Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 20 - Evidence, November 18, 1998

OTTAWA, Wednesday, November 18, 1998

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 3:40 p.m. to consider the dimensions of social cohesion in Canada in the context of globalization and other economic and structural forces that influence trust and reciprocity among Canadians.

Senator Lowell Murray (Chairman) in the Chair.


The Chairman: Colleagues, this is our tenth meeting in pursuit of our mandate to study the impact of globalization and technology on social cohesion in Canada.

Very few people are as qualified as today's witness to discuss Canada's place in the international economy and the impact of international economic developments on Canada.

When Mr. Derek Burney was in the Public Service of Canada, he was the Canadian Ambassador to South Korea. He was also a deputy minister in the Department of External Affairs, as it was then known. He acted as the Prime Minister's personal representative in preparation for the G-7 summit in Houston in 1990, in London in 1991, and in Munich in 1992.

He was directly involved in the negotiation of the Canada-U.S. Free Trade Agreement. He was Chief of Staff to the Prime Minister of Canada from March 1987 to January 1989. He then ended a distinguished public service career as Canadian Ambassador to the United States.

He is now the Chairman and Chief Executive Officer of Bell Canada International Limited, which operates on a global scale.

Owing to his experience in both the private and public sectors, he is almost uniquely qualified to help us with our present study.

He has received various awards. In February 1992, he was awarded the Public Service of Canada's Outstanding Achievement Award. In July 1993, he was named an Officer of the Order of Canada. He has honorary doctor of laws degrees from Lakehead University, Queen's, and Wilfrid Laurier University. He earned degrees at Queen's; an honours B.A., and an M.A. in political science.

Mr. Derek Burney, Chairman and Chief Executive Officer, Bell Canada International Inc.: I am very pleased to join your deliberations on the challenge of globalization. My views are purely personal, but they do reflect my experience in both the public and private sectors of Canada over the past 35 years.

Bell Canada International is a publicly traded subsidiary of BCE, Canada's largest telecommunications group. We are the foreign investment arm of BCE. We build, own, and operate telecommunications service providers, which are primarily mobile wireless companies or cellular companies, in key emerging markets around the world.

We are currently involved with 10 operating companies in seven countries. In Latin America, we are in Columbia, Brazil, and Mexico. In Asia, we are in China, Taiwan, Korea and India.

In just four years, we have developed operations that now serve over 2.2 million subscribers. We are operating in licensed territories that contain a combined population of 330 million people.

Globalization is an overused and much abused term these days. It is heralded in some quarters as the wave of a more promising future. It is denounced in others as the cause of instability and social upheaval.

We live in a world that seems to be on fast-forward. The pace and scope of change is unprecedented. Information and financial flows literally move at the speed of light. Technological invocations in telecommunications and computers are transforming methods of business, as well as the nature of business itself.

The source of wealth is increasingly changing from natural resources to human resources, from tangible property to intellectual property, and from hardware to software. The issue is not whether we can avoid or shelter ourselves from the impact of these changes, but whether we can continue to turn change to our advantage.

I say "continue" because, to date, Canada has been a major beneficiary of globalization. We are positioned as well as anyone to meet the challenges ahead.

We start with some very definite pluses. We are one of the most affluent societies in the history of mankind -- a democratic civil society operating under the rule of law, with a relatively open economy dependent on foreign trade and capital, and which now has preferred access to the dynamic North American market.

Canada has a track record of success in adapting to change with leading technologies of our own. Our population is relatively well-educated, and a growing percentage of our work force -- the kids of the digital age -- is very capable of working in the new economy.

We do have some serious handicaps, however. We are a high-cost country in an increasingly competitive and cost-conscious world. Our citizens are relatively and absolutely overtaxed, over-governed, and still very much in hock.

Our economy is not making much headway in the battle to increase productivity, which is the essential element of rising living standards. Instead, we have watched our currency soften, masking the tougher task of improving productivity.

We still earn much of our national income from the sale of natural resources. This is another reason our currency is at a 140 year low compared to the American dollar. We also know that far too many of our best and brightest are seeking opportunities elsewhere, and that they are taking the substantial investments made by Canadians with them.

We do not seem to understand that our affluent past is not a prologue, and that the quality of life we have enjoyed can no longer be taken for granted. There are constructive things that we can do internationally and domestically to improve our prospects, and there is a genuine role for government. It will require equal measures of focus, courage and leadership.

First, we need to defend and assert our national interest in global institutions, especially the World Trade Organization, the IMF, the World Bank and the United Nations. Not simply through participation, which is a Canadian strength, but with commitments that help establish order through better rules, and through effective dispute settlement mechanisms governing the exchange of goods and services.

There is the prospect of a new round of global trade negotiations. That is a process in which Canadian interests need to be strengthened by Canadian ideas, as well as by Canadian commitments. The economic turmoil sweeping through emerging markets in recent months clearly signals a need for the reform and renovation of multilateral financial institutions, as well as for higher standards for banks. It also raises tough questions about the viability of national currencies in the longer term in an increasingly global economy.

Second, in my view, if we wish to play a constructive and effective role in global affairs, we should use our position of privilege and trust with the United States -- both to improve and strengthen our vital economic ties, and to help influence the conduct of American foreign policy. Whether we like it or not, our relationship with the United States conditions the tone and the scope of our influence on many global issues.

Third, we need coordinated domestic policies from our various governments that support clear objectives and equally clear priorities, and which give us credibility in advancing proposals on the global stage.

I have alluded to the need for action on taxation and debt. We still talk too much and do too little to remove interprovincial barriers to trade and commerce in Canada, even as we espouse ever-freer international trade. If we can negotiate free trade successfully with the United States and Mexico, why can we not aspire to a genuine common market within Canada? If we believe there is a case for better international regulation of capital flows, why can we not contemplate a national securities regulator for Canada? Those are two elements of economic cohesion. Closer to home, I would suggest that governments need to pay more attention to the most basic building blocks of our society; education, training and health.

Health and education used to be sources of pride for all Canadians. I am not sure that is the case today. I sometimes think our governments spend too much time haggling over who does what, and not enough time on the "what".

I recently read some very serious questions posed by leading educators at our largest university, and I think they are relevant to your topic. They asked how ambitious Canada is, and how are our universities will be internationally competitive, considering the high marginal tax rates, inadequate research financing, and the fact that salaries are lagging well behind those in the United States. They concluded that our best universities are at a distinct disadvantage today when trying to compete in North America. That is a worrying trend towards immediate mediocrity, and it does not only affect our universities. It is a trend we must reverse.

Ultimately cohesion in Canada depends on the will of people from all of our regions to continue to resolve challenges together, to respect our differences, and to nurture distinctively Canadian approaches to domestic and global challenges. That is what we risk squandering if we cannot provide policies and programs that convince people in all of our regions that our federation is a flexible partnership, and is well worth preserving. The pace of change these days is hectic, and the stress and strain that generates are real. Solutions will not come from slogans, nor will they come from laments about forces beyond our control.

Although we may disagree on prescriptions, that is the healthiest feature of democracy, and there should be little dispute about priorities. Globalization means fundamentally that we, including governments, have to do things differently. In a world that is running on fast-forward, we need to move beyond debate and discussion into the realm of direction and decision.

I believe that political leadership involves more than squirting oil on squeaky wheels. It means defining, explaining and defending policy prescriptions that serve the national interest. Those prescriptions may be difficult, but they can be beneficial. That is the essence of good governance. It is not good governance to let sleeping dogs lie. Good governance is to substitute process in the name of dialogue for purpose, and to gauge polls for direction instead of for conviction.

Consultation is important. It is why I am here today, but it is not an end in itself. More extensive consultation has not made government more relevant to the concerns of society. In many instances, it has postponed action on issues of national consequence. The hallmark of leadership, after all, is not "followership".

We can be successful in this hectic particular global environment. That is exactly what my company, Bell Canada International, is doing. We are simply doing something globally that Canadians do very well here at home -- in other words, turning globalization to our advantage.

We are providing modern telecommunications services in emerging markets, where the demand is soaring. This is particularly true in countries that see an advanced and competitive telecommunications infrastructure as a key component for their economic development. We are successfully competing against some global giants for the licences we secure and for the customers we serve. The Canadians that we send to these operations are like modern-day explorers. They are building companies from the ground up, and several of them have the potential for size and scale comparable to that of Bell Canada itself.

It is a very powerful niche in the future economy. It is one in which Canadians with the right education and training, a confident attitude, and a judicious taste for risk, can and will flourish.

The Chairman: Let me talk to you for a minute or two about politics. Not about party politics, of course, but about political opinion. The primaries for the American presidential election campaign occurred a year or so ago. I am sure you observed the phenomenon of Pat Buchanan, and the protectionist, perhaps even chauvinist, thrust of his campaign. He did not win, of course, but there is no mistaking the existence of quite a strong protectionist -- even reactionary -- sentiment in that country, which has the most self-sufficient economy in the world.

There is a protectionist sentiment in the United States Congress that you officially tracked for many years when you were in public service . When President Clinton came to get his fast track authority for free trade, he could not get it. They turned him down. It was a very close-run thing for him to get more money for the IMF to deal with internationalfinancial crises.

In this country, the Multilateral Agreement on Investment "cratered" outside our borders. My impression was, and continues to be, that the government Canadian decided it was not worth a nickel of political capital because people were against it. It was a very hard sell. I bring this up because you did speak in your opening statement about the need for better rules and dispute mechanisms for the exchange of trades in goods and services. Ten years ago I think the concept of an MAI might have been sold, but people's views have changed, perhaps temporarily. The government is not going to go ahead.

With respect to the bank mergers, there again one cannot ignore the political forces behind what we are hearing from the Liberal caucus committee and others. The support just is not there. One doubts whether the Minister of Finance and his colleagues are willing to spend a nickel of political capital to make that happen.

People are digging in their heels. I think what they perceive is that the forces of globalization, technology, free trade, open markets and all the rest of it have created a lot of wealth and economic activity, but that a lot of people have been left behind. There is a good deal of fallout. What can be done about it domestically? We have had this discussion at the committee. Are these forces beyond our control?

You have said we should not just lament the fact that there are forces beyond our control. Many people seem to think that they are not only beyond our control, however, but also beyond the control of their national government. These are the kinds of issues we have started to struggle with at this table. Our aim is to get a better handle on what is happening, and perhaps even to make some recommendations to our own government.

Do we have a choice? Do we have options as a nation, especially in terms of trying to maintain not just the social programs, but the sense of social justice we have had in the country for a long time?

Mr. Burney: You have raised a number of issues. I do not think I can respond to all of them, but I can take a stab at some of them.

The issue of the forces of protectionism has always been a concern for Canada. It will always be a concern for Canada, because we are far more dependent on access to markets than most other countries are. Of the G-7 countries, we are by far the most dependent on free access to other markets, simply because we do not have a market of our own that would support the standard of living that we have developed in this country.

We must be at the forefront of efforts to contain and control the forces of protectionism, whether they are coming from Pat Buchanan in the United States or from individuals in Europe who share his view. They want to put a moat around the country, pull up the drawbridge, and not let anyone in. That mentality is as vigorous today as it was in the 1930s. We are not seeing anything new in that sense; we are simply seeing new versions of an old virus.

I began by referring to the need for us to develop ideas, make commitments and then seek commitments in institutions such as the World Trade Organization. I believe that a middle-sized power like Canada cannot do these things on its own. We cannot create world order on our own.

The current director general of the WTO says that multilateralism is part of Canada's DNA, and I think he is right. We have to use international institutions to develop and establish rules that will help nullify the power imbalance that would be there if we were living in a jungle. We must do that first and foremost in the field of trade. We must do it in the multilateral institution, the WTO, which is geared to that. The WTO is about to launch a new round, and it is vital that Canada develop ideas that defend our interests.

In many rounds in the previous trade organization, the GATT, we fought for better access for our natural resources, but we did not get very far. That is why we ended up with more regional trade arrangements, because the global trade negotiations were not giving greater access or greater protection for Canadian exports. That is why the government of the day chose the regional route, and I think it has worked well.

Like you, I am concerned that the roar of the demagogues who pander to nationalistic solutions, whether in the United States, Europe or Canada, will always be louder than the lessons of history or the lessons of textbooks. That is why I said that it requires a degree of courage and leadership to take the other side.

I do not think, however, that the solution to some of the upheaval we are seeing as a result of a world running on fast-forward is to build walls around our own country to preserve what we think we have today. We cannot do that, because it is a fool's errand. I do not think Canada can shield itself from the forces at play in the world. Our best defence is to come up with ideas that we can initiate in international fora, as we have done in the past.

Canada was one of the founders of the GATT. Canada was one of the founders of the institutions that control the international finance and payments system. We need to remain active in those organizations, but we cannot simply be there as attendees. We must have a prescription on the home front that gives us credibility with the ideas and the commitments that we are seeking on a global basis.

There is no greater threat to the future of our economy than a world that turns in on itself. In my remarks, I stressed the need for international approaches and the need to take advantage of our privileged position with the United States, because those are fundamental prescriptions for Canada's success in dealing with the forces of globalization. We cannot fix all of the problems simply by being braver, bolder and more courageous on the international front.

We have things at home that need more attention than they are getting, and I have alluded to some of them. I have also tried to show the example of my own company. When you have people with the right education and training, the right confidence about their ability to compete in the world, and a little a taste for risk, you can succeed. We have no difficulty competing against telecommunications companies that are far larger than Bell Canada.

Bell Canada may seem large in a Canadian context, but it is twenty-third or twenty-fourth in the world today. I am not intimidated by anyone's size and never have been. I believe that if you have the right training, the right expertise, and the right financial support, you can do the kinds of things we are doing.

I still believe that we are in a very good position to take advantage of the forces out there, provided the rules of raw power do not prevail over multilateral disciplines that otherwise mitigate what you would see as power imbalances.

You are absolutely right -- Pat Buchanan has not disappeared. He, Ross Perot and any number of others hold a very similar view that the best way to prevent their society from facing the winds of globalization and change is to keep the world out. The United States can actually do that, because it has a huge internal market of its own.

A major concern of mine is American isolationism, as well as American protectionism. If the Americans come to the conclusion that they do not need the world, we are all in trouble.

Senator Cohen: Thank you for the pay equity that has just been handed down at Bell Canada. As a woman, that has been very important. I think you are setting a great example for governments to follow, but it will remain to be seen whether it is followed.

You mentioned in your address that one of our great handicaps is that citizens are overtaxed, over-governed, and very much in hock. Some of them are very poor, and they are getting poorer as globalization grows and technology changes. You mentioned that there has to be a will for people to work together. What kind of partnerships do you feel government, business and the volunteer sector should form to fight against unemployment, technological changes and social fragmentation?

Mr. Burney: I have already hinted at something that I think governments should do less of. That is, they should spend less time haggling over who is going to do what, and spend a little more time on the "what".

I now have the privilege of being some distance from government. The perception is that far too much time is spent trying to divide the spoils of power, rather than using the power that governments have been given.

If you were to ask Canadians what it is that they think you should be doing, and compare it to what you do on a daily basis, you would be a little surprised.

There are successful partnerships that addresses the need for better education and training, and one of those is the co-op schemes at our universities.Such schemes allow students in university to get both an education and business experience relevant to their education. When those students graduate, they come out not just with the parchment to hang on the wall, but also with one to two years of work experience.

Years ago, when we were facing even higher unemployment in Canada, our graduates could not get jobs because they did not have experience. By far the best education a university student could gain had nothing to do with the institution, but with real work experience. It had more to do with the concept of co-op.

The universities will have to be more adaptable to the needs of the future society, just as business will have to adapt. Whichever level of government wants to take the lead should try to induce more partnerships between business and education institutions. Businesses like telecommunications -- the businesses of the future -- should work with the universities so that more and more of our students emerge from those hallowed halls with a combination of education and work experience.

That is one of the improvements that we could make in training and education in this country. It would not be necessary to innovate, or to develop a fund, a program, and a bureaucracy to support the program This approach would take advantage of something that works today.

If you did a poll of parents of university co-op students, I would guarantee you that the success rate of that would be over 90 per cent. I am not sure you would get the same result from a poll of parents whose kids went to university and did not take a co-op program.

Why is it that we have not made something that has been demonstrated to work well more available in this country? Why is it we are letting the Americans come in and hire the best kids coming out of those programs?

You talked about how we are becoming poorer in some ways. You will not get richer by increasing the tax burdens on Canadians.

I read a report that suggested that the over 25,000 professionals who have left Canada in the last few years have done so because of the higher tax burden.

There is a tolerance level for individuals and corporations. There is a perception among the young people of Canada, and not just old-timers like me, that our tax rates are too high. Further, it is believed that what we are getting from the government in return for our taxes is not worth what we are paying.

The Chairman: What we are doing is paying down the debt that has been accumulated for many, many years. I am not disagreeing with you, Mr. Burney.

It is true that people are paying more, and that they perceive that they are getting less in the way of services from the government.

Senator Butts: We have half a dozen definitions of social cohesion.Would you give us yours?

Mr. Burney: Social justice is what I mean by social cohesion. It is equality of opportunity. It is not equality of results, but equality of opportunity.

If we provide equality of opportunity, we should have cohesion. If we look for equality of results, we will not have it.

Senator Butts: What about things like harmony?

Mr. Burney: A lot of bands play in many different notes, and you get harmony. Some people like classical music and some people like jazz. I would not say the two are the same in terms of harmony. Harmony is in the eye or the ear of the beholder.

In terms of cohesion in Canada, we have to convince people in all parts of the country that what we are doing in terms of policies and programs is done in order to better their lot in life.

If governments are unable to convince people in all regions of this country that what they are doing is improving their lots, then we will suffer the consequences of a lack of cohesion.

Senator Butts: You put a lot of emphasis on government for this social cohesion. On the profit side of globalization, you said that we are affluent, and that we have higher attainment of education. You also said that a whole group of people is ignored in that system, and that they are much worse off than they ever were before.

You are the CEO of a very big corporate giant. Do you think that corporations have an obligation because of the social impact that a lot of them have caused through unemployment? Do you think that business should contribute more to health care, education, and things like that? Should there be a social audit of the corporation?

Mr. Burney: I am not too familiar with the terminology of a "social audit", but I have nothing but praise for what Bell Canada has been doing, both for communities and for education. To use a hackneyed phrase, the best social program of all is a job.

Senator Butts: No question.

Mr. Burney: I think the kind of jobs we are creating in the telecommunications field, through entities such as Bell Canada, Bell Canada International, Bell Mobility, or Nortel, are among the best jobs being generated in Canada today.

Nortel by itself hires more than 30 per cent of all the electronic engineering and computer science graduates in Canada. That is one company. More companies should be doing the same thing.

Senator Butts: I agree, but I am wore worried about the millions who can never get these high degrees. Robots are doing their work. Would you consider putting a tax on the robots?

Mr. Burney: We are not using too many robots. I do not have any robots in my office. I have a lot of computers, and I pay a lot of tax on the computers when I buy them.

Senator LeBreton: Let us return to the issue of the role of government, and how people perceive government and the services it provides. I was taken by a remark about the co-op experience between business and universities. To what degree is that being used in Canada right now? Is this happening with a lot of companies, or is it is still in its infancy?

Mr. Burney: I do not have any detailed knowledge about that. I was speaking strictly from my own personal experience. I know that in Ottawa, for instance, Carleton University has a co-op program in computer science. That is the one I was talking about. The University of Waterloo is probably even more famous for its co-op program, and I am sure many other Canadian universities have such programs. This issue has not been front and centre, but it does have the potential to be much greater than it is today.

I do not know how many universities in Canada are actually doing it. Encouraging it would not involve a new bureaucracy or a new fund of any kind, however. It is already there. There may be ways that companies could be induced to become more involved. I am not suggesting they be given any breaks to do it, because they are the biggest beneficiaries of such programs. They will get the talent that comes out at the end of the day.

Senator LeBreton: Does your company do it?

Mr. Burney: We do it in a limited way. We take in students in the summer.

We are not a big company. BCI does not have a large employment base, unlike Bell, Nortel or some of the other affiliates in the BCE family. We are confined to a summer student policy, which is used across the company. Across the board, BCE's companies take in summer students.

Both Nortel and the new technology company of Bell -- Emergis, in Ottawa -- are very much involved in co-op program. They take students from Carleton, Waterloo and other universities as part of that program. I do not think there is a company more committed to the education side of things than Nortel, in terms of the money it is spending, as well as the programs it is endorsing.

Senator LeBreton: Who do you think should take the lead on this? Should it be the government, the universities, the companies, or a combination of all three? Which body should take a leadership role and move in direction of co-op education?

Mr. Burney: I sometimes wish the provincial get-togethers would focus more on things like this instead of some of the stuff they do look at.

As you know, creative policy comes from leadership. If the leader at whatever level decides that "X" is a priority, things tend to happen. It has to come from a leader, either at the national or the provincial level.

It is the same with respect to productivity. Everyone knows that Canada's productivity is slipping. We are slipping behind the other G-7 countries. Yet, is it a dominant topic of debate in Parliament? You tell me.

The Chairman: Why is it happening, Mr. Burney?

Mr. Burney: Why are we losing ground on productivity?

The Chairman: Yes.

Mr. Burney: I gave you one reason, which is that we have a floating exchange rate. We allow our dollar to shrink, in an effort to mask the tougher decisions we would otherwise have to make if we did not have the luxury of an ever-cheaper currency. If the Canadian dollar can drop 8 per cent in one month, that gives a big cushion for the manufacturing or productive sectors of our economy for the next six months.

The Chairman: Tom Courchesne suggests that we should link to the American dollar. Do you agree?

Mr. Burney: I made a very careful reference to what all the turmoil in the world in the emerging markets -- as well as the pace of change itself -- is doing to the viability of national currencies. Some of the things that were considered heretical 10 years ago are now being discussed. For instance, Mexicans are talking about tying the peso to the American dollar. If you had suggested that in Mexico five years ago, you would have been locked up. I will not be the first to suggest anything of that kind in Canada, because I might run the same risk. However, as a European currency emerges, I think the notion of national currencies will come under much more intense scrutiny.

Is the answer a fixed rate or a floating rate? I will let the Nabobs of the Department of Finance give you their expertise on that. All I am suggesting is that what we have today is not doing much good for productivity.

The other element is the high tax rate. If corporations and individuals in Canada are taxed at a much higher level than their competitors in the rest of the developed world, that will impact on productivity. Because of that, we cannot expect the same degree of investment and innovation from Canadian companies that we can from companies in countries where there are lower rates of tax.

The third thing is, in part, attitude. Some people talk about us suffering from an innovation gap in Canada, and say that we are not developing enough indigenous technology. They use all kinds of reasons. In part, it relates to the inheritance of a branch-plant economy. For years we ran under the walls of protective tariffs. What happened? Foreign companies came in to build companies in Canada to serve the Canadian market. No research was done here.

One of the advantages of lowering those barriers to trade is that we are trying to induce Canadians companies to be more competitive and to spend more money on research so that they can do that.

The Chairman: There is a very favourable tax regime for research and development.

Mr. Burney: In some areas, yes.

The Chairman: Why is it not being taken advantage of by the private sector?

Mr. Burney: I cannot say that it is not being taken advantage of. One of the companies taking advantage of it is Nortel, and they are doing it right here in Ottawa.

Senator LeBreton: I should like to follow along on what the chairman was saying with respect to the tax levels for corporations. The tax levels for individuals also contribute to the brain drain. I saw those statistics a couple of weeks ago, and they are quite stark. We are losing people. Even when one factors in the cost of health care in the United States, the difference is still an incredible sum of money. It is a shame to educate people in this country and then lose them.

Senator Roche: The work of the United Nations embraces a wide range of economic and social programs that affect virtually every person on the planet, whether they know it or not. The special UN conferences of the 1990s on great global themes of the environment, the development of women's rights, and energy have provided a catalogue of how modern global society operates. In short, the United Nations is central. It is a central way for Canada to express its views to the international community.

Canada has just been elected to a new term on the Security Council. Drawing on your considerable governmental experience, what advice do you have for the Canadian government? What should its policies be in respect of its new participation in the UN; policies that would both reflect Canadian values and, in turn, promote social cohesion at home?

Mr. Burney: First, our influence comes through people. I am delighted that we have a Canadian in the second most powerful position at the United Nations. With Louise Fréchette, we are extremely well positioned to have Canadian values, as they are today, expressed across the entire network of UN organizations. As you well know, individuals can have as much impact as policies and programs in an area such as that.

We cannot kid ourselves that simply attending meetings means that we are concerned, and that we have a prescription to offer. We must come up with ideas of our own to advance in whichever United Nations agency we choose to put our priority -- whether it is on the environment, the social area, or the development area. We cannot try to do everything. If we have made a mistake in the past, it may be that we have spread ourselves too thin in terms of our human resources and our financial resources. We have pulled back across the board, instead of putting a little more emphasis on the areas that we know something about.

The International Telecommunications Union is a branch of the UN, and a Canadian is in a senior position there. That is as it should be. Telecommunications is one of the things we do better than almost anyone else in the world.

The same is true with respect to the areas of environment and energy. Canada has a pretty proud track record in those fields, relative to other countries. We should flaunt it. We are respected around the world for the way we maintain our own environment. We are not perfect, but, generally speaking, I think that is one area in which we excel. I would be more selective. I would make sure that we put qualified people in, and not use it as a dumping ground for bureaucrats who cannot cut the mustard in Ottawa. I could go on.

The Chairman: Please do not do so.

Senator Roche: You might cut a little too close there.

I believe that, here in Canada, we find our cohesion -- and ourselves -- by looking outward. To turn that around, we cannot just keep looking inward in order to find out who we are and what we can do. We have to look outward. Do you share the view that as Canada plays a stronger role in the international community on selected issues, we will give a tremendous boost to the resolution of our internal unity and cohesion problems?

Mr. Burney: Yes. You have given me a great opening for a commercial about my own department. You served in that department at one time as well. I happen to think that the Public Service of Canada is one of the greatest unifying forces in the country. I am not sure it is as much of a magnet for unity and for quality as it once was. When you think about it, though, the federal public service is one of the only institutions in this country that genuinely attracts the service of people from all regions and from all cultures.

You are absolutely right. The career services within the public service were the ones that attracted the very best and radiated the very best, both to the world and back to Canada. I am not sure it is working as powerfully today as it used to, but that is partly perhaps because of cutbacks.

I think there is some argument within government today as to whether public servants still have a role in creating policy or whether, in this fast-moving world, that should all be left to the elected politicians.

I believe that you are right to say that one of the elements of promoting cohesion in Canada is to inculcate more pride in the role that Canada plays in the world. We are recognized more from outside than we are from inside. When I was in the foreign service, I used to say that if every Canadian had the opportunity to travel, they would be a lot happier when they returned home. Upon seeing what the rest of the world is like, Canadians tend to grumble a little less about their own lives, and I still think that hold true. I used to run into Canadians all the time in various parts of the world, and they would express that view.

To me, one of the sad things today is the way our military, as a career service, has fallen on hard times. Whether it is the military, the foreign service or the Post Office, these are unifying forces in the country. The people who serve in them serve a common public purpose. If we trash them, and if we do not get quality in those organizations, we will suffer in the end. That is a concern.

That is why I make semi-facetious remarks that, as a country, we are the greatest "joiners" in the world. There is not an organization that we do not belong to in the world community, but that is not the game. The game is not to attend all of the meetings. The game is to make yourselves known at the meeting, and you can only do that, in my judgment, with ideas that will capture consensus from a wider group. No one is going to follow Canada because of the colour of our eyes or because of the arsenal we have at home. You know that. It is either our ideas or our example; those are the best commodities we have. If we do not use either, we are not going to make much of an impact on the world.


Senator Ferretti Barth: You stated that Canadian firms are not competitive enough abroad because of our taxation system. Canadians are leaving to work elsewhere because they can pay less tax and earn higher salaries. You talked about large companies. In your opinion, what role does the private sector have to play in ensuring the welfare of the middle-class? We have talked a great deal about large companies. What is going to happen to the middle-class? Are you concerned about its fate?


Mr. Burney: I am not sure I follow your meaning with regards to the average employee or the average company. There seems to be a perception that the large corporations do not care about people in the medium-sized companies. I know there is a lot of criticism of the banks for not lending enough money to mid-sized companies, and I think there is some validity to that.

That comes back to one of the points I alluded to when I answered the chairman's question with regard to productivity. Canadians can be risk-averse as opposed to risk-aggressive, and that affects the performance of our mid-sized companies as well as the performance of many of the employees of those companies. It is an attitudinal issue. If you are not confident about your own capacity, and if you are not confident about your company's ability to compete in the world, it will affect the manner in which you work.

Companies, such as the companies in the Bell Canada family, have employees at all different levels, if that is the thrust of your question. I do not think that the only good employment is the employment at the very top of a company. If individuals feel a sense of satisfaction in their jobs, and that what they are doing is actually contributing to something positive, that can be much more meaningful to them at the end of the day than their salary would be.

If you are asking whether the big companies in Canada are better off, generally speaking, than the middle-sized companies, I can tell you that I do not think any company in Canada is really big by global standards. We like to think of the banks as being big, and we like to think of Bell Canada as being big, but we are not giants. One of your colleagues referred to us as having a giant company. We are all pygmies in this world. There are no Canadian giants. Even Nortel, which is probably the best known, is number four or five in the world in terms of the manufacture of telecommunications equipment.

In terms of exports, I have always felt that we need to be successful in North America if we ever hope to be successful on a more global basis. That is why I was very active in the negotiation of an agreement with the United States that gave us greater access to that market. I genuinely believe that, if a mid-size company is seeking to export for the first time, the best market for them to get into is the one right next door. It is easier, it is more profitable, and it operates on standards that are very similar. Once you go beyond that, you are getting into cultures, languages, business practices, laws, et cetera, which are very different from those that prevail in North America. Because of that, the risk goes up, even though the opportunity may be better.

I have always believed that, rather than trying to provide mid-sized Canadian companies with a global catalogue of opportunity for export, we should get them to concentrate their opportunities south of the border. If they are successful in exporting to the United States, I guarantee that they will have a better opportunity to sell to Europe, Japan, or Asia after that, rather than before.

Obviously, that only applies to companies that are providing either a commodity or a service that is in demand in the United States market, as opposed to some other market.


Senator Ferretti Barth: If I understood your presentation correctly, you stated that other countries have an easier time exporting their products than Canada does. Is that correct?


Mr. Burney: I did not say that exactly. I said that, in my view, if you are a mid-sized company about to enter the export market for the first time, in many cases it is easier to seek entry into the United States market than it would be to go elsewhere. I did say that I find it ironic that, as we espouse ever-freer international trade, we talk much and do very little about freer trade within Canada.

We still have far too many barriers between provinces, as anyone living in Ottawa knows, because of the trade barriers that exist between Ontario and Quebec. We talk about these endlessly at federal-provincial meetings. We sign all kinds of agreements on dealing with these problems, yet the problems still exist.

Yes, in some instances it is probably easier to export than it would be to sell to another part of Canada.

Senator Poy: My understanding is that you believe the government can do something with regard to co-op programs between institutions of higher educational and corporations. Is that correct?

Mr. Burney: Oh, yes. As I said to Senator LeBreton, often government's role does not depend on a new program or a new bureaucracy. If a leader -- at either the federal or provincial level -- attaches a priority to a particular issue, that in itself creates a role for government. If I were in one of my old jobs, I would probably be recommending that the Prime Minister convene a meeting with half a dozen Canadian university leaders. Such a meeting would allow them to respond to his concern about the lack of effort on the part of Canadian universities to create more co-op programs.

Northern Telecom did exactly that with the Government of Ontario about a year ago. They made a specific request, and said that they were prepared to put funding into universities in Ontario provided that the government did certain things, and it happened. That was an initiative from the private sector to government. There is no reason it cannot go the other way. It is a question of priority and leadership.

Senator Poy: Have you ever heard complaints from academics that corporations are taking over higher education? Through my own connections with higher education, people have expressed to me that many programs in universities have the names of big corporations attached to them, and they object to that. What have you heard about that?

Mr. Burney: I have heard similar expressions of concern from expected sources in universities, but I do not mind names on buildings. If someone is willing to put $1 million into a university to get his name on a building, that is fine with me. That will not change the level of education provided in that building.

Senator Poy: That was my answer whenever that concern was brought to me.

Mr. Burney: Universities need money, and they can no longer get it all from government. If the Canadian corporate sector can be bribed into giving money to universities in exchange for names on a building, we should go for it.

Senator Poy: I should like to comment on the pegging of the Canadian dollar to the U.S. dollar.

Mr. Burney: I did not recommend that.

Senator Poy: Did you not? It was my understanding that you did.

Mr. Burney: No.

The Chairman: I referred to what Professor Courchesne and others have recently recommended. He is the most prominent Canadian economist to have recommended that we peg the dollar, as it was pegged for many years.

Mr. Burney: I was not recommending it. I was simply saying that, as we are seeing in the emerging markets, the pressures of globalization today, as well as the pressure we are seeing on our own currency, are putting a lot of pressure on national currencies. I suspect that when the Euro comes in next year, it will put more pressure on smaller national currencies.

Frankly, I have seen both sides of the debate. I have heard the arguments about the value of a floating exchange rate, and those about the value of a pegged exchange rate. In the world today we are seeing all kinds of experiments. I am not suggesting that I have the answer. I am suggesting that this issue will be of continuing concern, and that perhaps some things that were heretical five or 10 years ago in terms of regional currencies may not be seen that way five years from now. That is as far as I will go.

The Chairman: Given the ever-increasing international economic links, could you say a word to us about social chapters of trade agreements and international economic agreements?

Mr. Burney: You alluded yourself, Mr. Chairman, to the fact that President Clinton was not able to get fast track authority in the United States. That had a little bit to do with protectionism, and a lot to do with efforts by a wing of the Democratic Party to include provisions of either a social or an environmental nature. Those provisions were repugnant to those on the Republican side, who otherwise would have supported the fast track proposal.

In the case of NAFTA, toward the end we saw that we needed to add dimensions on both the environment and labour in order for it to pass muster in the United States Congress. There is no question but that those issues are front and centre, and that they will be so in any future trade negotiation.

The Chairman: Even the WTO?

Mr. Burney: Yes. I happen to think that is putting a bit of an unfair burden on what is otherwise a trade negotiation. That is not to say that it will disappear, though, just because I think it does not really belong. It does mean that the trade negotiators will have to take the views of those who want to see a social or an environmental dimension as part of the negotiation into account. I am not sure what will come out at the end of the day, but I do recognize that this will be part of the agenda for future trade negotiations.

Earlier you made the point that the MAI got away from everyone. If governments do not take the lead in creating an umbrella for those issues to be addressed in a constructive way in trade negotiations, those issues will drown trade negotiations.

The Chairman: I tend to come at it from a slightly different direction. I ask myself whether we are not putting an unfair burden on social policy by asking it to deal with the fallout from globalization and technology.

Mr. Burney: It is a chicken or egg kind of thing. Bringing in adjustment measures as part of a trade agreement is the same issue. That was another dimension that had to be added to NAFTA in order to get it through. The government had to pledge that it would provide assistance for the industries that would be the most severely affected by the transition, but that is a different issue. I believe that that is a normal part of a trade negotiation.

Labour issues and environmental issues have both already surfaced as part and parcel of the political process in the United States on trade authority, and, because of that, I expect to see them asserted in the trade agenda itself. I am only saying that I think governments would be better off to get out in front of the debate, rather than trying to catch up with it after it has already come out of the starting blocks.

Senator Wilson: Yesterday we tried to talk positively about the nature of units of social cohesion in a society. Perhaps we can build on that, rather than saying that everything is a mess. I want to address the role of educational institutions in encouraging social cohesion and nurturing human resources. Later, I will ask what you think the role of the educational institutions is. In Ontario, society is being pulled apart by educational issues.

Your comments about universities interested me, because I happen to be the chancellor of a university. A meeting of chancellors was called, but it turned out to be a meeting of chancellors, and presidents and CEOs of businesses. It is the first time I was in a room it that was locked so nobody else could get in, and we had lunch with Mike Harris. We talked about the very thing you raised -- that is the role of business and the role of government in partnering with universities. Most of the talk was about the technical faculties in universities that would produce jobs and would produce more money.

One of my questions has to do with the people who sometimes militate against social cohesion because it enlarges the gap in society. As universities get on this bandwagon, they get carried away. You mentioned that Carleton is doing something excellent in technical studies, but in that same month, with the stroke of a pen, they wiped out their whole Comparative Literature faculty. That program encourages people to think about social cohesion, and to critique society.

Should partners other than businesses be encouraged to partner with universities in order to mitigate this? In my view, it is very problematic.

Mr. Burney: I do not want to leave the impression that I think the only role for business is supporting universities.

Senator Wilson: This meeting that I was at went far beyond having businesses get their names on buildings.

Mr. Burney: I cannot speak to why Carleton dropped Comparative Literature. Education is not my field of expertise. I was giving a personal example in response to an earlier question. If you were to press me, I would say we are going to have to do a little more sorting in Canada. We cannot expect all of our universities to provide the same services.

I do not want to use the terminology of "two tiers", but we already have tiered education in Canada. I do not know why we do not recognize it, get on with it, and let institutions specialize in those things that they do better than other institutions. We cannot hope to have all of our universities providing a broad education for everyone. It just will not work. We will aspire to mediocrity if that is the direction we choose.

Greater specialization is needed, and we must distinguish between those universities that are more technically oriented, and those that require more research funding -- for example, our medical faculties, as opposed to comparative literature. They do not require the same degree of research funding that a medical faculty requires.

We have to do some sorting, and allow specialization at the university level. This is not to denigrate the quality and value of a liberal arts education. Two of my sons are engineers. They took liberal arts courses as part of their engineering studies. I assume that is standard in Canadian universities. If it is not, it should be. In the same way, it would not hurt the arts students to learn how to add up a bank book.

Senator Wilson: Do you have a comment on the role of educational institutions and business in social cohesion?

Mr. Burney: As I said, my concept of social cohesion goes to my definition of social justice and equality of opportunity. If educational institutions have a purpose, it is to provide equal opportunity for people to study there, but the results of that flow from the individual's effort. In Canada, I think we do a good job of providing equal opportunity of access to our public education system, and I hope we will continue to do that.


Senator Gill: I come from a remote region, the Saguenay-Lac Saint-Jean region, and as is the case along the North Shore and in the Maritimes, the unemployment rate is very high, 15 to 18 per cent higher in fact than the national average. I come from a native community where the unemployment rate hovers around 50 or 60 per cent. What are we doing to address these problems? We hear a lot about equal opportunities for everyone. My region is home to many separatists. Groups are polarized and social, economic and cultural interests vary widely. Is there some recipe for offering equal opportunities to everyone? How can we achieve social cohesion or social justice in Canada when we have problems of this magnitude to contend with? Certain regions of the country are in more dire straights. How can we come up with the right formulas to help them? Mention was made of companies and protectionist policies. For example, Ontario wants to protect its identity in the face of the United States. Quebec and aboriginal peoples want to protect their identity as well. Everyone wants to have a place in the sun and to earn decent salaries. Would you care to comment?


Mr. Burney: It is very complicated, and I do not think I could respond to it adequately in a short period of time. However, we must recognize that we are not helped in this country -- whether it is in terms of productivity, equal opportunity, prosperity, or social cohesion -- by the steady drumbeat of uncertainty about our future as a country. As you know better than anyone, that is very much at the forefront of debate in the Province of Quebec these days.

I do not think we should allow ourselves to forget that we pay a price for the political instability that Canada has been going through, particularly in the 22 years since we first elected a separatist government in the Province of Quebec. I know it is not politically correct to say that that kind of uncertainty gives Canada a handicap, but it is a reality.

I saw figures today that suggested that foreign investment in Canada is not keeping pace with foreign investment in the G-7 countries. We are getting strong investment flows from the United States, but we are not getting what we should be getting from Europe and Japan. We should be getting more, because the cost of production here is substantially lower than it is in the United States, particularly when our dollar is worth $0.65 U.S.

The cost of operating in the City of Toronto is 25 per cent to 50 per cent cheaper than it is in any American city. Why are investors not coming here?

There is the perception of instability. One of the biggest contributors to the lack of cohesion in this country is the uncertainty as to whether we will have a country in the next three or four years.

You referred to the high unemployment in the Lac St-Jean region, particularly amongst native people. The situation for native people in this country is a travesty, and I wish I had some answers to it.

What we have been doing is not working. Perhaps it is time we recognized that, and tried something radically different. Whatever we are trying to do to allow native people to have their own identity and to have greater responsibility for their affairs is certainly not resolving the social problems that exists in most native communities.

Lac St-Jean is the centre for one of Alcan's most competitive productive facilities. It is a Canadian tradition to have these facilities located for employment opportunities.

As I said earlier, Canada, both internationally and domestically, could help raise the standard.

We are suffering on productivity, and one of the reasons is because we have an unemployment rate that is twice that of the United States. Overall productivity is affected by the high unemployment rate. It is basic mathematics. If the unemployment rate here is 9 per cent, and it is 4.5 per cent in the United States, on that basis alone the United States has a head start in terms of productivity.

The Chairman: Should we consider a full employment policy for the federal government?

Mr. Burney: Governments do not create jobs, Mr. Chairman.

The Chairman: I appreciate that, but there has been a question for a long time about what the appropriate goals of monetary policy should be. Should reasonably full employment be one of the goals of monetary policy? Should full employment be one of the stated goals of federal fiscal and economic policy?

Mr. Burney: I am not going to bite on that one.

Senator Cools: I have a couple of questions or comments. I would like to build on Mr. Burney's last statement that government does not create jobs, nor does it create wealth.

In the 1970s, the popular opinion was that government creates wealth by expanding deficits. That point of view is past, however. Governments do not create wealth. Wealth is created by certain individuals who find the right environment in which to flourish.

The second point is the question of what wealth is. If we can answer that question, we must ask what poverty is. Is poverty an absence of wealth, or is poverty an absence of the skills required to create wealth?

This committee has had an excellent discussion on the issue of poverty. Often when we look at poverty we are not really looking at an economic problem; we are looking at an absence of human development, and an absence of skills. We should employ the term "privation".

We see the proliferation of the "underclass" in Canadian metropolitan centres. In the ghettos that have been developing in Toronto and other metropolitan areas, we see the proliferation of single-mother homes, and the problems of absentee fathers. There is a deficit of personal coping skills, and an inability to make life function.

Privation is more than just an economic problem. Canada's international initiatives -- both in foreign policy and in trade -- are within this emphasis on international development. Should we not be paying more attention to human development within Canada, however? Could you give a bit of direction as to what we as policy-makers and members of Parliament can do about the question of privation in our metropolitan centres?

Mr. Burney: Senator, you put your finger on an issue that I may not have stressed as much as I should have in my opening remarks. The issue is very relevant to your concern.

In the future, I believe that human capital will be much more important than the kinds of capital that have turned engines in the last century. The paramount priority for government -- whatever the level -- should be education, training, and health.

If governments get those fundamentals right, it will answer some of your concern about privation and human development. Human development will be the winner in the future, and the countries that are most successful at sustaining high levels of human capital are the ones that will be successful in the future.

High levels of human development mean proper human development, and more equal opportunity for people to get an education. Countries that ensure that their populations are trained and healthy are preparing people to get good jobs at the end of the day.

The countries that are most successful at that are the ones that will succeed in the future. The role of government should be simplified, not made more complex. I will be as blunt as you would like me to be, and say that governments are getting more remote from their people by trying to do too many things, and by getting involved in too many politically incorrect topics.

The priority of people under 40 is employment. For people over 40, it is health. It is not much more complicated than that. Governments spend a lot of their time on extraneous issues, however, and then wonder why they are not relevant when it comes time for an election. Education, training and health are the issues. As I said in my opening remarks, education and health used to be things Canadians were proud of. We are not so proud any more.

I used to get into debate in Washington about our health system compared to the American health system. I was very proud to defend the Canadian health system that I knew at that time. I would be much more reluctant to defend the system that I am accustomed to after spending the last six years in Canada. We have problems there.

I do not think the answer is simply more money. I do not think it is exclusively a question exclusively of more funding. We have to think more courageously. You, as politicians, must think more courageously about solutions that you know will be politically unpopular. You must try to lead the public into focusing on it.

It was unpopular to go after the deficit, and we have done it. It is equally unpopular to think radically about how we can transform our health system -- not how we can further subsidize it, but how we can transform it. On a percentage per capita basis, we already spend more money on health than almost all of the other developed countries do, but it is not working. We all know that. Everyone around this table knows that it is not what it was five years ago.

It is the same with our education system. We used to brag about the public education system. We used to laugh at people who sent their kids to private school. You do not do that any more here. Why? Why are governments not taking the lead to fix this? Education and health are government responsibilities. You do not have to get involved in 100 other issues. If you were to get those two right, you would bere-elected for life.

The Chairman: You mean that our counterparts in the House of Commons would be re-elected.

Mr. Burney: I used "you" in a broad sense.

Senator Cools: Thank you for your presentation, Mr. Burney. In summary, Mr. Burney's response is that the preoccupation of government should be the development of human capital because, in the long run, human development is what we are all about.

I would like to tell you that I have discovered that that which is politically incorrect is usually the popular sentiment of this country. Quite often, we are confusing the voices of the small minority. They may be loud and a little aggressive, but I have discovered that they are not widely supported at all in public. The focus and the purpose of government should be to reach beyond those few loud voices, and to reach to the hearts and minds of our population.

Mr. Burney: Yes, and take some risks.

The Chairman: You were involved in international affairs when you were in the public sector, and you are involved in international business now. Are you concerned about the vulnerability of national economies to rapid speculative capital flows? Are these out of control?

Mr. Burney: I am not up there with the Prime Minister of Malaysia in terms of my concern. I do operate in the emerging markets, however, and I have seen the irrational panic -- which had nothing to do with the economic performance of those countries -- that took place in many of those markets, and I am concerned.

I am concerned about the opposite of "irrational exuberance", as Mr. Greenspan called it six months ago. It is what we saw happen in the summer in the emerging markets. In some cases, the wounds were self-inflicted. However, even the self-inflicted wounds went much deeper because of the way capital fled those countries.

Someone said earlier that money runs scared. Money ran scared in July and August, almost with a domino affect, from Russia, to Southeast Asia, to Latin America.

Yes, I am concerned. I do not have a paranoia about it, and I would not think that capital controls, which are currently being tried in Malaysia, are the answer. I do think that we have learned that the prescriptions that the IMF has been using have not worked, however. In fact, they have failed more often than they have worked. I hope they will work in Brazil. We must keep our fingers crossed on that.

The Chairman: They use the same prescriptions from one country to another, without regard for different circumstances.

Mr. Burney: That is correct. I echo Mr. Jeffrey Sach's view that the World Bank should get out of the banking business and into the knowledge business, which is something it could do a better job at than banking.

I think that what we saw was a lack of discipline among the banks. We saw a lack of discipline in the countries themselves, which allowed hot money to move in, and to leave as quickly as it came in. We obviously need to change the architecture of the international finance system. I do not pretend to have the answers.

I would hope that there is still some brain power left in the Public Service of Canada, and that it will come up some ideas that Canada can put forward to the international financial institutions. Perhaps then we might see greater order and stability in the international finance markets, as well as in the trade area.

We have pretty good solutions and stabilizers in place in terms of the international trade situation. They are under pressure, and they always will be. More antidumping cases were filed in 1998 than were filed in the five years before that, and the United States has been leading the charge. As least there is a system of dispute settlement there. Countries such as Korea and Thailand had no one to appeal to when the financial speculators decided that the jig was up there, and started to pull their money out. There is a need for reform, and for some new prescriptions.

The Chairman: They had the so-called "Tobin tax" on the table at G-7 in Halifax four or five years ago. It was taken off the table quickly, but in recent weeks there has been some talk of it, if only to slow things down. Have you thought about this?

Mr. Burney: Yes, briefly. I do not think that is the answer. Frankly, we are talking about discipline. We need more discipline in the financial markets, just as we have more discipline today in the trade area.

We do not have to reinvent the wheel. The problem is that our general accounting practices are not generally enforceable. One simple step would be to make the accounting practices to which companies in Canada and the United States must adhere in order to respond to the 11 regulators in Canada and the one regulator in the United States more generally applicable and enforceable. The trend in the audit community is to move in that direction.

We need to tighten the disciplines on these financial institutions, in order to prevent them from making the greedy lunges that are inevitable in a growth situation such as you are seeing in the emerging markets. That is what happened, and I have heard bankers say that. When you see growth at 8 per cent to 10 per cent per year in an economy, bankers get more lax in terms of the disciplines they put on the money they float. That is what happened. We all pay the price when they shut the market down. You cannot borrow money to send anywhere.

The Chairman: Mr. Burney, I wish to thank you most sincerely on behalf of all the members of the committee. You have given us an excellent afternoon. We found it extremely stimulating and useful.

The committee adjourned.