The Acting Chairperson (Peter Dyck): Good afternoon. Will the Committee of Supply please come to order. This afternoon this section of the Committee of Supply meeting in Room 255 will resume consideration of the Estimates of the Department of Industry, Trade and Tourism.

When the committee last sat, it had been considering item 2. Business Services (c) Manitoba Trade, the first part (1) Salaries and Employee Benefits, on page 103 of the Estimates book. Shall the item pass?

Mr. Tim Sale (Crescentwood): Mr. Chairperson, I want to spend some time, as the minister probably expects, on exploring the reasons for the changes in our patterns of trade with the world, with the NAFTA countries and with the United States specifically. I raised this in my opening remarks, and I am sure the minister has had some chance to review the data from Manitoba Bureau of Statistics.

I would like to start by asking whether the minister could shed some light on what has happened to the structure of our exports to the rest of the world, which have plateaued. In real dollar terms, they are up only slightly from 1990. In nominal dollars, they are up about $500 million, a little under $500 million, $470 million or so. In real dollars, of course, it would be quite a bit less than that. In effect, the peak year was 1997, but 1998 was below 1996 as well. In statistical terms, it is probably true that from 1995 onwards essentially it is really a flat picture. I am sure that if we did the standard deviations on it that those four years would all be within one standard deviation probably, although I have not done it, but it looks like it probably would be.

So could the minister explain? I do not mind if he needs to take a long time to do this, but if he could explain why our trade pattern with the rest of the world has lagged so far behind trade with the United States, essentially allowing us to slip into a record trade deficit this year.

Hon. Mervin Tweed (Minister of Industry, Trade and Tourism): I am advised that some of the reasons for the numbers that the member is referring to is the fact that, because we are a large exporter of raw agricultural products, the reduced commodity prices that we have seen worldwide have certainly impacted the numbers that he might be referring to. We have seen a downturn in the Asian market which has affected us somewhat in some degree, but the increase in the U.S. market, there has been a strong U.S. market. It has been encouraged by the NAFTA agreement that we have in place. Obviously, because of the closeness in proximity to our countries, it becomes a natural that we would be trading with the U.S. With the NAFTA agreement it has heated up that position. It is also for companies in Manitoba particularly that are just getting into the export industry, the U.S. is a perfect market for them to start with. It is again accepting of our products. It recognizes the quality of the products that we are producing. Because of the closeness it is certainly a first option for new exporters in particular.

I would like to point out that Manitoba has seen an increase in our value-added exports. We have certainly found that there are more firms in Manitoba active in the foreign markets in that particular area. The nonagricultural exports to non-U.S. markets have actually risen by 131.6 percent since 1994. I think that is a strong indication of the fact that Manitoba is diversifying, is moving into the value-added portion of agriculture. Our manufactured exports to non-U.S. countries have also increased since 1994 by 135.8 percent. When we are doing the numbers, and we looked at particularly the commodity prices in Canada that are down, certainly provinces and provincial governments are being asked to accept some of the responsibilities with the federal Farm Aid Program, the AIDA program that we have.

We do note that Manitoba, because of its positioning and because of its willingness and desire to get into more value-added, get into the ag value-added goods, has actually done quite well in this industry or in this market compared to say our neighbours in Saskatchewan, who have stayed more in the commodity, the producing of raw commodities and the export of those goods. When the economy does take a downturn, Manitoba has actually fared quite well in that area just simply because of its ability and willingness to diversify.

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Mr. Sale: In the agricultural exports, are the value-added exports included in agricultural exports or are they in nonagriculture?

Mr. Tweed: I am advised that they would be under the nonagricultural.

Mr. Sale: When I looked through the various areas where we have sent trade missions at some significant expense to Manitoba, I am sure this minister has not had a chance to go on any trade missions, but I am certain he will avail himself of the opportunity if there is time for him to do so. We do not seem to have produced, as far as I can see, any significant improvement in those areas that we have gone to have major trade missions with.

It seems that the minister's explanation is that the cyclical nature of commodity prices is really the determining factor because most of what we export to those non-United States markets is either agricultural products or value-added agricultural products and not a whole lot else. That would seem to be borne out by the statistics on the nine years trade trends report which shows that our agricultural product export has grown significantly in each of the markets, but our nonagricultural exports have not grown very much at all except in the case of the Pacific Rim where, I assume, that the growth is largely due to products of an agricultural nature but which have had value-added and therefore are showing up not in the agricultural but in the nonagricultural.

So really, it looks like most of what we export to the non-NAFTA countries is either value-added agricultural exports or agricultural exports. So commodity prices are really the determining factor more than anything else. Would the minister agree that that is the primary force at work and not whether we have been there as traders, as trade missions?

Mr. Tweed: I would suggest to the member that probably as long as I can remember, and not knowing his age probably as long as he can remember, commodity prices have had a tradition of being cyclical. We have certainly seen economies of many of the countries in the world that were producers of the raw product. The grains of the world rise and fall with the economy around it and the prices of the commodities that we are producing.

What I would like to say is that I think everyone recognizes that we are in a world and in a time of transition. We are seeing not only what we produce as the raw product but the encouragement, particularly of this government, to get into the value-added. I think it has probably served us well and, into the future, it will continue to enhance our opportunities.

I do know that we are seeing more exporters from Manitoba now getting into the market, I guess particularly in the value-added industries. As far as the trades and the trade missions that we do, yes, certainly they are not inexpensive to do, but we have to be able to go out and identify the markets for our exporters. This increases the amount of exporters that are willing to look at these markets, and if we can provide them with the knowledge and the expertise, then we can perhaps assist them in developing their businesses and their exports to a greater value. In doing so, it helps us and also lessens the reliance of the province on the raw commodity itself.

I am a firm believer that, like everything–having been in sales most of my life–sometimes the dollar I spend today is an investment for the future. It is not something that we can always judge or see a rate of return the very next day. It is the residual returns that come year after year as the companies that we are encouraging to do more exporting become more confident, become more capable. Probably as they grow as companies and mature as businesspeople in the export world, they will have less and less input from us as a province, because they will have been able to identify and recognize their markets. At the same time they will be helping us because they will be continuing to grow.

It is, again, just something that I think is very positive. Certainly the province has put an emphasis on it, in the value-added export side of it and nonagricultural exports. I think we recognize that those are opportunities that we should be developing and taking advantage of. Because of that emphasis on value-added exports and nonagricultural exports, again to non-US markets, we have seen that increase in the years '94 to '98 by 131.2 percent. So, it would suggest to me that we are moving in the right direction. We are progressing. If you were to say are we satisfied, I would like to think that my department would never be satisfied with what we are doing, hoping we could do better and present better opportunities and more opportunities.

I find it quite interesting coming from an agricultural background and community that the people who I see out there that are second-, third-generation farmers who, again, 15 years ago if you would have asked them what could government do, what would be the one thing government could do to solve the financial problems that you are in today, they would have said just raise the value of the commodity that we are selling, and we will be okay.

I think today if you asked that same group–and actually, it is not the same group. There are some that are still there, but it is more apt to be sons and daughters of these people who would suggest show me an opportunity where I can add some value and opportunity to what I am growing. I want to create a few more jobs in my community. I want to not be reliant on a world market for a commodity that I am producing and how I can add value, but also help me first establish and develop an export market.

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Usually when they come to us, their first market that they see as their best opportunity right now is the U.S. market. We would, I think, be negligent if we did not suggest to them that we can help them in the U.S. market. Certainly, the opportunities are presenting themselves daily. What we are seeing is that these young entrepreneurs, these young exporters and not-so-young exporters are saying: Once we get our toehold in the industry and once we understand a little more of how we are doing and what we are doing, the world is our market. I think we are going to see that develop more and more in the very short future.

Mr. Sale: Mr. Chairperson, what is the fastest-growing export that we have had in the last decade?

Mr. Tweed: I am advised that the fastest market right now, fastest-growing market is in bus manufacturing.

Mr. Sale: Mr. Chairperson, where would I find that in the trade report, under what heading? Would it be under the heading of vehicles, et cetera?

Mr. Tweed: I am advised it will be under motor vehicle parts and accessories. Oh, excuse me. I am sorry, Mr. Chairman, it is the Manitoba Bureau of Statistics, 1997 Foreign Trade. It actually shows a chart on page 14. It would show motor vehicles on the bottom line as being, in dollars, the largest increase.

Mr. Sale: I wonder if I could see that chart just for a moment. It is a public report; it is really okay. I think the minister misunderstood my question. That is why I wanted to see the chart. I was asking what was the fastest growing export over the past decade or so in Manitoba's exports. I think what he was showing me was the amount that that was in a particular year.

Mr. Tweed: I am wondering if I might ask the member to allow us a day to get him the 10-year average and I can bring it back to committee.

Mr. Sale: I think we can probably save the minister and staff the time. I think if they look they will find that it is electrical energy which has gone up by a multiple of about 12 in the period 1989 to 1997, entirely due to the Limestone exports to the Northern States Power pool. I wonder if the minister could suggest to his Premier that, instead of slagging, a decision which has resulted in the most rapid significant growth other than some very small things which do not amount to a hill of beans, the electrical energy exports to the United States have grown from $24.5 million in 1989 to $309.8 million in 1997, and I believe they were higher again last year. I think they went up to the $350-million region. It comes under the heading of mineral products for some strange reason, but it is electrical energy.

So, just a little observation that, perhaps the minister might suggest to his Premier that slagging a decision that resulted in the most rapidly growing area of our exports and the complete payment for a dam in American dollars that was brought in a billion dollars under budget, on time, and is now being paid for by our most rapidly growing exports perhaps would be just a good high-road suggestion he might make to his Premier, instead of always taking the low road that he has the instinct to take.

Mr. Tweed: I know that the honourable member for Crescentwood always likes to take the high road, and, as previously stated, if he would be as considerate, I would certainly like to analyze this document and bring back the numbers tomorrow. It is for me probably the second time I have had an opportunity to look at it, and I would be happy to make a comment on it tomorrow.

Mr. Sale: I think that would be fine. I had hoped that he would extend this report to 1998. I do not have one for 1998, but the number is available in the 1998 year ended trade report which came out about, I do not know, three, maybe four, five weeks ago. So sure, that would be helpful.

What I would like to ask the Premier–or the Premier, not quite yet–would like to ask the minister to comment on what looks very much to me like a structural trade deficit with the United States that is growing, not shrinking. It does go up and down but the trend, when you plot it on a trend line, is clearly up. So the trade deficit with the United States is shrinking.

The trade surplus with the rest of the world, which used to come closer to offsetting the deficit and allowed us in '90, '91, '92, for example, which were recession years, to have deficits of only $250 million, $37 million and $19 million respectively, it is now at the point where our total deficit last year was over a billion dollars for the first time in Manitoba's history. It looks to me like this is not simply a cyclical phenomenon but increasingly a structural phenomenon which presumably is why the Premier (Mr. Filmon), in 1995, in his election literature, promised to reduce the export dependency on the United States market and to broaden our exports so that we were not trade dependant to the extent that we are with the United States. We are not less trade-dependant than we were when this government took office. In 1990, 60 percent of our exports went to the United States. In 1998, 78 percent of our exports went to the United States.

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So it is very clear that we are in a continental trade pattern which makes our economy and the livelihood of Manitobans increasingly dependant on the willingness of the United States to buy from us, and on the level of the Canadian dollar obviously because the Canadian dollar's value vis-a-vis American dollars is a critical issue in exports. The Alliance of Manufacturers & Exporters has said that if we get much over 73 cents, 74 cents, which many economists think we should be at already in terms of purchasing parity value, we would lose our export advantage, and we would then be vulnerable to a very sharp deterioration in the Manitoba economy because we are so trade dependent with that one enormous economy to the south of us.

Would the minister comment? I would be happy to have a document tabled discussing this issue because I think it is probably the most serious and most underdiscussed issue in Manitoba's economic discussion that we are now, for all intents and purposes, a client state of the United States. We are more trade dependant than most American states are on the United States economy. So we are going in the wrong direction in terms of broadening our relationship with the rest of the world. We continue to import the same percentage of goods from the United States that we did at the beginning of the period. It is 85 percent now, and it was 85 percent in 1990. But, as I said, our exports have grown by some 30 percent in the nine years that I have been looking at, from 1990 forward. That, I think, has to be a worrying statistic to the minister and to his staff. I would appreciate his views on that.

Mr. Tweed: I would probably, like everyone else, say that Canada and Manitoba have a challenge in diversifying our markets. I do not believe in 1995 that I ever heard the Premier make a commitment to reduce our business export dealings with the United States, but I would suggest he probably made a commitment to expand other markets so that we could continue to grow the export industry that is out there.

I think that our job is really to help Manitoba businesses to continue the successful export to the U.S. market but also, at the same time, help them develop new and better ways of expanding that boundary. We have certainly seen, in the last couple of years, the significant slow down, I would suggest, of the Asia Pacific countries and some South American economies. I think, for that reason, it is not surprising that we would find Manitobans chasing after or trying to increase their penetration of the U.S. market. It is certainly that when you have a slow down in world markets, our exports have continued to grow. I think that is a positive sign. I guess, again, it depends on whether you are looking at things from whether the glass is half full or half empty. It is a perspective that people choose when they are making comparisons. It does satisfy everyone's arguments, depending on what side of the argument you would like to be on.

We find that Manitoba's companies, again, look to the United States for their first experience in the market simply because of the closeness. I would also like to suggest that when we look at the United States we do not look at it as such as one country. We try and look at the United States in five regional markets that we break down so that we can try and develop strategies and positions, so that when we see one region of the country, similar to Canada, we certainly know that the Maritimes market suffers from time to time because of the commodity pricing that they have. That will fluctuate upwards. Then we have western Canada battling the low commodity prices for their raw product. When we look at the United States, we look at it in the same way. We try and approach each of the regional markets. We try and identify and recognize their economic cycles so that we can move in and take advantage of the opportunities that are there but also prepare our exporters for a market slow down so that they can, again, refocus and take another look at another region of the U.S. market. It has been a strategy of Manitoba Trade. I think it has worked very well, and I think the numbers would certainly support that.

I guess I always think that when we are exporting the numbers that we are in the province of Manitoba, we always have to be aware of the market, and we always have to be aware of things that are out there that can affect or impact, but rather than talk about, not to deny its importance and that we should not be aware of it, but I think it is also important and appropriate that we talk about the fact that we have an extremely strong export performance, again, depending on what side you want to look at it. I look at it as a positive thing. I think that the more we export our products, the more jobs we create in our province, the more wealth we create within our province, and by doing that, we create other opportunities. We create a better business network for our exporters who have gained that valuable experience through the American market.

I think that we also have to look at the significant increase in the ratio of Manitoba exports to the U.S. versus the U.S. imports into Manitoba. I think this ratio is a reflection. It is on the value of Manitoba products sold to the United States. For every dollar's worth of goods Manitoba brought in from the United States, in 1989 the export-import ratio was 72.7 cents, which means that Manitoba sold the U.S. an average of 72.7 cents for every dollar's worth of goods it bought from them. In 1995, the export-import ratio was 75.4 cents, and in 1998 the export-import ratio was 81 cents, or in essence Manitoba sold 81 cents for every dollar's worth of import.

So I think, again, the perspective that you are looking at, you can probably put the down side on it. I think from my point of view and my department's point of view and the government's, we are proud of our export numbers. We continue to search and find new markets. We are dealing with different countries on a regular basis trying to find out their strengths, and no doubt they are doing the same to us. When our export companies get comfortable with the idea of export and start to grow and want to grow, I am sure that the government and Manitoba trade will be there to assist them and help them develop those plans so that they can continue to grow.

Again, I cannot emphasize enough the fact that when these companies do that, which we are seeing in a lot of the companies in the province of Manitoba, they are creating wealth. They are creating jobs for my children, for my children's children and opportunities for them to stay at home and work in the province and create an economy that shows across not only western Canada, not only all of Canada but in North America that we are willing to adjust, we are willing to continue to change.

I quite often think of a task force that I served on very early in my tenure as an MLA when we were speaking to a young Japanese woman. She was explaining to me that in their language they did not have a word that described change. I said, well, okay, what terminology do you use? She said we use the word "opportunity." I said, you know, that to me summarizes really what has been happening in Manitoba for the last probably seven or eight years, probably even longer, but just the fact that Manitobans are no longer waiting for something to happen and then reacting to it. What they are doing is they are going out there and making the changes, creating the changes, creating the opportunities.

The export numbers that we see clearly indicate that they have been very successful at it, and I think as a government it is incumbent upon us to continue to encourage them to do so. We certainly encourage them to continue to expand those markets and not become reliant on an individual market, and I think that they are doing that. I think as time progresses, we will continue to see those successes, and it will be good for all of Manitoba.

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Mr. Sale: Mr. Chairperson, first, no one has been critical of the level of exports. Thank goodness we have had the level of export growth that we have had because the import level has been faster in terms of the creating of the deficit. Now the import-export ratio, yes, it has been improving in most years, and at some point in the distant future I suppose one could project, using statistics, that there might come a day when it was balanced. But the Manitoba economy pays for the trade deficit every year, and that is the big number that I am concerned about.

While we are waiting for that import-export ratio to get better, we have got a real deficit in real dollars this year of $1.4 billion. I will be getting for the minister Premier Filmon's promise in the 1995 election which obviously was not to reduce exports; it was to broaden the base of our exports so that we were not so export dependent on the United States. That is the issue. The issue is dependency on one economy that is so big that essentially our entire Canadian trade with that economy is relatively trivial to the total American economy.

Would the minister not agree that in fact the low Canadian dollar in lots of ways penalizes us because essentially our exports are worth less than our imports, and that this continued harping on how our Canadian dollar is helping exports is a very unbalanced way of understanding the problem that we have got? In fact, the Canadian dollar being low is importing into our economy a whole lot of inflation, particularly in the medical field, in the drug pharmaceutical field, any imported vehicles. When we look at our manufacturing exports in that same report I was referring to, if you look at the total value of manufacturing exports versus manufacturing imports, you will see that both have grown by almost exactly the same amount.

So while we are manufacturing more, and manufacturing more with smaller numbers of people, in fact we have tripled our manufactured goods exports, and we are now just back to the same number of employees we had in the manufacturing field in the late '80s, about 62,000-64,000 staff in that field, but we are making three times the value of goods that we were in 1989. The trouble is all the stuff we are importing to build those things with has also tripled in costs. So the low dollar is not the panacea that many people seem immediately to think it is. I am wondering if the minister could comment on that.

Mr. Tweed: Mr. Chairman, I would just like to put it on the record and just perhaps give some explanation, but when you look at the data from the 1998 Statistics Canada publication, it includes the estimates of service trade flows. We find that if we examine Manitoba's overall trade performance, and by overall I would suggest we are talking about covering both goods and services, I think it shows a very positive statement for the province of Manitoba in the sense that, in the years from 1987 to 1996, Manitoba has actually recorded an overall international trade surplus in all but two of those years. The comments by the honourable member, when we look at the numbers and we add in on the international side, if we add in goods and services, the table would suggest that as current as 1996, which is the last year of the reporting, it would show Manitoba in an actual trade surplus of $554 million.

I think that he had made some comments about the low dollar. I guess what I am seeing from this side of the table is the fact that with the increase in manufacturing opportunities and the increase in export opportunities, what we are doing in the province is actually adding jobs to the province. They are good jobs. They are well-paying jobs. They are creating more opportunity for communities to participate, to be a part of the export system. Again, I think that Manitoba is certainly a leader in many of the areas. We have a very strong economy right now. It is going to lead to increased imports. The other thing that I see that enhances that is when you have the exports that we have right at this particular time, we see a certain, well, actually a remarkable increase in private-sector investment in Manitoba. As I stated earlier, a good majority of that is in the manufacturing process.

Manitoba's private sector is coming off seven years of steady consistent growth, from '92 to '98, in new capital investment. Our growth in new private capital expenditures for those years totalled 73.4 percent, and when you compare that to Canada, it shows Manitoba, and I quite often think it was not that long ago that when we referred to Manitoba, we referred to Manitoba as perhaps a struggling, some would even say a have-not province, but when we compare our private capital expenditures, a growth rate of 73.4 percent compared to Canada at 39.3, it certainly gives us reason to be optimistic. It is the third best among all the provinces.

We have to be aware that when we continue to grow, our manufacturing industry, our segment of the industry, that a lot of the equipment that we are purchasing for these facilities is actually imported. The machinery–I think of the Isobord that we discussed yesterday, the actual plant that produces the board was imported and I understand somewhere in the $45-million to $60-million range, and it has to be imported because we need it and it is included. When you look at imports of machinery and equipment in constant dollars, it increased by over 150 percent between '92 and '98, and it did account for approximately 18.2 percent of our total imports. To me, that is a positive sign. That is a positive sign for the future performance, because our manufacturing sector is rising to the challenge. It is meeting the demands out there. It is meeting the export demands, and hopefully will continue to do so.

Mr. Sale: So essentially, the minister seems to be saying that he is not overly concerned with the change in the pattern of exports and imports from the rest of the world, where our exports to the rest of the world, excluding the U.S.A., have grown by something in nominal dollars of maybe 35 percent, whereas our imports have approximately tripled. He is basically I think saying that he believes that our economy has changed to the point where the services side of that makes up for that difference, and we really do not need to be overly concerned about the $1-billion deficit in manufactured and raw materials, because that is being overtaken by a surplus in services. Is that essentially the position that he is taking?

Mr. Tweed: I would never want it to be said that this minister or this government did not always want to be aware of what is going on in the world and preparing and continuing to prepare its populations for that change. I think what we have to recognize is that it is a period of great change right now. Things are happening at a faster rate than probably ever before in our history. I recognize, and I think the honourable member would recognize, that we cannot, as a province, change the world economy. But what we have to do is ensure that the companies in our province and the government are adequately prepared to take advantage of the opportunities as they present themselves.

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It is surprising to me, and I think the numbers will support it, that the growth in the service side of the world market is just expanding, probably far quicker than we had estimated. What we are doing is trying to create that balance where we have goods and services. With the service industry being as strong as it has, it has certainly put us in a very positive position. As I say, according to the table, when you combine the two, goods and services, it does show us in a very positive position in 1996. As I stated earlier, it shows us actually with two small deficits in two of the years from 1987 to 1996.

I think that what we have been doing as a province has been assisting these Manitoba companies to prepare, to be ready for the export markets, but also to be prepared for the changing markets. It is not just the hard goods that people are buying or exporting around the world. It is services. I think, with our help, and with the leadership shown by the business people in the communities of Manitoba, that they are very well positioned to take advantage of whichever of the markets are stronger at a given time.

Mr. Sale: Mr. Chairperson, I wonder if the minister would be willing to table that information. I believe it is from a Stats Can report. I do not remember seeing it recently, but I am sure it is useful information. I would be interested in looking at it.

Mr. Tweed: Mr. Chairman, if I may, I just have some notes scribbled on mine, but I will get him a clean sheet and provide it before the–pardon me. We have one here, and I will table it now. How is that for service?

Mr. Chairperson: That is excellent. We will get copies of that sheet that you have supplied.

Mr. Sale: Mr. Chairperson, the minister talked earlier about the 1995 campaign commitment that was made by the Premier (Mr. Filmon). I would just like to read it into the record so that he knows what the commitment was. It comes on page 14 under the heading of Export Diversification. It talks about Manitoba exports–

Mr. Chairperson: Order, please.

Mr. Tweed: If I may just, I might ask the member to table the document.

Mr. Sale: I am not going to table this document. It is yours.

Mr. Tweed: Okay. Well, I just thought it would be relevant to the discussion.

Mr. Sale: I would be glad to give you a copy of this page. In fact, I could do that, but it is our only copy. It has been so popular. Here is a copy of the relevant page. Mr. Chairperson, the key sentence is on page 14. Our economic strategy is to expand world trade and diversify Manitoba exports, which were then 73 percent dependence on the American market. In the ensuing years, it has grown to 78 percent.

So I simply was pointing out that the commitment made in 1995 has not been able to be met. The reason may well be that that is the structure of international trade, that is the result of the structure of NAFTA and all those other forces, but I simply wanted to point out that we have not been successful in lessening our dependence on a very large economy that is a very capricious trading partner. I simply do not feel very comfortable with that degree of dependence.

I think if the minister wants to move on, we could move on to the next areas. We could pass this area.

Mr. Tweed: There are some things you just cannot leave unspoken. I think again, when we talk about our economic strategy, it is very clear. The member has read it correctly into the record. Our economic strategy is to expand world trade and diversify Manitoba exports. Exports mean jobs, and I would challenge the member to provide me with any information that might suggest that we have not done this.

Mr. Sale: Well, I do not think we have to debate this for a long time. That is essentially what I have been saying, that the promise in the platform was to diversify, that the reality of the performance has been that we are increasingly dependent on one market, the United States of America. I think any prudent businessperson or economist or trade official, including the minister's own officials, would say, if they had their druthers, they would rather not be quite so dependent on one market for exports. They would rather have a breadth of dependencies so that when the United States has difficulties, as it inevitably will at some point in the economic cycle, we may be trading successfully with other economies that are not completely in sync with the American economy. So the whole point of broadening your RRSP holdings or your business dealings or your markets is to eliminate the risk associated with overdependence.

The Premier (Mr. Filmon) correctly saw that risk in 1995, and he committed to do something about it. Unfortunately, in the ensuing years we have become more dependent, not less, on the American market. That is clear. The data are there. It is regrettable. That is simply the point that I have been making. Of course exports mean jobs and of course our exports have grown. The point that we are concerned about is that they have grown mainly with one market. That creates a dependency and a risk that I do not think is welcome.

Mr. Tweed: I guess I just want to make sure that the record clearly states that the economic strategy of this government was to expand world trade. We have done that and we continue to do that. Are we content? I would say not. I would say that every and any opportunity that has presented itself or that we find as a province or as a government or as a department of Manitoba Trade we will explore to the fullest extent to give the population and the people of the province of Manitoba an opportunity to take advantage of those opportunities that are presented.

I think it is very clear that the strategy to expand world trade markets is working. We have diversified Manitoba exports and we have created more jobs. I would just like to be on record as saying that that is happening, will continue to happen, and I look forward to being a part of a government that continues to be a part of that success.

Mr. Chairperson: 10.2. Business Services (c) Manitoba Trade (1) Salaries and Employee Benefits $1,245,200–pass; 2.(c)(2) Other Expenditures $2,130,300.

Mr. Sale: Mr. Chairperson, it may be my eyes, but I am looking at the book supplied as Estimates material. I see $1,245.2 for 10.2(c). I guess that is (a), is it?

Mr. Chairperson: Item 10.2(c)(2).

Mr. Sale: (2). The next figure in my book is the sum of Other Expenditures of 2,380.3, which does not seem to be the same as the Estimates book.

Mr. Tweed: Mr. Chairman, if I might help for a point of clarification. I understand you have the supplementary. The $2,380,300, if you go to the actual Estimates of Expenditure, that is a combination of (2) and (3) under Manitoba Trade, $2,130,300 Other Expenditures plus 250 Grants.

Mr. Chairperson: I would like to thank the minister for clarification.

Item 10.2(c)(2) Other Expenditures $2,130,300 plus (3) Grants $250,000 come to that total as shown in the other book.

Mr. Sale: I should have brought my book with me, but I see what has happened here.

Mr. Chairperson: We can proceed.

Mr. Sale: Yes.

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Mr. Chairperson: Item 10.2(c)(2) Other Expenditures $2,130,300–pass; (3) Grants $250,000–pass; (4) Less Recoverable from Rural and Urban Economic Development Initiatives ($1,000,000)–pass.

(d) Telecommunications Marketing (1) Salaries and Employee Benefits $328,500–pass; (2) Other Expenditures $460,000–pass; (3) Less Recoverable from Rural Economic Development Initiatives ($198,200).

Mr. Sale: Mr. Chairperson, what is the recoverable here and why are we recovering into this appropriation?

Mr. Tweed: I am advised that the number represents about 25 percent, which is the Rural Economic Development's cost-sharing portion of this initiative.

Mr. Sale: Mr. Chairperson, is the assumption here that some of the smaller call centres are located outside of Winnipeg and REDI has a mandate outside of the city and that is the rationale? Is that what we are talking about?

Mr. Tweed: If I could, Mr. Chairman, we have a gentleman, Mr. Steve Demmings. He is the executive director, Manitoba Call Centre Team, and I would ask him to join us at the table. I am sorry I did not do it sooner. I am advised that the contribution and participation from Rural Development is with the intention of creating and developing call centres in rural Manitoba as well as in the major cities.

Mr. Sale: I thank the minister for the answer. TeleSpectrum Worldwide merged recently with another American telecommunications call centre, essentially operation. TeleSpectrum in the past year and a half or so has had an extremely volatile history, I am sure as the minister and staff know. They have opened centres, closed centres, centres have apparently failed. This centre almost closed at one point and then it rebounded and again has a–at least the last time I talked to anybody there–fairly large number of employees again. Does the minister believe that TeleSpectrum is stabilized at this point or is it still in a, let us say, developing situation?

Mr. Tweed: Mr. Chairman, I am not sure I would want to comment on the viability of any particular company in the province. I can tell the honourable member that the province has benefited from this company's participation in the provincial economy. We have benefited through the taxation, through the creation of jobs, through the opportunities that it has presented, but at this point in time I am advised that we do not have a financial stake in this company, and I am not sure it would be fair for me to make comment on the success or nonsuccess of this particular company.

Mr. Sale: Mr. Chairperson, there are a number of what I would call high-end or very good call centre jobs in places like the CN, Air Canada, and Royal Bank Direct, to give three examples where staff are highly trained. There is a good career path for them. In some cases they are unionized and have the protection of a unionized work environment. One of the issues when we visited some of those centres is the question, well, two questions, one of the availability of adequately trained staff that the company can then train in their own particular area but people who come in with the kinds of skills that are needed. Could the minister comment on whether our post-secondary institutions or secondary institutions are providing appropriate training for people in the quality jobs that are primarily involved in inbound calling centres?

Mr. Tweed: Mr. Chairman, I am advised that the Call Centre Association has taken it upon themselves to develop and are very involved in the producing of a curriculum for the training of the call centres. I think they have seen that as a priority in their association, and I am lead to believe that the curriculum that they are developing has been very successful and is continuing to develop along that path.

Mr. Sale: Could the minister indicate what college or colleges are currently using this curriculum?

Mr. Tweed: I am advised that Red River Community College are working with this curriculum and successfully.

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Mr. Sale: The call centre industry is like any other industry that is relatively recent, certainly recent in its explosive growth. Any industry undergoing that kind of change always has problems, structural problems, problems with regulation, problems with staffing. Are we currently meeting the needs of the members of the association in terms of available staff that provide a stable workforce, because as I am sure the minister knows, the turnover rate in some aspects of the call centre business is still extremely high?

Mr. Tweed: I am advised that the association itself, when it was first established by the representatives of the call centre organization, was basically originally set up to deal with that particular issue. I just quote here from my note that one of their main common goals was to ensure a sustainable reliable labour pool and develop a certified curriculum of studies. I understand that the curriculum has been developed and, as previously stated, is being used by one of our community colleges. We are advised by new companies that are coming to Manitoba and seeking people from the labour pool to fill the jobs that are being created, at this point in time are being met. I am also told that since the introduction of the call centres into Manitoba that over 8,000 jobs have been created.

Mr. Sale: Does the department or the industry association maintain turnover numbers in terms of the approximate staff retention numbers or turnover numbers, I guess two sides of the same issue?

Mr. Tweed: I am advised that the call centres maintain that number independently of the association.

Mr. Sale: Of the centres that we have an involvement with like Faneuil, AT&T, Transtech, GWE, some others, Angus Reid more recently, and I guess another one to be announced shortly or sometime soon, does the government maintain any kind of turnover numbers? Is that of concern to the government?

Mr. Tweed: Mr. Chairman, I am advised that as part of the agreement and arrangements that we enter into with many of the call centre companies, we do an audit on the jobs more to match to the obligation number, not so much to deal with the turnover. At this point, I am not aware that we keep a record of actual turnover of employees.

Mr. Sale: Mr. Chairperson, in the industry it is thought that if you can keep your turnover below 20 percent a month, you are doing pretty well in terms of employee turnover. Of course, that is a staggeringly high rate of annual turnover. I know there are some people who find this absolutely the right kind of job to do. They stay with it for years, and they find it a good job. But it is a tough job for many people, and the turnover rate is still extremely high, which is why we view these jobs, particularly in the outbound marketing area, in companies like Faneuil and TeleSpectrum, where they are essentially selling all the time and the refusal rates are running at 96, 97 percent. I think they feel that if they get 2 percent or 3 percent hits it has been a good evening, and that is an awful lot of stress for people who are constantly being refused and sometimes very rudely.

Are we still running in the outbound centres at that kind of level of turnover, 20-25 percent a month?

Mr. Tweed: Mr. Chairman, I think when you look at any industry that is new and developing, probably the companies that are involved in the call centre industry, certainly–again, just thinking of my own experience and business experience–if these companies are spending the dollars to train, it would be certainly, I would suggest, in their best interests to maintain that. I think you are always going to have some turnover that is directly related to improved opportunities after the training is completed. We currently do not have any numbers that would indicate turnover, and I guess then you would have to probably go into the reason for turnover: Was it a better job? Was it lost interest? Were there several varying reasons?

It has just actually been brought to my attention. Rather than get into the specifics, I can tell you that the type of people that are getting an opportunity to find a career or a career path that may take them on to bigger and better things–and hopefully it will–and if they are satisfied, hopefully they will continue at that job, but there is a company that has helped 150 social assistance recipients gain valuable work experience. To me, when you give people that opportunity, it just enforces my thinking that the opportunities created by the call centres are doing very much what they proposed to do. They are creating jobs, giving people the opportunities.

I had the opportunity just in the last, oh, it would be in the last six weeks, I would say, that we toured a couple of the call centre facilities in the province in Winnipeg, and I was totally taken by the professional demeanour of the entire facility. The people were working in very, very good conditions. The quality of the layout of the floor, the equipment that they were using, the ergonomics that they applied to the work stations that allowed the employees to be standing, be sitting, to get up and move around, I think the companies have recognized that to maintain the quality and the good employees these are the kinds of things that they have to do for the people they employ. We are certainly seeing every indication that these companies recognize that and are continuing to work to develop those types of properties or programs that will enhance the employment opportunities.

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Mr. Sale: Mr. Chairperson, does the government have a priority on any particular kind of call centres that it is attempting to particularly attract, or is it open to any and all with no particular priority?

Mr. Tweed: In developing a business and in developing opportunities for the people in the province, I think it has to be noted that the province has been in the call centre business now between five and six years. I think if you travel, not only in Canada but perhaps North America, maybe even beyond, you will find that Manitoba has, because of their strong concern and development for education and training, for developing a curriculum, for developing the programs, that we have developed a very strong reputation for attracting these types of businesses. I think now that we have done that, our reputation, we also have perhaps as good an infrastructure as anyone in the competitive market that we are going after.

We are now able, because of all that, to focus our attentions. We are certainly looking more towards the inbound calls that are coming in, which apply again in the areas of technical service, customer services. I think our position now is to highlight those areas and try and go out and attract those types of centres to our communities now.

Mr. Sale: Just a last question in this area, Mr. Chairperson, in our tours of some of what I would say the best centres, maybe it was the CN, or the Royal Bank, or Air Canada–I think Faneuil has a very good physical set up. I am not sure which ones the minister was through, but it might have been one of those. In all of those though, particularly CN, Air Canada, to a lesser extent some of the others, disaster recovery and standby came up every time we talked with the management. I know CN maintains a centre, I am not sure whether it is in Pennsylvania or Ohio, as their hot standby. These are all mission critical systems that cannot be down, period. I mean the whole CN system is controlled essentially from the old Eaton catalogue building, which is kind of an interesting rebirth for that building. It used to ship stuff all over the world, or all over Canada, from the catalogue building. Now we ship electronic signals all over Canada from the same building and control all the freight.

There is some talk of having a recovery location in western Manitoba. I think the concern is which grid the location would be, which electrical grid the location would be dependent on. Is there any anticipation that there will be a Manitoba recovery centre, or is it the feeling that such a centre has to be physically more distant from Winnipeg than a Manitoba location would allow?

Mr. Tweed: I think when you are in this type of industry, it is certainly a wise decision by the company or a company to have that secondary. One of the companies, and I will put on the record, that we toured was the Air Canada call centre. In talking to the manager there, we discussed the situation during the ice storm in Quebec. He said that they had rerouted all the calls that were coming into Quebec into Winnipeg. I should correct. I am not sure if he said all, but many of them. What he suggested to me was that they always try and set their system up so that they do have an opportunity to forward it to another call centre or to another area that will answer and look after the requests of the people coming in.

I think it is probably a company decision that would dictate that. Then they would make those decisions based on the investment and where they see fit that it would best suit their needs. I would just, and more for interest I think and for the sake of the member, when we talk about the opportunities that having the reputation that Manitoba does, the Royal Direct call centre that is coming into Manitoba or is here in Manitoba has invested $10 million in Winnipeg. Apparently they are hoping to employ approximately 700 people by the year 2000 because of our strong reputation and the training and the quality of the people that we have here.

This was a company that came to Manitoba without being convinced by us that this was the place to be. They came because they knew it was a good place to be. I am only guessing, but I believe that their location is at the Grant Park mall, which you might be a benefactor of in the constituency. Does it fall under the Inkster constituency? I am sorry, Crescentwood.

Mr. Sale: Well, the minister probably knows there were days in my past when I was a Liberal, so that is not an unforgivable slight. The centre is in the old Crescentwood riding, which now does not exist. It is now in the Lord Roberts. I was pleased to be at the groundbreaking and at the official opening for that centre. I would agree with the minister that that is what the staff said, that is what the president of the Royal Bank said. In fact, the former minister is here reading.

He will remember that at the official opening, we were paid a visit by Lily Tomlin. I must say that the chairman, John Cleghorn, of the Royal Bank was a most gracious recipient of a practical joke. I am not entirely sure that conversation was all scripted. I rather think that some of the things she said and some of the things that he responded with may not have been in the script, as it was very funny. It was quite a good exchange, I thought, Lily Tomlin in the form of Arvel Gray, if I am not mistaken. I thought for Canada's staid bankers, who are not usually given to that kind of public display of wit and humour, it was quite fun.

So, yes, it is a good centre, and they are good jobs, a stable workforce and low turnover in that centre, in my understanding, and there is a career path for those people, which is not the case in some of the low-end centres. So it is a very good centre. Pass.

Mr. Chairperson: 10.2. Business Services (d) Telecommunications Marketing (3) Less: Recoverable from Rural Economic Development Initiatives ($198,200)–pass.

10.2.(e) Industrial Technology Centre.

Mr. Sale: I think that in the main the centre provides some useful functions, particularly in its library and its resource function to Manitoba businesses. There are some aspects of it which are unique. The minister refers to them in some reports, for example, its ability to test paper–break-open tickets, lottery tickets–to assure the security of those systems. It is quite a unique function. It is not entirely clear why it needs to stay in the public sector, because it is a fee-for-service system. Anyway, it is there.

The main thing I just want to explore, I really just want the minister to explain this little red kit that we ran into a year ago. I am sure the minister is aware of it. He has seen it. It is called the Innovation Report. It consists of a cute little box, a printed report, a CD and a video. With all due respect to the producers, the quality is not wonderful. The video, audio and CD quality, at least on my computer, is not what I would call high level. It is not bad, but it is not great.

How in the world did we come to let the contract for $260,000 to Rescom Interactive when the industry knew that Rescom was in trouble when the contract was let, and it got deeper and deeper into trouble as the months went by after the contract was let?

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Mr. Tweed: Mr. Chairman, if I may, and just only for clarification, I think the line that we are on is ITC, the Industrial Technology Centre. I suspect that the line that the honourable member would like to deal with is under Economic Innovation and Technology Council, EITC, which is subappropriations 10.4.(b) and 10.4.(c).

Mr. Sale: Mr. Chairperson, I am just referring to the note: The centre formerly functioned as part of the EIT Council. ITC will provide services, et cetera.

I do not mind where we do it. We can pass this if you want to do that and come to it in due course.

Mr. Tweed: If that would be okay, we do have a person on staff that we would like to bring in, if there are questions, particularly on the ITC, and we can bring him in. He is not here today, I guess that is what I am saying.

Mr. Chairperson: Item 10.2.(e) Industrial Technology Centre $851,300–pass.

Item 10.2.(f) Health Research Initiative $3,000,000.

Mr. Sale: Mr. Chairperson, the announcement, I think it was yesterday, of an additional million dollars in this area, I presume that is what we are looking at here in terms of this increase.

Mr. Tweed: Yes, it is, Mr. Chairman. What we have found is that, with the receivers of these funds going out and competitively attracting new industry and new development, that their costs of operation increased. So we tried to reflect that in this year's budget.

Mr. Sale: Mr. Chairperson, I am just wondering how the minister and his government got a hold of our platform. I am puzzled by this, because I certainly support this increase in support for research and development. I am just sad that we did not get to announce it ourselves instead of having you announce it for us.

Mr. Tweed: Mr. Chairman, I would love to stand up and take all the credit for it, but I think I would have to credit my predecessor for his forward thinking, seeing opportunities for the province and helping government make the right decisions. Again as much as I would like to say I initiated it, I cannot. Mr. Downey should be congratulated and my increase is merely recognizing the good work previous.

Mr. Chairperson: 10.(2)(f) $3 million–pass. 10.(2)(g) Manitoba Centres of Excellence Fund.

Mr. Sale: Is this an open-ended federal provincial agreement under the Networks of Centres of Excellence Initiative or is there a time limit on it?

Mr. Tweed: I am advised that there is no time limit.

Mr. Sale: Does the government have any role in directing the particular areas? Does it sit on the grants council or is it simply funding and the grants are awarded on a completely independent basis?

Mr. Tweed: I am advised that the provincial government senior policy advisor for science and technology allocates approximately 20 percent of his time in the management of the MCEF with minimal support and assistance from other RES and finance administration staff as required.

Mr. Sale: Mr. Chairperson, what is the jurying process for sorting out which projects are funded and which are not?

Mr. Tweed: I am lead to believe that we do not have a part in the decision-making process, but certainly we encourage and offer advice to the federal government and federal department based on our economic priorities so that they are aware of it and hopefully they will link the two together.

Mr. Sale: So in the actual selection process, is this a peer juried process or is it a federal government staff directed process?

Mr. Tweed: Mr. Chairman, I would be prepared to provide for the member a detailed description of the process. I understand it is quite detailed, the formula, and I would be happy to share it with the member.

Mr. Chairperson: 10.2(g) Manitoba Centre of Excellence Fund $450,000--pass;

Resolution 10.2: RESOLVED that there be granted to Her Majesty a sum not exceeding $22,614,400 to Industry, Trade and Tourism, Business Services for the fiscal year ending 31st day of March, 2000.

Is it the will of the committee to call it five o'clock.? [agreed] The time being five o'clock, committee rise.