainly agree with some of what has been said by the third party.

I will tell you where the hangup comes: this is a political committee. By definition, we are politicians; it is very difficult to divorce us from it. I will give you an example of a concern that I see. In Germany and in other high-economy, high-wage countries, they have what is known as a gastarbeiter program. For those of you who do not know what a gastarbeiter program is, they bring in people from Turkey, from other countries, to do the menial jobs, and they pay them menial wages, and then they get rid of them. The reason for that is they feel their economy for their nationals cannot sustain what we would call a minimum wage, where they would be paying too much for the jobs that on the world market do not warrant that kind of pay.

That is a system that in no way this government, or probably any government in Ontario, would condone.

Mr Sterling: We do with Jamaicans.

Mr Kwinter: We do it in crop-picking and things. There are lots of problems like that. If you are going to be really objective and look at these things, you might have to say: "You know what? That's a solution." But politically we cannot live with that, so you say, "No, we can't do that." My concern is that in order to be really effective, without making any judgements, I think we have to look at all those things and then, on some other level of this government, someone would have to make a determination, "That's great, but there's no way we're going to do it." That is fine, but what I do not want to see happen is that these things get filtered out early because politically we are not prepared to support that. That is my concern, and I do not mean this in a negative way, because it could come from all three parties, where you bring some ideological baggage with you and immediately say, "We don't do that here, so we're not looking at it."

I am saying that in the crass, cold economic world, there are things happening and we should be looking at them and evaluating them and finding out whether we like it or not -- it may be impacting on our competitiveness -- so that at least we have a clear understanding of what we are competing against. Whether we like it or whether we would accept it or whether we would promote it has nothing to do with it, but we want to look at that. I just want to make sure that some of these examinations are not filtered out beforehand because they may not be politically acceptable.

Mr Sutherland: Mr Kwinter, if we look at the pre-budget submissions, at the post-budget submissions, at the issue of cross-border shopping, I think we all agree that there are many people who came forward who had some ideas that we did not agree with. I mostly remember the Buffalo Bargains fellow with the cross-border shopping. We are having open hearings. We are going to look for input -- obviously the subcommittee is going to have to do a little more work in terms of working out how it comes forward, but I do not think there is anything to stop ideas coming forward and being presented. Then we will all make our judgements afterwards. I do not think it is a problem to have issues laid on the table. We will make our judgements and evaluations at the end of the process.

Mr Sterling: We have a limited time and you are talking about a huge topic. I do not know how you are going to do it. That is why I thought it would be more practical to identify certain goals and deal with them. To talk about the European Community, I imagine it is just a huge thing, that there are thousands and thousands of people who have talked about it. Is the idea to get an overall, bird's-eye sketch or is it to try to become pretty proficient in one area?

Mr Sutherland: Maybe I could just respond. For example, if we decided to use Germany, then it would seem logical to see if we could not get the German ambassador to come before this committee and talk about how they are dealing with some of these issues, people like that who have some knowledge. As I say, there are some people in academia who could come in and give some opinions and give us some knowledge on what they have done in certain areas, and then we can sit down and focus. Once we get a general overview that way, we can sit down as a subcommittee and focus on the specifics and who else we need to bring into our discussion to give us a broader picture.

1650

Mr Kwinter: Maybe I can be of some help. There is no question that this can be as broad as global trade and looking at every single aspect of it. Maybe, to be more practical and to try to accommodate the third party's position, what we are really trying to do in a practical sense is identify, if someone is coming to this part of the world, whether it means going to Quebec or Manitoba or New York or Illinois, what are the determinants that would weigh his decision one way or the other.

We also have to put Mexico into the hopper, I think, because that is a very definite alternative. There is very little chance that someone is going to make a decision as to whether he is going to put his plant in Ontario or Baden-Württemberg in Germany. I do not think that is a factor. It could be, in the greatest global sense, but generally what would happen is that an investor or a manufacturer who is looking to access the North American market has to decide where he wants to be; that is, "Whom are we competing with, where do we want to be in the North American market and where are our industries in that North American market?"

Mr Sutherland: That was not the sense that I was getting.

Mr Sterling: That is where you start.

Mr Sutherland: What are some of the other mechanisms you can use in dealing with these issues? What are some of the other mechanisms Germany has used to take advantage of the situation? As we go into a more competitive situation, what mechanisms are they using, either within their private industry or in co-operative efforts between government, labour and business? Not only those mechanisms, but what type of decisions are they making about certain aspects and certain sectors of the economy, and what are they willing to do for them, and how does that fit into it? I guess we are starting to differ a little bit on where we are going. That was more the direction I thought we would look in.

Mr Sterling: I guess it is, how do you find out where are the productivity strengths and weaknesses of a community?

Mr Jamison: By studying it, probably.

Mr Sterling: My tendency would be to go to the people who are investing, or the people who represent investors, and say, "When you have an investor coming to this community, Ontario or Canada, what are the effects that you take into consideration, or what are the strengths or weaknesses that your clients look at?" Then I would like to know if they say the educational system in Ontario is wonderful, or this part of the educational system is good or bad when they compare it with the United States or Mexico.

I understand Mexico is turning out a huge number of engineers and technical people at this time, which is attracting a lot of industry there. If that is a factor, then maybe the province of Ontario should change some of its educational policies to try to compete with that part of it. That is what I was thinking we could get. I have invested 14 years of my life in this business. I want people to come here and invest here, provide jobs for people like my son and my daughter so that they can stay here. I want to know why people are not coming here at this time. I think I am correct in saying that at this time. If we do not find that out, then my kids, who are likely to be wealth producers, are going to go somewhere else.

Mr Christopherson: I do not think we necessarily disagree with the suggestion Mr Sterling makes and, to a large degree, that Mr Kwinter makes regarding the competitiveness issue. What we do not want on this side of the room is to have a two-dimensional review that only looks at the competitiveness issue, comparing two entities.

When you suggest that we have no control at the provincial level, that we seem to be heading in that direction, there are other experiences in the world, the most obvious one being the European Community where a lot of social programs and social attitudes were protected and indeed enhanced in a trading block. What we are trying to do is ensure that our review -- and I realize you may not necessarily agree it is a priority, and that perhaps differentiates this party from the opposition, at least at this point in time, but it is important to us that we take a look at how we can be competitive and generate the investment climate while at the same time not letting go of those things that we think make us proud Canadians and proud Ontarians. That is why we are very reluctant to enter into a discussion that is strictly and solely a look at competitiveness without, while walking down that road, looking at how we protect and promote the things in our society of which we think Ontarians are proud. I do not think we are going to come to agreement on that.

Mr Sterling: I do not differ with one word you have said. But I think you have to realize, as I have realized, that when we make a decision here to draw a line on an environmental policy that may affect an investment decision that comes in here, we have to decide what mix we want in our community. Do you want to forgo some material wealth or investment because you have drawn the line too high in that area? All these things add up to the decision. It may be market location, it may be a whole number of things. I guess the one thing that has become patently obvious to me is that, even going back 10 or 15 years, as provincial legislators, as federal legislators in this country, we could draw our standards and our lines and whatever we wanted to without having much concern about what was going on next door to us, in Mexico or in Europe or wherever. Now when you make those decisions, you have to bring everything into the mix. You have to talk about corporation taxes; you have to talk about the social welfare programs you have in your province; you have to talk about your health care, your education system; you have to talk about the whole mix. It is not just what you pay the people. That can be a minor part of it. In fact, in most manufacturing industries, the wage part is becoming less and less a factor. It is about 12% of their cost now. It is becoming less and less a factor as we go down the trail.

I was down at Dofasco four weeks ago with Mike Harris and Gary Carr talking to the executives. The increases in hydro rates are going to cost them $45 million next year. That is an increased cost. Now, they are huge energy users. One per cent of the total hydro in all of this province is used by Dofasco. I imagine Stelco is somewhat similar to that.

When you make policies like this, in which you are going to buy uranium from Elliot Lake at five or six times its market price, you are affecting jobs at Dofasco. All those policies are interrelated.

What I really would like to know is, when somebody comes here, what can I say to him? Can I say, "Look, we have better energy rates; we have a surer supply of energy in the province of Ontario; we have a more stable social program; our health care system is not going to cost you as much as it would in the United States or wherever"? I would like to know what those advantages are. I would also like to know what disadvantages there are so that our governments can pull into line and be reasonable in terms of what they are demanding of the people who are providing the wealth. You have to be reasonable. If you are not reasonable, the world is their oyster. They can go wherever they want. That was driven home to Monte and me when we went to Cuba a couple of weeks ago. Those guys have operated in Cuba in a total vacuum, away from the rest of the world. They have operated on a budget in which 80% of their trade was with the USSR, and most of it or a lot of it subsidized. Now they are being cut off. Even before they were cut off they were not operating in a real world as to how they could be competitive with the outside. Now they have to grapple with it. It is just a terrible problem in terms of trying to become competitive on the outside. They thought they could draw a line around the shores of Cuba and say, "We can have whatever rules we want inside our country, regardless of what the rest of the world thinks." That is no longer the way the world is going. The world is going such that you have to watch what the other people in the world are doing. I would like to know what they are doing so that we can draw the best conclusions, to provide the highest standard of living for our people, with the best possible social programs. If we do not know that combination, we are in deep trouble.

1700

Mr Sutherland: Just to respond to that, I think that is what we were saying earlier in terms of wanting to know how Germany is dealing with that reality. They have obviously been dealing with it somewhat within the European context. How are they going to deal with it in a much broader context? We debated much of this this morning. We have been here for an hour. At times I thought we were very close and then other times it seems we are getting further apart. The focus should be in terms of how Canada or how this province is going to fit into trading in a North American context, though not necessarily in a North American formal trade agreement, with maybe some comparison with how Germany fits into a context within a trading block there.

Mr Kwinter: Can I just make an observation? One of the problems we have when we try to compare the North American situation with the European situation is that in Europe you have very small countries. You can get into a car and you can start driving in France and you can hit four or five countries in one day. You cannot do that in Ontario. You can spend three days driving from here to Thunder Bay.

Here you have population centres that are relatively equal, and they are highly concentrated. There is no such thing in most European countries. The only exception I know of is Italy, because of the wide discrepancy between the southern part of Italy and the northern part of Italy, where the government distorts what is happening by directing stuff to the south. They have very much the same experience as we do: When you artificially try to relocate places, it does not work. When I visited Italy, government officials told me they have tried to put plants into the south and it just does not work. Generally, they have the ability to get a critical mass in their particular industries without worrying about geographic apportionment. In Canada we have a unique situation. We have a population less than that of California. We have a country 3,000 miles wide and 100 miles deep and there is a political imperative to try to spread the stuff around. What you really do is dilute our ability to be competitive. If we were in a small country, a small land mass, we would take our aerospace industry and put it in one spot, getting all the synergies of all of the things that are going on. We would be the best there is for what we could do. We cannot do that in Canada. The political imperative is you have to put something out in BC, you have to put something out in the Maritimes. You have to do that because we have to spread this around, give these guys some economic vitality.

The other problem we have, even more critical I think, is that our trading block is with a country that dominates this country to begin with, which no other country in Europe does to another country. They are all pretty sovereign. Germany has never had a dominant position in Italy, other than when they have had wars. They have taken territory where they have overlapped, but generally each of the countries there are autonomous units with absolute control of their own economies. We do not have that. We are a branch-plant economy. It is one of those facts of economic life.

Just because of economies of scale, it is very difficult for us to be truly competitive with the United States. You get a company geared to service 270 million people and for them to service another 27 million is quite marginal, whereas going the other way, it is a serious problem. I do not know whether there is any real benefit in comparing the two systems because the basic premises are very, very different. We now have another player, Mexico, coming on the scene. Even though they do not have the same economic clout, notwithstanding that they have 85 million people, they still have a huge internal market. If they can ever get the standard of living of those 85 million people to a level where they are a positive economic force, they are going to have a huge competitive advantage on us, if for no other reason than that large internal market.

Our problem is, we have such a small population and we have these interprovincial trade barriers which do not even allow us to maximize our access to that small population. We do not have the kind of internal market that either Mexico or the United States has and it means we are very trade-dependent. I have said this so many times it is getting a little nauseous, even for me.

Mr Sterling: Is it that bad?

Mr Kwinter: What I am saying is that one third of our gross domestic product is trade-related.

Mr Sterling: He noticed too.

Mr Kwinter: The point I am making is that it is important that we protect that and enhance it, and in order to do that, we have to know where our competition is coming from. We have to know why we are not competitive. I think that is what we should be doing.

Mr Sutherland: The issue you raise I think is one we all agree upon. Now we have to figure out how we are going to achieve some of those objectives, given the realities we face. Mr Sterling was saying, let's just look at why people are not coming here right at this time. I do not think that is a broad enough focus in terms of how we are going to deal with that. What all of us are still struggling with is, how are we going to get the specific focus we need to achieve what we want out of that? That seems to be the extreme difficulty. We have spent an hour and 10 minutes here. I would just like to know how they see this specific focus as being something all three parties can agree upon.

Mr Sterling: I am sorry, maybe I did put it in the negative. I want to know what people look at when they come to any jurisdiction and say, "What are the factors involved in making our decision whether to invest here?" I was not trying to be negative in terms of saying why they are not coming here. I am not out to prove that people are not coming here because of NDP policies, or of federal government policies, or whatever. I am sure that is part of the decision, whatever government is there. I want to know whether wage rates are too high or too low in comparison to people doing the same job across the border, or two borders away. I want to know what the other competitive factors are. Productivity is one and there are a number of others. What are the things that encourage a business to make that very critical decision?

You find out whether you are competitive or not from the people who are making the investments. That is why I thought a good way to start is to get somebody in who deals in that kind of business and ask, "What are the things people look at when they come to you?" If there are 26 factors, how do we in Ontario weigh those 26 factors against Ohio or Mexico or wherever it is? Then you start to understand why some issues will raise their head as being the top three they are most concerned about. I know what they are, but I may be wrong.

Mr Sutherland: If you want to do that as a small part of the whole exercise, fine. But my sense earlier was you wanted that to be the whole exercise. That was the concern. Maybe we should try to do this just as the subcommittee again and see what we can come up with.

Mr Sterling: Has anybody got a suggestion on how to start this thing?

Mr Jamison: We had better let the subcommittee take a look at it.

The Chair: There seems to be a problem. Mr Kwinter, are you away next week?

Mr Kwinter: Yes.

The Chair: Can Mr Phillips sit in?

Mr Kwinter: Mr Phillips or Barbara Sullivan, if you want.

Mr Jamison: Maybe each party could provide a motion that suggests what it would like, take it to the subcommittee and see if they cannot reach agreement to collectively recommend to this body. If they cannot -- and I am not just trying to exercise a majority vote here -- then we will bring it to the committee and make a decision. We have lost a lot of time and we are not doing anything for the people of Ontario going around in circles. That at least is a process that is fair.

The Chair: As I listen to the three subcommittee members, it seems to be very close. But there seem to be some areas of expansion here that just seem --

Mr Sterling: Not at all. We are all talking about the competitive issue that has been raised. I am quite willing to listen to suggestions as to how we start this.

Mr Jamison: Do it at the subcommittee level.

Mr Sterling: Okay. It does not matter whether I do it right now or I do it at the subcommittee. If the other ones want to go, that is fine. Why do we not do it right now?

Mr Sutherland: We can do it in subcommittee right now. I have no problem doing that.

Mr Sterling: Let us just adjourn and try to work it out a little more informally and then see what we can come back with. Okay? If anybody has any ideas from the other parties, that is fine.

Mr Wiseman: Perhaps we could line up a number of people who have expertise in the strengths and weaknesses of the Ontario economy, who could give us an overview to start with of where Ontario is at -- what is happening in investment income, what is happening in job relocation -- and maybe also have some people come in and discuss what kind of trade barriers exist in the world, either directly or indirectly, in terms of the transportation of goods among jurisdictions, and get a general sense of what is going on.

The Chair: We can relate those things to Mr Sutherland; the same thing with the other two members, who will come forward with suggestions from their members on who should be contacted to come before the committee. Actually, it is an education for all of us and gets us up to speed on what is happening out there.

The committee adjourned at 1713.