International Trade Committee on Dec. 1st, 2011

[The Chair, Conservative, Rob Merrifield]

You have 40 seconds, Mr. Ravignat.

[Mathieu Ravignat, NDP, Pontiac, QC]

Forty seconds?

Very quickly, with the CETA agreement, the provinces were brought into the process early. I'd like to know how the states in India are being engaged in the process.

[Don Stephenson]

I'm sorry, but I am unaware of what arrangements the Indians make on their side to consult their states. I'm only concerned with engaging my provinces and territories.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Now we have Mr. Easter, then Mr. Holder, and then we'll wrap it up.

Go ahead.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Don, there's not much need to be nervous about the numbers. While we like accurate numbers, the chief number cruncher of the country, the Minister of Finance, has never hit a budget target yet and he's not very nervous.

On your presentation--

[Ed Holder, Conservative, London West, ON]

Point of order. That would be the--

[Wayne Easter, Liberal, Malpeque, PE]

Well, it's true, guys--

[An hon. member]

Relevance?

[Wayne Easter, Liberal, Malpeque, PE]

We call him “Deficit Jim”.

[The Chair, Conservative, Rob Merrifield]

I think we need the question.

[An hon. member]

He's respected by the financiers of the world, isn't he?

[Wayne Easter, Liberal, Malpeque, PE]

In your presentation, you mentioned that in addition to the bilateral S and T agreement already in place, budget 2011 provides $12 million over five years for a Canada-India Research Centre of Excellence. How does that work? Is it for areas that benefit both countries? Just expand on that, if you could.

[Don Stephenson]

Luc, are you aware of the details?

[Luc Santerre]

I'm not entirely aware of the details. These are currently being developed. There is work between the government and learning institutions to make sure that the proper areas of interest are being addressed. The Canadian learning institutions all have an active and beneficial dialogue with counterpart institutions in India. It's pretty vast: science, technology, humanities, and policy. It is being refined and developed.

[Don Stephenson]

I'm sorry, but we don't have a direct role in those discussions. The best I could do would be to ensure that a written brief comes to the committee.

[Wayne Easter, Liberal, Malpeque, PE]

Yes, if you could do that, we'd appreciate it. I think that Holland College in Prince Edward Island has set up two satellite colleges in China. We need to find out the details of what really that means and how it is to be utilized for the benefit of Canadians.

When Mr. Macartney was before the committee in September, he stated that in terms of two-way investment, in 2010 it had reached $7 billion, with the majority being Indian investments in Canada. I guess we don't need to know how much of that Indian investment is targeted and where to. Maybe there's no way of knowing.

In your earlier remarks, you said that one of our key areas would be investment in India through engineering and architectural firms, etc. But what areas is India currently targeting in our market? Is it real estate, business, resources...? In what areas are they gaining an advantage in Canadian society?

[Don Stephenson]

I'll let Luc give you some information on investments that have been made or discussions that we're aware of.

While the minister was in India three weeks ago, he heard about investment interests in Canada, particularly in potash, so I'll add that to Luc's list.

With respect to investment numbers in particular, I think I mentioned the last time I was here that there is a little bit of scrutiny over the number for Canadian investment in India because, principally for tax reasons, Canadian investors often make their investment from a third state. In particular, Mauritius is a popular site for incorporating an investment in India. That's for tax purposes, as I understand it. As well, more recently, people are using Sri Lanka. So it's difficult to know precisely what the Canadian investment is.

This problem occurs across trade statistics, most especially in investment, but even with respect to goods. For example, we're confidently advised that 8 out every 10 diamonds that come out of the Northwest Territories ends up in India for polishing and being made into jewellery. None of it shows in our trade statistics because first it goes to Antwerp. So it's U.S.-India trade. The numbers need to be examined a little bit before you can have too much confidence.

[The Chair, Conservative, Rob Merrifield]

Please be very quick.

[Luc Santerre]

Indeed, very briefly, I would say that one has to take the bilateral investment statistics with India with a grain of salt. First of all, we only track what is considered foreign direct investment with at least a 10% stake. Portfolio investment is not captured and there are substantial amounts of that in the world today. Also, then, for tax reasons, investment may be registered in third countries and not appear in official stats.

What we know from anecdotal evidence from our operations in India, in speaking to Canadian companies that are investing there, and also in speaking to Indian companies that are invested here in Canada, is that we can quickly add up amounts that exceed the official stats. When we meet with a company, they tell us what they consider to be their stock of investment in Canada, regardless of what third country it may be structured to for tax maximization purposes that are obvious to all corporations around the world.

I would say there's certainly an interest in fertilizers and in natural resources. But more broadly speaking, certainly, we've talked about information and communications technology, life sciences, and advanced manufacturing. Given the size of India and the strong growth demographically and economically, you can imagine that it's pretty much in every sector.

I don't know that the Indian government has any kind of industrial or sectoral strategy, if that's what your question was referring to. My guess would be, if that was your question, that there isn't.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Please go ahead, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much, Chair.

I'm very proud to be part of a government that has such an incredibly strong finance minister, to the point where he's regarded as the single strongest finance minister in the world, and not judged by this government, although that is our opinion, but by those around the world. I would tell you that there will be those who see the glass as half-empty, but as my Cape Breton mom used to always say, it's more crucial to look at things as half-full if you want to move along and get ahead.

[An hon. member]

Hear, hear!

[Ed Holder, Conservative, London West, ON]

I think that's the point of what we're trying to do: move along and get ahead.

There's a question, though, that I wasn't sure about. In your earlier testimony, Mr. Stephenson, you talked about the difference between the lower tariffs that Canada has with India, at somewhere in the 3% range, I think you indicated, and tariffs on average in excess of 10%. Is that historical? Why is that? I mean, obviously even without trade agreements there are always negotiations that go on, and things can be moved. Why the disparity?

[Don Stephenson]

Well, it is historical, but it also has to do with the fact that India is a developing country and Canada is a developed country. Generally speaking, developed country tariffs have decreased considerably more than those of developing countries in multilateral trade negotiations, as well as bilateral and regional agreements.

Now, you have to understand the difference between the bound tariff and the applied tariff. The bound tariff for India, for Brazil, and for others—but not China—can be considerably higher than their actually applied tariff under WTO and other rules. But generally speaking, the difference is the history of developed versus developing country economies.

[Ed Holder, Conservative, London West, ON]

Thank you.

You made some comment that Canada is, dare we say, 0.5% of the population: where do we rank in standard of living?