Published on May 07, 2016

Maxime Bernier was the first declared leadership candidate to sign Generation Screwed’s Future Generations Protection Pledge. 

He committed to: 

1. Present a balanced budget to the House of Commons within 24 months after taking office – stopping the federal debt clock; 

2. After the budget is balanced, commit to running ONLY balanced budgets at all times outside of war or natural disaster; and

3. Legislate a debt repayment schedule, dedicating a portion of annual revenues towards eliminating the debt.

Published on May 11, 2016

On June 13, 2006, I gave the keynote speech as Minister of Industry at the Canadian Telecom Summit in Toronto. The speech announces the main points of the reform that I implemented in this sector during the year that followed. — 6 April 2009

It is a great pleasure for me to attend this important gathering of the Canadian telecommunications industry.

I’m especially happy to meet so many of the people behind all these new products and services that are changing our lives and our economy.

It’s impossible to overstate how important the telecom industry is to our competitiveness, our productivity and our living standards. Our very future as a developed nation is increasingly dependent on information and communications technology.

As many of you may know, our new government has five priorities, but I can assure you that telecommunications is at the top of my action list.

In addition to its size and its importance to the Canadian economy, one reason the telecommunications industry has to be a priority is that things are changing so fast.

New technologies can be “cutting edge” one day and virtually obsolete the next.

In government, just as in business, we cannot afford to be slow in adapting. We cannot afford to lag behind while other countries leap forward.

When the Telecommunications Act was adopted in 1993, no one could foresee the extent to which the Internet and other technologies would revolutionize almost every aspect of our daily lives.

Today, no one can predict what the sector will look like a year from now. This pace of change has become a fact of life, and it forces us – on the government side – to adapt our ways.

Canada already has one of the most dynamic and competitive telecom sectors in the world. Since the introduction of competition in the 1990s, we have had a measured transition toward an increasingly open and competitive market.

Today, this transition is almost complete. Except for remote regions of the country, there are competitive pressures coming from all sides.

The introduction of competition has also led to the emergence of innovation, new technologies and services at affordable prices.

Several types of technologies – wireline and wireless – have been blended. And it is becoming increasingly difficult to define precisely what a market in telecommunications services is – where it starts and where it ends.

For example, not only is there more competition for traditional local phone services, there is also competition coming from other technologies.

More and more Canadians have no telephones plugged into the walls of their homes. They use only cell phones.

I read in a survey done last month by Decima Research that about 5 percent of all Canadian households have replaced their traditional telephone line with wireless telephone service. Another 17 percent are considering doing so.

Let me give you this clear message today: it is not the role of government to decide how this increasingly complex market should evolve. It is up to you – producers and consumers.

Likewise, our role is not to decide which technology is better and should be permitted to to grow faster. That is up to the marketplace to decide.

What this government wants to do is twofold: to ensure that all businesses -regardless of their size – have a chance to succeed.

As well, we want to ensure that consumers are protected and have access to the best services at an affordable price.

Our government is committed to modernizing the way the telecommunications industry is being regulated in Canada. Our goal is to remain among the most advanced and dynamic nations in the world in this field.

That is why I was very pleased to receive, last March, the final report of the Telecommunications Policy Review Panel.

Its three members – Gerri Sinclair, Hank Intven and André Tremblay – did extremely valuable work in analysing the state of the industry and in proposing ways to bring about this modernization.

Among its numerous recommendations, the Panel calls for extensive reform of Canada’s national telecommunications policy and the regulatory approaches used to implement it.

As the Panel wrote:

It is time to reverse the current presumption in the Telecommunications Act that all services should be regulated unless the CRTC issues a forbearance order. This should be replaced with a legislative presumption that services would not be regulated except in specified circumstances designed to protect end-users or maintain competitive markets.

Back in 1993 when the Act came into force, it introduced a transition to a competitive telecom landscape. That is why two of the policy objectives set out in the Act deal with this question.

One states: “to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications.” Another states: “to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective.”

How these two objectives are interpreted is key to implementing many of the regulatory reforms recommended in the Panel’s report.

Over the years, as the report clearly states, these two objectives have been subject to a wide disparity of interpretations by parties who advocate diametrically opposed views.

For some, the objectives are interpreted to call for proactive measures to increase competition. For others, they mean that market forces should be permitted to work without regulation.

They have been used to justify both the increased regulation of essential facilities and their deregulation.

Specifically, the Panel recommended that the government issue a policy direction to the CRTC in order to help clarify this confusion. In doing so, we can immediately begin the modernization of our telecom regulation.

That is why the government tabled in Parliament today a proposed policy direction to direct the CRTC to rely on market forces to the maximum extent feasible within the scope of the current Telecommunications Act.

It calls on the CRTC to regulate telecommunications services only when necessary.

It is the first time since the adoption of the Telecommunications Act that such a policy direction has been issued. It will help clarify the meaning of the policy objectives set out in the Act when these are debated again in the regulatory proceedings of the CRTC.

The ultimate goal of this initiative is that all Canadian consumers and the economy as a whole benefit from this competitive environment – and from the greater innovation that it will spur.

As a former businessman, I of course wish each of you great success in your business pursuits, but as Minister of Industry, I have a responsibility to all Canadians.

Let me share some of my personal beliefs.

As you know, I have been in public life for only a few months now.

I came to this portfolio from the private sector with a strong appreciation for the benefits of markets and their ability to deliver results.

The record is clear around the globe. Economic freedom benefits individuals, communities and countries.

Countries where economic freedom flourishes – countries that are open to business and entrepreneurship – are countries that have faster-rising standards of living.

So, greater competition in the telecom sector – supported by a more coherent policy that relies on market forces to the greatest extent possible under the Act – will bring about even lower prices and better services.

It will encourage innovation and lead to higher productivity in how services are provided.

As changes to the regulatory environment take place, we will ensure that the needs and rights of consumers are protected.

In particular, for Canadians living in remote areas of the country where there is limited choice, our government will be there to ensure universal access to telecommunications services at a reasonable price.

These communities are not likely to see as much telecommunications competition as larger centres; they may continue to be served by only one provider.

Regulation, or some other form of government support, will continue to be essential to ensure that these consumers and businesses have access to an affordable, world-class communications infrastructure.

Although many of us take the power of technology for granted, we cannot be complacent in creating an environment where these technologies can grow and thrive.

That’s because it is through the use of telecom technology that our economy, our citizens and our country can compete and succeed in the global marketplace.

Let me close by saying again that our government endorses the concept of reliance on market forces to the maximum extent feasible under the Telecommunications Act while using regulatory tools to deal only with those issues that market forces cannot address.

I am committed to making every change necessary so that our telecom industry remains one of the most dynamic in the world.

I cannot wait to see all the new gadgets that you will bring to the market in the coming years to enhance our work and our lives, even though they may drive us all a little crazy!

We are entering an exciting new era of reform, and I hope I will have your support in going forward in this direction.

Thank you very much.

Published on May 11, 2016

On Septembre 17, 2006, I delivered this speech about economic freedom, the importance of entrepreneurship and the role of government at the Annual General Assembly of the Canadian Chamber of Commerce in Saskatoon. — 7 April 2009

Before I begin, I want to take a moment to recognize the outstanding work of the Chamber of Commerce and its members. The Chamber is an essential link between government and tens of thousands of Canadian entrepreneurs and innovators – the very heart of Canada’s economic engine. One of the keys to prosperity for all Canadians is entrepreneurship. It is very important to me; it is vital to our economy. And this is what I would like to discuss with you today.

The first thing you should know about me is that I am from the Beauce, the region along the Chaudière River south of Québec. The Beauce is unique in Quebec – it is well known as the most entrepreneurial region of the province. Many of the best-known business people in Quebec come from the Beauce.

This is also where I learned the values that go with entrepreneurship: individual freedom, integrity, responsibility and self-reliance. When I am defending economic freedom and entrepreneurship, I am defending what to me are “les valeurs Beauceronnes” – the values of my native Beauce.

I grew up believing that when we are free to create and to innovate, and to reap the benefit of our work, all human beings will tend to exhibit some quality of entrepreneurship. And by embracing these ideals we will make the world better, for ourselves and for everybody else at the same time.

Although we usually think of entrepreneurs as business people developing new products and investing in risky ventures, this is a narrow definition. Entrepreneurship is an outlook on life. It is the ability to see opportunities in your environment and exploit them to create something new or make something better.

You can be an entrepreneur in your own field, since there is always something to improve whatever we do. A hairdresser who develops an ability to match heads with new hairstyles is an entrepreneur. An industrial worker who finds a faster way to assemble a machine is an entrepreneur. A teacher who uses games to keep his students interested in mathematics is an entrepreneur.

All these people create something of a greater value. They do it not only because they can earn more money. They do it because it makes their jobs more interesting, because it gives meaning to their lives, because they believe that they can make a difference. That is why governments at all levels need to nurture entrepreneurs, not punish them with job-killing taxes and burdensome red tape.

My dream for Canada is that the 21st century becomes the century of the individual, the century of the entrepreneur, a century of unequalled freedom and prosperity. As Canadian Minister of Industry, I can have a bit of influence on making this dream come true. I have already started working to achieve this goal.

You are probably aware that earlier this year, I tabled in Parliament a proposed policy direction to the Canadian Radio-television and Telecommunications Commission – the CRTC. This is the first time since the Telecommunications Act came into force almost 15 years ago that a policy direction has been issued to the CRTC. It marks our intention to direct the CRTC to rely on market forces as much as possible in exercising its mandate. When regulation is necessary, we want to ensure it poses the least possible interference with market forces.

This will mean lower regulatory cost and burden, with fewer regulatory proceedings and more competitive markets. This will lead to a stronger competitive environment and, in turn, more choice, lower prices and better service for Canadians.

In June I met with my American and Mexican counterparts to officially launch the North American Competitiveness Council (NACC). Its mandate is to provide governments with recommendations on broad issues such as making our borders more efficient and reducing regulations, as well as increasing the competitiveness of key sectors. I look forward to receiving recommendations from the entrepreneurs – members of the NACC – who know better about fostering a more productive economy.

Last week, I met with my provincial and territorial counterparts in Halifax to discuss ways to strengthen Canada’s economic union. In today’s globalizing world, it makes no sense to still have interprovincial trade barriers. I was very encouraged by the discussions with my provincial colleagues. We reached agreement on an ambitious action plan that will significantly improve labour mobility, allowing Canadians to work and live anywhere in Canada without restrictions by April 1, 2009.

As Canadian Minister of Industry and member of Canada’s new government, I believe we have to establish conditions so that all small businesses can realize their goals. We need to nurture entrepreneurs and liberate their capacities to invent, invest and achieve.

Our government shares your goal to foster a strong, competitive economic environment that benefits Canada and all Canadians. That is why the budget’s first priority is a more competitive tax system. We want to create an environment that encourages investment and supports a more productive economy.

We cut the GST. We reduced the lowest personal income tax rate. The amount that all Canadians can earn without paying federal income tax will be increased, each and every year for 2005, 2006 and 2007. We introduced the $1000 Canada Employment Credit to give Canadians a break on what it costs to work – recognizing expenses for things such as home computers, uniforms and supplies. We reduced the tax burden on business, especially small business – the greatest generator of jobs and wealth in Canada.

Beginning next year, the threshold at which small business income is eligible for the reduced federal tax rate will increase by $100 000, to $400 000. The 12-percent rate for eligible small business income will be reduced by a full percentage point over the next two and a half years. We have eliminated the federal capital tax, two years ahead of schedule. The corporate surtax will be abolished in 2008, and, by 2010, Canada’s general corporate tax rate will have dropped by two full percentage points.

Budget 2006 also outlined the reduction of paper burden on small and medium-sized businesses as a priority. Like the Canadian Chamber of Commerce, Canada’s government recognizes that time is money, especially when it comes to regulatory matters. We are working with partners such as the Canadian Federation of Independent Business and the Canadian Manufacturers & Exporters association to bring about real results from the Paperwork Burden Reduction Initiative. Processes are being streamlined and, as the Minister responsible, I am committed to working within the federal government and with our partners in the provinces and territories to increase the pace of regulatory reform.

In addition, we continue to refine the BizPaL initiative, working with our partners in the provinces, territories and municipalities to give business people easy, one-stop access to the business permit and licence process for all levels of government.

Improving the business environment also means enhancing trade relations with other countries. Already we have moved decisively to improve the working relationship with the Americans – our largest trading partner and closest ally. We have reached an agreement with the United States to bring an end to the longstanding softwood lumber dispute. It ensures a greater certainty for businesses in this industry that will allow them to innovate, invest, grow and expand.

We are also building upon existing relations with China, our fastest-growing and second-largest national trading partner. Our nations have enjoyed a long and mutually beneficial trade partnership, and we will continue developing this important relationship.

These are only a few examples of what we have accomplished. And more will come.

For too long in this country, we have had too much government on our back and too much government in our pockets. The government’s role is to create an environment that does not punish people who work more and earn more money, but rather encourages them.

As Ronald Reagan once said, the role of the government is not: If it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidize it. Good government policy gives people the opportunity to look to the future, to dream and to realize their dreams. This is what living in a great and free country is all about.

Today I’ve spoken about values that I know you share. I’m not asking you to believe in yourselves; you already do. I’m not asking you to be entrepreneurs; you already are. But I will ask you to work with me, and with my colleagues in Canada’s new government, to build a freer, more dynamic and competitive economy.

Ladies and gentlemen, entrepreneurs, thank you.

Published on May 11, 2016

On December 11, 2006, I held a press conference at the Canada Science and Technology Museum to announce the main points of the changes in the regulatory framework of the local telephone markets that I had succeeded in getting adopted by the government. Professor Richard Schultz, who is director of the political science department at McGill University, explains in an article reprinted elsewhere on this blog the process that led to this reform. It is a major reform, seen by many as the most important in this sector for several decades, and of which I am extremely proud — 8 April 2009

A major reform for local telephone markets

Today, December 11, 2006, will become an important date for telecommunications in Canada. We are here this afternoon for a very important announcement. A museum featuring an exhibition on the history of telecommunications is the best place to announce a reform of the telecommunications industry.

About 25 years ago, Canada started the process of ending the monopolies of a few big telephone companies. This long process started with allowing the interconnection of private lines and private equipment to the monopoly networks in 1979 and 1980. But the pace accelerated after the government licensed two national cellular service systems in 1984.

Further, in 1992, the Canadian Radio-television and Telecommunications Commission (CRTC) opened the market for public long-distance calls to competition. Then, in 1997, competitors were also allowed in the local telephone market.

There have been many technological revolutions during this period, such as the arrival of cell phones, the Internet, broadband networks, Voice over Internet Protocol and cable telephony. Today, Canadians benefit from one of the most developed and dynamic telecommunication industries in the world.

All this happened thanks to several key ingredients: entrepreneurship, capital investment and new technologies.

But it also happened for one major reason and that is because the former monopolies lost their privileges – because market forces were allowed to play, and because consumers were allowed to choose.

Without deregulation of the telephone market, or the absence of regulation from the start of emerging sectors like wireless and the Internet, it could not have happened. Today, 70 percent of the telecommunications sector is deregulated.

That is why I am spearheading an ambitious policy agenda in the telecom sector, the essence of which is a new regulatory framework that is more modern, flexible and efficient.

I started this process in June, when I tabled a proposed policy direction to the CRTC in Parliament. It calls on the CRTC to rely on market forces to the maximum extent feasible and to regulate telecommunications services only when necessary.

Now, it is time to enable consumers and businesses to benefit from retail-price deregulation of traditional local telephone service as well.

Today, I am proud to announce that, in the interests of Canadian consumers, the government is proposing to change the CRTC Decision on Local Forbearance. In this ruling, the CRTC laid out its criteria for determining when it would refrain from regulating retail local telephone service provided by the former monopolies, on the basis of a market-share test.

With this regulatory regime, however, the CRTC is still inhibiting competition beyond what is necessary. Continuing with this regime means it may take up to two years before deregulation comes to major urban markets. Meanwhile, consumers are deprived of the benefits of more intense competition.

The government proposes to replace the CRTC’s market-share test with one that emphasizes the presence of competitive infrastructure in a given geographical area.

The new test that we are putting forward is based on the presence of several competitors that have their own wireline or wireless networks and are offering competing telephone services. Under this test, the former regional monopolies will no longer need to get CRTC approval to set their prices for residential services in areas where there are at least three facilities-based telecommunications service providers owned by three non-affiliated companies.

This means that in regions where consumers have access to telephone services from a traditional telephone service, a cable company and at least one non-related wireless provider, deregulation will occur. For local business markets, we are proposing a similar test based on the presence of two competing wireline network operators.

We are also proposing an end to restrictions on “winback” offers and other promotions and marketing practices in all markets across Canada. It is the essence of competition to be able to inform your customers. We don’t help competition by preventing players from promoting their products.

The transition from the old way of regulated telephone monopolies to an open and competitive market offering several types of services is now almost complete. Except for rural and remote regions of the country, there are competitive pressures coming from all sides.

In a competitive sector, consumers – not a government agency – should determine what price to pay for telephone services. In a competitive sector, there is no reason to regulate some companies while allowing others to offer the services they want at the prices they want. It is time to have a level playing field.

This is why our government is taking a step further today to complete this development. We are proposing to remove the last regulatory obstacles to full competition in the local telephone market, so that Canadian consumers will benefit from even more choice, better service and lower prices.

Deregulation in the long-distance sector has shown that competition is a key factor in keeping telephone service prices low. Domestic prices for long-distance calls have dropped from an average of 35 cents a minute in 1993, when the market was open to new players, to approximately 10 cents a minute today. And these price decreases occurred mostly in 1998 and 1999. That’s just after the CRTC deregulated the long-distance rates of the former monopolies.

In following this agenda, Canada will be guided by the spirit of deregulation shown by initiatives in several developed countries such as Denmark, Finland, Germany, New Zealand, the United Kingdom, Norway and Australia, which have significantly less price regulation than Canada, or no regulation at all. This is despite the fact that none of these countries have cable deployment as extensive as Canada, where cable telephony is rapidly establishing itself as the main competitor to traditional wireline telephony.

On Saturday, December 16, we will publish our proposal to alter the CRTC Decision for public consideration in the Canada Gazette for a 30-day consultation period.

About 60 percent of the Canadian population lives in regions that meet the competitive infrastructure test, including most major urban centres. For Canadians living in remote areas of the country where there is limited choice, our government will be there to ensure universal access to telecommunications services at a reasonable price.

We propose to leave in place existing safeguards that protect consumers such as a price ceiling for stand-alone residential service and continued price regulation in regions where there is little competition.

Finally, we are also proposing to amend the Competition Act. Last week, I tabled in Parliament amendments to the Competition Act to establish financial consequences for companies that engage in anti-competitive behaviour in deregulated markets.

This new safeguard will ensure the viability of competition in a deregulated market, protecting both consumers and competitors. Together, these proposals will reduce unnecessary regulation and increase reliance on market forces and competition in telecommunications, so that Canadian families and businesses can benefit from more choices and improved products and services.

Published on May 11, 2016

On January 18, 2007, as Minister of Industry, I gave this speech on the importance of entrepreneurship and the high economic costs of too much regulation at the Saint-Georges-de-Beauce Chamber of Commerce. — 10 April 2009

As you probably know, one of the most important keys to prosperity for all Canadians is entrepreneurship. An entrepreneurial approach is vital to our economy, and that is what I would like to discuss with you today.

Wherever I give speeches in Canada, be it in Montréal, Toronto or Saskatoon, I always introduce myself the same way.

I say that I come from the Beauce. That the Beauce region is unique in Canada. That it is well known as Quebec’s most dynamic business centre. That many of Quebec’s best-known business leaders are from the Beauce.

And if you want to understand who Maxime Bernier is and what he does, keep in mind that he comes from the Beauce. And that the Beauce made him what he is.

A year ago, when I announced that I was running for Parliament, I said that I would go to Ottawa to defend les valeurs beauceronnes, the values of the Beauce – values such as integrity, entrepreneurship and individual freedom.

That was my one and only promise.

These values are what guides me in the numerous issues for which I am responsible at Industry Canada. In promoting economic freedom and entrepreneurship, I am defending what I consider to be Beauce values.

These are obviously universal values – values that are at the core of Western civilization and shared by millions of Canadians. Values that have made this country prosperous and a great place to live.

The word “entrepreneur” usually brings to mind business people who are developing new products and investing in risky ventures, but this definition is too narrow. When they are free to create and innovate and reap the benefits of their work, all human beings exhibit an entrepreneurial spirit.

Entrepreneurship is an outlook on life. It is the ability to see opportunities in our environment and exploit them to create something new or make something better.

We can all be entrepreneurs in our own fields, since there is always something to improve, no matter what we do. A hairdresser who can tailor the latest hairstyles to his clients is an entrepreneur. An industrial worker who finds a faster way to assemble a machine is an entrepreneur. A teacher who uses games to keep her students interested in mathematics is an entrepreneur.

All these people create something valuable. They don’t necessarily do it for the money. They do it because it makes their jobs more interesting. Because they believe that they can make a difference. Because it gives meaning to their lives.

By embracing the ideals of entrepreneurship and free enterprise, we make the world a better place, for us and for everyone else.

You may be wondering what all of this has to do with my mandate at Industry Canada. Actually, it has a lot to do with this mandate. My department’s mission is to help make the Canadian economy more productive.

You are probably aware that an economy is more productive when people are free to create, innovate, work, exchange ideas and invest. It is more productive when people are motivated to demonstrate their entrepreneurship, in the most traditional business sense and in the general terms I just mentioned.

I believe in economic freedom because I have faith in people. Because I have faith in entrepreneurs. Entrepreneurs like you are the very heart of our economy. They drive the economy. They create wealth. It isn’t governments that create jobs, it is entrepreneurs.

Governments at all levels need to nurture entrepreneurs, not punish them with taxes and burdensome red tape. There has been too much government in Canada for too long. Governments dip into our pockets too often. They impose too much red tape. They put a spoke in the wheel of those who want to create. It is time for this to change.

Excessive regulation comes at a price, and the price is very high. Last fall, the Organisation for Economic Co-operation and Development (OECD) published a study that explains how unnecessary regulations hamper the implementation of new technologies. According to this study, countries with many restrictive regulations have lower productivity levels.

The study also indicated that productivity in Canadian enterprises could have been higher. It could have been one percent higher every year from 1995 to 2003, if we had adopted regulations similar to those of less restrictive countries for each of our economic sectors. One percent higher per year. We all know that this makes a huge difference after a few years!

The OECD study made another important observation. Excessive regulation has more serious consequences on sectors that make extensive use of information and communications technologies. It is therefore even more crucial that we reduce unnecessary regulations in these sectors.

That is why, over the past few months, I have taken action on many occasions with regard to telecommunications. My goal is to create a new regulatory framework that is more modern, flexible and effective.

I made an order that gives clear policy directions to the CRTC. This is the first time since the Telecommunications Act came into force nearly 15 years ago that any such instruction has been issued to the CRTC. It directs the CRTC to rely on market forces as much as possible in its decision making, and to impose regulations only when needed to protect the interests of Canadians.

I also changed two CRTC decisions that imposed overly burdensome regulations with regard to the Internet and local telephony. It is time that consumers and enterprises benefit from the deregulation of these services. This will lead to a stronger competitive environment and, in turn, more choice, lower prices and better telephone services for all Canadians.

Since it came into power almost a year ago, Canada’s new government, led by Prime Minister Harper, of which I am proud to be a part, has agreed to govern Canada according to a clear vision and an ambitious program.

Reducing personal income tax and the tax burden on business was a key element of the 2006 Budget and of our recent Economic and Fiscal Update.

The 2006 Budget not only confirmed our commitment to reducing the GST by one percentage point, but it also eased the tax burden of Canadians by a total of more than $20 billion over two years. That is more than the overall tax relief provided by the last four federal budgets combined.

In November’s Economic and Fiscal Update, Finance Minister Flaherty publicly announced the Advantage Canada Plan. Under this plan, Canada’s new government has promised to reduce the debt by at least $3 billion in 2006-2007 and each subsequent fiscal year. Canadians will directly benefit from this measure. The interest savings generated by the reduced debt will be returned directly to Canadians through a reduction in personal income taxes. As the Finance Minister said: “Lower debt means less interest means lower taxes; that’s our tax back guarantee.”

I have spoken today of the values of freedom and enterprise that I share with many of you. These are the values that led me into politics.

It is because of you that I am an MP and a minister. It is because of you that Beauce values are so influential in Ottawa. And it’s also because of you, our entrepreneurs, that the country is so prosperous. I am asking you to keep on being entrepreneurs, in your own endeavours and in your own way.

Human progress knows no limits when women and men are free to follow their dreams. My dream is that the 21st century will be, for the Beauce, for Quebec and for Canada, the century of the entrepreneur – a century of unequalled liberty and prosperity. With your support, I want to help make this dream come true.

Thank you, ladies and gentlemen. Thank you, entrepreneurs.

Published on May 11, 2016

Professor Richard Schultz, who heads McGill University’s political science department, wrote a very interesting analysis of the reforms that I accomplished in the telecommunications sector as Canadian minister of Industry. This analysis makes up a chapter in the book How Ottawa Spends 2008-2009: A More Orderly Federalism? The Financial Post ran an excerpt of this document in its May 29, 2008 edition, which is reprinted below. The quotation refers to the British Comedy series Yes Minister. — 14 April 2009

Maxime Bernier: the ‘yes’ minister

Financial Post May 29, 2008

McGill professor Richard Schultz says that as industry minister, Maxime Bernier courageously took on telecom bureaucrats and won major victories for market reforms of Canadian telecommunications.

By Richard Schultz

That would be courageous, Minister, very courageous.
– Sir Humphrey Appleby, Yes Minister

Over the past 40 years, telecommunications has largely been neglected by elected policy-makers. For the most part, the industry has been bureaucratically shaped while politicians have played only a supporting role for decisions made by others. This is true even for the 1993 Telecommunications Act which did not substantially affect the policy directions pursued by the CRTC ever since it gained jurisdiction over telecommunications in 1976.

This political-bureaucratic dynamic dramatically changed with the election of the Conservatives in 2006, particularly with the appointment of Maxime Bernier as minister of industry. Telecommunications was not one of the vaunted five priorities of the new government. But in one of his first appearances as minister, Bernier made it clear that he had his own agenda: “As many of you may know, our new government has five priorities, but I can assure you that telecommunications is at the top of my action list.”

Over the next year, Bernier succeeded in fundamentally changing two major decisions of the CRTC through the appeal process and imposing a policy direction on the CRTC, the first since Cabinet was authorized to do so under 1993 legislation. These initiatives represented the most profound policy changes to the regulatory regime since the introduction of competition in 1979. They also established, for the first time, that elected authorities, not appointed officials, were responsible for setting policy.

Bernier was able to overcome both Cabinet and PMO doubts and determined opposition from both his departmental officials and those in the Privy Council Office. For the first time in the past 40 years of federal regulation of telecommunications, a minister had made a policy difference. The major direction Cabinet sent to the CRTC substantially re-interpreted the policy objectives of the Telecommunications Act. The regulator was ordered to give market forces primacy in its regulatory decisions which was a fundamental re-ordering of the objectives of telecommunications regulation.

There is no evidence that Maxime Bernier came to the position of industry minister with any prior knowledge of telecommunications or with any agenda for the sector. What he did bring was a philosophical outlook that would allow him to adopt, and aggressively pursue, an interrelated set of policy prescriptions for telecommunications.

In Bernier’s case, his sense of mission was clearly ideologically inspired. He is a staunch advocate of free market principles. In his first speeches as a minister, Bernier emphasized that he saw himself as a defender of economic freedom and open competition who embraced “the spirit of entrepreneurship and all it stands for – individual freedom, self-reliance, responsibility and autonomy.” In his first speech on telecommunications, Bernier signalled the importance of his principles: “I came to this portfolio from the private sector with a strong appreciation for the benefits of markets and their ability to deliver results.”

Bernier faced a formidable opponent to his agenda: the Canadian Radio-television and Telecommunications Commission (CRTC). Since acquiring jurisdiction over telecommunications in 1976, the CRTC had become the dominant force in shaping telecommunications regulatory policy. Without any overt political direction or guidance, for example, it had radically redefined legislative provisions dating from 1906 to permit competition in the terminal equipment and long distance telecommunications markets.

The only direct political intervention in the telecommunications regulatory system was the Telecommunications Act. It empowered the CRTC to forbear, or conditionally refrain, from exercising its powers to regulate rates and other aspects of market behaviour. Second, it permitted the CRTC to develop alternative methods for regulating telecommunications other than relying on traditional rate of return methods. Third, it gave the Cabinet authority to issue policy direction to the commission.

Bernier’s role in changing the CRTC came in the battle over VOIP – Voice over Internet Protocol – and forbearance of local telephone regulation. In March, 2006, a Liberal-appointed review panel reported with a recommendation that “market forces should be relied upon to the maximum extent feasible as the means to achieving Canada’s telecommunications policy objectives.” The panel was particularly critical of the CRTC.

The panel report would become crucial to Bernier’s overthrow of CRTC policy. In May, 2005, the CRTC had announced the rules that would be imposed on VOIP services. It rejected the major telcos’ position that VOIP services were revolutionary new services which should not be regulated through tariff approval and other requirements. The CRTC adopted the opposite view that such services, rather than being novel, simply marked “another step in the evolution of telecommunications networks” and were not a substitute for primary local exchange services.

The CRTC said it would continue to regulate the prices and service conditions for such services offered by the telcos but forebear from regulating new entrants and resellers on the grounds that they did not have any market power. This would give the cable companies especially a very significant competitive advantage. Included in the regulatory rules were the so-called “winback rules” which prohibited a telco from initiating contact with a residential customer which it had lost to a competitor. These rules would supposedly prevent anti-competitive behaviour by the telcos before a market had “matured.”

Less than two months after the CRTC’s decision, the telcos appealed to the Cabinet. The Liberal government declined to take up the case. And so, following the Conservative assumption of power, Bernier inherited the CRTC policy issue.

Weeks after Bernier’s appointment, he had lunch with members of the Telecom Policy Review Panel as well as departmental officials to discuss among other matters the VOIP appeal. Departmental officials discouraged Bernier from entertaining it, saying it “would be too technical and difficult” to explain to other Cabinet ministers why they should take the extremely unusual and politically risky step of overturning a CRTC decision. Review panel members, however, said the central issue was not how complex the matter was but that VOIP was exactly the type of novel breakthrough technology that should not be regulated by anything other than market forces.

Over the objections of his officials, Bernier supported the appeal but only to the extent of persuading Cabinet, in May, 2006, to send the decision back to the CRTC for reconsideration. Just in case the CRTC did not “get” the message, in June, 2006, Bernier announced that Cabinet was prepared to employ for the first time the power to issue a policy direction to the CRTC. The CRTC appeared to ignore the Cabinet. Bernier viewed the CRTC’s lack of response as an arrogant and wilful dismissal of political policy direction. Convinced that this was evidence that the CRTC was out of control and “did not get it,” Bernier easily persuaded his Cabinet colleagues that a Liberal-appointed commission was not sympathetic to the “new” government’s policy direction in telecommunications.

Consequently, on Dec. 14, 2006, Cabinet issued an order directing the CRTC to implement the revised telecommunications policy objectives. Bernier had won again, ignoring or overriding the advice of his officials, and the CRTC had lost again. But he was not finished. He would encounter the most strenuous opposition, not just from some industry players, his own officials and the CRTC, but from the most senior levels of the government in both the Prime Minister’s Office and the Privy Council Office.

In April, 2006, in a decision closely linked to the VOIP decision, the CRTC had issued its decision setting out how and when it would forbear from regulating the incumbent telcos providing local retail exchange services. It effectively said the CRTC would only forebear from regulating the telcos under certain conditions. They would also be subject to restrictions on their ability to “winback” lost customers. The telcos immediately appealed.

Bernier took up this case, and waged the most controversial of his telecom battles. Departmental officials felt that he was going too far in his attempt to impose his vision on the CRTC. According to several sources, Bernier in turn complained that his own Cabinet memos were rewritten in ways that undercut his arguments. On several occasions he was told that Cabinet did not have the legal authority to pursue his plan. He overcame that argument by obtaining independent legal opinions from outside the department. When Bernier persisted, departmental officials, according to several sources, then sought external support, primarily from the Privy Council Office to defeat their minister.

As a key decision date approached, Ottawa witnessed a bureaucratic coincidence worthy of Yes Minister. On March 27, just nine days before the deadline, the CRTC announced that it would forbear from regulating TELUS’ local service offerings in Fort McMurray, Alta. Although he did not take part in the decision, Konrad von Finckenstein, the new chair, declared in the accompanying press release that the “decision reflects our commitment to act quickly to bring the benefits of competition to Canadians.”

Cabinet was meeting that same day to take its decision on Bernier’s requested order. For the relevant PCO and PMO officers, here was sufficient proof that the CRTC did indeed finally “get it.” Bernier went to the Cabinet meeting only to discover that his item, approval of the Cabinet order, had been lifted from the agenda. Bernier was not yet prepared to concede defeat. He ordered his political staff to contact senior Bell and TELUS officers to tell them that, unless they were able to give him some help quickly, the order was doomed and the decision would stand. Both companies immediately issued press releases critical of the CRTC’s decision. TELUS said that it was “extremely disappointed” because it said that “the conditions for deregulation they set out are unattainable in any practical sense and . their decision runs entirely contrary to the government’s direction.”

In another coincidence, Bernier had a pre-arranged meeting with Prime Minister Harper that afternoon. Armed with the two press releases, he persuaded the Prime Minister that the need for the order amending the CRTC decision was in fact as strong as ever. As a consequence, Harper instructed officials in both the PMO and the PCO that, unless they had substantive problems with the order, he was authorizing Bernier to announce that the government was varying the CRTC’s decision.

On April 4, one day before the legal deadline, Bernier made the announcement that the Cabinet had opted to rewrite fundamentally the CRTC’s original decision and invited the telcos to file for forbearance in a number of major urban markets. This order was undoubtedly the most comprehensive variance of a CRTC decision.

Three weeks after the Cabinet order, the new CRTC chair said, “the message is clear: the government wants to move quickly toward more reliance on market forces in telecom services, less regulation and smarter regulation. I welcome the clarity and I welcome the variation order.” Thus concluded the 12-month series of battles that had been fought following the appointment of Maxime Bernier as minister of industry, battles that the minister had clearly won.

Unfortunately, we will never know whether he would have been able to deliver on the other components of the action plan developed by the Telecom Policy Review Panel because, after little more than a year-and-a-half as industry minister, Bernier was “rewarded” for his performance by being promoted to minister of foreign affairs. But in the short time he was industry minister, he decidedly made a difference that other ministers, past and present, can only envy.

**********

Richard Schultz is James McGill Professor and Chair, Department of Political Science, McGill University. This article is adapted from Telecommunications Policy: What a Difference a Minister Can Make, in How Ottawa Spends: 2008-2009, just published by McGill-Queen’s University Press.

Published on May 11, 2016

On June 13, 2007, I again was invited to address the Canadian Telecom Summit in Toronto as Industry minister. I reminded the audience of the reforms adopted over the preceding year and mostly discussed the reforms to come in the management of the frequency spectrum, a crucial element for the telecom industry. My transfer to the Foreign Affairs department two months later unfortunately prevented me from going forward with these plans. — 14 April 2009

A lot has happened in telecommunications policy since last June.

When I was here a year ago, I told you I wanted to modernize the way the telecom industry is regulated. I told you I had just tabled a proposed policy direction to the Canadian Radio-television and Telecommunications Commission (CRTC). We wanted the CRTC to rely on market forces to the maximum extent possible, and to regulate services only when necessary.

I told you this was the first step in a series of telecommunications policy changes. I was also examining two CRTC decisions – one on local telephone markets and another on Voice over Internet Protocol.

These decisions I believed were not consistent with the market-based approach that will make your industry stronger – an approach that guarantees there will be more competition among providers, and that consumers will get a bigger telecom bang for their buck.

Today, one year later, I am here to say that the policy direction is in force. Access-independent VoIP services were deregulated in the fall. In April, we abolished the regulations restricting telephone companies from offering promotions and calling back their former customers to offer them a better deal. These types of restrictions do not help competition and should not exist in a market-based economy.

Also in April, the criteria for deregulating local telephone markets were streamlined. This means that consumers in major urban markets such as Toronto will benefit sooner from the impact of competition in the marketplace, potentially bringing lower prices and better choice. And the CRTC has also recently announced that it is re-examining its existing regulations in light of the policy direction.

I am very proud of these accomplishments. They have reduced the burden of regulation on the industry. And they will benefit businesses and consumers!

I told you what Canada’s New Government would do. We acted. Today, one year later, I can say: mission accomplished! Now, with your continued support and advice, our government intends to move forward and make more changes to telecommunications policy that will benefit Canadians.

This year, we want to concentrate on another central aspect of the telecommunications industry – spectrum. Or, more precisely, the portion of spectrum – radio frequencies – that is the basis for wireless transmission.

Unfortunately, most people are unaware of the importance of spectrum. The media rarely mention it. But you and I know it: the broadcasting industry would not exist without spectrum. And the telecommunications industry would be much smaller.

When I was a kid, we used to play with walkie-talkies. Today, cellphones are not merely toys – they are widely used in everyday life. It is the fastest-growing sector in the Canadian telecommunications market.

But spectrum is not just about cellphones. New applications are being developed and commercialized every year.

High-tech cars today come with satellite navigation systems, and this requires spectrum. Farmland irrigation systems are being switched on and off remotely, which requires spectrum. Bank cards and public transit passes will soon be able to communicate by using spectrum.

The wireless transmission of energy is being developed. Imagine how revolutionary it would be if we did not need wires to transmit power. There are dozens of other examples of wireless communication between people and machines.

Wireless technology is like the electrical grid. At first, it was used mainly for lighting. Since then, all kinds of new electrical devices have been invented and connected to the wireline electrical network: ovens and refrigerators, hair dryers and washing machines. As new devices are invented that communicate wirelessly using spectrum, they too will reshape society in unpredictable ways.

This is why we must have an effective spectrum policy. The next wave of innovation depends on spectrum. Countries that have flexible spectrum policies will attract innovators, researchers and investments. Their citizens will have faster access to all these new products. Countries that slow down the adoption of technologies, or inhibit market forces, will fall behind.

The most critical role of government is to allocate spectrum in a timely and efficient manner.

This week, I approved a new spectrum policy framework. It will be officially published in the Canada Gazette on June 16. It will guide Industry Canada in managing spectrum more efficiently. This means that service providers who need spectrum will have easier access to it. It will foster innovation. And ultimately, consumers will have better telephone, Internet and television services.

The framework provides a small set of concise and clear guidelines, starting with:

�”market forces should be relied upon to the maximum extent feasible”; and
�”regulatory measures, when required, should be minimally intrusive.”

You will recognize here some similarities with the policy direction to the CRTC!

To put Canada at the forefront of wireless innovation, however, we need to go further. In its report last year, the Telecom Policy Review Panel called for, among other things:

�the establishment of market-based exclusive spectrum rights, which means an ability to buy, sell and lease spectrum holdings; and
�the elimination of barriers to the development of secondary markets in spectrum.

A sizeable body of economic, legal and technical literature considers that this would bring significant improvements in economic efficiency and innovation. I want to look at best practices around the globe. I want to know how we can adapt and improve our current practices.

This is why I have initiated a study of market-based exclusive spectrum rights. A group of experts with an international reputation in this field has been awarded the job. It is headed by Mr. Martin Cave, a British expert in spectrum policy who has been responsible for important reforms in that country. There is also a Canadian, Mr. Robert Jones. He has worked for 30 years in the field of spectrum here and on the international scene.

They will report to me in two months. I hope this will launch a lively debate.

Spectrum is a technical matter. But we’re making decisions that have important consequences for Canadians in their daily lives.

Earlier today, I announced that 12 new orbital positions have been made available to two Canadian satellite operators, Ciel Satellite and Telesat Canada. These new orbital positions are necessary in particular to better serve the customers of satellite television services. They are also needed to provide faster and more accessible broadband services in northern and remote communities.

Awarding these new licences will bring all the benefits of competition, including increased product and service offerings, choice in supplier, and competitive prices. That will benefit Canadians for years to come.

Let’s talk a bit more about television. Last month, the CRTC established August 31, 2011, as the deadline for the transition from analogue to digital television.

Digital TV is more efficient and uses less spectrum than analogue TV. It means that spectrum will become available for other uses. And so today, I am pleased to announce that this spectrum will become available for the industry in four years.

As in the U. S., channels 52 to 69 will be moved to lower frequencies, freeing up the 700-megahertz band. Four of these channels will be used for public safety. The others will be allocated for new services, including:

�advanced mobile;
�wireless broadband; and
�broadcasting.

I know that there is already strong interest in this spectrum. In the coming months, we will start laying the groundwork for its allocation. Stay tuned!

Finally, as you know, other important decisions must soon be made regarding spectrum allocation. They are related to the spectrum auction for advanced wireless services, to be held in early 2008. There are consultations now taking place to determine the auction rules.

As I said earlier, Canadians usually never hear about spectrum issues in the news. But looking at the press coverage for this auction, some of you must have been working overtime!

I note with interest that there is a debate about the amount of competition in the cellphone sector. A good debate includes opposing views and new ideas.

There are those who say we need specific measures to allow new players into the cellphone business to guarantee more competition. Others say there is a lot of competition already, and the rules should be the same for everybody. And there are also those who believe another way to stimulate more competition is by removing foreign investment restrictions. I’m glad to see that everybody takes for granted that competition is a good thing!

You know, every few years, we witness a new revolution in the telecommunications industry. Today, we are on the brink of a wireless revolution. Digital and wireless technologies are merging to create something new – something that will impact all aspects of our economy and our daily life.

As Minister of Industry, I want to make sure that you can develop your vision and plans. I want to make sure that you can seize all these exciting opportunities. My job is to create the best possible policy environment for business to thrive – and that in the end Canadians consumers are well served.

I hope to come back again next year to share with you more fascinating developments, and to report on all the policy improvements our government has made.

Published on May 11, 2016

On January 20, 2009, I was invited by the St-Georges Chamber of commerce to offer my reflections on the economic crisis. This is the English translation of my presentation, which you can also watch (in French) on this video. — 18 April 2009

I have always been fascinated by economics: how to help our fellow citizens realize their dreams, build better lives and, by the same token, a better world for all of us.

The past few months have given me more time to take a closer look at this current economic crisis. Today, I would like to share my reflections with you.

Between 2001 and 2004, in the wake of the dotcom crash, in order to stimulate the economy, the Federal Reserve pushed down interest rates to as low as 1%. If you factor in the level of inflation, real interest rates were negative.

What happens when central banks maintain artificially low interest rates? Ultimately, people are encouraged to save less, because the return on savings is lower. Furthermore, they are more prone to accumulate debt, because credit is easier and cheaper to obtain.

It basically came down to subsidizing people to borrow. But we all know this lesson: you cannot live on just your credit card for very long! This is precisely what has been going on in Canada, in the United States and elsewhere in the world for the past 20 years.

For example, in Canada, in 1990, the ratio of total debt to disposable income for Canadian families was 90%. Today, this ratio has surged to 130%. In 1990, Canadian families saved about 10% of their disposable income. Today, their savings rate is down to 1%.

Some people felt comfortable with this situation because they believed that their debts would eventually balance out as the value of their assets continued to grow. More specifically, this belief was driven by the rising price of homes since the late 1990s and the increasing value of retirement nest eggs.

But with the decline of the real estate market and recent crash in the stock market, we now know that this was a monetary illusion.

In the United States, this bubble was made bigger by the policies of the US government. It encouraged banks to extend risky mortgages to insolvent borrowers; and pushed people to take up mortgages to buy houses that they could not really afford. All of which contributed to an unsustainable increase in house prices of 10 to 15% per year.

In 2006, 22% of all new mortgage loans in the US were subprime. You’ve heard the rest of the story. These mortgage loans were securitized and then sold on the market around the world. Financial institutions who bought these investments stumbled when home owners started to default and house prices went down.

One of the reasons, this financial crisis turned into international economic crisis because these securitized loans were sold on the global market.

Now, what should we do to get out of this crisis?

Everybody agrees that we must inject money in our roads, bridges, tunnels, and other infrastructures after decades of non investment.

We hear a lot about artificially sustaining demand by injecting even more money into the economy. But where do you find the money to inject into the economy? It’s not falling from the sky.

The money has to come from somewhere else in the economy. In effect, it is all about taking money from some and giving it to others. It’s like taking a bucket of water in the deep end of a swimming pool and emptying it in the shallow end.

A government cannot inject money in the economy unless it has first extracted it from the private sector through taxes; or put us further into debt by borrowing the money.

We are also being told by some commentators to continue to shop till we drop in order to kick-start the economy. In these uncertain times, when many could lose their jobs, this amounts to urging people to be irresponsible.

This approach tells us that the more we consume, the richer we get. But the truth is exactly the opposite. The richer we are, the more stuff we can buy! And you get rich by working, by saving and investing real resources, and by becoming more productive. There are no other ways.

There have been many examples of excessive government intervention. Roosevelt prolonged the Great Depression by a decade with his ultra interventionist policies. The Japanese also implemented such policies after their real estate bubble burst in the late 1980s.

They voted in huge spending packages and the Japanese central bank kept interest rates at 0% for several years. It did not work.

The only tangible result is that Japan went from the country with the smallest debt in the G7 in 1995 to the country with the largest debt today. And, 20 years later, its economy is still in crisis.

So, the only thing more dangerous than this economic crisis may be our way of responding to it. If we intervene too much or in an inappropriate manner, we could very well aggravate and prolong the crisis

We need to permanently reduce the tax burden on individuals and businesses to allow them to better cope with the situation and get through the crisis. Because people know better than any politicians and bureaucrats in Ottawa what to do with their money

Reducing taxes is exactly what our government has been doing, since 2006. New specific tax reduction measures took effect this January 1st: the tax free savings account, the increase in the basic personal amount to $10,100 and the reduction of the general corporate income tax rate to 19%.

Thanks to these tax cuts and others that have already been implemented, we will pay 31 billion dollars less in taxes than expected in 2009-2010.

As you know, the opposition parties are threatening to defeat our government if the upcoming budget does not contain an ambitious spending package.

When the opposition parties declare that we must resolve the crisis by spending an enormous amount of money, they, in effect, are saying that the solution to the crisis is to increase our taxes and our debt.

However, considering the current political climate, and because we are a minority government, we will obviously need to make compromises.

Yet, we need to stay focused on the fundamental principles that have been tried and tested: responsible finances and free markets. It is only by fighting for these values that will find our way back to prosperity, and safeguard our children’s future.

Published on May 11, 2016

On January 22, 2009, I was invited by the Calgary Chamber of Commerce to give a speech on the causes and solutions to the economic crisis.  — 20 April 2009

Published on May 11, 2016

On February 10, 2009, the governor of the Bank of Canada, Mr Mark Carney, appeared before the Standing Committee on Finance, on which I sit, to discuss the state of the economies of Canada and the rest of the world. I asked him a question on the nature of inflation and the inflation target of the Bank of Canada. You can watch this exchange (in English) on the following video clip or read the adapted transcript below. — 21 April 2009

Maxime Bernier: You said in a speech two weeks ago in Halifax, and I quote:

… monetary policy is concerned with how much money circulates in the economy, and what that money is worth. The single, most direct contribution that monetary policy can make to sound economic performance is to provide Canadians with confidence that their money will retain its purchasing power.

At the same time, you spoke about the inflation target of 2%, which you called the cornerstone of the bank’s monetary policy framework.

I’m wondering how money can retain its purchasing power when it loses it by 2% every year. An inflation rate of 2% per year may seem small, but ultimately when you add up 2% depreciation of the monetary unit year after year, you end up with big numbers.

I went to the Bank of Canada website and I used the inflation calculator you provide there to see how much value our dollar has lost over the past few years. Let’s take 1990 as a reference point. It is not that long ago, but from 1990 to today, inflation in Canada adds up to 42%. This means that our dollar can now buy the equivalent of only 70¢ compared to 19 years ago.

The fundamental cause of price inflation is that the money supply is continually increasing. We get price inflation because we first have monetary inflation. The more money there is, the more likely it is that overall prices rise and that our dollar will lose its purchasing power.

I also saw on your website that M1, which is one definition of the monetary supply, has increased by 6% to 12% annually over the past 12 years. That’s a lot more than the growth rate of our economy. This inflation eats away at the income of every Canadian and it reduces the value of their savings. When your colleague at the Federal Reserve, Mr. Bernanke, appeared before a congressional committee on July 16, 2008, he said that inflation is a tax because people are forced to pay more for the goods and services they buy.

I would like to ask you two questions. The first is whether you agree with the chairman of the Federal Reserve that inflation is a tax. My second question has to do with the 2% inflation target. This implies a very large depreciation of our currency over the years. I wonder why the target is 2% and not a 0% target that will allow a complete preservation of the dollar’s purchasing power. I understand that this target is fixed in agreement with the finance department and that you cannot simply decide to change it on your own, but I would like to have your opinion. As an economist, do you think a 0% inflation target would have more advantages, and if not, why not?

Mark Carney: You’ve been busy, Monsieur Bernier!

I’ll mention a couple of things very rapidly; we can have a deeper discussion later.

First, as you referenced, there’s a very clear accountability framework for the Bank of Canada. The 2% inflation target is an agreement with the Government of Canada. It runs through 2011, and I would say that since the inception of that agreement in the early 1990s, inflation in Canada, as it’s tracked, has averaged exactly on that 2%. So the agreement has been fulfilled. It’s important in times like this, where there are some disinflationary pressures, that Canadians have the confidence that inflation will be at that. Those expectations remain.

Let me make a very important point in the current environment. The fact that Canadians can expect, in the medium term, that inflation will be at 2% helps to bring negative real interest rates at very low interest rates at the moment. But I absolutely agree that your calculations are correct: they’re based on our calculator, so they’d better be correct. This is a political economy decision. We’re doing a lot of research on this, whether it would be better to have a lower target. We will come back to this committee to discuss that research at the appropriate time.

You used depreciation of the currency, and the one thing I want to flag on that is that what is relevant for exports and competitiveness is the real effective exchange rate, which is a product of where the actual headline nominal exchange rate is, and relative inflation rates in countries. So it matters what the inflation rate is in, say, the U. S. relative to Canada.

The last point I’d like to make is on M1 growth in Canada. What’s important in this time of crisis–and always important–is the relationship between the narrow monetary aggregates and the broader monetary aggregates. What you’re seeing in a variety of other countries is that the velocity of money has shrunk and so the broader monetary aggregates–the credit aggregates–are not growing, even though the monetary base is growing. The issue is to repair those linkages in Canada. You still have a more stable relationship and it’s relevant to Monsieur Mulcair’s question in terms of the medium term.

My last point is that one thing that has turned in the last month or so is that M1 growth is now above nominal GDP growth globally, which is normally a precursor of expansion.