Manitoba Committee Hansard — 5 June 1974 (Education Committee, Sitting 10, 30th Legislature, 1st Session)

30-1-ed10

Manitoba — Debates (Hansard)

ECONOMIC DEVELOPMENT COMMITTEE 8:00 p. m. Wednesday, June 5, 1974 Chairman: Mr. J. R. Boyce. MR. CHAIRMAN: Order please. This evening it was decided to proceed with the report of the Economic Development Advisory Board and with ... of McKenzie Seed. 261 Is it the wish of the Commit tee to proceed? I'll ask Mr. Evans, the Minister, to introduce Mr. Remis. MR. EVANS: Yes, Mr. Chairman, very br iefly. I don't believe Mr. Leonard Remis needs much intr oduction to the committee. Mr .

Remis ,a s my Deputy Minister, was appointed chairm an of the Economic Development Advisory Board only a matter of a few months ago when Dr. Baldur Krist janson was ass igned to other duties in the Department of Agr iculture. There has been also som e change in the make-up of the com mittee and I would hope that Mr. Remis, when he gives his report, may make some reference to the membership of the commit tee for the edification of the members of the Legislature who are on this

part icular Economic Development Commi ttee. By Order- in-Council it has been requested - the board has been requested - to report annually to the Standing Committee on Economic Development pertaining to prior ities on development programs; and secondly, how best to st imulate and co-ordinate public and pri vate activities in the field of economic development in the province and to generally make observations on the economic situation of Manitoba. Therefore, Mr. Chairman, in keeping with past practice, I would then on your behalf call upon Mr.

Remis to present the report which is, I understand, a consensus of the Economic Development Advisory Board. MR. CHAIRMAN: Mr . McGill. MR. Me GILL: Mr . Chairman, before Mr . Remis begins his report I just want to check with Mr. Evans. I have a report of the Standing Co mmittee on Economic Development for June 1971 and June 1972. Was there a report for June 1973 ? MR. EVANS: Mr. Chairman, there was a report planned to be given in 1973 but there was a dissolution of the Legislature and, as you know, a lot of business did not take place that might have taken place if such a dissolution didn't occur.

Therefore the Com mittee did not report in that year although it was prepared to do so. I mean, the Board did not report in that year -D r. Krist janson. MR . McGILL: I was just wonder ing how the Board would comply with the Order-in Council which required that they report annually to the Legislatur e. Would they not file a written report then, when they were not able to pres ent one verbally? MR. EVAN S: Well, I am not a lawyer but you may have a very good point there, Mr. McGill. I am not aware of ... MR. McGILL: There is a written report ? MR. EVANS: There is a written report - on file, is there? MR.

McGILL: For ' 73 and '74? MR. REMIS: Can I answer that question ? I will be touching on the report that was not given in '7 3 bri efly, although there is a written report and I have a copy of it, and I am pre pared to make it available at the discretion of the chairman. MR. McGILL: ... if we could have that, Mr. Chairm an. MR. CHAIRMAN: If Mr. Remis has it and ... MR. REMIS: I don 't have it with me now but I can make that available at any time. MR. CHAIRMAN: Thank you very much, Mr. Rem is. The Committee will antic ipate a copy of the report. Mr. Remis, perhaps you would like to remain seated while you .. . MR.

REMIS: I've got a mike here and if I had a glass of water -- I think it's going to be kind of a dry affa ir. I hope it isn't too dry for the members who are listening to this report. MR. McGILL: Mr. Chairm an, does Mr. Remis have reports that he might circulate and we could follow him through with ? MR . REMIS: At the pleasure of the Chair. MR. CHAffiM AN: What is the wish of the committ ee? The committee is at the disposal of the . . . MR. McGILL: Well, I would request that they be cir culated so that we can follow him as he makes his pres entation.

262 June 5, 1974 MR. CHAIRMAN: Okay. Then we would ask that they be cir culated. Mr. Remis. MR. REMlS: Mr.

Chair man, the Economic Development Advisory Board has the responsibility, under the terms of its governing Order -in-Council, to report to the Standing Co mmittee on Economic Development of the Legislative As sembly on prior ities recomme nded in development programs for the province and how best to stimulate and co-ordinate public and private activities in the field of economic development in the province, and recom mend any measures considered necessary to achieve the most effective means of com munication between government departments and agencies and industri es.

In conf or mance with this obli gation, the Board wishes to submit the following report for your consideration. The last appearance of the Board before the Standing Com mittee was in 1972. The scheduled presentation for 1973 was cancelled because of the dissolution of the House and the subs equent general election. Theref ore, it may be us eful to review very brie fly the activities of and changes in the Board since our last appearance. The major activity of the 1972-73 year ws the Rural Development Conference held at the Marlboro ugh Hotel, February 23-24, 1973, of which mention will be made later.

This followed a Dairy lndus,try Conference held in Brandon, December 14 and 15, 1972, sponsored by the Board, in conjunction with the Milk Board of Manitoba and the Manitoba Department of Agr icultur e. The third project undertaken by the Board in that year was a survey of business activity carried out jo intly with the Manitoba Chamber of Co mmerce, the Winnipeg Chamber of Comm erce, and the Manitoba Chamber of the Canadian Manufa cturers Association.

Since the end of 1972-73 year EDAB has undergone some substantive changes in personnel, in part because of the appointment of the previous chairman to the position of the As sociate Deputy Minister of Agr icultur e. Subsequently I have been appointed Acting Chairman. Pro fessor Paul Phillips, on a one year leave of absence from the Department of Economics, University of Manitoba, has been appointed Research Director and Executive Secretary. The other members of the Board are: Mr. A. S. Leach, Acti ng Vice-Chairman, who is Chairman of the Board, Federal Industries Ltd. and is a re-appointment to the Board. Mr. L.

Butterworth, retired - also a re-appointment to the Boar d. Mr. Keith Ebbern, Pres ident of the Manitoba

Chapter of the Canadian Manufactur ers As sociation and General Manager of Domi nion Br idge Co. Ltd. , - a new appointee. Dr . Om. P. Tangri, Professor of Agr icultural Economics, Univers ity of Manitoba - also a new appointee, and is present here tonight to as sist me in some of the technical aspects of this paper, for which the technical members of the Board have played a prom inent role. Mr. L. D. Whitehead, Editor and Pu blisher of the Brandon Sun, and he is also a new appointee. The fir st charge on the Board is to recomme nd priorities in provincial economic develop ment programs .

This means that we must have an appreciation of what const itutes economic development and how this differs from the narrower concept of economic growth. Economic growth in its simplest form is merely "more of the same" or, in more technical ter ms, ri se in Gross National Pr oduct. For Manitoba, the equivalent is ri se in Gross Pr ovincial Pro duct. If the Board were to be asked to recom mend priorit ies relating to economic gro wth, and only economic growth, it would find difficulty in doing much more than discussing the rate of growt h and what policies might be adopted to influence that rate.

The simple increase in GNP or GPP is the crudest measurement of growth, and more sophist icated measures - such as income per capita - are also widely used. However, in all cases, growth is assoc iated directly with ris ing Gross National or Gross Provincial Product, either in total or per capita. But - and this is a crucial, critical point - while risi ng levels of nat ional output and income per capita usually accom pany economic development, economic development does not necessarily accompany ri sing incomes . Clas sic examples of this point have been som e of the oil sheikdoms in the Middle East.

With the discovery of oil, their rate of economic growth was fa ntastic until some achieved a GNP per capita greatly exceeding those of Canada, the United Stat es, or any of the western industrialized countr ies. By no stretch of the imagination, however, could these "r ich"countries be cons idered developed. Economic development, therefore, must be conceived of as a much broader process, one result of which process is usually a higher command of goods and services on a per capita basis. Yet there are other equally important character istics of the more developed economies.

Without suggest ing any ranking of importance, we would like to expand on some of the more significant empir ical measures that have been identified as charact eristic of the development

June 5, 1974 263 (MR. REMIS cont'd) ... process. (

a) Divers ity and stability. The stability of an economy is usually (although not necessarily always) a function of its divers ity. This is because the gr eater dependence on one product or industry the greater the destabilizing effects of a rise or fall in the demand, supply or price of that product or industry. This is particularly true where an economy becomes dependent on a narrow specialization of a single res ource sub-sector. We need look no fa rther than our sister province, Saskatchewan, in the 1930's to see the devastating effect of reliance on one particular staple comm odity - wheat.

Manitoba with its more diverse agriculture and general economic base also suffered badly, but not to the same extent as Saskatchewan. Ontario, with a still more diverse economic structure, was even less affected. In general, the greater was the reliance on a single industry or resource the greater was the disruption and collapse. Examples could be expanded almost endlessly, but in terms of the old adage, it is hardly prudent to put all your eggs in one basket.

Diversity in the economy, therefore, in long run economically viable industr ies, is necessary to produce the high degree of economic stability that is assoc iated with economic development in a political economic unit. (

b) A signifi cant share of "higher order activities ". Since the concept of higher order activities may not be the easiest to describe, it may best be explained in the context of the stay option. An economy can be said to be more developed, all other things be ing equal, the more opportunity it of fers to its labour for ce to realize its full creative potential. This means that the economy must provide employment opportunities other than as "hewers of wood and drawers of water".

It must also provide opportunities in decision making, in research and development, in artistic and cultural affa irs, and in the application of technology and specialized skills, or in broader ter ms, what we have here defined as higher order activities. (

c) Facility for adaptation and choice. It is normally cons idered a mark of under development when an economy is primarily export propelled. By this we mean the health and prosperity of the economy is determined by markets and decisions outside of the control or influence of domestic decis ion makers. At the extreme, one can identify the so-called one-export economies. Prime examples would be Cuba with sugar, Ghana with cocoa, and Bolivia with tin.

Where the se conditions pers ist, domestic decision makers can have little control over their economy, and without control there can be little scope for decisions on priori ties. Any change in the external economic climate, therefore, tends to dictate priori ties with the consequent political and economic upheavals. In a world of international, inter-regional and inter-provinc ial trade, no economy-national, regional or provincial - is completely autono mous , yet the degree of indigenous policy control is a legitimate measure of economic development. (

d) Full meaningful and productive employment. A standard character is tic of under developed economies is a high level of under-em ployment and/or unemployment. Under employment occurs when people ar e working at least part time, but at a productivity well below what they are capable of if other work were ava ilable. The most common examples are excess family workers in peasant agriculture and excess service and trade workers and family servants, working for extremely low wages, in the traditional underdeveloped countries.

Rais ing the wages of these people under these cir cumstances merely results in the conversion of underemployment into unemployment. Chronic unemployment and under employment are symptoms of many weaknesses in an economy, not least being the inability to change because of the underdeveloped nature of the economic institutions or because of the dependence of domestic institutions on external forces, decisions or inst itutions. (

e) High levels of health, welfare and education services. One of the most freq uently used yardsticks of economic development are the welfare indicators such as infant mortality, availability of medical and educational perso nnel, and hospital beds, life expectancy, and sim ilar indices of the availability of social services. It is often these measures that betray the lack of real development in countries or regions which by gross output measures may be characterized as high income. MR . AXWORTHY: Mr.

Chair man, would it be possible that rather than reading his already prepared paper, which runs to I think 14 pages, or 17, I'm afraid it will be at least another half hour to read, pe rhaps the chairman of this Board could simply review for us sort of the highlights of the report, and particularly give us an assessme nt of the kind of advice and recomm endation deriving from the results rather than going through the philosophy and - It's interesting, but I find I can usually read faster than I can listen, and I oo uld prefer if

264 Jun e 5, 1974 (MR. AXWORTHY cont'd) ... Mr. Remis would just be able to address hims elf to highlights of his presentation and review some of the findings and recom mendations of his Board. MR. CHAIRMAN: Well of course, Mr. Axworthy, the Chair is at the will of the committee. It has been the usual practice in the past for the Chair to proceed by direction of the commi ttee, and before you arrived it was decided that Mr . Remis would read his report. Now if the committee wish to entertain a change of ... MR. EVANS: Mr . Chair man, I would like to make this point.

This report, this written document, represents the consensus of a number of people who have gone over it very care fully and they expect this report to be presented. Unfortunately they are not all here this evening, but people with diverse business backgrounds and diverse profess ional backgrounds have worked on it.

I know it's som etimes a rather bor ing procedure to hear a report read which is also before you for yourself to read; Therefore I would perhaps have the concern that the board members themselves may feel a bit slighted and may not be happy with a resume, which may leave out one or two points that some of the board members felt to be rather im portant. I do know members that we have on the board are very experienced businessme n and they've got som e pretty fir m views on what they put down here. Now that's an observation. MR.

AXWORT HY: ... appear to have been in the interest to have had the report distr ibuted before we met this evening so we would have had a chance to read it in our own right and then be able to comme nt on it. I just feel that so mehow at a time when we're supposed to be concerned with speed-up of affa irs, to spend an hour listening to a rec itation of a report is somewhat of a waste of time. MR. CHAIRMAN: Once again, your opinions as a member of the Committee, Mr. Axworthy, are noted and the Chair will proceed as the com mittee so dictates. Is there a desire of the Com mittee to proceed? MR. McGILL: Mr.

Chairm an, if he sees an opportunity to paraphras e or to give us som e

summary of an area, why we'd be happy to have that. MR. CHAIRMAN: Thanks, Mr. McG ill. Mr. Remis. MR. REMIS: I'm not sure where I left off. MR. PA WLEY: I think it was Page 16, wasn't it ? (Laughter) MR. REMIS: One of the most frequently used yardsticks of economic development are the welfare indicators such as infant mortal ity, availability of medical and educational personnel and hospital beds, life expectancy, and similar indices of the availability of social services.

It is often these measures that betray the lack of real development in countries or regions which by gross output measures may be characterized as high income. In a very real sense they measure the true welfare level in the community which average or total income levels do not, usually because of problems of income distr ibution and the lack of social infrastructure. (

f) A decrease in the disparities of income and wealth. One of the market attr ibutes of underdeveloped economies is the wide disparities in income and wealth - I think that should be "m arked" -b etween economic and social classes or strata, between rural and urban sector s, between geographical areas or regions, and between different industries and occupa tions within the economy.

As development takes place, markets fu nction more sm oothly and mobility improves between labour markets , tending to decrease the income disparities and, over time, usually with the ass istance of the elaboration of redistri butive tax schemes, to moderate disparities in wealth. Obviously, the moderation of inequalities does not mean and has not meant the absolute equaHzation of income and wealth; nor is this at all likely the result of development in a market-oriented economy. Once again, this measure of develop ment, therefore, is one of degree.

The fuller realization of these marks of development therefore must be our prim ary goal. Nevertheless, as the Board has pointed out in earlier reports, there ::an be substantive conflicts between some of these goals. As well, we shall emphasize that there are costs in volved in attaining growth. These costs are now recognized to include such problems as pollution, urban congestion, rural depopulation, disruption of tradit ional communities and values, and the costs of providing new soc ial infrastructure to service comm unities created inthe process of economic change.

It is the Board's position that minim izing these costs must be a prior ity in any policy matters. For example, we recognize that the relatively unpolluted natural environment in Manitoba has been, and continues to be, an important provincial asset, both for the welfar e of res idents and, in development ter ms, as an attraction

June 5, 1974 265 (MR. REMIS cont'd) .. . to environment related industries such as tour ism. The Board has maintained in the past that the protection of our ecological environment should be a major priority in economic development policy in order to maintain, undiminished, this real resource asset. We see no need to change our position. It was in the pursuit of a strate gy to avoid some of the costs assoc iated with the rural urban shift noted above that the Rural Development Conference was organ ized. The major concern of the Conference was the question of how to provide a stay option in rural Manitoba.

The response from delegates was more or less predictable --higher prices for agri cultural products to raise fa rm income to levels comparable with those in urban areas , a higher level of services available within a reasonable driving distance, and more diversity of employment opportunities . The difficult question is how to achieve these objectives which are, indeed, integral to our concept of a developed society. One problem, of course, is that, short of direct and massive subs idies, the province has diffic ulty in controll ing farm prices and far m income for those com modities that enter a wider market.

Therefore, to a considerable ex te nt, the health of the rural sector is at the mercy of the world trend in food prices, which until recently has not been favourable to the prair ie fa rm er. Within the last two years the external economic climate has changed markedly, with both favourable and unfavourable ef fects on the Manitoba economy. It is probably useful at this point to review the provincial economy' s performance over the last year in order to evaluate it in developmental ter ms.

The most import ant single influen ce on the course of the Manitoba economy in 1973 was the dramatic turn-around in agr icultural prices. Overall for Manitoba, prelim inary data show an increase in the index of agri cultural pr ices from December 1972 to December 1973 of almost 25 percent. At the same tim e, total farm receipts were up 30 percent following a rise in 1972 of 28 percent, and the value of agr icultural output in the last year rose 86 percent. By any measure, therefo re, 1973 must be viewed as one of the better years for the agr icultural sector of Manitoba.

This relative prosper ity cannot help but have a signifi cant impact on the provincial economy and str engthen the stay option, providing of course that the higher fa rm income is stabilized in real ter ms at a more remunerative level than in the past. The problem is, and has been, that Manitoba and her sister prairie provinces have little control over agr icultural prices and incomes. That means the general level of prosperity of the rural sector is largely determined by the state of national and international markets which fluctuate widely in response to world supply and demand conditions.

Let us look at the Manitoba situat ion more care fully. In 1973, while the value of all grain crops increased dramatically, the change in volumes of production was moderate, in some cases negative. For instance, wheat production in the province increased 16 percent but the value of the cro p increased by 200 percent from $1 21 million to $360 million. The barley crop further exemplified this trend of increased agric ultural crop values over and above the increase in production.

Barley production dropped slightly from 85 million to 83 million bushels but the value of the crop increased from just over $90 million to $195 million, an almost 110 percent increase. Increases in livestock prices resulted in a similar trend in total value of the livestock although the increases of value and production were not as great as in grain crops. Total livestock value rose from just over $250 million to $350 million, a 40 percent increase.

The number of cattle increased by four percent while the number of hogs decreased by one per cent, but the value of these cattle and hogs increased by 40 percent and 50 percent respectively. These sam e tre nds are visible in the other categor ies, namely sheep, dairy products and poultry. On a more somber note, it must be recognized that agricultural pr ices, particularly in the United States, are softening. Livestock and poultry prices have fallen up to 25 percent. World grain prices have retreated considerably from the very high prices of last year.

Of course world prices are so dependent on supply conditions that it is difficult to predict futur e prices with such low world res erves and uncertain harvests. Then again there is this year's moisture problem, and that must increase the uncerta inty of the rural sector. We are aware of the attempts by pr oducer marketing boards to dampen price fluctu ations but while they may have som e benefic ial effects for the producer in domestic markets, they can have little ef fect in competitive world markets. A second note of caution must be sounded in respect to the net income of the rural sector.

While gross fa rm receipts have ri sen impress ively over the last two years, so have

266 June 5, 1974 (MR. REMIS cont'd) ... farm costs, and while it appears that in net terms there has been som e improvement in real income to the farm sector, it is cons iderably less than is suggested by the gross increase in farm incomes and value of production. In summ ary, then, it is clear that ris ing world food prices have had a significant ef fect on the Manitoba economy recently, and while we should not overestimate the improvement in net farm incomes, there has been a more healthy buoyancy in our rural sectors over the last year or so that has been absent all too long.

It is difficult, if not imposs ible, to separate out the influence on the rest of the provincial economy of the agricu ltural situation from the influence of other industr ies which have also shown considerable str ength in 1973. Estim ated gross provincial product increased 15. 4 percent in 1973, slightly surpassing the national increase of 14. 8 percent in gross product.

A two-thirds increase in the value of prim ary production was the propelling force behind the provinc ial growth but, on further analys is, it should be noted that agriculture took a lion's share with an 86 percent increase in value of output, with mining second, show ing a 30 per cent increase. Secondary industries also gained in gross value of production. Construction was up over 10 percent and manufacturing almost 25 percent. Tertiary industries which include retail trade, services, utilities, and transportation and com munication, followed the general trend of increased gross product.

Retail trade, for instance, grew by 14 percent. These figures all show increases in gross production. They are important indicators if we can separate the real increase in production from the increase due to inf lationary pressures. Inf lation and its effects on the economy will be discussed later in this report. We have been dealing with the increase in the value of goods, a quantifying measure, but for a true discussion of development one should attempt to measure the relative welfare of Manitobans. Unfortunately, no welfare index exists that adequately reflects our concept of economic development.

Certainly the availability of, and access to, housing, medical services, education, cultural and recre ational facilities are all important indices of the quality of life in the province but we have not had the chance to review these measures for this report. However, one measure of economic health we have identified is full, meaningful employment. The labour force in Manitoba increased to 408, 000 in 1973, up 12, 000 from the previous year. The higher participation rate in 1973 was respons ible for the larger than nor mal increase in the labour force.

As has been the case in the last five year s, the fe male partici pation rate continued to climb, reaching 40. 4 percent in 1973, up from 38. 4 per cent in 1972. A most encouraging sign was an impress ive increase of 14, 000 in the number of employed. Employment increased in the services, trade and manufa cturing sectors while it rem ained relatively stable in finance, construction, utilities and overall public administration. Indeed, labour shortages occurred in many occupations in Manitoba in 1973.

Chronic shortages were reported in certain occupations in the metal trades, rest aurants, of fice workers, the gar ment industry, mining and nurs ing. The increase in the number of employed was greater than that of the labour force. Therefore the number of unemployed decreased from 18, 000 to 16, 000. As a result, the unemployment rate fell to 3. 9 percent from 4. 5 percent in 1972. But unemployment and under-employment continued to be a ser ious problem in som e northern and isolated comm uni ties.

Most of the employment gains were in those sectors where traditionally there has been a high proportion of employees without a primary attachment to the labour force. This group of workers, so metimes referred to as the secondary labour force, tend to move with comparative ease in and out of the labour force in response to job opportunities. As a result, these sectors, for example the service sector, tend to be charac terized by low wages, unstable employment and little labour organization.

The prim ary labour market offers less employment opportunities but higher wages, stable employment and gr eater market control. This trend to duality in the labour market continued through 1973 and probably accentuated because the service sector rece ived on the average only a relatively sm all wage increase of 4. 4 percent compared to over 9 percent in the construction and fi nance, insurance and real estate sectors. Manufacturing and transport employees both won wage increases of over seven percent. The cumulative eff ect of these increases was a greater inequality in the distr ibution of income.

June 5, 1974 267 (MR . REMIS cont'

d) Despite the generally improved perfo rmance of the provincial economy in 1973 there are problem areas. One has been the short ages of certain type of labour that have been noted previously. It is partly in response to this problem area that this Board plans to carry out over the next year a major evaluation of the labour market. There is no need to belabour the other major "shortages'' problem, that is of energy and certain intermediate goods such as steel, plastics, res ins and some types of wood products.

But while these inputs were in temp orary short supply, the longer term problem will almost inevitably be translated into ri sing prices of these intermediate commodities. The rise in prices of intermediate goods is but one part of the most press ing con tem porary economic problem -- ri sing prices, or as it is more generally referred to, inf lation. Since inflation does bulk so large in any projectio n or evaluation of provincial economic per for mance, it is worthwhile directing some considerable attention to it in this review.

It has been customary, since the Second World War, to think of infl ation as resulting fr om an "overheated" economy. In simple ter ms, this means that demand for goods and services exceeds the supply of goods and services and, as a result, prices are bid up. The standard policy prescr iption for government, therefore, was to atte mpt in the short run to dampen demand until supply in the longer run could catch up. Dampening of demand could be implemented by increasing taxes, decreas ing government expenditure, increasing interest rates, etc. , the standard monetary and fis cal package familiar to most of us .

Indeed, this was the policy that the Federal Govern ment adopted in the early 70's when the Canadian unemployment rate reached unacceptable rates of about seven percent (seasonally adjust ed). Yet the rate of price increase showed little sensitivity to the recom mended set of anti- inflat ion policies. Since the early 1970's, with the reversal in federal policies, the unemployment rate across the country has fallen. Manitoba has one of the lowest rates, and if some reports are accurate we are facing bottlenecks of zero unemployment in selected industries.

The fact that in February of this year we had a reported 3. 9 percent of the labour force unem ployed, even if part of that percentage was due to statistical measureme nt problems , indicates some structural maladjustments in the provincial labour market, although less ser ious than in most other parts of the country. The question of whether the province could or should attempt to lessen these maladjustments is one to which this Board will address itself over the next year.

But while unemployment appears to have yielded to the change in federal policy and presumably also to provincial employment policies, which we have not yet had the chance to review; the inflation rate has rise n dramatically. It is so mewhat comforting to be able to report that, relatively, Manitoba has far ed somewhat better than other provinces in terms of inflation as well as in unemployment, but inflation remains the most serious cloud on the provincial economic horizon. What then, if anything, can we suggest to you as pr iorities in meeting this infla tion threat ?

First, it is instructive to look at the Consumer Pr ice Index and to br eak the price index down into its components in order to see where the major infl ationary pressure is manifesting itself. Since figures are not collected for the provinces, we have no Manitoba wide picture. However, price stat istics are collected for Winnipeg; therefore we will base our analysis on these. It should also be noted in passing that the Manitoba Bureau of Stat istics is initiating collection of pr ice data for other areas of the province but these data are not yet available.

Us ing Winnipeg figur es, then, we find the following: Fifty-five percent of the increase in consumer prices is due to the food component. Housing places a distant second, account ing for 17 percent of the increase, followed by clothing at 11 percent, recre ation and reading at 7 percent, health and personal care at 6 percent, transportation at 3 percent, tobacco and alcohol at one percent. The pattern is cons istent across the country. Food has been the predom inant inflat ionary source followed by housing. This poses an interesting dilemma for Ma nitoba.

Our rural sector is undergoing a relatively prosperous period because food prices have been ris ing, but, on the other hand, risi ng food prices are our biggest problem. There is no question that Manitoba is all but powerless to aff ect world food markets. This means that any attempt to control prices would, in the absence of subs idy programs, lead only to shortages. This assumes, of cou rse , no changes in the margins between the pr imary producer and the consumer. It is true, of course, that only a part of the Manitoba

268 June 5, 1974 (MR. REMIS cont'd) ... consumer 's food dollar is spent on food produced in Manitoba, but the food price phenomenon has been world-wide, reflec ting real com modity shortages . Manitoba, therefore, being a net food exporter, both gains and loses as a result of risi ng food prices. This is not to deny that there are many people in the province who have suff ered a major drop in real income as a result of the ri se in the cost of food, but it does suggest to us that the government's first concern should be to protect the real standards of living of those on small, fixed incomes.

We have not yet had the tim e or opportunity to study indexing as a method of lessening the impact of ri sing prices on the welfare of this group of people, but it is one of the policy tools that could be looked at. It does not appear likely that, barr ing maj or crop failure, the 1973 pattern of increase in the Consumer Pri ce Index being more than half accounted for by food, will con tinue. Obviously the ri sing price of fuel will also enter almost everywhere as a cost item. Most industr ial com modities such as steel are in short supply and prices are rising.

The conclus ion from all this is that, for the most part, the inflationary pressures lie outside the Manitoba economy, indeed outside the Canadian economy, and it would be pointless for Manitoba to attempt a frontal attack on the problem. The major priori ty, therefore, must be to minimize the disruptive impact and to lessen the distributive inequalities that have resulted. There is one signifi cant sector where the province can have and has had a substantive influence. This is, of course, hous ing where the largest single inflationary element has been spirall ing land prices.

It is interesting to note that, relative to other major cities, Winnipeg's housing index has risen much more slowly; at least until recently. This is partly attr ibutable to the slower growth rate in population in the metropolitan region. Undoubtedly it is also reflected by the number of units provided by the Manitoba Housing and Renewal Corporation. In any case, the only defence against inflationary rise s in housing prices is increas ing supply. In priori ty terms, ther efore, this means ensur ing that increased am ounts of serviced land are available to the hous ing market.

In the service and trade sector , the largest part of value added is labour cost. Inflation in these sectors ' pr ices represent to a great degree increased wages. Therefore, any pres cr iption for reducing price increases for services would involve a reduction in the real wages of those workers relative to the rest of soc iety and, as we have already noted, these people are on average already the lowest paid segment in our economy.

In short, Manitoba does not have in its hands the tools to take on the world-wide inflation whose cause is partly rooted in real com modity shortages, a fact that has contributed to risi ng far m incomes in Manitoba. We would therefore suggest that the province's attention would be best concentrated on those areas where it can have some effect and try to lessen the impact on those who can ill afford any decline in real income. This brief review of 1973 obviously raises many issues which we ar e unable to com ment further at this tim e.

However, the Board has adopted a tentative research and review pro gram that should provide new insights into these problems before our next presentation in one year's time. At the moment, the Board has decided that its first primary objective is to provide an independent evaluation of problems and programs in selected areas of provincial economic development. With this in mind, we intend to greatly extend our provincial economic review both in depth and in time, so as to provide a medium ter m report on the economy in the recent past, the present, and with som e projection to the futur e.

In this exerci se we will continue to look at inflation and its impact on Manitoba, and consider proposals that might be beneficial to counteract the existing and antic ipated costs of risi ng prices. As well, a priori ty in any assess ment must be balanced regional development. Supplemental to th is, we intend to initiate a general evaluation of manpower progra ms, problems and policies. In part this will be designed to provide information to improve co ordination between governmental agencies and departments.

We hope, as well, that the pr ivate sector will have a signific ant part to play in the evaluation, particularly in re spect to the question of bottle necks in the availab ility of certain types of skilled labour . We have a particular interest in promoti ng som e specific studies that we cons ider of considerable importance to the evaluation and implementation of provincial and regional development strategies.

Two studies that we should mention at this tim e are a study of the size and compos ition of Manitoba's exports and imports , and a study of transportation pro grams and their relation to prices and economic development in the northern part of our

June 5, 1974 269 (MR. REMIS cont'

d) province. Since the Board itself has lim ited staff resources, it plans to co-operate with and supplement ongoing government studies rather than attempt to cover all areas itself, thereby ri sking duplication and superfi ciality. Indeed we foresee the Board partic ipating in the co-ordination of economic rese arch across as broad a range of the government service as the limitations of our staff resource s permit. Discussions about where the Board can make its most significant contribution are presently under way with other branches and agencies.

Our second primary objective is to promote two-way communication between the pr ivate sector and the government. In the past, one major effo rt in this regard has taken the form of an annual conference on a select topic in regional development. We expect to continue this practice early in the next year. In addition, we intend to sponsor or eo-sponsor a number of smaller seminars relating to aspects of our manpower evaluation program and our ge neral review of the Manitoba economy.

It is obvious that som eone else looking at the contemporary problems of the provincial economy might decide that some other areas should receive intensive study by the Board. In fact, we did not cons ider a broad range of subjects which we felt could benefit from our cons ideration, but given the lim itations of staff resources, we decided that the above items should receive priority attention. We intend to bro aden our work as time and resources permit. This concludes my report. MR . McGILL: Mr. Chair man, I'd like to thank Mr . Remis for the report of the Advisory Board.

It is a fa irly complete analysis of the economic condition of the province at the moment. It is, however, in som ewhat dif ferent terms than I had expected. I rather thought, Mr. Remis, that you might have included here some more specific advice in practical terms to the department in respect to the priorities which they should be observing in the next twelve months. In looking over a previous report I note one paragraph that states that - and this was in June /72 - one

part icular requirement, meaning requirement of the work of the Advisory Board, was "that we review the the operation of the Manitoba Development Corporation from time to time. This review is now in progress ." I had hoped that perhaps that review might have been presented to us. Have you any information to give to the Committee on any review of the operat ions of the Man itoba Development Corporation ? MR. CHAIRMAN: Mr. Remis . MR .

REMIS: I should point out that some of the work that the Board does is public, such as our report today; some of the work that the Board does at the request of the Govern ment is private to the Government, and that there has been a report to the Government on the MDC, which the Government in its wisdom will release or not release. MR. CHAIRMAN: Mr. McGill . MR.

McGILL: Well, I just took from this particular part of the report that there would be some foll ow-up to the rather intriguing and interest ing statement that they were in the process of reviewing that operation, and you are going to leave us hanging in mid-air here and not give us anything further on that ? MR. REMIS: I'm afraid at the moment that's about all I can tell you, Mr. McGill. I know the report was done and I know it was given to the Government. MR.

McGILL: Does the report for last year, which you've said that you had available although you haven't it here tonight - does that contain any indication or any more specific recomm endations on the priorities of the Department of Industry and Commerce than you have provided for in this report tonight? MR . REMIS: I think I'd like to diffe rentiate between this report of the Economic Development Advisory Board and the Department of Industry and Com merce, of which I also am an administrative of ficer. MR. McGILL: Yes. Well- excuse me, Mr.

Chairman - this is an interesting report of what you are prepared to do in the way of rese arch in the futur e. I had rather envisioned that you would be coming here tonight with some specific reco mmendations from the commit tee and using the varied experience of the members of the commi ttee to suggest specific guidelines. I think that happened back in 1970 and 171 when Dr.

Kr istjanson suggested certain areas in the economy that lent themselves to expansion - he mentioned food process ing and the process ing of natural products - areas in which there should be some direct emphasis by the Departm ent of Industry and Commerce. Now that trend has not continued thr ough this

270 June 5, 1974 (MR. McGILL cont'd) ... report and I'm wondering why. MR. REMIS: Well, I think any report on the department should really be referred to the Minister, who is quite aware of what the department has been doing with regard to those items in Mr. Kristjans on's report, and I don't really think I ought to comment on that at this time. MR. McGILL: Mr. Chairman. Well then, to be very direct about it, Mr. Remis, does the fact that you are a Deputy Minister in the department make it difficult for you to objective ly bring advice to the department ? MR . REMIS: No.

I've wrestled with that topic myself, as you're well aware, and I note that Mr. Kristjanson is also a civil servant, a senior civil servant in the government, as I am. I have communicated with other Economic Development Advisory Board people and I find that their chair men are often civil servants as well. I think that my vantage point is really helpful to the Economic Development Advisory Board in directing their res earch pro grams into those areas in which even the department, with its more considerable resources, often isn't able to do because of its day-to-day needs.

Now this may apply to other departments as well; consequently I feel that this gives me an opportunity to tackle some of the broader range problems rather than the more specific ones - and if you will note some of the things that we have alr eady indicated that we'd like to do for next year, given the resources we have, such as an evaluation of the manpower programs in a macrosense, identifying what seem to be anomalies in the system: You have a low unemployment rate and yet you have structural unemployment in areas.

Now let's take a good look at this and perhaps indicate to other people what ought to be done to re ctify this situation. Nobody that I know of in the system has really looked at the pr ovincial economy in even a short-term historical sense, that is since the last five or six years, and evaluated in terms of where we were and where we've been, where are we now and where are we likely to be in the short term fut ure. I think forecasts are diff icult in themselves and if you try to go too far you could really be out on a limb.

I think sti mulating the Bureau of Statistics to come out with some data such as developing or examining Manitoba 's trade balance, exports and imports, will give us a better measure for the department and for others to evaluate both the str engths and the weaknesses of the economy and what can be done about ov erco ming some of these weaknesses, and how do we build on some of these str engths. The problems of the Nort h; transport ation, and the influen ce on prices.

Now not much work has been done in these areas, not because people aren't aware of them, just somehow line departments, like mine, find themselves so caught up in the day-to-day things that so metimes standing back becomes a dif ficult thing, or not even the ability you have, you don't have the time to do those things. The Economic Development Advisory Board can do that and I'm in a position to help them see the route and help to channel their effor ts.

Now, communicating with the private sector is so mething that we do all day long every day, but there are certain levels of comm unication that we can't get at, and I think the development of holding these national conferences and seminars on selected papers, such as perhaps distributing this paper to a selected grou p of people and having them come down and tear this thing apart or talk about it, will be a useful fu nction. So that over-all I think that I can wear the two hats comfortably, direct the effo rts of the Economic Development Advisory Board and at the same time the departmental activities. MR.

CHAIRMAN: Mr. McGill. MR. McGILL: Mr . Chairman, again, Mr. Remis has explained his position and he's apparently satisfied with this, but I put it to him: Don't you find it rather dull presiding over a comm ittee and writing yourself letters of advice on how you should direct your department ? Isn't this a kind of closed cir cuit ? Wouldn't you prefer to have som eone remote from your own thinking as chairman of the Economic Development Advisory Board, so that you might argue with him a bit ? It's no fun argu ing with yourself, really, is it ? MR.

REMIS: Well, the report that I read today is really a consensus of a fairly bro ad ranging group of people - incidentally, I might introduce Mr. Leach, who is a director of the Board, who has come to participate in this meeting - that it is not just my opinion that is being read here today but the result of the research of the Research Director and the con sensus of opinion of the rest of the Board. So that, I don't know, it may be unlikely that I find myself being highly criticize d by my own people at some futur e time, but that could happen. MR . CHAIRMAN: Mr. Axworthy.

June 5, 1974 271 MR . AXWORTHY: Thank you, Mr. Chairman. I'd like to pursue two or three lines of questioning and one would just be the follow -up on Mr. McGill's concern about really the lack of independence that this board has, becaus e of the close connection it has with the department whom it's advising, and I was wondering if they had considered, for example, the model of the Economic Council, which works on the federal level as a totally independent board.

While appoint ments are made to it by the Federal Government, there is no connection between it and civil servants, and it is able to provide an annual economic review which often tim es is very critical of the government. And let me put a question to you this way.

This report, as you read it and I've read it, is singularly lacking in any particular area of cr itique of the Provincial Government, and while I know that they are exemplary in so many facets of their activity, it str ikes me that they can't be that good, and I do think that the fact of the lack of any kind of criticism in the report is a product of the fact that this Board is too closely tied in with the Government. MR. CHAIRMAN: Mr. Evans . MR. EVANS: Mr. Chairm an ... MR . AXWORTHY: Well, Mr. Chairman, is it poss ible for Mr. Remis to answer the question ? MR.

EVANS: Well just as a point of information, as one who is part of the Government and has passed the 0. C. , it was not the intention of the Government, nor has it ever been, to have the Board confine itself strictly and narrowly to the operations and policy objectives of a particular department. The spectrum of economic development involves many depart ments. It probably involves every department, including education and health. These all have a role to play in this very broad subj ect. So really, as much as Mr.

Axworthy's comm ents are rather flattering of the Department of Industry and Commerce, I would submit that we are playing but one role in this whole process. To the extent that government can play a process in economic development, we are only playing one role. The Department of Education plays a very vital role, the Department of Agriculture plays a role, the Department of Municipal Aff airs plays a role, and so forth. MR . CHAIRMAN: With that clarification, Mr. Re mis, would you like to answer Mr. Axworthy's question ? MR. REMIS: I don't see how I can answer it any differently than I answered Mr. McGill. MR.

AXWORTHY: Well let me put the question in a str aightfo rward way. Would it be a more effective operation of this commi ttee if it was entirely composed of individuals who did not earn their keep as civil servants of a government to whom they are supposedly reviewing and assess ing the activities of that government, and it was a completely independent board on economic development? MR. CHAIRMAN:Mr. Remis. MR . REMIS: You know, it's one of those questions: "Im damned if I do and I'm damned if I don't.

" How can I argue about complete objectivity without recognizing that nothing can be com pletely objective for anybody ? MR. EVANS: Mr. Chairm an, on a point of order, I think in a way that is an unfa ir question, because if there is a question or if there is a criticism, you know, it should be really directed at the Government, not at the board or the board chairman who has been appointed by the Government. MR . CHAIRMAN: Order pleas e. I was very careful in attending to the words of Mr.· Axworthy's question and I would rule the quest ion in order. He asked for an expression of an opinion, and Mr.

Remis can either express that opinion or not express the opinion, and the interpr etation is a matter of debate. I was very car eful to listen then to Mr. Remis ' answer to the quest ion. Mr. Axworthy. MR . AXWORT HY: Well, maybe just to carry on that line, Mr. Chairman, I'd like to again say, where in the province are other sources of independen t evaluat ion of the economic performance of the province available, if not pr esumably from a board that has some staff resou rces , as yours does, to do this, and therefore by the fact that there is some connecting links pr imarily through your own pos ition?

Ar e we totally devoid then of any independent source of review and assessme nt on an annual basis of economic performance, one that we can assume is not just objective but independent in its point of view? MR. CHAIRMAN: Mr. Dillen on a point of order. MR . DILLEN: On a point of order, I think what Mr . Axworthy is suggesting here is that when I go throu gh the list of names of the people who are involved in this committee I

272 June 5, 1974 (MR. DILLEN cont'd) ... find Professo r Paul Phillips of the University of Manitoba, and I know that Mr . .Axworthy is also connected so mehow to the University of Manitoba, and if he's suggesting that he is using that as being controlled by the Government, I would have to question his line of questioning. MR . .AXWORTHY: ... he's on a leave of absence. MR. DILLEN: Not only that, but I find that we have also Mr .

Leach, who is of Federal Industries Limited, Chairm an of the Board, and I wonder what kind of control the Government is influencing over him. .And I suggest that there isn't any or he wouldn't be on that board . .Another name I find is Mr. Ebbern, who is of Dominion Bridge Company, and the list goes on to another Professor of Economics at the University of Manitoba, .Agricultural Economics, and the Publisher of the Brandon Sun, you know, and I only find one connection and just one person who is directly related to Government in the form of Mr.

Remis. .And I can't see how you can possibly consider that this Board is not act ing independently of government by just going by the names that are listed as board members . So that 's the point I wanted to make. MR. CHAIRMAN: Well I understand your point, Mr. Dillen, but nevertheless the question I accepted it, and having accepted it I didn't question the question being in order . Now, Mr. Remis can answer the question in any way he so chooses. .And if we want to debate the efficacy of governmental approaches after receiving the report of the Chairm an, I suggest that we enter into that area. Mr. Remis.

Then perhaps Mr . .Axworthy would rephrase his last question. MR . .AXWORTHY: I just so mewhat lost the train after that very extended point of order, Mr. Chairm an, the stateme nt of point of order.

I would just again, and I'm not being critical of the individuals on the board, I' m si mply saying that I think in this day and age where it's very important that we have good in-depth, independent criti que of economic performance ) I' m really saying as to whether the model that has been applied in the federal level where the economic council is, doesn't have the kind of governmental connection that your board has, whether in fact it would be preferable to have it, or are ther e other sources of that independent economic crit ique available to us, so that we are able to provide -- (Interj ection) -- That's both opinion, Mr.

Chairman, and information. MR. CHAIRMAN: Here again there is some statement in your question also. The statem ent being in whether Mr. Remis would prefer, or has some observation to make on your statement. Mr. Remis. MR. REMIS: Well, Mr . .Axworthy has raised a difficult question and one that the Econo mic Council of Canada, and I just met with the Chair man on Monday, and also the Chairm an of the Ontario Economic Council, and we discussed this very problem: How can a government, a quasi government agency be criti cal of government, be independent of government?

We all recognize this problem, and we're thinking serio usly of it and this, hopefully, we will be able to meet very shortly and develop som e kind of an answer to this question. I don't think it's an easy answer . I don't think you're looking for an easy answer. . ... citizen advisory boards critical of government policy, or should they be critical of how governm ents try to attain their policy of genuineness. There's a difference. We can be quite, I think, quite free in trying to assist the Government to obtaining its objectives in all honesty, whatever the Government of the day is.

I don't think that a board of this kind should really be critical· of government policy because that is a matter for the government to decide, and if the board wants to be crit ical of Governm ent policy then it should get out of the board and get into the political arena, where it really belongs . So a body of this type seems to me should strive to assist the Government to achieve its objectives in the most professional, the most ob je ctive, and the most independent way that it knows how. Now so me of that critic ism needn't be made public. It doesn't always have to be public, it can be quite private. MR.

CHAIRMAN: Mr . .Axworthy. MR . .AXWORTHY: Well, Mr. Chairm an, I think that goes to the centre of the question I' m trying to raise, that to use, for example in your report you raise two economic areas where you comment that obviously some difficulties have occurred: One in the manpower fi eld, there have been - I think your word was there has been sort of blockade or something in the manpower field. What you don't say is whether that is a consequence of government

June 5, 1974 273 (MR . AXWORTHY cont'd) ... policy or not. Second, in the area of housing and land supply which you say is again a major factor conveying to fun ction. The conclusion is you make no comments to whether again that is a product of either errors of ommissio n or commiss ion by different members of the Govern ment.

Now is that because you feel it's not in your rein or your area to comment upon, critically upon the performance of government, and therefore are we not able to ask you quest ions about whether in fact certain kinds of public policy either have had deleterious effects upon these two critic al areas of labour management and . . . MR . REMIS: I think you answered the question. I agree with you then. MR. AXWORTHY: Well let me ask first then, did you ther efor e avoid consciously com menting upon public policy in this area because you don't feel that 's part of your mandate ? MR. REMIS: That's right. MR.

AXWORTHY: That's right ? Okay. All right, okay. Mr. Speaker, I don't want to dominate. I have two other supplements of questions to raise, but I'll let other members - perhaps I can come back to them if other members want to pursue this line of thought. MR . CHAIRMAN: Mr. McGill - is there anyone else that would like to question Mr. Remis. Mr. McGill. MR. McGILL: Mr. Chairman, I note from Mr.

Re mis ' explanation now that perhaps the terms of reference of the board have changed, becaus e I recall in 1970 or 71 the board was critical of the Department of Indus try and Com merce fo r getting involved in a certain industry, which they felt was not a good area and a productive area, i. e. aerospace. And so this was an objective report, and it differed with government policy, and it was a point well taken as subs equent events seemed to prove.

But I understand from your explana tion now that we will not have the benefit of that kind of confrontation in the fut ure, that this will be really a re-work of either supportive of the policies of government, or a research effo rt on the part of the Advisory Board to supplement what is going on in the Department of Industry and Commerce. Now I don't think we need to belabour the point. Just one final question. How many meetings of the Advisory Board took place in the preparation of the report which we got here ton ight ? MR . CHAIRMAN: Mr . Remis. MR.

REMIS: I was appointed Chairman, Acting Chair man, the last week in February, and we've met three times as a board. Our first meeting considered programs; our second meeting cons idered the outline of this report, the third meeting cons idered the first draft of the report. So in the three months we have met three times. MR. CHAIRMAN: Mr. Evans. MR. EVANS: Mr. Chairm an, I'd like to make an observation as the Minister responsi ble just in case there is some mis impress ion left with members of the Committee.

The terms of reference of this Board has not changed, have not changed since it was establ ished, and reference is made to the two items, to the key terms of reierence in the report by the Chair man of EDAB ,and it relates to prior ities. They are to recomme nd prior ities for development, and also to make suggestions how to sti mulate and co-or dinate public and pr ivate activities, and so on. You can read it for yourself.

And I think those are pretty broad terms of reference and it does leave the board -- and I as the Minister, I would hope that the Board if it has som e cr itical com ments to make about the Department of Industry , or the Department of Agricultur e, or whatever department, would do so. I would . . . it to do so. And I would hope all members of the board feel free in that respect. The boar d's terms of reference have not been changed by the Government and as far as I'm concerned we expect it to carry on in its analytical and cri tical role that it has played in the past. MR . CHAIRMAN: Mr. Axworthy. MR .

AXWORTHY: Well, Mr. Speaker, I'm glad to hear the Minister say that in fact he expects his board to be a critical agent in the fu ture, and I would only comment that this pres ent report does leave something lacking in the sense that it does rais e problems but doesn't carry through any analysis of the public policies relating to those problerrs in the areas. And that 's one area if I may, Mr. Chairm an, I'd like to pursue, particularly in the two areas, key areas, which are within the provincial jurisdic tion that the report raises .

First is in the problem of labour shortage, and as the Chair man of this board well recognizes there was some concern over the past three or four months about the problem of

274 June 5, 1974 (MR. AXWORTHY cont'd) ... labour shortage, particularly in the garment industry in the province, and the fact that it appeared that public policy of the Provinc ial Government was generally negative towards prom oting manpower labour policies to support the growth of the garment industry, because it was I gather a low wage, cons idered to be a low wage industry.

Now in the position of the board itself, is it your assess ment that the lack of growth in this particular area is attr ibutable to the public policy of the Provincial Government in not promo ting a manpower policy to bring suf fic ient workers into the industr y? MR. CHAIRMAN: Mr. Remis . MR. REMIS: I' m having difficulty with your question because really it's a series of questions. Government policy regarding the importation of immigrant workers into the - is governm ent policy, and one which I' m not in a position to argue with, as I indicated to you a moment ago.

Whether that is contr ibuting or not contributing to the growth of the industry, I am really in no position to give any comment at this moment. I don't think we're in possession of the data or the facts to know to what extent the growth of the industry is in hibited because it's unable to attract low-wage people. As a matter of fact one wonders what would happen to the industry if it suddenly became a high-wage industry, whether we would still be in a position where we would want to import other outside . . .

I don't think we know too much, enough about available labour pool in Manitoba, its character, the resources that are available to train it so that it would fit in a preliminary, at the lower level of the wage of the labour market. I think this is one of the things we want to take a good hard look at next year, as I've indicated bef ore. MR. AXWORTHY: Mr. Chairman, may I interrupt. MR. CHAIRMAN: Mr. Axworthy. MR. AXWORTHY: Mr.

Remis could you, through the Chairman, say that then it is your intention under the mandate next year to examine specifically the manpower requirements of the garment industry in the province, and to see how that may be eased or satisfied to provide for a proper growth of that indu stry ? MR. REMIS: Right. I'd say that in our study of the manpower situat ion, and existent government policies will be examined, and the industry itself will be examin ed, and perhaps we may come up with an answer next year. I have no guarantee. MR. AXWORTHY: But it is your intention to study that industry and prepare ... MR .

REMIS: Well we'll study that industry and other of the labour intensive industries, which we've pointed out in this report that are really not keeping pace with the general increase in wage levels, and really falling further behind all the time, and this is an undesirable ef fect in the economy and one we would like to correct. Now what suggestions and what recomm en dations we're likely to make a year from now, I'd hesitate to make.

I certainly would like to turn the economists loose on this subj ect, and related subj ects in manpower, not only here, not only in the garment industry, but in other of the service industries, other low wage industries, other structural unemployment in the province, and perhaps we'll have an answer for you next year. No promises. MR. AXWORTHY: No. Without extracting a promise from Mr. Rem is, Mr.

Chairman, I'd just like to confirm though that we could expect in his re port next year not only an assess ment of that manpower issue, but also of the impact that public policies carried out by the Provinc ial Government, and Federal Governm ent for that matt er, have upon the supply and provision of manpower for these key industries. Is that a correct statement of your intention ? MR. REMIS: I would say that we would be looking at the garment industry with other industries .

Whether we look at it specifically in addition, and taking a harder look at it than in other areas, I would leave to the board to decide, and knowing the res ourc es we have and the priorities we have for ourself, I wouldn't like to make a commi tment now to you on that, that I'd have to live with. MR. AXWORTHY: Mr. Chairman, may I pursue one other line of question before continuing? Another substantive area, Mr. Chair man, that was raised in this report is in the area of housing and land supply. MR. REMIS: Well we did raise a few sens itive areas didn't we ? MR. AXWORTHY: Yes, you did.

More than a few but those two . MR. REMIS: I don't think that we pulled too many punches. MR. AX WORTHY: Well except this, Mr. Chairm an . I again come back - but so mehow in this field again of housing and land supply it is an area which is, I think Mr. Remis and I would agree, is an area particularly sensitive to government direction, that both municipal

Jun e 5, 1974 275 (MR. AXWORTHY cont'd). and provincial governments have a predominant role in the determination of that supply through the policies and regulation that they follow.

I am again concerned, and also somewhat intr igued, by the seeming fact that the sentence was never completed in your report, that while you identify the problem that the shortage, not just for res idential purposes but also for industrial purposes, in the City of Winnipeg where we almost are virtually without land for industrial purposes in the city, again there is no comment upon the present ef ficacy of public policy in that respect and how that may be altered and then go on not -- and as I gather you have no intention to study that problem as part of your mandate in the next year. MR. CHA illMAN: Mr . Remis.

MR. REMIS: Well we had a list of about seven or eight topics that we thought were urgent enough for us to want to look at, and land was one of them. We recognize it's im portant because, as we pointed out in the report, that it was the next highest contr ibutor to our inflat ionary cycle, like the food, and a substantial one, 17, may 20, maybe 25 percent next year - who knows how things are going ?

But the board in its wisdom having looked over the range of subj ects and the amount of resources, and they are extremely limited as you well know, we decided that this was one topic that we would not pursue in detail, not because we don't recognize it as an important item, and only because of our resources . Now maybe in the following year, maybe the urgency, somewhere half-way through the year we may decide that notwithstandin g we better take a good hard look at this before the next board; we probably will, but we are aware. MR. AXWORTHY: Well, Mr. Chairman, if I can ask Mr. Remis this through you.

Presu mably you did som e analysis of the problem, otherwise you wouldn't have mentioned it in your report. Would you say on a basis of that analysis that present public policy, on both provincial and municipal levels directed towards land, is effectively responding to the problem of inflat ion in land prices at the present moment, or is there a requirement for major changes and alterations in that public policy ? MR . REMIS: No, Mr. Axworthy by definition I can't answer that question. MR. AXWORTHY: Well, Mr.

Chairm an, the Minister has said previously that the Board can be a cr itic in observation, and therefore I'd like to know why we can't answer that question. Is it lack of . . . Pardon me ? MR. REMIS: Not right now I can't. MR . AXWOR THY: Is that simply because you don't have the information or analysis available ? Is that the reason, or just that you don't want to answer it ? MR . REMIS: Well I think, my own personal terms of reference which stem from the reference there, I think preclude me for comme nting on government policy. MR . AXWORTHY: So we're back aro und the circle again. MR. EVANS: Mr.

Chair man, if I may just interj ect, just as a matter of clarification.

As I said earlier the report, as I understand it, and I have just gone through the report with th e members myself and have noted that the report tends to be a bit differ ent from the previous reports, which tended to be more specific and referred to very particular industry groups, or particular individual industries, but having said that, I just wanted as a matter of clar ification to point out again that the report is a report, as I understand it, of a consensus of the group and, you know, they in their wisdom decide to follow one course or another.

Now I'm sure the Chair man, and through him to the Board, they may be prepared and pro bably would be prepared to entertain questions of the MLAs either now, or, you know, during the course of the year, you wish to put for cons ideration and independent observation. But I think in a sense you' re putting the chairman on the spot, because you're aski ng for his per sonal opinion each tim e when he's endeavoured to give you the opinion of a group of business men and a group of university profes sors. MR . AXWORTHY: Well, Mr. Chairm an, perhaps I can speak to the point of order. I'm not trying to press Mr.

Remis as Mr. Remis, or concerning his own personal opinion. I asked the question in this way, that as Chairman of the Board, having been party to the information and also as derived by the rese arch staff, and being the spokesman for the group of members of this Board, during their discuss ion they must have discussed more than simply the fact that inflation - and that is a problem - they must also have asked the question why, and I was simply asking, in the deliberations of that Board and the inf ormation that resulted, were they able to derive any asse ss ment of the present effec tiveness or lack of

276 June 5, 1974 (MR . AX WORTHY cont'd) ... ef fectiveness of public policy in this area, so that presumably their wisdom could be passed on to us so that we might take some action upon it, which I would think would be the proper functioning of a board such as this . MR. CHAIRMAN: Well, to the point of order. Mr. Axworth y asked Mr. Remis a ques tion and Mr. Remis answered the question. Now whether the answer is sati sfactory or not to the committee is another question. It' s a matter of debate ... so that while I appreciate the point raised by the Minister and also by Mr.

Axworthy, nevertheless under the rules of our procedures, you know, in such presentations such as this the res ponsibility of the Chair is to allow a wide lati tude to solicit informatio n, but nevertheless once the question has been answer ed, the reason for the answer is totally irreleva nt, you know, because this particular question was whether, in the opinion of Mr . Remis, the effect of government policy relative to housing was or was not having an eff ect on housing, and he chose not to answer that -- why he chose not to answer. MR. AXWORTHY: I have just one other small question, Mr.

Chairman, I am sure Mr. Remis will be able to answer without any equivocation, and I'd ju st like him -- I gather from the thrust of your report that because of the present interest in the topic under discussion of inflation, your conclusion is, at least for the Province of Manitoba, a program of wage and price controls would be of no use or in fact would be destructiv e or detrimental. Is that corr ect ? MR. REMIS: I am always skeptical when people say "I have a small question. 11 I don' t think I can answer that question whether wage and price control is the answer to inflation.

I don't think anybody can answer that question. MR. AXWORTHY: Well, Mr . Chairman, I'm just deriving from the comments on the report, I believe on Page . . • MR. OSLAND: The voters will answer that question. MR. REMIS: That' s true. MR. AXWORTHY: Well it's true, but I'm ju st trying to get again the wisdom of this assemb led group of cross

section of the public that you have derived the basis of analysis for, and I believe you say that because of food and housing and a few major components of inflation, food in particular, that is not susceptible to controls, is that the assessment of the Board, in fact a control situation would not work in this case . . . MR.

REMIS: No, we're saying that certain aspects of indexing should be looked into because there is a sector of the comm unity that are helpless in the face of infl ation, and al though the governments, even Federal Governments find dif ficulty in coping with . . . there is a responsibility to do some thing about those people on fixed incomes and low incomes. Now maybe indexing is the answer to that but we're prepared to study it. I would feel more com fortable if we had had a year under our belt of operating at the level on which we intend to operate next year.

Hopefully, if I'm here to answer your questions next year, I can be more explicit, but I think in the main, what we really try to indicate is that the area that we intend to probe into now may not be the ones that you would pick, Mr. Axworthy, but they are the ones that the Board thinks is what is important to it. Also pick these subjects as they think they are high priority and they' ve had to limit the number of subj ects because of the resources that we have. Free people, you know. MR. CHAIRMAN: Mr. Axworthy. MR. AXWORT HY: ..• then I will be quiet. Not only that, because I haven't had dinner yet and •..

In that case, perhaps I could direct a question to the Minister, who I gather here is in a consulting capacity to the committee. Is the Minister therefore prepared to of fer more resources to this Board so that it may widen its scope and address itself to more of these high priority questions, so that next year we're able to gain answers on the broader range and in more specific form ? MR. CHAIRMAN: The Minister of Industry and Commerce. MR. EVANS: Mr. Chairman, I understan d that a new ... director - is that his title ? Or . MR. REMIS: Research Director. MR.

EVANS: The new Research Director who is on leave of absence from the University and is an economist, has obtained the services of two assist ants for at least a period of time, if not for the next year, so the staff resources have been tripled as such. I must add also, Mr. Chairman, there has been some disruption of the work of the Board partly because of the involvement of the former chairman in some critical problems that arose in the question of

J14lle5 , 1974 277 (MR . EVANS cont'd) ... milk control, milk supply in this province, and eventually of course he moved over entirely to Agriculture and there was a bit of a lapse in it, so our new chairman and some of the board members are perhaps at a disadvantage because they'r e relatively new in this particular area. I would be delighted incidentally - this is co mpletely out of order, Mr. Chairman - but I'd be delighted to give you an opinion on price controls any time. MR. AXWOR THY: I was asking Mr. Remi s. MR. CHAIRMAN: There being no more questions, we will hear from McKenzie Seed. Oh, Mr. McKellar.

I'm sorry. MR. McKELLAR: I ju st want to mention because of the fact I'm a farmer and because mention was made of the view of the Manitoba economy dealing with agri culture, much of the report dealt with agriculture and the good year we had in 1973. Because of the fact that the grain prices have dipped considerably and also the livestock prices have dipped considerably in the last three or four months, have there been any studies made, you know, regarding the whole agricultural economy, like for the year 1975-76 coming up ?

I just wondered, because I think this is very important to most of the farmers who have been planting their crops at the present time . MR. CHAIRMAN: Mr . Remi s. MR. REMIS: No. I think that subject is way beyond the ability of this Board to deal with, really. This is not dodging the issue at all. MR. McKELLAR: Well I think the whole livestock industry, though, I realize that's not your department, but I think the livestock industry is very concerned about the present time, and I'm just wondering if any studies have been made, because they're really in deep trouble right now.

I just wonderrd if any studies have been made. MR. REMIS: Well, the very fact that Professor Tangri, who is a member of our Board, is an agricultural economist . . . MR. CHAIRMAN: Maybe Dr . Tangri would like to comment on this ... ? MR. REMIS: I would like to point out that we are concerned about this. The very fact that he' s on it indicates that we're looking forward to utilizing his skills and knowledge in this field.

Whether we will do a study in time to be of any value to you now, I' m not even sure, but cer tainly as you noticed, the report is largely a report on agriculture and I think it' s pretty straightforw ard ; I think we didn' t beat around the bush. MR. McKELLAR: Well, if the livestock industry, and the grain industry is in trouble too, and this is why I' m trying to relate one to the other like this, that we in the grain industry are in real trouble unless the livestock industry, some recovery is made of that particular industry. MR. REMIS: Why don' t I let Mr. Tangri speak for himself ? MR. CHAIRMAN: Dr.

Tangri, would you care to step up here, Doctor, please? There' s a microp hone right here. Dr. Tangri is a member of the Board. DR. TANGRI: Thank you, Mr. Chairman. I am an agricultural economist and before re sponding to your question I just wanted to make a brief obser vation or two on the question ... MR. CHAIRMAN: I'm sorry, Dr . TangriJ I have to be a little stuffy . This is a parlia mentary committee and the rules are rather strict. The question is to you through the Chair man of the Board and your answer has to be relat ive to the question asked. I'm sorry but .. DR.

TANGRI: Then I would like to have the Chairman of the Board ask me which ques- tions he wants me to answer. (L aughter) MR. CHAIRMAN: The question raised by Mr . McKellar. DR. TANGRI: Is that the question ? MR. REMIS: I think if we're going to follow the procedure, I think he should repeat the question and then Mr. Tangri can answer. MR. McKELLAR: Well my concern is about the future of the whole grain and livestock industry and its relation one to the other.

The livestock industry being what it is ri ght now, the depressed prices, and its effe ct on the grain industry like it eventually will have, I wondered if there' s any studies made of what will take place in the next twelve months as to what is going to happen, because I tell you, the concern of the average farmer both in the livestock industry, the grain and cattle men and livestock men in general, he' s really concerned right at this present time because of ju st what might happen. I'm just wondering what the experts have to offer in this regard, you know. MR. CHAIRMAN: Dr. Tangri .

278 June 5, 1974 DR. TANGRI: Thank you. Your question, as you just say, the first part of it: are any studies being done? Not by the Board as of now, but certain studies are being made by some of the agricultural economists in the department, long range studies. I believe that some of the aspects of your question are also being looked at by the Manitoba Department of Agricult ure, for as you know they are also quite concerned about the current trends.

As you very corre ctly pointed out, in the last three months the prices have dipped, and I think some of the trends we have also noted •.• very broadly and very generally. At the moment the cryst al balls are not very polished, not very clear, but the best we can say that there is concern - much of this depends on, not only what' s happening in Canada, but largely and more so on the international trends, the sit uation in the developing part of the world, the third world, what' s happening there and also what is happening in some of our major competitors in the supplies and pro duction of grain - the U.

S. , Arg entine, etc. etc. So at this time, we are unable to tell you exactly what is going to happen but I think in the near future, maybe 3 to 6 months, some of the answers will start coming i11;but at the moment we can' t answer definitively. MR. McKELLAR: One other question. Are there any other indications that livestock prices will increase in the next six to nine months, in that neighborbood? Or is there anything to indicate that ? MR. CHAIRMAN: Dr. Tangri. DR. TANGRI: At the retail level - I'm talking only as an individual, I don't want to commit the Board or the profe ssion.

As you know, if you talk to nine economists you will get ten opinions and you don't know where the tenth came from. But my own feeling at the moment is that at the retail level livestock prices are likely to go up a little bit. MR . CHAIRMAN: Mr . Henderson. MR. HENDERSON: Yes. Well I'd just like to make this remark here. I remember the experts doing a lot of studying a few years ago in connection with cattle and livestock and farmi ng, and they rec ommended that rural people go out of livestock, and they went out of live stock.

They rec ommended them to go out of chickens and out of hogs, and then a few years ago the experts were telling us that we had a surplus of grain, we had to live with surpluses, and that we were going to have depressed prices and, you know, the world could just produce more. So as far as I'm concerned, I think a lot of other farmers are concerned, we have lost faith in those experts. We sure have - we'll just do the opposite. MR. CHAIRMAN: There being no more questions - The Minister of Municipal Aff airs. MR.

PA WLEY: I would just like to ask the Profe ssor when he' s here, is he aware there is a serious concern about the present crop situation in Manitoba if present weather conditions continue. There will be very little wheat, if any, planted in the province and continuation of that further crop problem, so that at the moment indications are that we might be without any subs tantial crop whatsoever in Manitoba this year, '74. I was wondering in the event of a near or complete crop failure in the province, what type of impact that has on the provincial eco nomy as a whole. MR. CHAIRMAN: Dr. Tangri. DR .

TANGRI: I think the answer to some extent is fairly clear; that if we did have a disaster of serious dimensions, it would have a disastrous impact, it could have - not disast er, but at least it could have fairly strong impact on the Manitoba economy.

But there is a saving grace, or there' s always a silvery lining in the dark clouds that I can look at through this window, even now, that as long as our reserve situation is not too bad - you have to keep in mind, not only what is coming off the farm right now but also what is going through the pipe and what is with the Wheat Board - and with the reserves, I think that part of the harmful im pact of that disast er would be alleviated, would be softened.

The situation is not as bad, first of all, as it might look from the reports, because I know of quite a few big farmers and medium sized farmers who are busy seeding right now. They were high level lands, they were not low lying lands, and they are busy seeding. They are having diffi culty in getting help, hired labour for example, but to the extent they can - and some of them have 6, 000 acres, 8, 000 acres, some are 500 acres or 1, 000 acres. As far as I know from personal experience, many of them are busy seeding very very rapidly, so one can get sometimes overly scared by what one fears. MR.

PA WLEY: Excuse me, is that any particular part of the province - some distance from Winnipeg, would it not be ? DR. TANGRI: Yes, it' s within 30 miles, 40 miles, of Winnipeg.

June 5, 1974 279 MR. PAWLEY: Of Winnipeg? Well! DR. TANGRI: Yes, it' s not far away. I have talked to them - I am not a farmer myself, but I have talked with some of the farmers and some of the people at the University. They say that it is difficult to find help, but they are busy seeding to the extent they can. Now there' s no question that this damp weather would hamper the progress or the rate at which it can be seeded, but I don't think we'll have a total collapse to the extent one might be led to believe on general reports or hearsay.

So there are two things - one is that their land is being seeded; secondly, the reserves and the buf fer crops would help cushion them. MR. PA WLEY: What would be the ef fect agricul turally if there is a subst antial shift from wheat to oats and barley as a result of this present situation ? Are we getting off the topic, Mr. Chairman ? MR . CHAIRMAN: I like to be as liberal ... A MEMBER: This is not the Agricul tural Committee. MR. CHAIRMAN: This is just what I'm wondering. I wonder if . MR. PA WLEY: This is very basic to the economy of the province, Mr. Chairman, and I think very timely. MR.

CHAIRMAN: Well, perhaps the committee could take a five-min ute adjournment and you could talk informa lly about some of these things. I want to hear from McKenzie Seed, if it' s agreeable. MR. McG ILL : Mr. Chairman, we desire to proceed imme diately without any adjourn ment. MR. CHAIRMAN: For five minutes. It' s 9:30. We'll convene in five minutes. (Five-minute adjournment) MR. CHAIRMAN: Mr. McKellar, may we proceed? Mr. Evans. MR. EVANS: Thank you, Mr. Chairman. We have with us the Chairman of the Board of McKenzie Seed Limited, Mr. Bob Clement, Q.

C. very well-known lawyer in the City of Brandon; many years experience as well as a gentleman who has had considerable experience in business and in investments. Mr . Clement was - although he was elected by t he Board, the Board elects the chairman, he's not appointed by the Government - the Board elected Mr. Clement chairman as of May 1st of this year, although he has served on the Board since 1970 I believe. I just want to comm ent, Mr. Chairman, that the Board is also comprised of a few other members: Mr. Pat Kelleher, a professi onal accountant in the City of Brandon; a Mr.

Glen Lawson, business man, City of Brandon; Mr. Al Chisvin, profes sional accountant in the City of Winnipeg - I guess I should be using the expression "chartered accountant" - Mr. T. Sumida, businessman from the City of Brandon; Mrs . Kathleen Roberts, daughter of the late A. E. McKenzie, the founder of the company; Mr. Ian Blicq, Assi stant Deputy Minister of the De partment of Industry and Commerce; and Mr. Sidney Parsons, Chairman of the Board of the Manitoba Development Corporation. By way of a very brief explanation, Mr. Chairman, for particularly some of the newer MLA' s, the com pany, A. E.

McKenzie, was virtua lly turned over to the Government of Mani toba by legislation in 1945 at which time 90 percent of the stock was given to the Provincial Government, and has since been held. The other 10 percent is presently held by Mr s. Kathleen Roberts, the daughter of the late Dr. McKenzie. Although it has therefore been virtually a Crown corporation since 1945, it was not the procedure or policy or practice to provide annual financial statements or highlights of operations until 1970. This was shortly after this Govern ment decided not to sell A. E.

McKenzie to a prospective American com pany who wished to buy it, but would not commit itself to maintaining the company in Manitoba, and indeed we under stood the particular company in question was to move the McKenzie Seed operation. It had the intention of moving it to the City of Toronto. We decided to retain the situation that was set up in 1945, in 1970 therefo re, and each year thereafter the company has issued annual statements of its financial operations, its profit or loss for the year.

This is the first occasion on which we have had the company, although it is not a subsidiary, or although the MDC does not hold equity as such in the company and therefore it is not required to report by the law governing the MDC, the legislation under which the Manitoba Development Corporation is established, nevertheless in keeping with the Government• s policy of providing information on companies in

280 June 5, 1974 (MR. EVANS cont'd) ..• which it has an interest, we have request ed the Chairman to appear before you and to go over some of the highlights and to answer your questions. I might ju st add he has a couple of people with him, I suppose you might say in a staff capacity, including the Pres ident, Mr. Maruca and the auditor, Mr. Dave Norris. And with those introductory remarks, Mr. Chairman, I would turn the proceedings over to Mr. Clement. MR . CHAIRMAN: Mr. Clement. MR . CLEMENT: Thank you, Mr. Chairman. Since this is the first time that the Board of Directors of A. E.

McKenzie Company Limited has had an opportunity to present their state ment to you, I thought it appropriate to say a few words about the origin of the company. It was founded in Brandon in 1896 by A. E. McKenzie, a young man then, under the name Brandon Seed House. In 1906 it was incor porated under its present name, A. E. McKenzie Company Limited. Mr. McKenzie married and had a family consist ing of two daughters and no sons. He was a philanthropist as well as a seedsman. He gave subst antial sums to the YMCA, to his church and finally to Brandon College, which was very much in need of assis tance in 1930.

He kept it going until it was finally supported by the Provincial Government. In 1945, Mr. McKenzie made a donation of 90 percent of the shares of this company that he'd incorporated in 1906 to the Government of Manitoba - or to the Province of Manitoba rather. The vehicle for doing this was a bill passed in 1945 establishing a fou ndation and gov erning to some degree the conduct of the company. The fo undation's purpose was to receive dividends from the company, invest them and use the funds for education in the Province of Manitoba. Mr.

McKenzie retained the active control of this company until his death, although it was owned by the province. On his death in 1964, the control of the company passed to the Province, as well as the ownership of it, and the Province now nominates the Board of Directors - with the exception of one of Mr . McKenzie's daughters, Mr s. Kathleen Roberts, who is a director by virtue of agreement so long as she lives and so long as the estate of A. E. McKenzie has 114 common shares of the company, which is his ten percent that he retained after giving 90 percent to the Province of Manitoba.

The capitalization of the company has not changed since 1906. There are 1, 145 common shares issued. This is one of the things that the directors are concerning themselves with now, because the company is now operating on a national scale from coast to coast in Canada. It has purchased the other larg est seed company in Canada, Steele Briggs Company Limited, and is in process of amalgamating or consolidating the operations of the two companies so that they are supplementing each other rather than competing with each other .

One of the pu rposes, of course, of the gift to the province was to provide money for education. You may wish to know how much was provided. The total receipts to the Foundation from the company have been $483, 392. 21 in payments from the McKenzie Company to the Foun dation, and then interest earned on that money while it was invested, $192, 885. 39. Some of this money is still retained in the trust fund, $190, 437. 07. The balance of the moneys has been paid to Brandon University for education purposes. There have been no payments made to this Foundation by McKenzies since the death of Dr.

McKenzie ten years ago. The provision as to payment of dividends was set out in the gift and in the Foundation legislation - that is, dividends could only be paid if the assets and work ing capital of the company were in a ratio of four to one, and that has not occurred since ten years ago - and in my view it' s not likely to occur, because it would require present assets of $32 million to bring this into ratio because of the capital situation of the company.

As a re sult of being very much undercapitalized, the company depends on bank support for its working capital, and with present bank rates, intere st rates, this is a very serious burden to the company. You will wish to know what it does in its other field, that is providing employment. It now employs 350 people across Canada, with a total payroll of $2, 30 0, 000 annually. In Mani toba there are about 175 employees, and their payroll is $1, 250 , 000. 00.

We're in process of creating new jobs in Bra ndon by amalgamating the Steele Briggs production facilities in Toronto and elsewhere with the production facilities in Brandon so that this will all be done in Brandon, with Toronto supplying a wareh ouse and distribution facility for the big markets in the east. Production will all be done in Br andon. This will add to the payroll in Manitoba approximately $750 , 000 annually. This informa tion has been included in various press re leases, but I'd like to give it to you now.

June 5, 1974 281 (MR. CLEMENT cont'

d) The company, I think as I mentioned, is the main supplier of packet seeds in Canada. Als o there are a great many small companies operating in the same field, so that there is a very knowledgeable competition that has to be faced in every part of Canada. The company is fortun ate in having a management group who are experienced in this field, and who are work ing on and developing accounting procedures which will enable us to make the economies in distribution which are necessa ry to operate with the expenses that seem to be increasing every day. I see that the statements have been circu larized.

I've also thought that you might be interested in having a look at the sales of the company and its subsidiaries over the last ten years. I have summarized this on one sheet of paper for you. I wondered, Mr. Chairman, if this could be distributed. MR. CHAIRMAN: Would the Clerk please distribute these. Mr. Clement. MR. CL EMENT: This sheet just distributed, Mr. Chairman, is a summar y of sales operations and of net income over the period since the death of A. E. McKenzie, that is the ten-year period in which the af fairs of the company were managed by a board of directors, and not by Mr. McKenzie.

You will see that in the year following his death, the sales were $3, 320 , 000. 00. They dropped the following year to just under three million. The same ratio seemed to continue for about eight years, the same sales picture with varying profit or net income results, which is tabulated on the last column on this sheet - until 1971, when you will see a drop in sales. In 1970 there was a drop in sales, and then in 1972 it shows the ef fects of the acquisition of Steele Briggs. Sales increased in a very dramatic fashion to over $8 mill ion, and last year sales were over $12 million.

The net income in those last three years you can see on the last column, in thousands. We made a small profit in the year ending October, 1971; we made a small loss in the year ending October, 1972 ; made quite a small profit in the year ending October, 1973.

And in the last year there was a most unfortunate fire in the building adjoining McKenzie' s building in Brandon, which spread to the McKenzie Building and destroyed in the busiest season of the seed business, December, when just as the shipments were going out to the retail stores, it destroyed half a million dollars worth of seed packets that were assembled and ready for distribution. This left the customers in a very bad way, and McKenzie did everything they could, including spending considerable extra freig ht money and extra acquisition of seed money in order to replace this and supply their customers.

Some of this was recovered by insuran ce. There was quite adequate insurance, but the eff ort to overcome this loss just at that season was terrific with the staff. I certainly must commend the management for the ef forts they put forth to minimize the ef fects on Canada of that rather disastrous fire. We are back in production again, and this season• s results seem to be up to, if not exceeding our expectations, because people seem to be very hungry for seeds and for small garden plots and this is reflect ed in our sales this year.

We don't get our full returns in for some time yet, but the present indications are that this year will be much better than we had reason to expect. On the other hand, the interest we pay is just terrif ic. The bank rates of interest as you know have gone up almost every month and we have to pay the current ra te of bank interest even though the loans are guaranteed by the Manitoba Development Cor poration. Perhaps that' s a sufficient background, Mr. Chairman. If there are some questions either as to

summary or the statement - I might say I've only beeii Chairman of the Board for one month, so that I may have to ask for a little help. MR. CHAIRMAN: Just before we get into the questions, I wish to commend you on your correc tion, so that we well understand the dif ferentiation between the Province and the Govern ment. Mr. Pawley, then Mr. McGill. MR. PA WLEY: I'd like to commend Mr . Clement on his presentation.

There' s just one question I was curious about, and that was in examining the sales, one finds that interes tingly during the period of higher sales - for inst ance '6 4, a loss, the next year a decrease in sales and a slight profit. Or if you take for instance '6 9, a higher sale period, a very subst antial loss; the following year quite a sharp decline in sales and yet a profit. I was just curious as to why there would be so little relevancy between sales and net profit or income. MR. CHAIRMAN: Mr. Clement. MR.

CLEMENT: The information that I have on this is, there is a very dramatic change in some of the cost factors,

whereas the cost of distributing packet seeds to literally hundreds

282 June 5, 1974 (MR. CLEMENT cont'd) .•. of small grocery stores and the salesm an' s time to pick them up again makes a very awkward merch andising operation. This is some thing that we hwe n't got a suitable resolution to. Just to give an example of this, our President has told me that a dis play of seeds - which are in a display form to set up in a store with $2 00 in retail value of seeds in it - was sent out to a small retail store at their request because it had been done in the previous year and the previous year and the previous year.

That store sold about $25 worth of seeds, and then in the fall those seeds came back - every packet had to be ripped, the seed put into its different category of where it was, tested for germination, discarded if the germination tests weren' t of a satisfactory quality ; if they were of a good quality, they were added to new supplies of seed and repackaged and sent out again.

Now this resu lted, on the smaller accounts of this character, on a subs tantial excess in cost of distributing the seeds over what came back in sales, and one of the present objects of the company is to eliminate the supplying of small user in such an expensive way. We don't want to cut him out, we want to supply him by mail or some other matter and have him look after it in a less expensive way, because they don' t want to lose those sales; but we're not now having to compete with Steele Briggs, so that we think they can w ork out a satisfactory method of handling the smaller sales. MR. PA WLEY: Yes.

The seeds are supplied to all the main chain stores as well, we gather. MR. CLEMENT: . • . all around consignment. MR. PA WLEY: Oh. I was also wondering what the percentage of sales Manitoba is to Canada and areas out side of Canada. Do we have a sales market outside of Canada and the United States as well ? MR. CL EMENT: We don't have a significant market at all. One of the subsidiaries, which is Brett- Young, is known around the world apparently for its specialized seed in the fodder field seed range. lt' s not the packet seed, it' s specialized seed.

I was in the shipping room, and I saw Helsinki and the rules that Finland had established for the importation of seed right on the shipping board there, exactly what they had to do. And apparently this is one of the things that has made them very successful, is they know exactly what each market re quires in the way of germination tests, documentati on, cleanliness, all the rules that are needed in an international trade in seeds. But McKenzie' s big business is in the packet seed business, and the European and United States markets supply their own packet seeds by and large.

We do have some, what are known as convenience products. They're sort of like a litt le farm thing that's set out and people can water it, and it usually grows . But the main thrus t of McKenzie' s is in the packet seed, the lawn seed and the onion set busines s. MR. CHAIRMAN: Mr . McGill. MR. McGILL: Yes, Mr. Chairman. I would also like to compliment Mr. Clement on his explanations and the detail that he's provided us with tonight. Certainly I think many of the questions that I might, and I do intend to ask, would probably be answered if, you know, I had a little more time to look at the financial statemen ts.

But I'll proceed in any event. I would also like to thank the Minister for regularizing - I hope this will be a regular annual review of the accounts of McKenzie Seed which is a major seed business in Canada, and one that Brandon of course is extremely interested in. I think everyone around this table is anxious to see that business prosper. You did mention your major problem - at least I take it to be a major financial problem that is the fact that you're operating on bank loans and that the cost of this is a great burden on the whole operation.

I think it was reported in the News Service that last year the inter est charges were $615 , 000. 00. Mr. Clement, do you see any relief from that in the coming year ? Are they going to be as high as that this coming year or higher or wh at ? MR. CLEMENT: I don't see any relief for it, but the Board of Directors are trying to come up with a proposal that there be more equity capital introduced into the company if we feel that we can ju stify this with a plan of operations.

And this is what we're presently engaged in, in making a businessl ike plan of operations for the company for the next few years which would just ify us in seeking more equity in the company, either fr om the main shareholder or from any other proper source. But we want to believe in what we're asking for before we ask for it. MR. McGILL: Well, I think probably we could maybe discuss that a little later when we talk about the responsibilities and the connection between Brandon Universit y and the company and so forth. But I presume that some of this diffi culty is occasi oned, or is the result of

June 5, 1974 283 (NIR. McGILL cont'd) ••• having to use borrowed bank funds for the purchase of Steele Briggs and Brett -Young and those other operations, and that had you had some other source of funds other than strai ght bank loans you might not now be in the position to only showing $8, 000 profit on $12 million of sales. NIR. CLEMENT: I'm not saying that the cost of borrowed money is not a proper business expense, I'm simply saying that it makes it very dif ficult when nearly all of your money has to be at this expense.

Brett- Young doesn' t involve the company in any interest costs for acquisi tion purposes, there's no interest charged on the acquisition cost. MR. McGILL: Well, perhaps we might review a few of those acquisit ions . I just note in passing that your ratio of current assets to current liabilities is eight to ten - that' s a long way from what Mr . McKenzie had in mi nd when he said it should be four to one. So that' s an indication of your problem. Could you tell me a little bit about the financial arrangement between your company and • • • MR. CHAIRMAN: Excuse me please, Mr. McGill.

You know, maybe if you want to have a private caucus, I would suggest that you have it elsewhere. Mr. McGill. MR. McGILL: The financial arrangements between McKenzie' s and Bon Jardin, is it ? - Good Garden of Mexico. Could you tell me somet hing about that involvement ? MR. CHAIRMAN: Mr . Clement. MR. CLEMENT: Mr. Chairman, several years ago the cost of producing seed, particu larly packet seed that McKenzie's buys, started to accelerate, most of it coming from California. And part of it was the labour cost which is involved in producing seed from field crops of flowers and vegetables.

It was thought that instead of the high cost California market selling seed to Canada, that we might make some arrangement with Mexico, which is still on the same continent , and have a mu tually advantageous labour arrangement whereby they would produce some of this high cost seed, provide employment for their people which they dearly need, and that McKenzie might have an established market for seed that it has to buy because it can't be raised in this climate succes sfullyJapparently. So the leading seed company in Mexico was contacted, this was a man named Mr.

Berentsen and a joint venture was finally worked out with him whereby he would do the things that the Mexican people could do well and McKenzie's would do the things that we could do well, and work together on it through a com pany called Bon Jardin. And to start this venture, McKenzie' s sent down some inventory of seeds which were surplus to their current requirements, and some cash to help them change the wording into Spanish, the instruct ions for planting into Spanish, and assemble them into displays suitable for Mexican distri bution. Mr.

Berentsen did an exceedingly good job through Bon Jardin of cer tain development work in Mexico, but McKenzie and Berentsen had a disagree ment over one portion of their effort, and that was the value of the seed that had been sent down ther e. I was not involved in this, but this is what I learned from it . Instead of going to Court over the matter, we have now submitted this problem to arbitration ; I hope it will be resolved, and that McKenzie' s could continue this relationship with Berentsen.

But in the meantime, McKenzie's has been fully occupied in recovering from that fire and amalgamating with Steele Briggs, and ensuring the Canadian market. So that until this dispute is resolved I don't think McKenzie wants to become further involved with the Mexican venture. MR. McGILL: Was there a financial loss ? Would you say that there has been a financial loss as a result of that venture ? I notice there 's some unusual charges for bad debts here - is that in connection with this operati on ? MR. CHAIRMAN: I'm sorr y, Mr. McGill, you had two questions. MR.

McGILL: They are related in that>in the News Service Release of March 16th, extraordinary charges were not directly related to the 1973 operations and consisted mainly of charges applicable to previous years, including $220, 000 for bad debts and obsolete inventory written off . Is that the Mexican venture ? MR. CLEMENT: Yes. So this is in escrow at the moment. The provision in the state ment is a provision providing there' s a complete write-off; we have provided for it. We don't think there will be a complete write-o ff, but we have made provision for it because it's in dispute. MR. McGILL: I see. MR.

CLEMENT: And it' s in a foreign jurisdiction, it' s not before a court, it's in an arbitration proceedings. We think there will be a subst antial recovery, but we've made pro vision in the statement conservatively for a complete write-o ff.

284 June 5, 1974 MR. McGILL: Good word. Yes. MR. CHAffiMAN: There are Conservatives and Conservatives. Mr. McGill. MR. McGILL: Mr. Clement, could you explain then some of the financial arrangements entered into with Sabetha Seeds of Kansas ? I don't think we're familiar with that operation. MR. CHAffiMAN: Mr. Clement. MR. CLEMENT: Mr. Chairman, Sabetha, Kansas is a very small town, much smaller than Brandon. It has a very dynamic businessman by the name of Bernard Wiltz - among other things he operates a seed supply company. The location of Sabetha is very strategic to some of the largest United States mark ets.

McKenzie' s made an option agreement with Sabetha that involved them supplying some assis tance, $2 0, 000 in capital, and in return re ceived an option whereby McKenzie' s could acquire all of Sabetha as a wholly owned subsidiary if certain objectives were reached by Sabetha by 1975. It seems from a report I received from one of our accountants about ten days ago who made a visit there, that they're experiencing the same buoyant sales of seeds that the rest of North America is and that they are going to do exceedingly well.

It may work out very well ; if it doesn' t, the costs to McKenzie' s will not be serious. MR . CHAffiMAN: Mr. McGill. MR. McGILL: I would like to proceed then to another subject. I understa nd, Mr. Clement, that now - and perhaps for a term of years, I' m not sure - the head of fice of the McKenzie Seed Company is in Winnipeg, although your major plant is in Brandon and it will become even more major when Steele Briggs is moved from Toronto to the Brandon area . Now, I know that your problems are expenses in running this busin ess.

What is the reason for maintaining executive of fices in Winnipeg as remote from the operations of the company in Brandon, and how much would you say annually this adds to your cost of doing busine ss ? MR. CHAffiMAN: Mr. Clement. MR. CL EMENT: I think this was the second question I asked when I became Chairman of the Board mont hs ago. There are certain advantages to the President being on a main air line route ; when half the production was originating in Toronto, I think it was perhaps very import ant that the Presi dent be able to go quickly from Winnipeg to Toronto.

I think with the amalgamation of Steele Briggs into the Brandon plant that some of these reasons will dis appear, and I have asked our management to make a detailed report to the directors for a meeting we're having this month. I am concerned that the actual head off ice be in Brandon also - the legal head of fice is still in Brandon, the corporate head of fices are in Brandon, but the President has so far found it more efficient to work out of Winnipeg. This is under review at the next meeting now of the Board of Directors. MR.

CHAffiMAN: Perhaps some living in other const ituencies would like to make representation with you to consider many locations. Mr. McGill. MR . McGILL: You wouldn't, Mr. Clement, have an idea in terms of dollars annually oL the cost of maintaining an off ice in Winnipeg? MR. CHAffiMAN: Mr. Clement. MR. CLEMENT: No, Mr. Chairman, this analysis will be made available to our next directors' meeting, but it hasn't been brought to me yet and I believe it' s still under preparation. MR. CHAIRMAN: Mr . McGill. MR.

McGILL: I think the point about transportation is one that you make, and perhaps the application of Transair will have some ef fect upon that difficulty. I understand that the late Mr. McKenzie had that pretty well worked out. He was just across the road from the CPR station, and I'm told he phoned the station and told them that he was going to take the train and would they hold a few minutes, that he wasn' t quite ready to go, and they did that for him . I think this was a very convenient arrangement. MR . CHAIRMAN: This was before life got so complicated. Mr. McGill. MR. McGILL: Mr.

Chairman, I' d like to ask Mr. Clement about a recent trip of the Presi dent and I believe the me rchandising manager, in the month of May to Holland. What was the purpose of that trip in respect to the seed business, was it a buying or selling trip ? MR. CHAffiMAN: Mr. Clement. MR. CLEMENT: Mr. Chairman, the parpose of the trip was twofo ld.

One of the pro blems in merchandising is, that if you're selling packet seeds, the public are only interested in them for two or three months a year and the rest of the year you have little if nothing to sell; so that McKenzie having a very ef fective distribution system, should have products if

June 5, 1974 285 (MR. CLEMENT cont'd) . . possible that it is knowledgeable about and can sell all year round. Now one of those products is cut flowers, which the supermarkets find very acceptable for weekend specials - and to maintain quality all year round, Holland is the ef ficient producer of flowers and McKenzie' s flies every week cut flowers to Canada and distributes them through its sales organizations to markets that have already placed an order. I could spend some time on this marketing point because it' s a fas cinating story, but this was part of the purpose of the trip to Europe.

The other part was, that McKenzie' s have a product which is very much in demand in Europe - not packet seeds, they can produce their own seeds just as well as we can, and therefore there's not - but our convenience products are new to Europe, and this was the other parpose, to find out if it was really worthwhile to look at a European market for a Canadian seed company. I might say that the Canadian Government and Pacific Airlines paid the out-of- pocket expenses of the trip as a promotiona l ef fort. MR. CHAIRMAN: Mr. McGill. MR. McGILL: Mr.

Chairman, I recall that in the explanations about the Mexico con nection, it was the intention to import cut flowers from Mexico. Is this Holland arrangement now taking the place of the proposed Mexican arrangement for the delivery of cut flower s? MR. CHAIRMAN: Mr. Clement. MR. CLEMENT: Ye s. The quality of the flowers from Holland is so acceptable to the marketplace, that it seems to be the best until the same or similar standard could be achieved by another supplier.

The greenhouses in Ontario produce a very good quality cut flower, but only for certain seasons like around Easter time they'll flood the mark et with certain types of flow ers.

But we're really interested in developing a weekend special, sell it for around 98 cents a bunch, and have a very good bunch of flowers that the housewife can buy for say 98 cents and take home in her shopping cart, put them on her table for the weekend, possibly with a bottle of Ontario wine or Manitoba wine or whatever she likes to do - but it is someth ing that the supermarkets like very much, and that we have a capability of servicing. MR . CHAIRMAN: Mr. McGill. MR. McGILL: Now, I'm jumping around a little bit here. You did mention the conven ience display packaging program that the company was involved in.

Now has this been a suc cess financia lly, would you say, or is it one in which you have had difficult ies ? You mentioned for the very small accounts it doesn' t seem to work, but what about this program generally, has it been an expense item for the company ? MR. CHAIRMAN: Mr. Clement. MR . CLEMENT: I'm not sold on it, and I don' t think management is sold on it.

We recognize that it takes as a rule two to three years to introduce a major new line and test pro perly the acceptability of it, and we have some very serious doubts as to whether this is the answer to our year-ro und sales program . lt' s an odd thing, but some of the markets seem to have ju st welcomed the convenience products, and other markets can' t do a thing with it. lt' s someth ing that we still have to do more work on before we can satisfy ourselves as to whether it' s somet hing we should stay in, or go back into the packet seed busin ess.

This is another thing that we are going to have to deal with at a very early meeting. MR . CHAIRMAN:Just before you proceed, Mr. McGill, I just want to let Mr. Banman know, I have your name down here. Mr. McGill. MR. McGILL: Yes. I want to just swing over now to the otlier matter which Mr. Clement mentioned, and that is the

chapter of the Statutes of April 1945 which spells out the relationship and the benefits to be received by Brandon College, now Brandon Universit y, and which - and I' m speaking here as a person who has had an interest in this over the years - it may be the difficult y, or part of the diff iculty that you are experiencing at the moment in maintaining pro per financing, or at least obtaining equity capital to enable you to reduce your current liabilities.

Now you mentioned the - and you did it in detail, so I won't go over that - the Province has �028 shares of the stock of the comp:my, and in ret urn for this turning over, I understand that the Consolidated Fund of the Province of Manitoba pays $22, 500 annually to Brandon College. Now that is really a bookkeeping entry, because very much more money annually of course is being paid by the Grants Commiss ion, so that really is not important. Then another require ment was that $60, 000 be set aside out of profits each year as working capital until that ratio four to one was achieved.

Well I guess there hasn' t been any $60, 000 application because the dividends have not achieved that status, but the first charge on declared dividends is $20, 000

286 June 5, 1974 (MR. McGILL cont•d) ••• per year to Bra ndon Universit y plus $4, 000 for if and when a Chair in Social Science is established. I think that is not established yet, is it ? (No) So it has been represented in our News Service from the Government that Brandon University will variously receive 100 percent of dividends, or 90 percent, and up to this point - I guess since the Govern ment of Manitoba became an active operator of this business, probably since 1969 or '70 -there has not been any opportunity for the Universit y to participate. I would like to hear your comments, Mr .

Clement, on what you think the solution of this may be. These shares are in the hands of the Province. The University hopes some day to achieve some benefits from the operations of the company and at the same time they are speci fi cally kept out of the operating decisions of the company - I believe

Document details

Collection	Manitoba — Debates (Hansard)
Citation	30-1-ed10
Type	hansard
Volume / chapter	30th 1st hansardpdf ed10.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	c2e71560f42dc062da91f5dc60fa669777b0dfe3

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