International Trade Committee on Nov. 28th, 2006

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Maloney.

Could we have a short answer please?

[Carol Osmond]

Certainly the private sector is very much engaged in terms of conducting investigations and doing what they can to protect their intellectual property rights and to try to raise awareness of this issue. But when you're dealing with counterfeit and pirated goods, the civil remedies that we have available are just not very effective. If you bring someone to court and sue them for your lost profits and so on, chances are they have no assets. And even if you could get a significant award, they have very few assets that you could seize or obtain from the offenders. So it's certainly an area where we do need more help from the government, specifically dealing with counterfeit and pirated goods, not areas where it's questionable whether there's a legal issue as to whether a trademark or copyright is being used improperly, but in cases where it's clear that we're dealing with counterfeit and pirated goods.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Mr. Valley has a short question he'd like to ask.

[Roger Valley, Liberal, Kenora, ON]

You mentioned infrastructure problems and opportunities on the coast. You mentioned Windsor, with its huge volume predictions. From Windsor to the west coast, can you tell me of any other border-crossing capacity difficulties we have? What other border crossings are you aware of that are causing problems for your members and your concerns?

[Carol Osmond]

Windsor-Detroit is probably the key crossing. I know there are members here who are from the west coast, and I think probably there are issues at the crossings between B.C. and Washington State. Also, there are the issues at the Peace Bridge, where there have been proposals for a long time to have a pre-clearance facility on the Canadian side of the border going into the United States, and that's a key issue as well.

[Roger Valley, Liberal, Kenora, ON]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you.

Monsieur André, for five minutes.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Good afternoon, Ms. Osmond.

I'm very pleased to meet with you today.

You mentioned to my colleague, Mr. Julian, that there are 750 members in your association. I would like you to tell me what they think about fiscal competitiveness. That is a very topical matter. We hear talk about reducing income taxes, about promoting innovation and investment further. Income tax reduction always has an impact on our society. I know this is a matter of great concern to exporters.

There is also the issue about companies that relocate. For about 10 years, have some of your companies moved or moved some of their activities in order to reduce production costs, and so on? Can you give us a percentage?

[Carol Osmond]

You might be interested to know that currently a study is being conducted by the University at Buffalo looking at the issue of how the border is impacting, or potentially impacting, investment decisions. Within, I guess, the last couple of years, the university has conducted the study to try to get a sense of the cost of the delays at the border, the additional security requirements, and so on, and how that was impacting Canadian companies vis-à-vis American companies. Not surprisingly, they found that it was an issue of much greater concern to Canadians. The cost to Canadians was higher than the cost to American companies.

What they're doing now is they're going back and interviewing some of the same companies they interviewed a few years ago to find out how they've adapted to those additional costs. Have they, for example, established distribution facilities on the U.S. side of the border in order to avoid delays and so on?

So that's something that will probably be coming out in the next little while that may be of interest to you.

Just to give you some anecdotal evidence, I was speaking recently with one of our members involved in the food and agricultural sector. They were finding that because of the nature of their product, they were subject to FDA inspections of their product going into the United States. Samples were taken of their product, and the samples were then tested. But because of the delays in terms of getting the test results, they found that their product was spoiling at the border, and they had to re-ship it. As a result of all that, they actually bought a facility in the United States so that they wouldn't have to deal with the border.

It's difficult to know how many Canadian companies have made similar decisions. Certainly other companies have found other ways to address the issues at the border and adjust their practices and so on. Still, I think it might be interesting for the committee to look at how the border is impacting Canadian investment decisions, or investment decisions vis-à-vis investment coming into Canada.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Do I still have a little time left, Mr. Chairman?

[The Chair, Conservative, Leon Benoit]

Very short, Monsieur André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

We asked you a few questions about competition in the manufacturing industry, namely competition from Asia or elsewhere, in industries such as textiles and furniture.

There is a great deal of concern among companies in Quebec and Canada. People think that this competition could result in many job losses in rural communities, on farms, etc. Competition could have an important impact on the vitality of communities. We establish safeguards, and we want government policies that provide more support to industry to make it more competitive and productive.

In your opinion, how can we really take our place in the manufacturing sector or in the soft sectors, as they are called, in light of the competition from Asia? What steps should the government take to support the industry or perhaps not support it, depending on the issues involved?

[Carol Osmond]

I think it's interesting. I was recently speaking with a Quebec company that actually sources their fabric in China and produces finished products in Canada that are then exported to the United States.

We have to be careful when we talk about safeguard measures. They could have some unintended consequences.

Unfortunately, the textile and apparel sector is not a sector on which I can claim to have a lot of expertise and knowledge.

At the proceedings that were held here in October, I noticed there was reference to the wine industry and the furniture industry in Canada. Those industries were able to adjust and in fact even thrived as a result of the competition that came with free trade and, in the wine industry, the decisions that were made at the GATT and at the WTO back in the 1980s and early 1990s.

I think we have to be careful in terms of how we go about protecting our industries. Rather than trying to protect them, shouldn't we help those industries adjust to this competition?

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Osmond.

Merci, Monsieur André.

We'll go to Mr. Cannan for a very short round.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Ms. Osmond, for your presentation.

There were very interesting questions.

I'm not sure if you had a chance to review the Conference Board teaser article that was in Maclean's magazine.

[Carol Osmond]

I saw it.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

It was a recap of what we're hoping to see from this committee on the three-volume Conference Board report, the three-year report showing some of the real inefficiencies in our trade policy and where we need to improve.

One of the areas it talks about is the service sector. I believe the whole segment has potential export growth and wealth creation that's being unfulfilled. About two-thirds of our industry is service, and you mentioned that about 20% of your members comprise the service sector.

From your perspective and your experience of working in the United States on the NAFTA agreement, we're sending more and more of our raw materials to the U.S. and a smaller proportion of manufactured goods. Do you have any suggestions on how we can improve on expanding the service sector and capitalizing on a potential growth area that's not being fulfilled today?

[Carol Osmond]

The focus of our association is primarily on trading goods and the movement of goods back and forth across the border, rather than services.

The service sector our association represents is largely service providers to that industry, the import and export industry. They're involved in things like customs brokerage, logistics, transportation, and so on.

I actually think it's interesting that in the customs brokerage industry, in order to service U.S. customers, many Canadian companies actually serve as the importer of record into the United States. They're not only exporting to the U.S.; they're actually engaged in the process of importing the goods and complying with all the requirements in order to import those goods into the United States.

What has been allowed to happen is Canadian customs brokerage firms have established operations in the United States. They're some of the largest service providers in that sector in the U.S., because they have a contingent of Canadian exporters that also serve as importers into the United States.

As I mentioned, the logistics of ensuring the efficient movement of goods into the country, across the country, and into our export markets have also become increasingly important to the import and export community. I think it's potentially an area where Canada could have an advantage.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have one supplemental on that.

[The Chair, Conservative, Leon Benoit]

Mr. Cannan, please, can I have—?

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

The theme of this is possible sustainable prosperity for Canada. The major theme of it is that the NAFTA agreement is past its due date. The changing global economy is rendering it insufficient. Do you agree with that statement?

[Carol Osmond]

I think we obviously need to continue to build on the NAFTA. There have been a lot of changes in the global economy since NAFTA was negotiated. The negotiations finished almost 14 or 15 years ago. Certainly there have been significant changes that have taken place in the global economy since then. North America is not isolated, and we're all impacted by those changes. I think, yes, we do have to continue to build on the NAFTA agreement and address issues related to competitiveness on a North American level instead of just on a national level.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cannan.

Mr. Julian, do you have one? We do want to get to your motions and to the other business. Go ahead, Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I was wondering if you could make available to us the results of the surveys you have been doing now for five years, I believe.

[Carol Osmond]

I'm not sure how long the surveys have been conducted.