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OTTAWA, Tuesday, June 2, 2020

The Standing Senate Committee on National Finance met by videoconference this day at 2:30 p.m. [ET] to study: a) certain elements of Bill C-13, An Act respecting certain measures in response to COVID-19; b) the provisions and operations of Bill C-14, A second Act respecting measures in response to COVID-19; and c) the government’s response to the COVID-19 pandemic and its economic consequences.

Senator Percy Mockler (Chair) in the chair.


The Chair: Honourable senators, before we begin, I’d like to remind senators and witnesses to keep your microphones muted at all times unless recognized by name by the chair. We will now begin with the official portion of our meeting.

My name is Percy Mockler, a senator from New Brunswick and chair of the Finance Committee. I would like to introduce the members of the committee who are participating in this meeting today: Senator Forest, deputy chair; Senator Richards, steering committee member; Senator Dagenais; Senator M. Deacon; Senator Duncan; Senator Galvez; Senator Harder; Senator Klyne; Senator Loffreda; Senator Marshall; Senator Pate; Senator Smith; and our two ex-officio senators, Senators Gagné and Martin. We also have non-members Senator Miville-Dechêne and Senator Patterson.


Welcome, everyone; I also welcome all the Canadians who are watching us. Today our committee continues its study of certain elements of Bill C-13, the provisions and operations of Bill C-14, and the Canadian government’s response to the COVID-19 pandemic and its economic consequences, a study that the Senate of Canada referred to the committee on April 11 by order of reference.


Honourable senators, with our collective experience, no doubt as chair I will need your constant support and cooperation.

Today, for our first panel, representing the business sector, we welcome Daniel Kelly, President and Chief Executive Officer of the Canadian Federation of Independent Business.


We also welcome, from the Conseil du patronat du Québec, the Quebec Employers’ Council, the President and Chief Executive Officer, Mr. Yves-Thomas Dorval. He is accompanied by Ms. Norma Kozhaya, Vice-President, Research, and Chief Economist.


Finally, honourable senators, from the Canadian Chamber of Commerce, we have the Honourable Perrin Beatty, P.C., President and Chief Executive Officer. Mr. Beatty is accompanied by Dr. Trevin Stratton, Chief Economist and Vice‑President, Policy and Advocacy.

Welcome to all of the witnesses. Thank you for accepting our invitation.

Mr. Kelly, the floor is yours.

Daniel Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business: Thank you very much, senator. It’s great to be with the Senate Finance Committee once again. I am happy to share with you an update from CFIB, the Canadian Federation of Independent Business. Just by way of background, my organization represents 110,000 small- and medium-sized companies across Canada. All of them are independently owned and operated; none of them are publicly traded corporations.

The COVID-19 pandemic has been, as I am sure you can all appreciate, incredibly difficult for independent businesses. This problem, unlike other turbulent economic times, started on Main Street and affected small- and medium-sized companies far more quickly than companies of other sizes. It has put small firms in a very difficult position. I want to share with a few of the results with you. I prepared and I believe the clerk has shared a deck of data that we have been collecting weekly from small businesses across the country.

As of this weekend, half of the small-business community in Canada is now fully open. Only half. This is now almost three months into the pandemic. Half of Canada’s small-business community remains either fully or partially shut down as a result of the pandemic.

The sectoral data is deeply worrying. The retail sector, hospitality sector, most notably restaurants, tourism-related businesses, service-related businesses, certainly personal services like salons, and arts and recreational businesses are the ones hardest hit through the course of this challenging time.

And 40% of our members, small business owners, have seen their revenues drop by 70% or more; 70% have seen a 30% drop in their gross revenues. Many are deeply behind on bill payments, including things like rent, credit card payments or payments to suppliers. Most troubling, three months into the challenge, 12% of Canadian small- and medium-sized businesses are actively considering winding down their businesses or potential bankruptcy as a result of COVID-19.

The data across Canada is deeply worrisome. The same sectors I spoke about a moment ago are the ones hardest hit. That is on slide 7; and 43% of business owners say the state of their business is bad or very bad. Only 14% say their businesses are good at the moment.

The things that are top of mind for small business owners are the economic repercussions on their businesses, on the national or global economy; consumer spending and whether that is likely to return; cash-flow issues; and debt. Stress and mental health issues abound amongst small- and medium-sized firms. Six members of CFIB have called our business help lines contemplating taking their own lives. That’s how bad the pandemic has been for many small companies.

It is good news that restrictions are starting to lift in parts of Canada. Most notably, Manitoba, Saskatchewan, New Brunswick and Alberta lead the way in business opening, with Newfoundland and Labrador, Nova Scotia and Ontario being the most closed economies at the moment. Many concerns, including finding and paying for personal protective equipment, are top of mind for business.

The federal government has come to the relief of small businesses with several major support programs. The three big ones are the wage subsidy; the Canada Emergency Business Account, or CEBA, with $40,000 loans for small firms; and a major rent subsidy. Those are the three biggest programs that are in place.

The wage subsidy is working well. There are, of course, some businesses that do not qualify, but we were encouraged when the Prime Minister announced he would be extending the program until the end of August. Right now, the government is consulting on just how to do that. Second, the CEBA bank accounts are also helping out small businesses, especially because $10,000 of those loans is not repayable; it’s forgivable. But many firms were disqualified, including those that pay dividends and those that pay contractors. We have been actively lobbying government to extend the CEBA loan program to more businesses. Much more work needs to be done on that front.

The Canada Emergency Commercial Rent Assistance program is another big lifeline for our members. I see my time is up. That program, while well-intentioned, is a real mess. The program is not delivering money and relief to business owners that need it. Many business owners, I’m afraid, are telling us that they are likely to go bankrupt before the program provides any relief to them.

We have made recommendations on all the programs for further reforms. I’m happy to take questions about those ideas.


The Chair: Mr. Dorval, the floor is yours.

Yves-Thomas Dorval, President and Chief Executive Officer, Conseil du patronat du Québec: I would like to thank the Standing Senate Committee on National Finance for hosting us today to discuss the issues and programs related to COVID-19.

Our comments will focus on certain aspects of this response that are of particular interest to employers, since the CPQ is an organization that represents employers. The CPQ is a federation that represents more than 70,000 employers operating in Quebec, employers of all sizes and from all regions of Quebec, from all sectors, including employers in the social economy, cooperatives, the parapublic sector, and private sector businesses.

Rather than go into detail, we invite senators and researchers to consult the Roadmap Towards Economic Recovery on the CPQ website, where you will find all of our recommendations for the restart of activities and economic recovery. I’ll limit myself to a few comments at this time and answer your questions. I have Ms. Kozhaya with me.

The Government of Canada has, since the beginning of the pandemic, put in place various measures in a very short period of time, such as the Canada Emergency Wage Subsidy, loans and guarantee programs for SMEs and, more recently, the Canada Emergency Commercial Rent Assistance program (CECRA), and the Large Employer Emergency Financing Facility (LEEFF). For individuals, the government has introduced the Canada Emergency Response Benefit and the Canada Emergency Student Benefit. These measures have generally been very much appreciated and have provided a response to the urgency of the situation at the time of containment, or what has been called the “hibernation period” in Quebec. Among the measures most appreciated by employers was the wage subsidy, as it avoids increasing business debt and subsequent liabilities, and also helps pay employees, even if they are not necessarily at work.

I will make some general comments. It is clearly important to support employers in the implementation of their new business model, which has been adopted in the context of the pandemic and is expected to last. It includes technological and digital transformations and the new work organization, which may involve offering incentives for the acquisition of digital tools to facilitate telework and e-commerce. Furthermore, we must ensure that the various measures put in place to support businesses and individuals, which are certainly indispensable in the context of containment, will not have the effect of discouraging work. In this regard, despite the interest shown in CERB, employers say that because of this benefit, they are having difficulty recruiting or getting their employees back to work as business resumes, on the eve of an economic recovery, particularly in the case of summer student hires. As for the wage subsidy, the CPQ would first like to point out that this measure remains a lifeline for many employers. It is an excellent program, even if certain criteria limit access to it.

We are proposing adjustments to improve its use. In particular, we propose that you reduce the eligibility threshold, which is currently set at a 30% reduction in income, or adjust the terms and conditions so that seasonal workers are eligible, once again during the summer period. This is very important. We are also proposing that you examine the possibility that the subsidy could cover a number of benefits in the event of a complete cessation of activities, as is the case with employment insurance or the Canada Pension Plan. We also propose that you give advance notice to employers in some of the hardest-hit sectors such as tourism and cultural events, who may be able to take advantage of the subsidy a little longer, perhaps until October 15. You also need to look at how to adjust the subsidy for start-up businesses or those that experienced strong growth early last year. Special attention and measures must be provided to sectors where the recovery will be longer and more difficult because of the nature of their activities, such as tourism and event hosting, particularly in the Montreal region, and aerospace and the entire airline sector. The subsidy must be awarded for an extended period of time to match their prospects for a return to profitability. These measures include any direct assistance related to fixed costs, rents, property taxes, and so on.

Among other stimulus measures, consideration should be given to adapting public procurement to further encourage innovation, local purchasing, carbon footprint reduction and other elements that would support business recovery in a sustainable development context, and to accelerating the most organized infrastructure projects and those already under way. These include investments in transportation, public transit, port and airport infrastructure, which are under federal jurisdiction, energy infrastructure, and technology and digital infrastructure. A residential renovation tax credit should also be offered and applied to rental fleets.

Finally, it is important that the government prepare a picture of the state of public finances fairly quickly. I’m going to close by inviting you to ask us questions, and I’d be happy to participate in the discussion.

The Chair: Thank you, Mr. Dorval.


Hon. Perrin Beatty, P.C., President and Chief Executive Officer, Canadian Chamber of Commerce: Senators, thank you for your hospitality. I’m pleased to be able to be with you for this important discussion.

In the middle of a once-in-a-century pandemic, it is difficult to think beyond confronting the immediate effects of COVID-19. However, even as we continue supporting each other today, we also have to begin looking over the horizon to the post‑COVID-19 world. We need to start planning how our country and economy can emerge stronger.

The first phase of dealing with the pandemic was to contain it using any means available to us, even at the expense of placing our economy and much of our social interaction into a medically induced coma. We are now moving into the second stage of our response, a carefully measured decontrol that allows Canadians to resume more of their ordinary lives and attempts to breathe life back into our economy. That phase will last for some time.

We often speak about “the new normal,” but we won’t really know what that new normal will look like, let alone start to live it, until we have an effective vaccine in wide distribution, a process that will likely take one to two years. What is clear is that to attempt to remain on lockdown for that period would be unsustainable both economically and socially. We find ourselves in a transitional phase where we will have to live with the virus in our midst without any absolute guarantees, but managing the risks involved carefully and responsibly while increasing our economic and social activities.

Full recovery is a long way off, but recovery starts with resilience. The government’s response spared millions of Canadians from economic disaster. Measures like the Canada Emergency Wage Subsidy and the Canada Emergency Business Account have provided urgently needed assistance to Canadian workers and businesses, helping to ensure they will be there to propel our economic recovery. These measures have come at an enormous price that’s estimated at over a quarter trillion dollars so far, and their cost will continue to mount for the coming year and beyond. The burden of carrying that cost will be borne by an economic infrastructure that has been badly damaged.

As provinces and territories begin to reopen, Canada must prepare to transition away from a subsidy-based crisis response toward economic stimulus and getting Canadians back to work, while ensuring their health and safety. We will need to encourage investment and business activities that will create jobs and generate the revenue needed to offset extraordinarily high levels of public spending during the emergency.

This will be no easy task. Over the coming months and years, our international competitors will be fixated on attracting investment and creating jobs. For Canada’s recovery plan to succeed, our policy-makers will need a singular focus on economic fundamentals and on promoting growth. The federal government must be as agile and determined in pursuing economic growth as it has been in responding to the virus.

Developed in partnership with our network of over 450 chambers of commerce and boards of trade, and more than 100 of Canada’s business associations, the Canadian Chamber of Commerce’s Roadmap to Recovery lays out nine policy areas and specific measures that our political leaders must consider to ensure a lasting recovery. These priority areas are getting Canadians back to work; keeping supply chains and people moving; managing debt and deficits; navigating global fragmentation; adopting technology and innovation; ensuring a resilient resources sector; planning for SME business continuity; strengthening our public health infrastructure; and rethinking the government’s role and priorities.

The economic, political and cultural changes that this crisis inflicts on Canada and the rest of the world will be massive. We will need to continue the high level of collaboration among governments, business and civil society that characterized the management of this pandemic. We ask that the government work closely with the business community in developing a road map for economic recovery. A growth-focused plan based on broad consultation will unlock economic capacity, fuel job creation and promote new business investment. By working together, we can forge a path to recovery that’s inclusive, environmentally responsible and innovative.

Senators, thank you again for the opportunity to meet with you, and I look forward to our discussion.

The Chair: Thank you to the witnesses.

Before we proceed to questions, we would like to ask witnesses that if time does not permit you to answer the questions completely, the committee would appreciate if you could follow up in writing with the clerk of the committee, Maxime Fortin.

We will now proceed to questions. I would like to remind senators that you will have a maximum of three minutes. Therefore, please ask your questions directly to the witnesses in a succinct manner. Witnesses, please respond concisely to the questions. The clerk will make a signal to show that the time is over and I will then proceed to the next senator.

Senator Marshall: In preparing for the meeting, I was looking at your websites, and checking media articles and interviews you’ve done. I thought there was a glimmer of hope with the various provinces reopening their economies, but after hearing you speak I’m not quite so sure.

Some provinces are reopening their economies. How can your businesses successfully transition back into operation with the CERB program that will run until September? Can you speak about how you will deal with the transition?

Mr. Kelly: Thank you, senator, for your question. It’s something that’s very much on the minds of many business owners. My organization and many business associations have created back-to-business kits to provide guidance to firms as they start to reopen. Issue number one for many of those firms is ensuring they can protect the safety of both their employees and their customers. On that front, it is challenging because just as our health care system has struggled in some respects to find sufficient amounts of affordable personal protective equipment, small businesses are as well. That is very much at the top of the minds of many business owners. They are also very concerned about bringing back employees.

While the wage subsidy was a helpful program, it was delivered so late in the game — both the announcement that the government was going to provide a significant wage subsidy and the actual wage subsidy itself — that many firms were forced to lay off their employees. It’s a difficult proposition now to unscramble the egg and bring your employees back. Many employees are reluctant to return to work both because of the CERB benefits continuing, in many respects replacing their wages at the same or similar level in parts of the economy, and we’ve spent two months telling every Canadian to stay at home. It’s a bit of a shock to then be invited back to work.

It is going to take some time, some care, and we are going to need to put some guardrails around the CERB benefit to ensure that if your employer is asking you to return to work, unless you have a pressing health reason, your CERB benefits would expire if you’re invited back to work. You may also wish to ensure that the CERB benefits have guardrails that you have to be available for work, as we have with the EI system. Those are a couple of the things that are on my mind.

The Chair: Mr. Dorval and Mr. Beatty, can you answer that question in writing please? I need to proceed with the other senators. Do we have that agreement?

Mr. Beatty: Yes.

Mr. Dorval: Yes.

The Chair: Thank you.


Senator Forest: Thank you for being with us. First of all, Mr. Dorval, I would like to take this opportunity to thank you, because I have just learned that you may be passing on the torch shortly, after 11 years of eminent contribution to the development of Quebec. I wish you the best of luck in your new adventure.

My question is for you. You’ve talked a lot about one of the main tools, the Emergency Wage Subsidy. My question is about the possibility of making some changes to it, because we do not think the program is as successful as it should be.

I also questioned witnesses on this subject last week. You talked about the 30% drop-in-income threshold to qualify for this subsidy, which I consider to be an all-or-nothing program. If a business suffers a 29% drop in revenue, it is not eligible for the program, whereas if it suffers a 30% or 31% drop in revenue, it becomes eligible for the program.

How do you feel about imposing an eligibility threshold for the Emergency Wage Subsidy set in proportion to the loss of business revenue, to cover businesses that may have experienced less revenue loss than the 30% proportion currently required?

Mr. Dorval: Thank you for your kind words, and also for highlighting my career transition.

To answer your question more precisely, this is an excellent idea. In fact, I think our colleagues from the Canadian chambers of commerce are making a similar proposal. We need to find a way to adapt this threshold to special circumstances. We understand that when the program was created — and it is understandable that it was created that way — there was a need to establish a minimum set of selection criteria, so that it could be applied generally from coast to coast to coast to meet a number of needs.

We are now seeing a recovery in activity, and we know that revenues may have fluctuated. I mentioned startups or companies that experienced a boom in early 2019, but there are also companies that have variable revenues, because those revenues come in at different times during the year. That is not necessarily easy, but perhaps adjusting the formula to allow the subsidy to be offered to businesses that receive this type of income would be a good way to do it.

The application of the criteria should still be fairly straightforward, taking into account that incomes may have fluctuated quite differently from month to month or season to season. We are now entering the summer period; some revenues may be higher or lower for businesses, as the case may be. Therefore, tailoring this benefit to income is an excellent suggestion. Other means can also be considered, but again, one can put oneself in the shoes of government and imagine that the more criteria there are, the more difficult a program is to administer.

In summary, I think it’s an excellent suggestion.


Senator Richards: Thank you, witnesses, for being here.

Mr. Kelly, I believe you mentioned this, but how many businesses are lost now and can you give a projection of how many businesses and millions of dollars might be lost?

Coming from New Brunswick, I know that New Brunswick tourism will be almost non-existent this summer, as it will be in P.E.I. I imagine that the little island of Campobello, which relies on tourism, will lose everything this summer, and so will Nova Scotia. I wonder about the big picture. After we get back on track, how many billions of dollars will be lost? I know you wouldn’t have a definitive answer, but maybe you will have a speculative one. Are we a little bit concerned about the payback of loans with businesses that will have to go into default anyway? Do the banks become like loan sharks? I’m not trying to blame anyone here. What is the future projection? If you could answer that perhaps.

Mr. Kelly: Sure. That is a lot to unpack. I’m deeply worried about, of course, not just getting through the emergency phase of COVID-19 but what happens in the immediate aftermath. For the tourism industry, the emergency period was challenging enough. But if they lose the summer months, many of these tourism-related businesses will go into the fall extremely weakened. I worry that the bankruptcies will happen later in the year rather than right now. Looking at the data we’ve collected so far, I can’t see any way that we are not going to see tens of thousands of business bankruptcies, business failures by the end of this. And that’s an optimistic scenario based on full utilization of all the government support programs.

So many Canadian businesses depend on physical presence of customers. Even as provincial governments allow more customers to return to businesses, it’s an open question as to whether consumers will, on their own, take up that opportunity and return to those businesses that they patronized in the past.

I remain deeply worried. There are likely to be thousands and thousands of business failures. I am keeping a close eye on interprovincial barriers, but I understand why provinces are motivated to do so, such as New Brunswick right now with respect to prohibiting those from entering the province. At the same time, that is going to really bite hard on the local businesses who depend on tourists from other parts of Canada, let alone tourists from outside. So that is one major concern on our part.

With respect to the banking sector, banks have behaved reasonably responsibly, but you are quite right, there’s a long way to go before the end of this.

Senator Harder: Thank you to our witnesses. My question is for Perrin Beatty. The Roadmap to Recovery that your organization, with others, has developed is extremely interesting, and I would like you to comment on two aspects. One is the nature of the consultations that went into both the developing of it, as well as how you see the state of consultations with governments, both provincial and federal, in terms of both understanding the road map but also pursuing it. And in that regard, I’m particularly interested in any advice you have on programs that are not in place now and would be appropriate for the transition that you foresee. Because, clearly, the existing programs are transitional and cannot be either afforded or contemplated in full in the number of months ahead.

Mr. Beatty: Senator, thank you very much. I’ll try my best to cover that territory. If I leave any time, Dr. Stratton might comment on the consultations leading up to the road map. We’ve had good consultations from governments at all levels. There has been more outreach from federal ministers and from the Prime Minister to me, certainly, in the last two months than there was in the previous four years. So that’s very positive. That’s going to be critical going forward. We need to ensure that this Team Canada approach we’ve developed be continued.

Senator, more than any one program is a question of re-examining our priorities. We can’t go back to the public policy agenda that there was in January. The fact is the economy has been fundamentally damaged, and we now have an extra quarter trillion dollars worth of debt to be carried by an economy that has suffered serious economic damage. That means that governments at all levels will have to go back to their public policy agendas and differentiate between the nice-to-haves and the must-haves. Our priority has to be a phasedown of the subsidy-based economy to move to investment and to growth as a means of dealing with that debt and creating jobs.

It’s going to happen at different times in different sectors. The tourism sector is a case in point, where it’s not going to bounce back any time soon. We’ll need continuing assistance there. Other areas we can control more readily.

What’s critically needed is close collaboration. We need to encourage investment. We need to encourage growth. And we need to recognize that’s going to come from the private sector. It means that governments at all levels will have to go back to the drawing board and look at their pre-COVID priorities and differentiate between things that would be nice to have and things that are essential to have, not just now but over the course of the next few years.

Perhaps if there’s still time, senator, I could turn to Dr. Stratton, who could comment on the consultations and building the strategy we were talking about.

The Chair: I’m sorry, Mr. Beatty. I was going to advise you that the time had been taken by your comments.

Mr. Beatty: I will leave you in suspense, senator.

The Chair: Can you ask our friend Dr. Stratton to make sure that he could answer or add to it in writing to our clerk?

Mr. Beatty: Gladly.

The Chair: Thank you.

Senator Smith: I have a question for Mr. Beatty. While it’s important to make sure that business gets back on its feet, it’s important that family households are in a position where they will be able to support businesses moving forward as consumption is a key driver of economic growth. I’m wondering if you could comment on the consumption side, in terms of your plan, how you see things unfolding. When we talk about household debt, when we talk about what the actual average consumer is up to or their position in life, where is it going to go?

Mr. Beatty: Thank you, senator. What’s going to be absolutely crucial is to unleash the capacity in consumer spending, which right now is exceptionally low. People are highly indebted. They’re concerned about the future. They’re worried about their health. They’re staying home.

A starting point for me would be the messaging coming from government itself and from the rest of us. For the last two or three months we’ve been essentially taking a binary approach in our messaging, which is “stay home or you’ll die. It’s essential that we not go about our ordinary lives.”

We have to accept the fact that until there’s a widely distributed vaccine, we’ll have to live with the disease in our midst. We’ll have to manage it in a way that’s responsible and protects people’s health but allows people increasingly to go about their ordinary lives.

A starting point for us right now is for governments to make the point that there are no absolute guarantees here, that we have to have an orderly decontrol of our economy and that we have to allow people to start going back about their lives. If we don’t do that, people will not have jobs to come back to because we will lose tens of thousands more businesses.

What we’ve learned over the course of the pandemic is how we can manage living with the pandemic in a way that minimizes the health impacts but allows us to come out of our homes and be engaged in more ordinary activities.

The goal for families has to be the same as it is for businesses. We help them in the short term to get to the other side of the river, but the goal must be to enable them to be self-sufficient and be able to generate the revenues they need to be able to survive after that. That means getting our economy moving again on a staged basis.

Senator Smith: Mr. Beatty, in terms of the new norm — and we’re not going to know what the new norm is until we start to experience it — when you look at layoffs of major corporations, small corporations throughout our country, it looks like we’ll be into more of the high-tech world of doing business. Do you have any concerns about where that leads the property section in Canada? Maybe if you could give us a written update on that, it would be great. Where will real estate go in terms of offices?

The Chair: Mr. Beatty, you can answer that question in writing, please.

Mr. Beatty: We’ll be glad to. Thank you, senator.


Senator Dagenais: My question is for Mr. Dorval. The Prime Minister announced last week that he was providing 10 days of sick leave to Canadian workers as a preventive measure.

Ten days multiplied by about 15 million permanent workers in Canada, say at $100 a day, that’s $15 billion. I don’t know if Mr. Trudeau did the math; probably not. Who do you think is going to pay? Can the companies afford the costs associated with these 10 new sick days?

Mr. Dorval: Thank you, senator. That’s an excellent question. We can look at it another way. If we take 10 working days off in a year, which includes about 200 working days, that is almost 4% of GDP. That is huge. Of course, someone is going to have to pay, because the amounts are enormous. What we understand from the Prime Minister is that there will be discussions with the provinces. We understand his intentions. A person — especially if we think about the possibility of a second wave of COVID-19 — could show up for work, even if they have symptoms of COVID-19, because they need their salary. This means that contamination is possible in the workplace.

We believe that, first and foremost, protective measures must be put in place in the workplace. If a general appeal were to be made across Canada, and particularly in Quebec, it would be to rely on innovation in order to quickly offer mass screening tests in workplaces; better to diagnose the risks of contamination, rather than working on the consequence, which is to pay people who are suffering from a disease.

That said, as far as the 10 days of leave are concerned, we know that Quebec already has labour standards. It is the same at the federal level, in each of the provinces. Paid sick leave days are part of labour standards in Quebec. A third day off can be taken at the employee’s expense. The employment insurance program includes a section on health insurance after a waiting period. There are also many jobs that offer additional benefits. If we calculate everything that is already in the basket, there are other ways of doing things than introducing 10 mandatory days off. In any environment where there are 10 days of sick leave, people take all or almost all of their 10 sick days, whether they are sick or not. It then becomes part of the benefits package. So the risk of slippage is huge. There is a cost associated with all of this, not only in terms of salary but also in terms of the availability of labour for employers.

The Chair: Thank you, Mr. Dorval.

Senator Galvez: Thank you very much to our guests. I have two questions, one for Mr. Dorval and one for Mr. Kelly. Mr. Dorval, together with representatives of social and environmental organizations, you co-signed a letter to the Premier of Quebec referring to a united, prosperous and green economic recovery. Can you give two examples of the measures you advocate and explain them to us?


Mr. Kelly, 42% of your members are worried about security and protective supplies, PPE, in relation to globalization. Can you tell us your concerns, if globalization has a role and if we should be manufacturing these things at home?


Mr. Dorval: First of all, in our roadmap, which we released on April 20, we concluded by saying that a safe and sustainable economic recovery must include a longer-term perspective, not only economic in the traditional sense, but also aimed at reducing negative environmental externalities, including elements such as social aspects. It is really characteristic for Quebec to engage an established social dialogue. The CPQ is part of a group made up of various unions and social and community stakeholders. We have adopted an approach to ensure that this economic recovery is not only safe and economically profitable, but also sustainable over time. For example, all investments aimed at reducing greenhouse gas emissions could be a priority, because this will have a double impact: creating economic activity and reducing negative externalities, which will represent a debt in the years to come.

Second, how can local production and the movement of goods to local consumers or customers be further facilitated? This will require the development of a shared logistics infrastructure, in some way, that will allow these products to be delivered to consumers at lower cost to compete more effectively with products from outside. This includes the green basket program, which is designed to reduce the cost differential that exists for products made here versus products from outside; it takes into account the carbon costs associated with long-distance transportation. We have proposed several initiatives that could support economic and community development.


The Chair: Mr. Kelly, I would ask you to please respond in writing.

Senator M. Deacon: Thank you folks for being here today. I want to direct my question to the Honourable Mr. Perrin Beatty [Technical difficulties] —

Maxime Fortin, Clerk of the Committee: Senator Deacon, we can’t hear you.

Senator M. Deacon: My apologies; I’m going to first direct this question to the Honourable Mr. Perrin Beatty and welcome our other panellists to respond because it starts with a survey. In April, StatCan and the Canadian Chamber of Commerce conducted a survey. More than 12,600 businesses show that the shutdown had and continues to have a disproportionate effect on businesses owned by women, Indigenous people, visible minorities, immigrants and persons with disabilities. My first question concerns why this might be, beyond the obvious. The obvious might be that systemic discrimination undoubtedly continues to exist in the country. A customer rarely deals with the owner directly, so I would not think people avoid, either consciously or subconsciously, minority-owned businesses. Is it things like access to credit, for instance; perhaps they don’t start on a firm or fair footing. I’d like to hear what areas we need to focus on related to this in our recovery.

Mr. Beatty: Thank you, senator. The disease doesn’t discriminate on the basis of gender or race or any other background, but where we have found a disproportionate effect as it relates to small business. The groups you mention are disproportionately represented in the small- and medium-sized business category. What we found in Canada and every other part of the world is that the SME category is the one most heavily battered. They are the least well-capitalized going into the crisis. They don’t have large cash reserves to carry them through. Often, they haven’t had business continuity plans in advance. They’re so busy keeping the lights on day to day that they haven’t been able to do the planning that larger businesses can do. As well, many of them are in sectors that are particularly hard hit. If you look at retail, the restaurant sector, for example, or the hospitality sector across the board, these tend to be sectors in which the groups you mentioned are disproportionately represented. They are badly hit at the present time. We need to have strategies that will bring those sectors, and particularly that will support small- and medium-sized businesses.

Mr. Kelly: Mr. Beatty said it very well. The segments of the population you mentioned are small business people and small businesses that are battered deeply by this. Special measures have been taken by governments to ensure that there are some supports available to them, but there is a lot more that needs to be done.

Senator Klyne: Welcome to our panel guests and witnesses. This question is for the Canadian Chamber of Commerce, which recently conducted the Canadian Survey on Business Conditions with StatCan to measure the effects of COVID-19 on business. Your survey found that only 62% of businesses reported that they could reopen or return to normal operations less than one month after social distancing measures are removed, and the Parliamentary Budget Officer noted we will need a quick recovery to ensure a positive outlook for the third quarter. Some regions have initiated the gradual relaxing of control measures a month earlier than assumed.

The third quarter is only a month away. Under the current circumstances, do you believe that 62% of businesses will be able to get up and running before the start of the third quarter? Where do you believe the government could play a role to assist the remaining 38% of businesses that require more time to get up and running as soon as possible?

Mr. Beatty: Thank you, senator. Yes, they can get up and running, but not up to the capacity they were at previously. We’re out in the field now with a follow-on survey. I think one of the things it will show is the damage that has been done is more severe than indicated. That survey tracked things to the end of March. It was really two weeks into the lockdown. I think we’ll find that there’s serious damage and it will be slower getting going. Anybody who believes we will have a V-shaped recovery is grievously mistaken. It will require that, first of all, we have a strategy for reopening, that it be coherent across provincial and territorial boundaries, and that we put a focus — more than anything else — on ensuring public confidence, the confidence of our workers and of our customers that it’s safe to do business again. We need a strategy for that. We need messaging from government that says we recognize that we can’t stay on lockdown until we have a vaccine. We have to start resuming more of our ordinary lives and we have to manage the disease as opposed to simply staying on lockdown.

The sooner we can start to decontrol the economy in an orderly way, the sooner we’ll be able to get these businesses up and running. Beyond that, yes, there will have to be tailored measures for businesses to assist certain sectors to be able to come back. But the key is to have a strategy, have a timetable and to get moving on that in a measured way that puts public health in front of everything else.

Senator Pate: My question is for the Honourable Perrin Beatty and perhaps Dr. Stratton as well. It’s a follow-up to Senator Richards’ question, as well as your response to Senator Harder.

Before COVID-19, we know that tourism was listed as Canada’s fifth-largest sector, valued at some $102 billion per year and employing 1.8 million Canadians. A statement from the Canadian Chamber of Commerce said that 42% of businesses in the accommodation and food sectors, compared to 26% of all businesses, are reporting revenue drops of over 50%.

As countries are easing travel restrictions in time for the tourism season, many destinations are offering travel incentives to bring back tourists. For example, Las Vegas offers free flights, Japan is offering vouchers to local restaurants, and Sicily is offering to cover parts of flight and hotel costs. Presumably, we all want to go there.

Has there been any thought put into Canada’s hard-hit tourism industry and how it will attract tourists to come to Canada once we start to ease border restrictions and physical distancing measures?

Mr. Beatty: It’s a very important question, senator. I haven’t seen evidence of a strategy as yet for that. In fact, the Government of Canada is still making recommendations against international travel. We still have restrictions on interprovincial travel within Canada. The messaging coming out of governments is to stay home. We have to recognize the sector that you’re talking about was the very first sector to be hit by the recession. Usually it’s first in, first out. In this case it will be the last sector to come out.

If you look at the restaurant sector, typically margins are 4% to 6% for a restaurant in good times. If you take half the seats out of a restaurant for social distancing, it’s virtually impossible to conceive of a business plan that would allow a restaurant to survive.

If you look at the airlines or hotels, even if the government announced today that it was lifting all restrictions, it would take weeks to hire people back, to get supplies in and then to market it, to start selling tickets or selling reservations. What we desperately need right now, if we’re going to salvage any of the summer’s tourist season, is a plan for decontrol and a timetable for doing so — one that puts public health ahead of everything else but that makes the point that we can’t stay on lockdown indefinitely. We have to allow Canadians to start to resume more of their ordinary lives and to start to have our economy resume more of its activity as well.

Senator Duncan: I would like to thank Senator Pate for that question regarding the tourism industry and perhaps recommend that our Finance Committee hear from the Tourism Industry Association of Canada, looking for a road map. Perhaps Canadians could be encouraged to see our own country first.

Perhaps Mr. Beatty would like to respond in writing to my question. I would ask for elaboration. He mentioned a Roadmap to Recovery that mentioned a resilient resource sector and foreign relations. I’m wondering if the Canadian Chamber of Commerce has addressed the issue or had a discussion of the recent foreign ownership of resources and mines in the North. I would request that answer in writing, if that would facilitate the discussion today, Mr. Chair, I’d appreciate it. I’d also like to express my thanks to the witnesses for their appearance today and for their information.

The Chair: Thank you, Senator Duncan. We will expect, Mr. Beatty, an answer in writing.

Mr. Beatty: We’ll be pleased to do that, senator.

The Chair: Thank you, sir. Honourable senators, I would ask Senator Loffreda, Senator Gagné and Senator Martin to just look at the road map that Senator Duncan used, and put your questions to the witnesses and they’ll come back to us in writing.


Senator Loffreda: My question is for Mr. Dorval of the Conseil du patronat du Québec. First of all, congratulations and bravo for your work, and best wishes of success for the future. How do you see the fact that many employers will now authorize telework, even after the pandemic? This will certainly have an effect on our economy. I liked your stimulus measures for our economy; did you propose any for telework and its impact on our economy? Clearly, if people are working from home, they’re not going out and they’re not consuming. You would think they would be less efficient and happier, but the opposite is true; they are less happy and more efficient. I believe there will be long‑term repercussions. It would be interesting to get your impressions and those of the other witnesses. Do you have any ideas on how we can provide stimulus to this potential problem, which may impact our economy?


The Chair: To the three witnesses, please submit your answers in writing.


Senator Gagné: Thank you to the witnesses. My question, on balance, is quite short, and I look forward to hearing your answers. It relates to the various economic measures that should be used to determine when governments should begin to reduce their pandemic-related expenditures. Right now, we know very well that Canada and the provinces are preparing for an economic recovery. In addition, the burden of public finances weighs heavily on the provinces, cities and Canada.

What economic measures should be used to determine when to start reducing spending?

The Chair: Is the question addressed to all witnesses, Senator Gagné?

Senator Gagné: My question is addressed to all of the witnesses. I’d like at least one answer: that would be greatly appreciated.

The Chair: I will ask the witnesses to respond in writing, please.


Senator Martin: Thank you to our presenters today. I had a question for all of the panellists regarding your makeup of businesses and whether ethnic communities have membership in your organizations. There are so many of them across the country who own small businesses and micro businesses, so I had a question regarding your membership makeup.

With regard to the Canada Emergency Commercial Rent Assistance, I know the takeup has not been very high and it took a long time. There were discussions to be had with provinces and territories. For instance, in Vancouver, some of the rents are $10,000 to $12,000 per month. This is clearly an issue, and I wanted to hear your recommendations on what needs to be done to address it.

The Chair: Thank you, Senator Martin. Hopefully, the three panellists will respond in writing to that question.

To the panellists, we want to thank you very much for your time and sharing your road maps and vision with us. We have a common denominator; our committee is all about transparency, accountability, predictability and reliability. That is the committee’s mandate for all Canadians.

Honourable senators, participants and Canadian viewers across the country, we will now welcome our witnesses for the second panel representing the transportation sector.

First, from the National Airlines Council of Canada, we welcome Mike McNaney, President and Chief Executive Officer. From the Canadian Trucking Alliance, we welcome Stephen Laskowski, President. Finally, from the Northern Air Transport Association, we welcome Joseph Sparling, Member of the Board of Directors, who is also President of Air North, Yukon’s airline. Welcome to all witnesses and thank you for accepting our invitation to appear.

We will start with Mr. McNaney, followed by Mr. Laskowski and Mr. Sparling. Mr. McNaney, the floor is yours.

Mike McNaney, President and Chief Executive Officer, National Airlines Council of Canada: Thank you, Mr. Chair. I want to begin by thanking the committee for the opportunity to appear as a witness today as you continue your hearings concerning the pandemic. I will keep my comments brief.

The National Airlines Council of Canada represents Canada’s largest airlines: Air Canada, Air Transat, Jazz Aviation LP and WestJet. We promote safe, sustainable and competitive air travel by advocating for the development of policies, regulations and legislation to foster a world-class transportation system. Collectively, our member airlines carried over 80 million passengers in 2019, directly employed over 60,000 people and are a critical component of Canada’s overall air transport and tourism sector, which supports more than 630,000 jobs in Canada.

Our industry is indeed reeling from the pandemic. It is a crisis unlike any we have experienced before. At present, we have about 95% of capacity eliminated from the market. There is over $10 billion worth of aircraft that are sitting idle and parked. Thousands of employees, direct and indirect, have been impacted. There is virtually no revenue coming in, and carriers are burning through cash at unsustainable rates. Of course, we do not have a clear timeline as to when and how things may start to improve.

A strong Canadian aviation sector is critical for our overall economic recovery. We support tens of thousands of jobs across every region of the country, in communities large and small and, of course, we support jobs across every sector of the economy.

The strategic significance of aviation lies in its well-established ability to support and promote economic growth across all sectors of the economy. Countries around the world have recognized this fact and have announced various initiatives over the past several months to support the sector, precisely because they will be relying on aviation to play a critical role in their economic rebound.

In Canada, our industry appreciates the measures the government has introduced, including the wage subsidy support program and the Large Employer Emergency Financing Facility. Individual carriers are reviewing the facility program and will determine how they wish to proceed.

It is important to note that as we enter 2020, after years of continuous investment in new aircraft, new routes and increased frequency to large and small communities across the country, our economy was more connected through aviation than it has ever been to communities across Canada and the world with all the economic and social benefits that entails. This expansion required successful investment of billions of dollars in capital in employees, in operations and in suppliers in every region of the country.

We are in this current financial crisis today not because of bad decisions by companies that have led to financial difficulty as consumers rejected their products or services; we are in this crisis because of the economic chaos caused by the pandemic as well as the closing of borders and the imposition of travel restrictions. Aviation has been hit particularly hard because it is very capital intensive and highly regulated for obvious safety and operational reasons. Overall, this means aviation is an expensive sector in which to operate. As we have seen demonstrated by our G7 partners, as well as our trading partners around the world, the industry will not get through this unprecedented crisis without government involvement.

To that point, we are now seeing even more financial pressure on the sector. Due to the unprecedented drop in air travel and subsequent loss of revenue, NAV CANADA has announced a proposed 29.5% fee increase for navigational services, and airport authorities have begun to announce substantial increases in airport improvement fees.

In order to establish the path forward for aviation, the industry is focused on a variety of factors, including work under way by the International Civil Aviation Organization, in developing the principles countries should follow to restart the sector, including addressing border and travel restrictions as well as clear action undertaken by the European Union for restart of its aviation sector.

To close, our members are focused on working with the government to support a process that allows us to begin moving back to what aviation is meant to do, which is to support the employment of hundreds of thousands of Canadians across the country in communities large and small, support our economic growth and connectivity not just within Canada but to the world, and aggressively support our overall recovery from the pandemic.

Thank you for the opportunity to appear today. I look forward to your questions.

Stephen Laskowski, President, Canadian Trucking Alliance: Thank you very much for having me here today. Briefly, I will introduce my alliance.

The alliance represents about 5,000 trucking companies from coast to coast. We represent all of the provincial trucking associations in all of the provinces. Our board is made up of 70 executives or owners from across the country.

Before I get into giving you an overview of what has happened to our industry as well as our asks going forward, I want to thank the government of Canada for its tremendous support to our sector throughout the COVID-19 crisis. There have been multiple departments and multiple ministers involved in ensuring our industry can continue to move forward during the crisis. And special thanks to Minister Garneau, his team and Transport Canada officials. Once again, they have been tremendous in their support for our sector and alliance throughout this crisis.

With regard to the economic condition of the industry and its operation during COVID-19, I think many of you may have read or seen the tremendous outpouring of support from government, the media and the general public with regard to the service our industry is performing and, in particular, the hard-working men and women in our sector driving trucks throughout the crisis.

As I said before, it has been tremendous and is a tip of the hat to those men and women that are keeping Canada going through the COVID-19 crisis.

However, there’s one thing about this outpouring that is perhaps a misunderstanding or misperception. It is that our industry has not been touched by the crisis. It is far from it. Ours is a demand-driven industry. If the economy goes down and catches a cold, we catch pneumonia. That is what has happened in many parts of our sector.

CTA conducted a Business Conditions Survey, which captured about 100 or 110 carriers that participated and represented about 70,000 employees from across the country.

What we’ve seen from this Business Conditions Survey is an average drop of between 27% and 35% in revenue in trucking companies. Some trucking companies have been completely shut down. As you just heard from the airline industry and people in the automotive sector, when the automotive industry shuts down, those trucks shut down.

Carriers have experienced a 300% increase in their empty miles. Trucks are paid to have product in the back of it. Empty miles is when there is no product in the back of the trailer. A 300% increase means 300% more times than average, which would typically be in the 8% to 9% range of empty miles. That means the costs are the same, but their revenues are far from it.

With regard to our customers, they are suffering too. We understand that. When our customers suffer, that means payment terms are being deferred. Over 63% of our carriers are seeing their payment terms by their customers extended.

If I had to summarize, there is a major cash flow crunch for trucking companies from coast to coast. Just as the airlines have mentioned, we would also like to thank the government. They have implemented several measures that have provided relief to the business community.

With regard to the Canada Emergency Wage Subsidy, the Prime Minister has mentioned there will be a second round and that the Government of Canada is open to listening to amendments to the Canada Emergency Wage Subsidy program.

With regard to our amendment, as I mentioned to you previously, many trucking companies are falling just below the 30% revenue threshold to qualify for the program. We would like to see the Government of Canada introduce scaleability to the program, meaning move it down slightly from the 30% or whatever that number is, but also the support with that. So as the revenue threshold gets lowered so does the support, but indeed there is support for these companies.

With regard to our nation’s truck drivers, we also have an ask for them. As many of these drivers are working through the COVID-19 crisis, we’ve all seen gas stations or rest areas that have been closed and restaurants that have been closed. That’s not just in Canada; that’s throughout the United States. These drivers are experiencing between a 50% and 80% increase —

The Chair: Thank you, Mr. Laskowski. We have your statement, and it will form part of what you just shared with us on our website. I have to recognize Mr. Sparling and then move on to questions.

Joseph Sparling, Member of the Board of Directors, Northern Air Transport Association: I am Joe Sparling with Air North, Yukon’s airline. I’m here representing the Northern Air Transport Association, a trade group representing northern air carriers.

I will start with some stats for perspective. The territories occupy more than 40% of Canada’s land mass but only about 0.3% of Canada’s population. Sixty-five communities receive scheduled air service, most have no road access and there are only 11 paved runways in the entire North. We deliver everything — passengers, including medevac services, groceries, consumer goods, building materials, fuel for vehicles, heating, and power generation. From bases throughout the North, we provide regional services that are integrated with gateway routes linking the territorial capitals to southern gateway cities.

Collectively, we transport more than 600,000 passengers and more than 50 million pounds of cargo annually. We employ more than 2,000 people, many of them northerners. Many of us are locally owned, including more than $100 million in Indigenous investment.

Because our services are essential for the communities we serve, our ability to reduce capacity in the face of COVID-19 was constrained due to the need to provide for the essential movement of medical-related passengers and cargo as well as day-to-day community necessities. In our case, a 95% drop in passenger demand permitted only a 77% capacity reduction.

Recognizing the essential nature of our services, all three territorial governments reacted right away and reached out to the federal government to provide funding under a Northern Essential Air Services Relief Program.

Both the EAS and the Canada Emergency Wage Subsidy programs are working for us. We are thankful for their help, but we know that the impact of the pandemic will be prolonged and funding will need to be extended. Because traffic is down, the flights we do operate are producing smaller overhead contributions, and because we are flying less, our overall overhead contributions are diminished. We are all doing our best to downsize by slashing overheads wherever we can, but there is still a significant pre-subsidy shortfall that could only be sustained for months and not years.

This dynamic leaves four choices: curtail operations voluntarily through a sale or a merger or involuntarily through bankruptcy; increase prices significantly; extend and possibly expand relief programs; develop strategies to improve loads, increase flying and reduce costs.

Northerners wouldn’t see us closing our doors as a good option and price increases of the magnitude required to offset current losses aren’t a good option either because many northerners don’t have the ability to jump into a car or onto a train if they can’t afford to fly. More relief money will work, but how much of this burden can we expect current and future taxpayers to shoulder?

Financial relief can’t go on forever, and it is going to take a long time for air travel demand to recover. In the North, we need to find ways to become self-sufficient in the new post-pandemic environment and make relief dollars go further in the current pandemic-impacted environment. Addressing merger undertakings will make relief funding more efficient in the central and eastern Arctic.

Gateway route traffic is another tool that would have a similar impact on financial relief in all three territories. Gateway routes are an integral part of northern route networks. Through the sharing of infrastructure and other overhead costs, gateway flying helps to ensure the viability of regional routes as well as optimum pricing. It is fair to say that there is significant cross-subsidization from Northern Gateway to northern regional routes.

In our operation, gateway routes look after about 80% of our overhead costs, so the ramification of the 95% traffic loss on 80% of our overhead contributions is obvious and significant.

While a healthy and growing economy was able to support a competitive market with a 50-year-plus backslide in traffic, gateway route competition now has the effect of driving up our required financial relief by more than 30%.

COVID-19 has caused northern air travel to revert to a time when government intervention was the norm and quite necessary to ensure service viability. In our market, with 100% market share on our gateway routes, we would be able to repay every dollar in relief funding received, thus creating opportunities to provide funding for other struggling businesses.

While few would want to go back to a regulated environment, the numbers speak for themselves. Whether it requires temporary intervention or a relaxation of anti-competitive restrictions so that carriers can work things out themselves or a combination of the two, one way or another the Canadian airline industry needs to be able to operate sustainably on a smaller scale while still providing essential services to all the regions of the country.

The Chair: Thank you very much to the witnesses.

We will proceed to questions.

Senator Marshall: My question is for Mr. McNaney with the National Airlines Council of Canada.

I was looking at the decline in the number of flights and passengers at various airports across the country. The economy is now starting to reopen and the financial assistance being provided will come to an end.

How are your members going to encourage customers to resume travel? People are a little fearful, but they need that extra push to start moving again, especially within the country. Can you answer that question for me?

Mr. McNaney: Thank you for the question. There are a couple of things inherent in responding to that. You heard a little of this earlier from Perrin Beatty’s testimony.

We will have to move, in some form or other, on the border measures and the travel restrictions. We will have to create an environment in which people are comfortable to travel, with the removal of those restrictions.

I mentioned in my opening comments that we are focused on the work going on at the International Civil Aviation Organization, the entity from the UN. They released a detailed report yesterday on how to restart; it’s quite detailed. The European Union has been following the same approach. They announced their report a week and a half ago, and it looks at how to establish the entire arc of the travel experience: before you even leave your house, when you get to the airport, when you transverse through the airport itself, board the aircraft and get to your destination. They are laying out a biosecurity pathway and the measures that air operators, government entities such as CATSA and CBSA, as well as airports should follow. There will be some good work undertaken on that. That addresses part of your question.

The other part of the question is the actual travel restrictions. Interprovincially, there are travel restrictions. There is a two-week self-isolation process.

I do not have a clear answer to this, senator, but at some point, we are going to have to align across the country on how we are going to deal with people travelling from one province to another. We can do everything we can to encourage domestic tourism, and to some degree, initially within a province and your local community, if we’re going to get the economic support and expansion we’re trying to achieve.

You heard the other witnesses saying government support can’t continue forever. If we are going to get to the point where aviation does not need that support, we have to address the travel restrictions both domestically, at the Canada-U.S. border and the international border. Until we get to that stage, we will see an industry that is dragging along as it is currently, with approximately 5% of capacity.

Senator Marshall: Are there any statistics on the likelihood of contracting COVID-19 on an aircraft?

Mr. McNaney: I believe there has been one identified case throughout the world or a suspected case that an individual may have. The reality is that modern jet aircraft, with the HEPA filters, the air refresh circulation is about 10 times that of —

The Chair: Mr. McNaney, I have to move on. Could you please answer Senator Marshall’s question in writing through the clerk of the committee. We would appreciate that.


Senator Forest: I thank all of the witnesses for being here to contribute to this reflection. My question is for Mr. Laskowski. I understand that your main request, with respect to the Emergency Wage Subsidy, is that businesses be able to qualify on a gradual basis, whereas at present it’s all or nothing, with a 30% floor. I agree with you. However, are there other changes that you or your members would like to see made to this very important Emergency Wage Subsidy program?


Mr. Laskowski: Thank you for the question, senator. We agree with your analysis, and that is the only modification we are requesting from the Government of Canada.

Senator Richards: Thank you to the witnesses. I have two questions. The first is for Mr. McNaney and the second is for Mr. Laskowski.

I know this question is speculative, but because of prices and the cost of bailing out the airline industry at large, will prices become exorbitant and create a class system of travel? I want to direct that question to Mr. McNaney or Mr. Sparling.

Mr. Laskowski, how many empty tractor trailers do you have across this country because of the decline of goods and services, and what kind of impact is that having on the economy of the trucking industry and the nation as a whole?

Mr. McNaney: In terms of the government’s support for the sector, what we’ve seen to date is the wage subsidy program, but there is also the LEEFF program, and that is looking at repayable loans.

I don’t view the actions taken by the government in the context of a sectoral bailout. If you look at what has happened in other jurisdictions, tens of billions of dollars in the United States and the European Union have been going directly to carriers in the form of grants in addition to loans. I do think there is an important distinction between how it is being done in other countries, from an industry perspective and sectoral, and how it’s being done in Canada.

In terms of pricing, the reference you made, senator, was a class system. That’s a very good question.

When you look at where we were in January of this year, the level of connectivity across the Canadian economy, the number flights and services in communities, large and small, was at its highest level ever, and that was the result of tens of billions of dollars of investment. The objective, from our sector, is to get back to January 2020 in terms of the scope, size and frequency of service. What you had in that period were airfares amongst the lowest they have been in decades, coupled with a wide number of options that consumers could choose from, both from the ULCC and LCC basis, standard carry, et cetera, and whether flying domestic or international. That is the objective. What is not at all clear for us, sir, is how and what time frame we have to get back to that state, given the challenges currently in front of us and given the border and travel measures also in existence right now.

The Chair: Mr. Laskowski, could you please respond in writing to Senator Richards’ question?

Mr. Laskowski: I will.

The Chair: Thank you, sir.

Senator Harder: Thank you to the witnesses for appearing today.

Mr. McNaney, I and a number of my colleagues are receiving calls about the fact that Air Canada has decided not to give reimbursements for flights cancelled due to COVID-19 and is, rather, providing vouchers valid for up to two years. A number of Canadians feel that is an inadequate and untimely response, and not sufficient given the nature of the personal circumstances that have changed as a result of COVID-19. Many of these flights were designed for special occasions. Family income is down.

Mr. Garneau has defended the industry, and I don’t expect you to take your industry on in this context, but surely we should be more responsive to the concerns of Canadians who, through no fault of their own, had COVID-19 cancel their travel plans and need their cash back. Are there not ways in which your industry should be working this issue through more productively?

Mr. McNaney: Thank you for the question, senator. I will speak at a general level as opposed to individual operators.

At a general level, the use of the vouchers has been created by the economic chaos that the pandemic has resulted in, and that has put all of us into an impossibly difficult situation. If the industry — and you heard public statements to this effect — did have to engage in reimbursement, it would have a devastating impact on the sector.

All we can operate on right now is the guidance that the Canadian Transportation Agency put out, which is trying to balance the issues you’re discussing and the issues you raised. That guidance to the sector has been that, given the current context, the use of vouchers is acceptable. Everyone is obviously hoping that we are eventually able to drive the economic recovery we need and that the issues and the cash crisis created by the pandemic will then be in the rearview mirror. But given where we are right now, I’m afraid our only real option at this point is for carriers to decide to follow that guidance.

Senator Smith: Thank you, witnesses. I’ve been asked by two of our senators to put a question to Mr. Sparling on behalf of the Northern Air Transportation Association.

Mr. Sparling, as I understand it, there are two recommendations for the federal government, which are being asked of this committee from Canadian North Airlines, a vital northern airline serving Nunavut and the Northwest Territories. The first is that the level of federal support, which has been delivered in collaboration with territorial and provincial governments and has allowed Canadian North to avoid having to ground their fleet, be continued past the current June sunset date until the impacts [Technical difficulties]. Second, certain conditions imposed by Minister Garneau on Canadian North last summer in approving the merger of Canadian North and First Air, which are not appropriate during the present negative financial environment, should be temporarily lifted by a ministerial order until the current severe travel restrictions imposed by governments are ended.

Is this correct in summarizing the two recommendations requested by Canadian North? And could you give a comment?

Mr. Sparling: The short answer is that it is essentially correct. There are really three elements to the northern air carrier strategy or road map for getting out of this. The first is short-term and that involves the subsidies. We’ve asked that the government at least extend their term until the pandemic ends. So that’s step one, very short-term help.

The second is intervention, which is short- to medium-term. There are two elements to the intervention. One is to relax the merger undertakings that Canadian North is bound by and for all three territories take steps to increase northern carrier market share on the gateway routes because they’re essential to our overall network.

The third element to our strategy is really a partnership strategy, and that’s a long-term strategy. As we emerge from the pandemic environment, on a smaller scale, we have to try to forge partnerships with the major mainline carriers so that we’re feeding them traffic in the gateway cities. That will help to ensure the continued and sustainable provision of essential services in the North.

Senator Smith: I know you’ve given me a kind of straight, factual answer. What is your feeling towards what has been asked of you as a director and a player within the industry?

Mr. Sparling: I’m sorry; I’m not sure I understand what you’re getting at there.

Senator Smith: You gave me a factual comment on where this is going, but what is your sense of the direction that things are likely to take? If you could write to us and let us know, we’d appreciate that. Our senators from the North, including Senator Patterson, would be very pleased.

Mr. Sparling: I am happy to do that.


Senator Dagenais: My question is for Mr. McNaney, and it complements the one asked by Senator Harder.

I think it is a bit strange that airline companies are asking for government support. We are talking about Canadians’ money, and those same Canadians will not be refunded for their plane tickets. It’s a matter of giving with one hand and taking away with the other. As for the vouchers you are offering, people who had tickets for international flights will not be able to use them for local flights. I think a double standard is at play, and airline companies should think about that.

Can you give us an overview of what air cargo will look like after the crisis?


Mr. McNaney: Thank you, senator. I’m sorry; do you want me to respond to both questions or was the first one largely a statement?


Senator Dagenais: You can answer both questions.


Mr. McNaney: No problem. In terms of the first question, I go back to my earlier response, but not simply to regurgitate the same talking points. The situation is what we find ourselves in. It is driven by the pandemic. Otherwise, we would not be taking the approach that we’re taking, senator. If we did have to respond with the refunds, it would have a devastating impact.

Earlier I mentioned other jurisdictions and how they are addressing support overall. The voucher issue has been addressed in a different way in the European Union and in the United States. Again, the form and level of support that those governments have taken, obviously with public funds and public support and public money, is an exponentially different approach than the Canadian government has landed on here in terms of the loan program under LEEFF.

If we’re going to look at the totality in which very-consumer-specific issue is being addressed in other jurisdictions, we have to look at the overall approach those countries are taking versus what Canada is taking. I do not view the provision of LEEFF — and the government was very clear. Both the Minister of Finance and the Prime Minister were very clear in how they positioned the program. It is a loan backstop approach that is deemed to be the last stop. Companies will obviously do their utmost to get assistance and drive liquidity through private markets. It is very much a last-stop measure. I don’t view it in the same context that I view the support that has been given in other jurisdictions. I see I’m getting the signal.

The Chair: Thank you, Mr. McNaney. If you want to continue adding on to that response, please do so through the clerk.

Senator Galvez: My question is directed to Mr. McNaney and Mr. Sparling. I would appreciate written answers.

I want to touch on the safety and security aspects of our situation. You know there is a role of globalization in the spread of COVID-19. In Canada, we are painfully flattening the curve. Experts are warning us about a second and even a third wave that may arrive this fall.

In travel, as both of you were saying, the virus passes through big cities. I know the spread of the virus in Canada is very heterogeneous; 94% of the cases are concentrated in Ontario, Quebec and Alberta while the North and remote areas are safe.

If we plan to implement the security that we have seen working in countries such as Taiwan, South Korea, Iceland and New Zealand, then we have to be more patient with opening travel. The last thing we want is that our northern communities get infected. For the same reasons that you explained earlier, it will be very difficult to control the COVID spread there.

Maybe you can have one minute to answer, but I would like written answers. Thank you.

Mr. Sparling: I’ll give the northern perspective quickly. In the Yukon, we are going slowly. Our borders are closed, but effective July 1 — subject to no adverse change in conditions; we have no COVID-19 cases in the Yukon. We had 11, but all 11 have recovered — it is our hope that we will create what’s called a “travel bubble” between the Yukon and British Columbia. However, our borders will still be closed to travel from other jurisdictions. Those are the steps we’re taking in the Yukon.

Mr. McNaney: Captured in your question, I go back to the point I made originally about the most recent report from the International Civil Aviation Organization, and it is absolutely designed to address the concerns that you were raising in terms of transmission through travel and the steps that need to be taken. If you look at the jurisdictions that you had referenced, Taiwan, South Korea and others, a great deal of what is baked into that ICAO report is learning from the examples of those countries. The report was released yesterday. Certainly it is our objective to work closely with Transport Canada and across a whole-of-government approach on implementing. That is the surest way we can get them to a restart on a safe basis, not just for travellers but also for our employees.

Senator M. Deacon: Thank you all for being here today. It’s very interesting listening to the airline and the trucking industry, and impacts in the short term.

This question is for you, Mr. McNaney, and it concerns the proposed $720-million acquisition of Air Transat by Air Canada within the context of the current crisis. I understand the thin margins that our airlines operate in, which is why was I looking forward to learning about how the federal government can step in and help. That being said, I have a hard time reconciling tax dollars for an airline that could very soon be enriching another company’s shareholders to the tune of three quarters of a billion dollars. On the surface, at least, it looks like taxpayers are funding an acquisition that, according to the Competition Bureau, would result in substantial anti-competitive effects to those very taxpayers.

I know you don’t necessarily represent each of these companies directly, but I would be interested in your perspective, helping me reconcile this or perhaps even hearing a different point of view.

Mr. McNaney: Thank you, senator. I’m afraid I don’t speak to individual companies and their corporate plans and commercial plans. What I could undertake, senator, is to follow up with you in a written format, but it’s not part of my mandate to speak to individual companies and what their corporate strategies are.

Senator M. Deacon: That would be greatly appreciated. Thank you.

Senator Klyne: This question is for Mr. Sparling. I’m interested in the northern carriers, which in many ways are utilities.

I’m concerned about one thing, which is the already high pre‑pandemic prices of essential goods, of food, fuels and such. Can you point the committee toward any analysis that clearly demonstrates the effects of reduced air travel to the North and how it’s affecting the cost of essential goods, such as food? As well, how can we ensure that Canadians living in the North have greater security in the future when facing another economic downturn such as this one?

Mr. Sparling: First, with respect to pricing, we’ve not seen significant price increases in our market, I think as a result solely of the drop in demand. We’ve incurred losses as a result of the drop in demand. However, one of the things I mentioned in my presentation is that we’re trying to get back on our feet without having to unreasonably raise prices. We need to increase our flying and increase our traffic to get the volumes back up so that the overhead costs we incur can be allocated over a greater volume of flying.

Northerners are very sensitive to increases in travel costs and the cost of goods because they rely on air travel, as you have observed, like a public utility or a taxi service. One of the things that we’ve tried to do in setting up our own operation is to set up our infrastructure in the North and share the infrastructure between the regional and the gateway routes so that we’ve got as much activity as possible to share the cost of providing the significant infrastructure that’s required to operate an airline in the North.

Senator Pate: Mr. McNaney, you’ve spoken about significant layoffs in the airline industry, and on April 22 WestJet announced layoffs of 3,000 employees. On May 15, Air Canada announced it would lay off 20,000 employees and on May 21, the Financial Post reported that Air Canada employees were being asked to choose between a voluntary unpaid leave of 6 to 24 months or resigning from the company. This situation would obviously leave those employees ineligible for both the CERB, the Canada Emergency Response Benefit, as well as the Canada Emergency Wage Subsidy.

Could you please provide, now or in writing later, how many employees across the airline industry have lost their jobs or their incomes in this manner, particularly because of the so-called voluntary unpaid leaves and therefore do not have access to the CERB or the wage subsidy measures?

Mr. McNaney: I will be able to follow up in writing with that information.

The Chair: Thank you very much.

Senator Duncan: Thank you to the witnesses who are appearing today. My question is for Joe Sparling of Air North.

Thank you, Joe. I especially appreciate the detailed brief you’ve provided to my colleagues on the committee and to Canadians. You’ve been very clear about the need for continuation of the federal subsidies, programs and assistance to the airlines, federal and territorial, and you’ve expressed your appreciation for their quick and timely response. You’ve also touched on the issue of the gateway routes and the need for exclusive access to gateway routes.

Would you please elaborate on that and provide some information to my colleagues on the necessity of the access and exclusive access to those gateway routes?

Mr. Sparling: I mentioned in my discussion that demand for aviation has taken a 50-year backslide. I was checking the numbers last night, and the Whitehorse airport had fewer than 2,000 emplanements and deplanements in May. Likely the last month it was that low was back to the 1950s when, as a kid, I used to travel to the Yukon to visit my grandparents on Canadian Pacific’s DC-6B on a regulated, protected route, with stops in Fort St. John, Fort Nelson and Watson Lake. The market has shrunk that much. For us to operate a sustainable network without massive price increases or incurring massive losses, we need to have access to all the revenue that’s within our reach. We’ve located ourselves in the North as a northern carrier. We’re far from the mainstream of Canadian aviation. It’s a large geography but a very small market. Therefore the gateway route traffic and revenues are absolutely essential and integral to the sustainability of our operation.

I think I mentioned, as a medium term, aid following the subsidies as we wean ourselves off the subsidies, some intervention to address the merger undertakings in the east and the gateway routes in the central areas in all three territories. And then long term we have to forge partnerships with the mainline carriers so that the northern carriers integrate well with mainline carriers. Instead of our networks overlapping with theirs, they link with them so that travellers can seamlessly travel from the North to anywhere in the country they need to go by first travelling on a northern carrier and linking seamlessly with the mainline carrier.

Senator Loffreda: My question is for Mr. McNaney from the National Airlines Council of Canada. According to The Wall Street Journal, Boeing and Airbus are studying how the coronavirus behaves on planes. Obviously, it’s an industry-wide effort to curb potential air travel risks and earn the trust of numerous travellers.

In 2003, 22 people on a single flight did come down with SARS. What are your impressions of such a study? How do we feel in Canada? Are there similar studies in Canada? It would be nice to be updated on the study and kept up to date or abreast of the results.

Boeing and Airbus are taking it a step further. They’re running simulations to understand seat-to-seat airflow and researching new technologies. Boeing is even looking at ultraviolet light. They want to see how they can disinfect surfaces. I would like your impressions on all of that. Can you keep us up to date or abreast of that research? Are we running similar research in Canada to bring back the trust of air travellers?

Mr. McNaney: Thank you for the question, senator. I can certainly update as the Boeing and Airbus work goes on. I’ve seen reports about the studies. Traditionally, the OEMs — original equipment manufacturers — the airframe manufacturers, are the ones who lead these types of studies. This is obviously a unique one. This is all related in one form or another to biosecurity, so we’re supportive of the action under way by both of those organizations.

I do believe there are a number of other studies under way. I’m not aware, senator, of anything specific to Canada. Generally, the lessons learned from this are applicable to every operator of that gauge and type of aircraft. It usually results in communication that goes both to the regulator and the operator on operating procedures to be followed with those aircraft. But I can certainly keep you updated. That all speaks to my response to one of the earlier questions, senator, in terms of this international effort that’s under way, led by ICAO. The Canadian government and Transport Canada were deeply involved in coming up with a clear set of procedures across the entire arc of flying, including your inflight experience, wearing PPE, the type of inflight service you might receive, the best ways of organizing within the cabin, and loading and off-loading the aircraft. All of that is being examined and best practices are being established. To your original question, I can certainly keep the committee updated on the study results.

The Chair: Thank you, Mr. McNaney. If it is possible to have additional information before the end of June, we would appreciate that in respect to tabling our report to the Senate.

Mr. McNaney: Yes, sir.

The Chair: Thank you, sir.


Senator Gagné: I thank the witnesses for joining us this afternoon. My question is for Mr. McNaney. You brought up the fact that the United States and perhaps European countries have supported airline companies. One of your members, Air Canada, has also said that global air transportation will probably resume toward the end of December. Given all that, what do you think would be a fair solution in terms of the support the Canadian government could give to air transportation?


Mr. McNaney: Thank you, senator. Fare support would fall into a couple of categories. First and foremost, it would need to be an approach that works for different carriers of different sizes and different levels of sophistication. Obviously, large network operators have a level of investment, capital investment and capital exposure that is quite large. That is not to suggest that smaller carriers also on a relative basis do not have that same type of capital exposure, but their operating and financial needs will be different than those of international and network operators; first and foremost, something that works across all sectors.

In our previous conversations and discussions with government, before they brought out the LEEFF program — and that is a non-sectoral approach — we had been asking for an approach that worked across all sectors. We had been saying to government that they have a variety of tools open to them, whether it’s loans or grants, et cetera. And we were actually saying to government that we leave it up to you to decide what you think is the best means. We’re not going to try to prescribe something.

At the same time, we also took the opportunity to outline what is occurring in other jurisdictions. Other countries made decisions on support, five or six or eight weeks ago and there are opportunities to learn from what they did. The government has landed on LEEFF. Carriers are now looking at that program and what it may mean for them. They will then have to decide if the terms and conditions of the program meet their objectives and obligations.

We have to recognize that in Canada we have taken a particular approach that is not what we have seen in other jurisdictions. In other countries you have seen, for example, air traffic control, the federal government has stepped in and has said it is going to avoid wage rate and fee increases. Other jurisdictions or countries have stepped in to avoid increases in airport charges and aeronautical fees. To date, that has not been the approach of the Canadian government. They have outlined what their approach is. Is there room to do more? Yes, absolutely I think there is room to do more.

What you have not seen is this great buildup of pressure from small- and medium-sized communities sprinkled across the country for air service because, of course, the economy is in hibernation. But we are going to get to the stage, when we’re looking at this recovery, when the small tourism operator in one community or the coffee shop on main street in another community is going to be looking for airlift, for service, and it’s an open question as to what extent it will be there. That is what the investment that has occurred to date in these other jurisdictions — other G7 partners and our trading competitors — have been attempting to do.

Senator Martin: First of all Mr. Laskowski, to your members who really are providing an essential service throughout the year, thank you so much.

Mr. McNaney and Mr. Sparling, I know that the Senate Transportation Committee undertook a multi-year study on the airline industry. The challenges for our country are so unique and tremendous. We live in a vast country where the only way to get to certain remote places is by plane. I understand the challenges that we face as Canadians.

Mr. Sparling, you said in your brief that virtually all Canadian air carriers are in need of immediate and prolonged financial assistance in order to ensure the viability and integrity of Canada’s entire air transportation network.

I was wondering how long you anticipate that financial relief would be necessary. If you can give us further details on that, it would be helpful. Thank you.

Mr. Sparling: The comment on the length of the assistance was merely in reference to my observation, and I think the general feeling is that demand for air travel will be slow to recover. I don’t think any of us have any idea when we’re going to see people getting back on to airplanes in the pre-pandemic numbers. For the purpose of really just going through the exercise, we’ve looked at it taking five years to get back to pre‑pandemic travel levels. That doesn’t mean we expect we will need financial assistance for five years. Our own numbers suggest that we may need financial assistance for perhaps a year or a little bit more than that, and in decreasing amounts.

It’s pretty difficult to predict how fast this is going to unwind. In regard to border closures, some of the territories are suggesting that we won’t see completely open borders until perhaps into the fall. That’s going to have a real negative impact on traffic for at least that long — and even when the borders are open — for people to be comfortable jumping on airplanes and travelling to large centres. We just don’t know.

The Chair: Thank you, Mr. Sparling. As we come to a close, with the indulgence of the senators and staff, I have a question for Mr. McNaney. There is no doubt when we talk about the devastating impacts for the industry. Can you provide us with the amount of money on the refund side that companies, the airline industry, would have to send to refund the whole industry?

Mr. McNaney: Thank you, senator. In terms of a number right now, I would not have a number. That depends on every single operator individually. I can undertake to follow up with the committee.

The Chair: Thank you, sir.

To the witnesses, thank you very much for sharing your ideas. It has been very informative. Thank you for having accepted our invitation to share the information.


Honourable senators, we are resuming our meeting and continuing our study on certain elements of bills C-13 and C-14, as well as on the government’s response to the COVID-19 pandemic and its economic consequences for Canadians.


Honourable senators, participants and the viewing public, for today’s third panel, we welcome representatives from the agriculture and fisheries sectors.

First, from the Canadian Federation of Agriculture, we welcome Keith Currie, First Vice-President. He is accompanied by Scott Ross, Assistant Executive Director. From the Fisheries Council of Canada, we welcome Paul Lansbergen, President.


We are also hearing from Marcel Groleau, President General of the Union des producteurs agricoles, UPA, who is joined by David Tougas, Economy and Trade Coordinator at the UPA Agricultural Research and Policy Branch.


To the witnesses, thank you for accepting our invitation to appear. At this point in time, I will ask Mr. Currie to make his statement, to be followed by Mr. Lansbergen and then Mr. Groleau. Then there will be questions from senators.

Mr. Currie, the floor is yours.

Keith Currie, First Vice-President, Canadian Federation of Agriculture: Thank you, Mr. Chair and honourable senators, for this opportunity to speak to you today. As you have heard, my name is Keith Currie. I grow grains and oilseeds, along with hay, sweet corn and gladiola flowers in the Collingwood, Ontario area. I am also currently the President of the Ontario Federation of Agriculture, along with being the First Vice-President of the Canadian Federation of Agriculture.

I would like to start by thanking and acknowledging the work of Canadian governments at all levels. Public servants and elected officials have been working 24-7 to help Canadians and to keep us safe during these difficult times. These coming days and weeks are critical if we are to ensure Canada’s domestic food supply is secure both now and into the future.

The federal government has designed and executed many programs for businesses and individuals. We are talking today about how we can bring this ingenuity and commitment to ensure an adequate food supply and support for our farmers. The COVID-19 crisis continues to generate significant challenges and uncertainty through the agri-food sector, with potentially devastating impacts on farmers from coast to coast. As leaders, we have an obligation to plan for the worst and drive for the best.

To understand the impacts of COVID-19, the Canadian Federation of Agriculture, through its member surveys, identified $2.6 billion in financial needs across the Canadian agri-food sector almost six weeks ago. To date, the government has announced a number of initiatives for the sector, including $252 million in assistance, and committed to further funding announcements. While critically important to the sector, the funding relief to date falls well short of the sector’s overall need. Today I will speak to the outstanding issues of shortfalls in programming and what’s needed to ensure we don’t see any unnecessary loss of food production during these difficult times.

For the first time in generations, serious questions in Canada have been raised about food supply chains and our food security. Right now, Canadian farmers are making decisions about how to proceed with their 2020 production given the immediate and critical challenges confronting the sector. These include processing disruptions; reducing supply chain capacity; loss of the food service industry, which is a key market for many agriculture producers; unfilled job vacancies throughout the agri‑food supply chain, further challenged by the possibility of COVID occurrences in the workforce; unprecedented market volatility; rising costs from COVID-related measures; and closure of sector-specific markets.

The CFA has proposed a number of specific policy measures to help address challenges faced by the sector during COVID-19. A brief will be submitted to the clerk shortly, with a detailed breakdown of these measures.

Given the short time I have today, I will focus on three key areas. First is the need to enhance business risk management coverage to ensure producers have support to overcome supply chain disruptions, address rising costs and ultimately manage pressures to scale back production. Changes to BRM programs are the most effective way to assist producers with the acute challenges posed by COVID-19 and other broad-spectrum crises, such as the loss of key international markets, production issues due to climate change or acute downturns in commodity markets.

Had BRM programs been operating effectively, the CFA’s view is that the programs would have covered up to 75% of the $2.6 billion in financial needs referenced earlier. Through years of review, most of the solutions to fix the BRM suite are already known. Now it is a matter of the government urgently sitting down with the CFA and other stakeholders and committing to a concrete and short timeline to fix these problems.

Second is additional support for food processors to mitigate the likelihood of COVID-related supply chain disruptions across the sector. While we were pleased to see the announcement of $77 million for food processors, our supply chain partners have indicated this is inadequate, with significant food and financial losses expected to follow any future disruptions. CFA is calling for urgent additional financial support to assist processors in retrofitting facilities to maintain capacity and support workplace safety.

Third, where disruptions either have or will take place, CFA is calling for additional funding beyond the $50 million food surplus program to ensure there is logistical support to address existing and anticipated surpluses, coupled with a Buy Canadian campaign to prevent farmers from further scaling back production due to the loss of food service industries.

We believe these measures and those in our forthcoming brief work hand in hand to help maintain capacity and ensure Canada’s agri-food sector is doing everything it can to put food on the plates of Canadians and consumers around the world during these difficult times.

In closing, Canadian farmers take pride in the fact that every day we feed Canadians. Like most sectors of the Canadian economy, farmers have felt the tremendous pain brought about by the unprecedented COVID-19 crisis. We will always work as partners with government to make nutritious and affordable food available to all Canadians. I’d like to thank all of you for your time.

Paul Lansbergen, President, Fisheries Council of Canada: Thank you. It is a pleasure to be with you this afternoon. I would like to point out that this is the first time the Fisheries Council of Canada, or FCC, has appeared before this committee. I feel like I should give you a bit of an overview of the FCC and the sector.

The FCC is the national voice for the wild capture sector, representing processors on all three coasts: East, West and the Eastern Arctic. Practically all members harvest as well, but for those of you who are from the East Coast, you will know there are fleet separation rules. To be clear, I represent the processors and the offshore harvesters. Most are privately held family‑owned businesses. For myself, I have been in the public policy and association leadership space for 25 years and with the Fisheries Council of Canada for two and a half years.

The fisheries sector in Canada has enjoyed strong growth in recent years, and the value of our exports were up 25% in the last five years to $7.5 billion. The sector employs nearly 80,000 Canadians, mostly from coastal communities. Our top four exports by value are to the U.S. at 61%, China at 17%, the EU at 7% and Japan at 4%. Lobster and other crustaceans are the top product grouping at 55% of our exports. Fresh and chilled fish is second at 14%, and molluscs are third at 7%.

Turning to the pandemic, impacts on individual companies vary depending on species, product format, geographic markets and market segments. Products that would typically go to food service or white-tablecloth restaurants have been the hardest hit. Unfortunately, seafood is not top of mind for takeout.

Looking at trade stats, they can be used to assess the disruption of the global trading system and its impact on our sector. Unfortunately, the trading data for April is not available yet, so the year-to-date, January to March, only shows a glimpse into these impacts.

The year-to-date exports were down 5.1%, but if you look at March only, it was much worse. March exports decline was triple that, down 15.3%. We did see some panic buying within March, so I expect April and May to be much worse.

Aside from the market disruption, there is tremendous effort to protect our workers and vessel crews. FCC has been doing everything it can to help the sector stay on top of public health guidance. Companies are investing in personal protective equipment and modifying operational configurations to create more spacing and distancing. In some sub-sectors, there is a reliance on temporary foreign workers. Some are having more success than others in securing them in light of the pandemic.

We are pleased that the government has come forth with the Canadian Seafood Stabilization Fund to recognize the disruption faced by the sector. The priority for the sector is the health and safety of our workers. These are increasing costs for everyone. For example, a processing plant could spend upwards of $50,000 or more a year on PPE. Costs to install physical barriers are in the tens of thousands per plant and isolating vessel crew before voyages adds costs.

The program will help cover some of these as well as help shift operations to serve retail markets. We hope the program will go live imminently. It will be administered by Canada’s Regional Development Agencies. For regions that are not included, they will be eligible for support from the Regional Relief and Recovery Fund.

The sector is eligible for economy-wide measures such as the Canada Emergency Wage Subsidy and the Canada Emergency Response Benefit. Smaller operators are eligible for the Canada Emergency Business Account.

Financing support from Export Development Canada, Business Development Bank of Canada and Farm Credit Canada will also be helpful. In particular, we have confirmed that Farm Credit Canada is now providing support to the factory freezer vessels as they have integrated harvesting and processing operations.

I would like to point out that the government has also announced support for the harvesters. These measures were to fix some technical eligibility issues for the Canada Emergency Wage Subsidy and the Canada Emergency Business Account, and they did so via separate programs for the sector. While this doesn’t directly benefit my members, we had advocated for such a fix. It is important to recognize that the supply chain is interdependent among the fleets and processors. We depend on each other for our prosperity.

I will leave it at that and welcome questions.


Marcel Groleau, President General, Union des producteurs agricoles: Good afternoon, everyone. My name is Marcel Groleau, and I am a farmer in the Thetford Mines region, in the Appalaches RCM, halfway between Sherbrooke and Quebec City, close to the Beauce region.

I will take up some of Mr. Currie’s remarks and add some clarifications. Canada’s agrifood sector generates over $112 billion annually in sales, with $60 billion of that amount coming from exports. That is a sector that will be very important in Canada’s economic recovery post COVID-19, and yet, that industry is being sorely tested by the current situation. We have seen closure of slaughterhouses and processing plants attributable to infected employees and unused animals on farms. All that leads to significant costs for producers and a labour shortage, since foreign workers will not be able to come to Canada this summer.

This situation has led to market losses attributable to the closing of restaurants, hotels and corporate procurement, which represent 15% to 30% of the markets, depending on the production. Moreover, we have experienced losses in terms of products, which in turn led to loss of revenue for producers.

Here are a few examples: domestically, we estimate that losses for poultry producers have so far added up to $100 billion. The Canadian Cattlemen’s Association estimates that beef products have suffered losses of $200 million. Finally, losses in the grain sector are projected to exceed $90 million.

The available programs to help producers address this situation are clearly insufficient. The main program that protects Canada’s industries is called AgriStability. In 2017, that program only provided $219 million to all of Canada’s producers. If we compare that amount to agricultural sales, we are talking about less than 37¢ per $100 of farm production. This data shows that Canadian agriculture is currently operating, for the most part, without a safety net.

The agricultural sector was no longer eligible for the Canada emergency wage subsidy program. Ms. Bibeau announced $252 million in federal assistance. In fact, the amount is about $175 million for the agricultural sector, since $77 million is being allocated to the food processing sector, and $100 million is allocated solely to beef and pork producers, in a program where we are far from certain that money can be spent.

This fund injection is clearly insufficient compared with the U.S. investment, which has been 10 to 12 times higher than that of the Canadian government, according to our analysts. To give you an example, $16 billion was made available to help U.S. farmers address the situation. So we are talking about CA$10 per tonne of corn, grain or soybeans, $100 per slaughter steer, $60 per head of grain-fed veal, $14 per head of pork or $13 per piglet. That makes a huge difference, and we are sharing the same markets. I should point out that this amount is added to special direct payments of over $23 billion provided by the United States in 2018-2019 to support American farmers in the trade war with China while, during that same period, the Canadian government provided no assistance to the country’s farmers.

I will quickly go over two charts. The first shows Canada’s net farm income. We see that, in 2017, the net farm income was $8 billion; in 2018, owing to trade tensions between the United States and China and during NAFTA negotiations, as well as in 2019, Canadian net farm income was cut in half and dropped to $4 billion. The next chart shows Canada’s intervention during that same period, compared to the intervention in other countries, which was measured by the OECD. From 2012 to 2017, Canada’s intervention decreased by 2%....

The Chair: Mr. Groleau, your time is up, but I believe that your presentation has been submitted to the clerk.

Mr. Groleau: If I may, I will wrap up quickly with the chart. While Canada was decreasing its support by 2% compared to production value, the United States increased its support by 1%. At this time, the U.S. intervention in terms of production value is twice as much as Canada’s intervention.

The Chair: Thank you, Mr. Groleau. You will likely have to answer a number of questions.


Thank you very much for accepting our invitation and sharing your vision, comments and recommendations with the Finance Committee. We will now proceed to questions and follow the previous format.

Senator Marshall: My question is for Mr. Lansbergen with the Fisheries Council of Canada. I live in Newfoundland and COVID-19 has had a devastating impact on my province’s fishing industry. Many fisheries have been delayed by more than a month. The market conditions are affecting incomes. Several COVID-19 programs have helped, and you mentioned them in your opening remarks. You referred to CERB, the wage subsidy program, grants and loans. I have some questions for you.

First of all, are the existing programs working? Are they adequate? And what additional assistance should be provided by the federal government to harvesters and processors?

Mr. Lansbergen: Thank you, Senator Marshall, for those very good questions.

Are the existing programs working? They are, to some degree. I think you’ve probably heard many times that there are people and segments that are falling through the cracks.

Are the programs adequate? Certainly, for the stabilization fund that I mentioned, we expect it will be fully utilized, certainly before the end of the year, if not just into the fall, based on our analysis.

What more could be done? At this point, it’s hard to tell because we don’t know how large the second wave will be, how prolonged the lockdown will be in terms of the food service side as well as the global market. One thing we have identified so far — and the government is doing some consultations on the wage subsidy — is looking at a different approach to determine who is eligible rather than just a straight decline in revenue because some fisheries were late opening, as you said, and they did not qualify for that because they didn’t have their revenue decline yet because they wouldn’t typically have revenue in the months of March or April.

Senator Marshall: There was some discussion about whether seasonal workers will be able to qualify for Employment Insurance, and there was some discussion as to whether there could be something done in that regard. Are you familiar with that issue?

Mr. Lansbergen: Yes. One of the other elements the government announced when they announced the measures for the harvesters was modification for the fishing EI eligibility, so they would be eligible based on previous years’ employment income.

Senator Marshall: What about the processors?

Mr. Lansbergen: Nothing yet.

Senator Marshall: There is nothing, so that’s an area that could be improved. Thank you.

The Chair: Mr. Lansbergen, can you follow up on the questions asked by Senator Marshall, in writing, if you want to add additional information?

Senator Marshall: On the processors. Thank you very much.


Senator Forest: I thank all the witnesses from these highly important sectors for Canada for the information they have provided to us. My two questions are for Mr. Groleau.

There is a lot of talk about a labour shortage, especially in terms of temporary farm workers. I have met with a number of vegetable producers. The government says it has done as much as it could to reduce red tape and to reassure foreign governments in terms of worker security.

Are you satisfied with the efforts that have been made? Is there really a feeling that they have made a difference on the ground? That is a crucial aspect, both in terms of planting and maintenance, and the harvest. Of all the available programs, which would be the best one to help the agricultural sector and the fisheries sector?

Mr. Groleau: Thank you for your question, Senator Forest. Concerning foreign workers, an effort has been made. Yes, we have seen a very nice collaboration between the government and the agricultural sector. Administrative arrangements have been made to facilitate the arrival of workers from Guatemala. However, other administrative arrangements could be made to encourage the arrival of Mexicans workers. It would be a matter of providing work permits for Mexican workers who came here in 2019, so that they could come back in 2020. Those work permits could be given to them upon their arrival at a Canadian airport, instead of requiring that they obtain them through the Mexican department of labour, which is currently dysfunctional. That arrangement would facilitate the arrival of many Mexican workers. However, there has been a solid collaboration between the agricultural sector and the federal government, as well as Ms. Bibeau, Minister of Agriculture and Agri-Food.

You are saying that there is an array of programs. There are actually several types of interventions, but for the agrifood sector. For the agricultural sector, there are three major programs: crop insurance, which works well, AgriInvest, which rewards companies’ performance and is capped out at $10,000 per company per year, and the last program, AgriStability, which is the primary program that helps farmers deal with market price fluctuations and production cost fluctuations. That program should be enhanced and go back to what it was before the cuts we saw in 2013.

Senator Forest: Thank you very much.


Senator Richards: I’m going to follow up on Senator Marshall’s question to Mr. Lansbergen and thank all the witnesses.

I have a lot of questions but I can only ask one. I’m thinking that the lobster fishery in places like Cape Breton; New Brunswick, where I come from; and P.E.I. is really going to suffer this year. The price of bait is going to be higher. I don’t know what the price of canners or markets will be and where you will process or sell them. Because of COVID-19, everyone is social distancing and temporary workers aren’t being hired on the boats.

I’m wondering if Mr. Lansbergen can give me some overview of how devastating he thinks this will be to the future of the lobster fishery in the Maritimes. Does he have any kind of indication already or can he speculate on that for me?

Mr. Lansbergen: Thank you, Senator Richards, for your question. The lobster sector in Nova Scotia, New Brunswick and P.E.I. is experiencing quite a bit of disruption. In P.E.I., they’re having labour shortages of about 30%. In New Brunswick, because the temporary foreign workers are not allowed in New Brunswick, labour shortages are as high as 50%. That’s causing a lot of disruption between the harvesting side and the processing side.

We are a fragmented industry, so trying to coordinate how much gets harvested, how much can be processed all within a very short time frame and how much the market can handle is going to be very problematic this year. Everyone in the industry is trying to work through that. Lobster is a luxury commodity for our sector, so it is among the hardest hit in terms of our individual species and markets.

The duration of the impacts depends on when global markets open back up as well as domestically. We’re seeing some pockets of recovery in Asia, but it depends on how the virus peaks as economies open back up, so that could be just temporary.

Senator Harder: Thank you to the witnesses. This is an important piece of our understanding of key sectors. I’d like to follow up on Senator Forest’s question with Keith Currie, if I could, and ask him about the effect of the seasonal workers program on his members’ activities. As Senator Forest indicated, we are aware that the government is taking a number of steps to facilitate seasonal workers in handling the challenges that COVID-19 presents. I’d like to hear your sense of whether or not this response has met the needs of your clients.

I’d like to ask a follow-up question of Paul Lansbergen of the Fisheries Council specifically with respect to the export of lobsters to China. I read a report recently that said, I believe, the history was two to three flights per week out of the Halifax airport to China and that those flights were resuming. I wonder if you could confirm if they have resumed and at what level?

Mr. Currie: Thank you for the question, Senator Harder. I will echo to a certain extent what Mr. Groleau mentioned earlier. Just to put it into perspective for senators, typically in a normal year we get around 60,000 foreign workers into Canada. Even with those 60,000, we still have 15,000 to 16,000 jobs unfulfilled on the farm each year. That lays out the importance of the foreign labour sector coming into Canada to help us with production not only on the farm but on the processing side as well.

We were very pleased that the government allowed the exemption for foreign workers to come in. We had to jump through hurdles here in Canada and also with the countries they are coming from. We are starting to see a slowdown, as Marcel mentioned, because visa applications are not being processed quickly in those foreign countries. That is why we would like to see the federal government look at alternative methods to speed up or find an alternative way to process those visas to allow the workers to come in.

Our members were pleased to get access. As for the long-term outcome of the growing season, we have to wait and see. Certainly, a lot of the growers in the initial stages of planting in particular did get access to a lot of their labour; maybe not all. There is worry that, through the growing and into the harvest season, there will be a labour shortage because of the lack of workers coming in. A lot has to do with the visa-processing process in those other countries. We will have to keep an eye on that; we’re certainly looking for more.

The Chair: Thank you, Mr. Currie.

As to the other question posed by Senator Harder, can you provide the answer in writing, Mr. Lansbergen, because of our time frame? We want to permit the other senators to ask questions. We would appreciate that. That answer can be submitted in writing to the clerk of the committee, Ms. Fortin.

Senator Smith: Thank you to the witnesses. Mr. Currie, I want to discuss the concept of proportional support for Canadian agricultural production, especially with giving up 3 or 4% of our dairy business to the Americans and then, with the European deal, another 3% or 4%. Could you give us more feedback on what you are doing to lobby for proportional support? Much of the $252 million was planned in last year’s budget. Where are we in terms of our lobbying and getting our position clearly understood by the government, because it seems some of the lights aren’t on with some of the ministers.

Mr. Currie: Mr. Groleau covered support in the U.S. for their farmers. Certainly that’s a great indication of how they value their agriculture and agri-food production system. If you look at the $2.6 billion “ask” by CFA and its partners, that would be representative of proportional support compared to the U.S. However, that support was not just ad hoc cheques in the mailbox. There were various different programs that we had discussed in consultation with our national commodity organizations to find out what would suit their needs at that time. Certainly that request would probably be higher if we did that same assessment today.

What we are looking for from the government are those programs and monies, if necessary, especially in the meat and poultry sectors. Some are holding animals back, with extra costs for feed and potentially euthanasia. Some euthanasia has happened; there is a cost to that. There is no income coming in. There are losses. How do we minimize that impact so that we not only keep our heads above water as we go through this process, but as others have said, we use this tremendous opportunity for economic recovery through the agri-food system.

We are one of the few industries that can hit the ground running post-COVID to help the economy recover in Canada, but we need that stimulus of programs and monies to get us through this and get us going to the other side. We were disappointed in the amount of funding, especially, as you mentioned, senator, when it was redistributing money that had been announced for some other programs. All we want is a conversation to make sure we get what we need in agriculture to move forward and hit the ground running.


Senator Dagenais: My question is for Mr. Groleau. If we forget about the money associated with available assistance programs for farmers, I think that you talked about a deficit. Announcing programs is easy to do, but things often get complicated after that. I would like to hear your thoughts on the effectiveness of assistance programs and on how easy it is for farmers to access them, and especially to get a cheque.

Mr. Groleau: Thank you for your question, Senator Dagenais. It would have been very easy for the Canadian government to enhance existing programs in the current situation, instead of creating others. As Mr. Currie mentioned when he took the floor, had the government enhanced the AgriStability program, as we were calling for, 75% of the issues experienced by Canadian farmers would have been resolved.

For other sectors that are doubly affected, there could have been a direct intervention, but better targeted for those sectors. That is the proposal made by the Canadian Federation of Agriculture. In that sense, it was largely supported by the Union des producteurs agricoles. To get back to the United States, I would say that what distinguishes it from Canada is that the food industry is a matter of national security for Americans.

It is clear that this is not the case in Canada. For Canada, the food industry is an expenditure, while, for the United States, it is a matter of national security. Canada must adopt a true agricultural policy, which is currently lacking.

Senator Dagenais: With COVID-19 and all the agreements that have been signed, such as the CUSMA, will the impact be more negative for Canadian farmers?

Mr. Groleau: Thanks to the agreement signed with Europe, the new agreement signed with the United States and the agreement signed with trans-Pacific countries, the Canadian market is being opened and given access to other markets, but, in order to benefit from those agreements, the Canadian government’s support for agriculture must be comparable to and competitive with the interventions made by the United States and Europe. If those interventions are not competitive, Canada will not be able to benefit from those agreements.


Senator Galvez: Thank you, guests. My question is for the three of you. Perhaps Mr. Lansbergen can answer verbally and the other two can answer in written form.

The three of you have described substantial problems and very difficult situations that were prevailing before the beginning of the pandemic.

Economic measures for the recovery and to cope are directed first to keep the sector afloat, and secondly to provide an economic stimulus and to hopefully develop sustainability in your specific sector.

Can you tell me some of the recommendations in your specific sectors in order to solve both problems, the ones that were there before and the ones that were created by COVID-19? Mr. Lansbergen please, and then maybe the other two could answer in written form. Thank you.

Mr. Lansbergen: Thank you for the question. It’s a difficult thing to balance in wild capture fisheries what to harvest for the markets, what to process and how to balance that supply and demand. If we’re not harvesting because we don’t think the demand is there, then certainly the fish will stay in the ocean and perhaps that will benefit various fish stocks in subsequent years. That is a little different than our agriculture friends where they’re managing on land.

In terms of sustainability, Canada is a responsible nation with regard to fisheries management and ocean ecosystem. We’re not perfect, but we’re pretty good. DFO has publicized that 96% of our fish stocks are harvested within sustainable levels, so that’s pretty good. Coming out of this, it is really about the sustainability of the operators, not the resource. How are the inshore fishermen going to be sustained and thrive through this pandemic — the processors, the offshore — and how can we keep them all intertwined in the supply chain, as well as distribution to customers, wherever they might be?

The Chair: Thank you. For the other two panellists, we will provide you with the question from Senator Galvez and then you could send the answer in writing. We would appreciate that, as per her request.

Senator M. Deacon: Thank you all for being here. I appreciate that.

My question is for Mr. Currie. It concerns temporary foreign workers here in Canada. Like all of you, I was happy to see these workers would still be permitted to be in Canada to work on our farms. In fact, like most Canadians, I have come to realize how vital they are to our supply of food. However, it’s no secret that these workers are sometimes abused and taken advantage of by some in the industry. Complaints seem centred mainly on really decrepit accommodations and withheld pay, but there are also reports of physical abuse. Clearly, we have gained a new appreciation for the work they do and perhaps we have the momentum to see cases of abuse being a thing of the past. I know the CFA shares my concerns as well. What can we as parliamentarians do to achieve this end? Is CFA working towards a similar end as well?

Mr. Currie: Thank you for the question. I think there has been a lot of misunderstanding around the housing and employment of foreign workers.

Certainly, I don’t want to see any worker, whether domestic or foreign, in a situation of employment that’s not conducive to a good workplace. I think putting foreign workers solely into that category would be unfair because there are lots of good and bad employers.

With respect to TFWs and seasonal ag workers, first of all, the accommodations are inspected on multiple levels by the local bylaw officers and local public health units. There are provincial ministries of health and labour protocols put in place. Service Canada also does inspections of the facilities they are staying in as well, so there are lots of opportunities for protocols to be administered, and they are.

Ultimately, the better you look after a worker, the better they perform for you. A lot of these workers come back year after year, as do their families, in some cases second and third generation. While we do not like bad employers, to say it’s running rampant would be an unfair statement. Most of these employers look after the workers in the same way they would look after you or I, or the way we would look after them. We are always striving for our employers to provide better accommodation and transportation for our workers, but certainly we do not condone a bad employer. To broadly say they are not looked after well is an unfair statement. We’ll continue to work with all levels of government to make sure we enhance workplace safety for every employer, domestic or foreign.

The Chair: Thank you, Mr. Currie.

Senator Klyne: Welcome to our panel of guests. My question is for any one of our guests. If there are other answers that can come forward in writing, that’s greatly appreciated.

I’m thinking about food security and what COVID-19 might have put a spotlight on in that regard, and where we need to change the way we approach doing business when it comes to food security. It seems odd to be worried about food shortages in Canada. While I’m confident we’re not going to starve any time soon, we did see empty shelves and cold display cases, and will likely experience more short-term availability issues intermittently for specific food products.

The bigger is better model usually works, but when things go wrong, it seems to be quite cumbersome and difficult to turn around or respond quickly. The logistics of large suppliers or chains looking for food products from small suppliers must be a logistical nightmare, and I’m thinking specifically around securing protein specifically, but food products generally.

Has COVID-19 identified some areas where we need to pay attention going forward with regard to food security?

Mr. Currie: Thank you for the question, senator. Certainly when we look at our food security overall, most Canadians have never experienced an empty portion of the store or shelf. To your point, we will not run out of food, but our selection has changed and so has the price. Canadians who have taken the ability to buy an abundance of good, safe, affordable food for granted has changed. This is an opportunity for us to examine our system in Canada, what is typically seen as a robust food production system; how can we make it stronger?

We are blessed with a lot of natural capital in this country that allows us to produce a lot of food — much more food than we can consume — and we therefore have the opportunity to export that and create an economic opportunity.

We also have a moral obligation to feed the world as well because we have that abundance of ability to produce food. How we take a look at this post COVID-19 to see how we can enhance the system, make it better and stronger, doesn’t necessarily mean we have to get smaller.

To your point about smaller, one of the other areas we can look at is interprovincial barriers that don’t allow transportation or movement of products between provinces. Meat is a primary example where interprovincial barriers could stop meat from travelling. We did get a temporary exemption from CFIA a week and a half ago — which is very much appreciated — for meat to be able to move out of the province where it’s needed, but perhaps looking at removing those barriers full-time might be a better way to make sure we have free flow of products in between provincial boundaries as well.

The Chair: Thank you, Mr. Currie.


Mr. Groleau: Food safety is in fact food availability. So is food available? It is also access to food, and not all Canadians have access to food in equal measure. If food prices go up, an increasingly significant portion of Canadians will not have access to sufficient food. That is also food security, and it is also a matter of income.

The Chair: Thank you, Mr. Groleau. If you would like to add any further information to your answer, you can do so in writing through the clerk.


Senator Pate: Thank you to all the witnesses for your work and your appearance.

Organizations such as the Migrant Rights Network have raised concerns about an estimated half a million migrant workers who have long performed vital work here in Canada, many of whom have lost jobs as a result of COVID-19 as you have already discussed, but have been unable to access the Canadian Emergency Response Benefit due to a lack of a Social Insurance Number. As well, some are undocumented. Some have Social Insurance Numbers that have expired. Some have work visas that have expired. The delays, in addition to what you’ve raised, raise significant concerns in terms of the ability of migrant workers to assist the agricultural as well as the fisheries sector. How many workers do you know of who are in this position? What measures are you aware of that are being implemented in order to support them?


Mr. Groleau: No, not really, since we mostly hire temporary foreign workers in the agricultural sector, who are eligible for the medicare program and for other services provided to Canadians. Their status is regularized. So those people are not primarily employed in our sectors.


Mr. Currie: I would echo what Mr. Groleau was saying. We’re not familiar with that, no.

Senator Duncan: Thank you to the panel for your answers. I will be brief in order to give my colleagues an opportunity, and I would ask for a response in writing.

I would like to thank Senator Klyne for raising the issue of food security. I was particularly heartened to hear that food production is able to feed our country, and there was talk of exports. I would like to draw the attention of our panellists to the prior discussion the National Finance Committee had about the transport of goods across the country and the interprovincial barriers that have been referenced.

Please, when you’re providing your report about the situation in Canada, would you also look north and consider that food security is a near and dear issue, a very important issue, particularly in Canada’s Arctic, and access to those food resources is incredibly important.

I look forward to a fulsome report that considers the North and the issues of food production, food security, transport and interprovincial barriers. I’m looking forward to your response on that. Thank you.

The Chair: Witnesses, please provide your answers in writing as per the wish of Senator Duncan.


Senator Loffreda: My question is for Mr. Groleau. We received this morning a survey from the Canadian Federation of Independent Business, which indicates that only 69% of businesses in the agricultural sector have remained open and have continued operating at full capacity to this day. Is that the case in Quebec, as well? Do you see an issue for the recovery of that 31% of businesses that did not remain open? What can we do to help them recover?

Mr. Groleau: Thank you. I think that estimate should be verified. I don’t feel that 31% of farm businesses have been closed during this period.

Senator Loffreda: They did not close, but they did not operate at full capacity, which means that their production has dropped significantly.

Mr. Groleau: Okay, I understand. In a number of production sectors, with the closure of restaurants, hotels and certain institutions, demand for food has changed dramatically. Some businesses have lost 100% of their market, while others have lost 80% of it. For instance, a lot of veal is sold in restaurants and hotels, but less so in grocery stores. So dramatic changes have taken place. That will have an impact on those businesses’ profitability, even more so with Canadian business risk management programs not applying, despite the significant impact those businesses have experienced. So that is why the way to remedy this situation would be to make changes to Canadian risk management programs, and more specifically the AgriStability program.

Senator Gagné: I thank the witnesses for joining us today. I would like to talk about Canada’s food self-sufficiency, to follow up on the questions asked by senators Klyne and Duncan.

I think that the current health crisis has highlighted our dependence on imported food. What is the percentage of food self-sufficiency in Canada? Is the business model for various types of agriculture in Canada conducive to self-sufficiency? We know that it is important to support the development of production and processing, but are consumers prepared to pay more for those foods?

Mr. Groleau: I will give you the figures for Quebec. Quebec is at about 35% in terms of agricultural self-sufficiency. If we add the sector of processing and products imported into Canada and processed here for the Canadian market, we are at about 57%. So, yes, there would be a significant amount of work to be done to improve Canada’s food self-sufficiency and to decrease the country’s dependence on imported products.

As for consumers, they have responded in an extremely interesting way during the current crisis. They are provisioning themselves locally and consuming local products. I think we should encourage that consumer interest after the crisis.


The Chair: Following the question from Senator Gagné, could I ask Mr. Currie and Mr. Lansbergen to respond to that in writing to the clerk, please?

Senator Martin: Thank you to the presenters today. I believe I’m the only B.C. senator, so I’m moving you all the way to the West Coast. There are distinct challenges but also opportunities on the West Coast. I was curious to ask both Mr. Currie and Mr. Lansbergen about the regional challenges and differences.

In B.C., we haven’t been hit as hard with the COVID-19 pandemic. May I get assurances, as a B.C. senator, that with your organizations, the B.C. producers and industries will be able to get access to support? I know the government support has been far short of what you asked for, so I’m assuming there are far more subscribers or need versus what is available, but I was concerned mostly with some of our industries in B.C. and would like to get your response to my question on that.

Mr. Currie: Thank you for the question, senator. The Canadian Federation of Agriculture represents over 200,000 members from coast to coast to coast. To your point, there are regional differences in production and types of production, and the types of crops and/or livestock that are grown.

We don’t discriminate between those groups; we fight for everyone. We are pushing hard for our membership to make sure they have access to all the tools, in particular business risk‑management tools, available to help them through tough times like COVID. We are fighting for every one of them.

The Chair: Witnesses, thank you for sharing your recommendations and ideas. In the next few weeks, as we are preparing to table our report on the COVID-19 study as per the mandate of the Senate of Canada, please feel free to add additional information through the clerk of our committee, Ms. Fortin.

Senators, we now welcome the witnesses for our fourth panel representing the banking sector. First, from the Canadian Credit Union Association, we welcome Martha Durdin, President and Chief Executive Officer. She is accompanied by Michael Hatch, Vice-President, Government Relations.

We also welcome, from the Canadian Bankers Association, Neil Parmenter, President and Chief Executive Officer. He is accompanied by Darren Hannah, Vice-President of Finance, Risk and Prudential Policy.

Honourable senators, we will now listen to statements by Ms. Durdin first, then Mr. Parmenter for his statement and comments, and we will proceed immediately to questions.

Ms. Durdin, the floor is yours.

Martha Durdin, President and Chief Executive Officer, Canadian Credit Union Association: Good evening, senators. Thank you for the opportunity to speak with you today about helping Canadians during these times. CCUA is the national trade association for 236 credit unions and caisses populaires outside Quebec, and we provide deposit, loan and wealth management services to 5.8 million Canadians.

Our members have taken decisive action to stabilize our financial system and help Canadians during this crisis. They’ve moved rapidly, as the banks have, to deliver financial relief by reducing credit card and loan interest rates, implementing mortgage deferrals, and increasing tap limits to slow the spread of COVID-19. Our sector has been in constant contact with the federal government through this crisis, and, broadly speaking, we’ve been impressed by the speed with which federal officials have acted and their willingness to engage with stakeholders and shift course when necessary. We recognize these are extraordinary times and that the policy process was never designed to operate under this kind of stress, but the government, like all of us, has had no choice but to play the hand it’s dealt.

Early in the crisis, when it looked as though the $40,000 Canadian Emergency Business Account may be restricted only to the clients of the large banks and a select few large credit unions, our sector united in the urgent message that to leave 20% of small businesses out of this vital program was not acceptable. To their credit, senior financial officials, the minister’s office, BDC and EDC found a way to bring all credit unions and their small-business members into the program.

To date, CEBA has delivered billions of dollars of credit and grants to the first hardest hit by this pandemic. While the support has been well received and necessary, there have been challenges with the implementation.

The banks were first at the table with regard to rolling out this program, putting credit unions and their business members at a disadvantage. It should have been the assumption from day one that all credit unions would participate. Instead, we were forced to lobby aggressively to get our members to the table, and significant delays resulted. Furthermore, the smallest companies remain largely excluded from the program and cannot meet the new threshold of demonstrating $40,000 in non-deferrable expenses for 2020. More work is needed to get financing to everyone that needs to survive this crisis. That said, the CEBA product is an effective one for those who qualify. If further support is needed in the coming months, the CEBA model would be an effective vehicle through which to deliver it.

The other component of BCAP — the co-lending program — of relevance to our members has not been as popular for reasons we’re still trying to understand. The co-lend is aimed at larger firms with loan products in the millions of dollars compared to the CEBA maximum of $40,000. It also lacks the grant component of CEBA, and we’ve heard feedback from members that reporting requirements are onerous. Clients are not yet ready to take on more debt at this point.

One emerging issue we would like to alert the committee members to is the ever-growing mandate and portfolio of Farm Credit Canada. FCC is unique among Crown corporations in that it is not subject to a regular parliamentary mandate review, and it has not had one in nearly 20 years. We brought this growing problem to the government’s attention prior to the crisis. It’s more urgent now with a further $5 billion in products now in the market on FCC’s books. The degree to which it has grown and continues to grow poses a serious competitive threat to other players in the financial sector.

Going forward, the government has many things to consider. None of us know how long this pandemic or the lockdown will last, but it can’t last forever. Already, pressure is building for a return to something more closely resembling normal, though normal won’t be what it was for a long time. The government should provide clear guidance on its exit strategy from the current extraordinary support measures and not just turn off the taps all at once and without advance notice. We know these programs cannot and should not last forever. The government has to be clear and consistent in its communication and intention for an eventual phase-out.

Speaking of communication, we would also like to see more and better communication between OSFI — the federal regulator for banks — and its provincial counterparts that regulate credit unions. We are provincially regulated, but OSFI sets the tone and provides leadership in all financial sector regulation in Canada. It is better resourced than its provincial counterparts. Increased communication between regulators and, where possible, coordination, would increase stability and predictability in the financial system.

As firms emerge from this crisis and begin the process of reopening, they will continue to need support to operate in the new normal. Our message throughout the crisis has been consistent and will remain so: Any financial relief measures delivered through financial institutions must also include credit unions and their hundreds of thousands of small-business members. This may seem self-evident, but recent history tells us it is not.

Thank you. We are happy to take any questions.

The Chair: Thank you. Now we will hear the presentation from Mr. Parmenter. The floor is yours.

Neil Parmenter, President and Chief Executive Officer, Canadian Bankers Association: I’m joined today by Darren Hannah, CBA’s Vice-President of Finance, Risk and Prudential Policy. I’m pleased to have this opportunity to appear before the committee.

Canada’s banking sector has worked in lockstep with the federal government, the Bank of Canada and regulators to implement a series of relief initiatives for the millions of Canadians whose lives have been suddenly altered by COVID-19.

For personal banking customers, Canada’s banks have been offering relief on all forms of lending, mortgages, lines of credit, personal loans and credit cards. As of May 27, 13 CBA member banks have provided help through mortgage deferrals or skip a payment to more than 721,000 Canadians. Banks have also taken decisive action to help an additional 413,000 Canadians manage credit card payments, with multiple banks announcing various programs to defer payments for customers along with heavily discounted or low fixed interest rates. Our members have worked to ensure Canadians have access to term loans, lines of credit and other products that carry lower interest rates. In addition, banks have taken steps to ensure credit scores are unaffected by deferrals and skipped payments and many standard fees for a range of services are being waived.

Canada’s banks are proud to serve more than 3 million small- and medium-sized enterprises, having authorized more than $247 billion in credit to the sector in 2019. Since this crisis began, authorizations for business loans and credit lines have increased by $61.5 billion. In response to the current strains on businesses, member banks have been working with clients to determine best options to suit their specific circumstances. This can involve extended operating lines of credit, but banks have also introduced a range of flexible measures for existing loans including deferrals and term extensions. More than 74,000 deferrals have been extended to small- and medium-sized enterprises worth a total value of $2.5 billion.

Banks have also worked with the federal government to implement and administer the Canada Emergency Business Account, which provides qualifying business customers with access to $40,000 line of credit and 0% interest. As of May 22, more than 621,000 CEBA loans have been processed. As you would have seen over the last few days as the six largest banks reported on their second-quarter results, provisions for credit loss have increased dramatically, providing an indication of the impact that the pandemic has had on the economy and on bank operations. That said, banks hold significantly more capital entering the COVID-19 crisis than they did entering the global financial crisis. From 2009 to 2019, in total, capital banks in Canada more than doubled from $163 billion to $336 billion.

More than 275,000 Canadians are employed in banks across the country and they do an outstanding job helping customers by staffing branches, answering phone lines at contact centres and maintaining critical back-office infrastructure that keeps Canada’s payments network running. Banks worked closely with the government to offer wider access to online enrolment for direct deposit from the Canada Revenue Agency, which ensures more Canadians are able to receive their CERB benefits quickly and securely. As of May 27, almost 2.4 million Canadians had newly enrolled to receive relief payments via direct deposit.

Hundreds of bank employees have been redeployed to work directly with customers experiencing hardship to tailor customized plans to help them manage their finances. Our members have introduced special programs to meet the needs of health care workers, ensure seniors have a priority line in contact centre access and the vulnerable populations continue to be served. Canada’s stable, well-regulated banks can provide this high level of engagement and support because of their strength.

In 2019, banks and their subsidiaries paid $30 billion in salaries and benefits, brought in $21.3 billion in dividend income to millions of Canadians, pension funds and charitable endowments, and paid $12.7 billion in taxes to all levels of government in Canada. For hundreds of years, Canada’s banks have helped Canadians through many challenging times, working in partnership with governments of all stripes and building global recognition for our financial strength, stability and resilience. Thank you, Mr. Chair. I look forward to your questions.

The Chair: To the two witnesses, thank you very much for accepting our invitation and for answering our questions. Honourable senators, we will proceed immediately to questions.

Senator Marshall: Thank you both for your excellent presentations. Mr. Parmenter, I hope you’ll forgive me, but I’m going to ask questions of the credit union, because I know more about the banks than the credit unions; I only have three minutes.

For the credit unions — and you both alluded to it in your opening remarks — Canadians are deferring payments on their mortgages and loans, and those deferrals will eventually have to end. We’re now looking at the high indebtedness of Canadians, high unemployment rate, increased insolvencies and other challenges. I’d like to know if you can give me an overview of the financial impact of COVID-19 on credit unions. What’s the financial exposure? Is there an increased provision for losses, loans and mortgages, like the banks are doing? Are the mortgages insured by CMHC? Are the loans guaranteed by third parties? Are the credit unions accessing liquidity programs offered by the Bank of Canada?

Ms. Durdin: Thank you. There are a number of questions there. Let me try and answer a few of them.

Credit unions, by their nature, are community banks. They provide community banking services. Because of that, they’re very involved with the communities and they make a judgment based on the health and the well-being of the economy of those communities. So there’s quite a difference across the country in terms of their exposure, depending on where they are. The West Coast, where there’s a lot of tourism, very high exposure. It’s slightly different in different parts of the country.

To answer your question about their exposure, you will see the same kind of exposure that you see with the banks, although credit unions, again by their nature, are much more conservative lenders than banks tend to be. When you look at our loan defaults, they’re always well below that of Canada’s banks. Very conservative lenders. So our exposures would be slightly less.

In terms of liquidity, what we see now at the beginning of this pandemic is that liquidity is quite high and there are no issues with liquidity in the sector.

You asked about whether we access the Bank of Canada. Credit unions are working with the Bank of Canada to secure the STLF for credit unions, and there is an issue with delivering STLF because you have to be a member of Payments Canada by regulation. Credit unions are members of Payments Canada through their centrals, and the centrals have to access it first. They’re working through that process in order to deliver it to credit unions later on.

The Chair: Ms. Durdin, I’ll have to —

Senator Marshall: That’s a good start. Thank you very much.

Ms. Durdin: I am happy to follow up.

Senator Marshall: Please do. Thank you.

The Chair: Ms. Durdin, could you please send answers to the rest of the questions in writing through the clerk? We would appreciate that. Thank you very much.


Senator Forest: I thank the witnesses for their presentations, which are very relevant and important in this COVID-19 crisis context. My question is for Mr. Parmenter, and it has to do with consumers and the postponement of mortgage payments. As a report on CBC News indicated, when mortgage payments are postponed, interest gets added to the amount owing. All that leads to compounded interest and a higher total cost of borrowing.

How much in additional interest do you think an average client should pay because of the postponement of their mortgage payments? What percentage of requests for postponed mortgage payments are approved? I would also like to know what the main reasons for request denials are?


Mr. Parmenter: Thanks for the question. With regard to mortgage deferrals, they’re treated differently by different banks. Some are not recapitalizing that as part of the overall mortgage; others are. While the six-month term is a maximum, many of the customers have only requested a single month deferral. They did that early on. They would have the option of either extending the term of their mortgage by that month or at most six months, or just increasing the payment. It’s difficult to calculate with a high degree of precision because there are so many variables for what the payments would be, but it would be in the order of magnitude of around $45 a payment depending on how long you defer the payments and at what interest rate. That would be an upper-end estimate.

To your question on approvals, it’s well in excess of over 90% that would be accepted in deferrals. The reasons for denial would usually have to do with a customer, for instance, being in arrears prior to COVID-19 or some other extenuating circumstances that would have predated the arrival of the relief program. Or it could have something to do with other funds they have available for the near term, perhaps in a savings account or something that would offer them some flexibility.

Senator Richards: Thank you to the witnesses. There will be insolvencies with these deferrals, Mr. Parmenter, won’t there? After COVID-19 takes effect on incomes, salaries and just the cost of living, there will be insolvencies because of it. Whether you defer or not, you want it back in the end, and a lot of households won’t be able to do that from coast to coast to coast. Corporate insolvencies will also come along because of this. I’m wondering if you have a program to deal with that.

On another issue, are there dividends being paid to the shareholders out of this money given by the government, the $240 million? Maybe you could enlighten us on that too.

Mr. Parmenter: It would be reasonable to assume there will be some increase in insolvencies. With that said, particularly on residential mortgages, Canadians are very good at repaying their mortgages, even in the face of hardship. If you look at mortgages in arrears, which means people would be more than three months behind on their mortgage payments, at historically high levels for Canada, we’d be at about 0.64%, so just over half of 1% of Canadians would be behind in their mortgages. To put that in context, in good economic times, Americans would be well over 1% as a normal run rate. That 0.65% is a high that Canadians hit in the early 1990s recession, so that just contextualizes it a bit for you.

You lost me on the reference to the $200 million from the government. If you’re talking about government programs like CEBA and those sorts of things, that’s a straight flow-through from the government to the customer. There’s no revenue stream there, if you will, from the banks.

Senator Harder: Thank you very much, panellists. I’d like to follow up a little bit with Martha Durdin with respect to the CEBA and the smaller end of your membership for which you had to fight to gain access to this program. I’d like to know about the performance of the support that they have been able to provide small businesses in their membership.

Has it been a roughly proportional percentage of small businesses across the spectrum of your membership, or is it a disproportionate application of the CEBA to the threshold that you were able to gain? In other words, I’m trying to figure out the rationale for the Department of Finance in the first instance. Have you proven them wrong in the delivery of the program as it has been extended?

Ms. Durdin: In trying to answer your question, let me just say that the Department of Finance was rolling out this CEBA program through EDC. EDC, being the Export Development Corporation, doesn’t have a lot of experience with credit unions because they don’t serve the export market very heavily. Therefore, they really didn’t understand the nature of credit unions and the fact that credit unions together across Canada hold 20% market share in small business. In rural places, like in the Prairies and some instances in Manitoba, for example, it’s 50% market share.

So I think there was a view that if they spoke to the big six banks and brought them in, they would support most Canadians, and that’s true. They do have the largest market share by far; credit unions are only 8% market share in Canada, but disproportionately in the small business market.

It was just a matter of trying to get it rolled out. At some point it became too difficult to deal with so many credit unions and they backed off, at which point we had to lobby quite heavily to represent the interests of small businesses, particularly in rural Canada, to make sure we were part of the program.

I don’t think it was predetermined. It was a question of moving quickly, not understanding the market, and just thinking that they could roll it out to the banks and they had everybody covered.

Senator Harder: Did it then allow the appropriate market share of your smaller-end credit unions to support their respective small businesses?

Ms. Durdin: Yes. Once it was rolled out, credit unions had a very strong pickup from our small business customers.

Senator Smith: Thank you, witnesses. I have a question for Mr. Parmenter. Has the banking sector completed its own modelling with respect to mortgage arrears? At the end of the day, who is ultimately liable?

Second, what type of planning has the banking industry or group done about a potential second wave? When we had the governor of the Bank of Canada in, we talked about the different programs. But if there’s a second wave, which could substantially be worse than where we are today, if you could give me background on that, it would be helpful.

Mr. Parmenter: Thanks for the question, senator. You answered the first question on mortgage books; each bank will make its own assessment about its overall comfort level with its mortgage book. You will see over time some banks grow a mortgage book when in customer acquisitions and then other times they will tighten and you’ll see them shrink a mortgage book. They’re making their own risk-based assessments.

About 66% of mortgages in Canada are uninsured, meaning they don’t have coverage from mortgage insurance organizations like CMHC. This means that in the event of a default, that loss, if uninsured, would be suffered by the bank unless it has some other form of hedging.

In answer to your question with regard to a second wave, when I mentioned provisions for credit loss, overall provisions for credit loss have grown from about $2.9 billion to close to $11 billion from this last quarter. As a result, banks sit down with their economists, with their lenders and other business leaders and take a hard look at their loan books, and they’re trying to forecast what the economy might be like in 3, 6 or 12 months. As you can appreciate, it is made much more difficult in the face of an unprecedented global pandemic, but that’s what’s really driving those increased reserves to cover loans that could possibly go into default. You’ve seen, in some cases among large banks, their provisions for credit loss have grown fivefold in the last quarter.


Senator Dagenais: My question is for Mr. Parmenter. I would like to come back to the residential real estate market. Do you think a significant drop will occur in the number of households that will be able to qualify for a mortgage loan with banks? To what extent will the government’s current programs help avoid repossessions of personal residences?


Mr. Parmenter: As I mentioned earlier, senator, historically the mortgage-in-arrears numbers for Canadians are fractions of 1%, so they’re incredibly low.

What drives housing affordability and people qualifying for mortgages are income and employment. If you look across the country, small differences in mortgage-in-arrears rates are largely tied directly to employment rates in those different provinces. For instance, Ontario would traditionally have among the lowest mortgage-in-arrears rates relative to some of the other provinces. The reason is that despite markets like Toronto where you have incredibly high housing prices relative to other parts of the country, the mortgage-in-arrears numbers are lower because the employment levels are often higher there than in other jurisdictions.


Senator Dagenais: Given the current pandemic, what will be the value of cash for consumers? Will consumers use it less? It cannot be used at all currently.


Mr. Parmenter: The question is the use of cash. Certainly, we think there will always be a place for cash. That’s what the Bank of Canada would say as well, for all kinds of reasons, for people from different communities. There is no doubt that during this pandemic, we have seen a pretty pronounced decrease in the use of cash. Paradoxically, in the earliest days of this crisis, there were fears that there would be runs on cash, that people would be running to ATMs and looking for cash. That did not materialize. We have certainly seen a continued use of credit and debit throughout the pandemic. To answer your question, I think there will always be a place for currency and hard cash.

Senator Galvez: I am reading a question from Senator Marilou McPhedran that is directed to Mr. Parmenter: Since the federal financial institution set out rules for the big six banks, including disclosure requirements, is the Finance Canada website correct in stating that the six largest banks’ share of all assets in the banking sub-sector has increased since the 2008 financial crisis and they now represent 93% of all banking assets?

Is it correct that the big six banks paid their CEOs a total of $75 million in 2018 in salaries and bonuses?

Acknowledging the massive gap between the wealth of the big six banks, the CEOs and ordinary Canadians, is it correct that the predictions indicate once again that the big six will emerge from the COVID-19 crisis with even bigger profits? For my education, can you mention the names of the big six banks?

Mr. Parmenter: Senator, there are a number of questions there. The big six banks would be TD Bank, RBC, Scotiabank, CIBC, Bank of Montreal and National Bank.

In answer to the question on CEO salaries, I don’t have that number at hand as to what they are. In terms of the overall assets, it varies by product. When you say asset, I do not know what product category you are talking about. I certainly don’t have that number at hand.

In answer to your question on profitability, senator, if you look at Q2 earnings that came out only last week, that was for the quarter that ended April 30. So depending on your perspective, if you think about four to six weeks of overall impact of COVID-19 in that quarter’s earnings, profits on average were down well over 50%. If you start to look ahead to quarters of the entire COVID-19 impact, like the third quarter we are in now, it would be very difficult to see increases in profits from current levels given that after only six weeks of impact, profits are down over 50%.

Senator M. Deacon: Thank you to the Canadian Credit Union Association and Canadian Bankers Association for being here this evening.

My question is for the Canadian Bankers Association and it concerns the health of our banking sector at the present time as we endure and recover from this pandemic. During the Great Recession, Canadian banks were held up as the gold standard at the time and weathered the storm reasonably well. I’m curious how we might fare this time. Even before we entered this chapter, Canadian households were carrying historically high levels of debt. No one can predict, but it’s our hope that we’ll be on our way to recovery by the end of 2020. That, of course, is by no means a guarantee.

How confident are you that our banks are truly prepared for a possible prolonged pandemic?

Mr. Parmenter: Thank you for the question, senator. The Canadian banks truly are among the strongest in the world if not the strongest in the world. There are two big reasons for that. Canadian banks, from a risk management perspective, are very conservative. Hand in hand with that is the oversight and regulation on the prudential side of the Canadian banking industry is among the strongest in the world. If you look at regulators like the Office of the Superintendent of Financial Institutions, they would be considered world class among their peer set globally. That is the framework in which Canadian banks operate with.

With that said, both from an individual bank risk management perspective and from a prudential oversight perspective, banks stress test their loan books and their operations to extremes. I think we can all agree that this is among the most extreme any of us have ever seen. With that said, these stress tests are onerous and performed regularly, including throughout this crisis. There is great confidence that not only will the banking sector continue its resilience and strength but overall, in time, the Canadian economy will do so as well.

Senator M. Deacon: Thank you.

Senator Klyne: My question is for either panel organization. I expect it might come in the form of writing from one or both.

Paul Martin, one of our revered business journalists in Saskatchewan, sparked something for me in his latest post.

One of the by-products of the COVID pandemic is that consumers are borrowing less. That shouldn’t be a surprise, given the shutdown of much of the retail, non-essential services and hospitality industries. Paul Martin shared a recent post from economists at Scotiabank, which zeroed in on this topic. It showed that the growth in consumer or household debt levels had slowed although, interestingly, our appetite for mortgages has not declined. What has changed is borrowing for consumption. Part of it is that lenders and credit cards are offering more generous terms or have deferral programs. I have to assume that homebuyers standing on the sidelines have decided that a buyers’ market is as good a time as any to get in.

Are farmers taking advantage of the federal government easing lending restrictions and encouraging lenders to support farmers? I recognize there are many issues in the farming sector, particularly producers of livestock, but lenders might be offering attractive terms and farmers may be inclined to take advantage of this, knowing demand for food is high and will continue to be there. Despite all the issues confronted by farmers, are they taking advantage of this environment to pick up on some new inventory?

Mr. Parmenter: To answer your question, I sadly don’t have a lot of colour on agricultural use of those products. I will check with my colleague Darren Hannah, who I know does some work in the ag sector, to see if he has any specific colour on that.

Darren Hannah, Vice-President of Finance, Risk and Prudential Policy, Canadian Bankers Association: I don’t have specific data with respect to that, other than to generally say that banks work closely with their agricultural clients regularly. It’s a very significant sector for us, one with a long history with the industry and one where banks work closely with their clients to realize the opportunities that present them.

Senator Pate: Thank you to our witnesses. My question is primarily for the Canadian Bankers Association, but if the Canadian Credit Union Association also has input, I would be very happy to hear that as well.

The Canadian Bankers Association and others have certainly participated in assisting the government in processing CERB payments, the emergency benefit payments. And last week, the association published information about Canada payday loans and the extent to which they’re being used. I’m wondering if you have data on who is not benefiting and still falling through the cracks, in terms of access to the CERB, as well as who is primarily using payday loans.

If you have that demographic information, if you could also comment on whether or not there are similarities in terms of those two groups. If you don’t have it available right now and you could provide it in writing, that would be much appreciated. Thank you.

Mr. Parmenter: I don’t have statistics on CERB. The banks’ only role in CERB was enabling customers that wanted to use their online banking services to access CERB through direct deposit. The CRA would have the overall CERB eligibility data because the banks aren’t, in effect, qualifying customers for CERB. All the qualifications are established by the CRA.

Senator Pate: In terms of the demographics of payday loans, do you have those?

Mr. Parmenter: I don’t have those numbers. There is a payday loan association. They would manage those statistics. I certainly have not seen them.

The Chair: Thank you. Before we go to the next senator, Ms. Durdin, do you want to answer Senator Pate’s question, or do you have information you would like to share?

Ms. Durdin: I don’t have statistical information, but in response to your question about who is being left behind, the feedback we’re getting from our members is that the new CERB 3.0, if you want to call it that, which allows individuals up to $40,000 worth of expenses, still misses the very small self‑employed individual business owners. Credit unions tend to be at the smaller end of the market and serve those members, and their view is that it still doesn’t quite hit the mark for that very, very small end of business owners.

The Chair: Thank you.

Senator Duncan: Thank you to our panellists for being present with us today. I appreciate your time and presentations.

I would note for Ms. Durdin that to the best of my knowledge, credit unions are not operating in the three northern territories.

Last year, I had the privilege of serving on the Standing Senate Committee on Banking, Trade and Commerce, which produced Open Banking: What it Means for You, a report in June 2019. In that report, the CRTC expressed concern about the growing effect of the digital divide in Canada. I noted on May 16, I believe it was, there was a full-page ad in The Globe and Mail on behalf of the big six banks, entitled Committed to Canadians: Here is How. It said “we’ve also been assisting our clients with digital channels to bank from home for more convenience and to keep them safe.”

My question is addressing the access of vulnerable and rural Canadians, in particular. Would you please explain the steps banks are taking to assist Canadians in rural Canada without necessarily having access to digital or without the capability to access digital channels and banking.

Again, with the vulnerable sector, what steps are the banks taking to reach out to those Canadians? If you would prefer to provide your answer in writing in order to allow time for Senator Loffreda, that would be fine. I will leave that to the direction of the chair. Thank you.

Mr. Parmenter: I can answer very quickly. One of the first things the banks did in rural communities is — and this was an opportunity through the Canadian Bankers Association — in communities where there are perhaps only two or three branches and at a time when there was a call, region by region, to close down branches because of physical distancing and lockdown concerns, banks collaborated and cooperated to ensure there was no scenario in which the only two or only three banks in a town closed.

I mentioned in my remarks on vulnerable people, particularly seniors and others, you’ve seen banks do a variety of things including having greeters in branches to ensure a senior wouldn’t need to line up at their local branch, to ensure they could come in and out quickly, similar to what you’ve seen at grocery stores.

To your question on digital, though, there is a challenge where there is a lack of high speed, unfortunately. It is something that our members struggle with as well.

The Chair: Thank you. Ms. Durdin, do you have any comments on that question?

Ms. Durdin: It is a similar process with credit unions, but I would say that there are over 350 communities in rural Canada where credit unions are the only bricks and mortar. There are no banks. There are no branches other than credit unions. In most instances, although some reduced their footprint and hours, in those rural communities the vast majority have kept their branches open and have done so in the same way; they have greeters at the door to make sure that people are safe, that they get in. The bricks and mortar access is there. We still struggle in areas where high-speed internet is not readily available.

The Chair: Thank you.

Senator Loffreda: Thank you to our panel for being with us this evening. My question is for Mr. Parmenter. You did mention that the provision for credit losses has gone from $2.9 billion to $11 billion. I assume that a portion of that $11 billion is still on performing loans at the major banks and it’s not all on non-performing loans at this point in time.

I’m curious to know what percentage of those provisions are on existing performing loans and what the Bank of Canada can do, what can we do; the Bank of Canada probably did all it could do but we need fiscal policies at this point. What fiscal policies can we implement to help those performing loans stay performing rather than becoming provision for credit losses? That’s one, because, as I said, it’s important. How can we help?

Two, my concern is not on the mortgages that are currently deferred. The last thing that Canadians stop paying is their mortgages, so I’m not concerned about them paying or wanting to pay those mortgages. My concern is on the renewals. When the mortgages are set to be renewed after the pandemic, the CMHC has predicted that house prices could fall as much as 18%. It’s a prediction and a forecast, and as a banker I’ve never seen bad predictions. They are all great forecasts. But we all know what could happen in the future.

I am concerned. Will the banks look at the values of the homes once they are being renewed in the future and say, “You no longer qualify for the initial amount you had on your initial mortgage”? And then there is a problem, there is an issue. That is my main concern. How flexible will the banks be? What can we do to grandfather those values into the renewals, especially in the cities with healthy increases such as Vancouver, Toronto and Montreal? Those are my questions. Hopefully you can give us a quick answer or get back to us in writing. I would be very concerned with some of those issues.

Mr. Parmenter: Thanks for the question. There was a lot of ground covered there. What has been helpful from groups like OSFI is to allow for mortgage deferrals to be treated as performing loans. I think that is more the concern with banks. In offering some of these deferrals in hardship, will that put them offside with the regulators? There is great collaboration and understanding, and I think that continues to be monitored.

On the real estate market —

Senator Loffreda: There has to be some performing loans in that $11 billion. I don’t think they are all non-performing at this point and time. Maybe you don’t have that.

Mr. Parmenter: I don’t have the number, but this is again a product of the conservatism that comes in. This is economic forecasting on the fly with a number of factors, so by no means could you come anywhere close to that total being non‑performing loans.

On the question of real estate, I think we’ve seen those numbers from CMHC. If you look at what some of the banks have reported, there is a range, but there is speculation more in the single-digit territory. In terms of overall impact on house prices, it’s more like 5% or 7% among the big six in terms of their forecasting.

It’s typical to look at the future and say, “What will happen?” But I can say the banks have demonstrated a lot of understanding, flexibility and willingness to work with customers. I would expect that would continue as we enter the next phase of this crisis.

Senator Loffreda: I’m happy to hear that. We have to keep the banks as part of the solution. As you said, we do have the strongest banking system in the world, and I hope they work with our businesses and Canadians to keep our economy viable. Thank you.

Senator Martin: Thank you to our witnesses in this final panel. It has been a long day, hasn’t it?

My question is for Ms. Durdin. You talk about the rural communities. You have 50% of the market share. I’m wondering about ethnic communities where — sometimes because of language and the services that are required in an ethnic language — it may actually be 80% to almost 100% of the market share for credit unions. You were very gracious when you said that the Department of Finance chose EDC not understanding the market. That’s a generous explanation. Why would they overlook this very important banking provider — credit unions — and make such a mistake? The delays that took place — and I can only imagine the challenges that you had as a national association in trying to help the credit unions across the country.

Ms. Durdin: There are six big banks with between 80% and 93% market share. Credit unions have very small market share, and credit unions tend not to be in the market in Ottawa. In Ontario, the market share is a little bit lower, where a lot of people who work in the financial sector and make the regulations live and work. It’s a bit of a challenge. We do work hard to make sure that we are at the table and those who are making policy decisions understand that we are really the only alternative to banks from a competitive point of view, small as we are, but we do play an important role.

We aren’t in the export business primarily. EDC was managing the process. It was a learning curve for them. They have really come along and we’re working with them collaboratively now.

Senator Martin: Thank you for the work you have done to champion your clients that use the credit union. This was a learning experience for the government as well. I cannot believe how many small businesses would have had to suffer and wait because they do their work with credit unions. Thank you for the work you’re doing.

The Chair: Thank you to the witnesses for sharing your ideas and your recommendations. You’ve been very informative and instructive as we look at our study on COVID-19. If you feel that you want to add something in the next few weeks, please do so through the clerk of the committee.

Honourable senators, we are scheduled for our next meeting on Tuesday, June 9, at 2:30 p.m. EST. Before I declare the meeting adjourned, I would like to ask Senators Forest and Richards to stay on for the steering committee meeting that will be short. It will be in preparation for our next meeting.

Honourable senators, staff and witnesses, thank you very much for a job well done.

(The committee continued in camera.)