Evidence of meeting #41 for International Trade in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was japanese.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Ken Ilasz  Owner, Boulanger Bassin Bed and Breakfast
  • John Tak  Vice-President, International Business, Factors Group of Nutritional Companies Inc.
  • Dana Hayden  Deputy Minister, Ministry of Jobs, Tourism and Innovation, Government of British Columbia
  • Henry Van Ankum  Chair, Grain Farmers of Ontario
  • Erin Fletcher  Manager, Public Affairs and Communication, Grain Farmers of Ontario

11:20 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

Yes. One thing that jumps to mind that you could call a non-tariff barrier and that you could say is a cultural barrier.... I tend to think they're more cultural barriers, but the Japanese do have, typically, a just-in-time delivery system, so it pushes back to our production system. We're saying that we have to produce more often and in smaller lots, get those lots over to Japan, have them warehoused in Japan, and allow our retail distributors there to draw off that inventory we're keeping there, constantly rotating that. This is not something that we normally do. They do it there and they do it all over the place, but it's not something that we normally do.

However, as a result of investing in it—and initially we weren't really making money—we started to make money and we were able to use the improvements in our production and inventory control in other countries. So there was actually a broader benefit from it.

So I would say that's.... Call it a business style barrier that is surmountable, but it's not easy to break into that market.

11:20 a.m.

NDP

Don Davies Vancouver Kingsway, BC

You mentioned decisions of the government in the last three years to shut down the Osaka consulate—I understand there was a commercial side at the Osaka consulate that was shut down three years ago—and the recent decision of the government to shut down the immigration office in Tokyo. I understand that things such as student visas will now have to be processed through Manila.

I'd like your opinion on what effect that may have, as viewed by the Japanese. Second, I'd like to know if you anticipate any reciprocal action by the Japanese government in Canada.

11:20 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

Thank you. I will preface any remarks I make by saying I completely understand that when you're looking at the finances of the country you have to assess where you can cut costs, and then you have to do it across all departments. I applaud the government for doing that, but when that happens, it's hard not to avoid sometimes putting out the baby with the bathwater. Hopefully we can take a second look and say that maybe in this case, yes, this is something that is worth it because it provides us a leveraged financial benefit that is more than going to pay for the investment.

I would say that in Japan you have two huge economic areas. You have the Tokyo area, which is called the Kanto, east of the barrier—the whole mountain—and then the Kansai, which is west of the barrier, and that's the whole Osaka area. They're huge economic generating areas and they compete very strongly.

So closing the office there had a very big psychological impact, and it was broadly noticed. I would say that having the people on the ground there to help our business people and tell us what's going on there is definitely of benefit to Canada if we want to further increase our exports.

On the ramifications, well, we've closed the immigration office, and there were other trade offices that were closed. I'm hearing rumours that the Japan External Trade Organization will close its Vancouver office in the next few months. I don't think that's retaliation. I just think that everybody looks at their trading partners, and who's their most valuable and who isn't. You take all the information, you throw it into the bucket, and you make a decision. But those kinds of things—the fact that we're closing offices there—don't play well into their decision on what they do with their offices here.

11:25 a.m.

NDP

Don Davies Vancouver Kingsway, BC

What's becoming increasingly clear, to me anyway, is that international trade is inextricably linked to our industrial policy. So it's not just who we're trading with and on what terms, but what are we making to trade and what are we trading? That leads to decisions in Canada about, for instance, what we are incenting. What sectors do we want to grow and nurture? I'm just wondering if you could give us some sense of what Japan does as a government in terms of directing its industrial policy. Are there any lessons for us there?

11:25 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

That question is for me?

11:25 a.m.

NDP

Don Davies Vancouver Kingsway, BC

Yes, please.

11:25 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

I would say what other countries are doing, including China, Korea, and Japan, which are well known for using industrial policy to leverage the economy and create jobs, is not controlling business but working with business and saying, “Okay, where can we get the biggest bang for our buck given the current global situation, the regional situation, and our domestic situation?”

Japan came gangbusters out of World War II into shipbuilding, and when that matured and others started taking over, it went to Korea, and they actually had a strategy for getting out of shipbuilding and getting more into auto making. Auto making has been fantastic for Japan, and now if you talk to Japanese bureaucrats, they'll say, “We are moving out of automotive and we're going to be moving into aerospace, aircraft, and bio-life sciences.”

So they have these strategies. They talk to their main sector, business sector organizations, and they form these policies. They're not perfect, but they certainly have proven successful in Japan's economy. China does the same thing. Korea does the same thing. I think we could probably learn from something like that. Maybe we don't want to mimic it. All the work you do in developing those policies gives you a road map of what's going on in the global trade market. So the worst you can do is just have a great road map of what's going on, and the best you can do is actually adapt a policy that fits in and takes advantage of what you're finding out there.

11:25 a.m.

Conservative

The Chair Rob Merrifield

Thank you very much.

We'll now move to Mr. Keddy.

June 5th, 2012 / 11:25 a.m.

Conservative

Gerald Keddy South Shore—St. Margaret's, NS

Thank you, Mr. Chairman.

Welcome to our witnesses. It's very interesting testimony, and quite frankly, I think we have two contrasting but interesting witnesses here.

I do want to pick up, Mr. Tak, on just a couple of points while they're fresh in my mind. I appreciate your comments and your knowledge of doing business in Japan, and importantly, certainly your knowledge of the language and of the way business actually operates and the areas in Japan in which it operates.

I appreciate your comments on the visa office in Tokyo, but to be fair what the minister was doing here was replacing a system under which it takes 30 days to get a visa with an online system under which it should take 10 days to get a visa. If we can get through those hiccups, there really should be an improvement to the system, although I take your point that face-to-face contact, especially in Japan, is important.

I'd just like some clarification on your comments about the nutritional supplements coming out of Japan and then being taxed when they go back in, because it makes no sense whatsoever for us to be importing products from Japan and then paying a tax on those products when they're being shipped back into the country. I don't know if you have a specific recommendation on how to get around that. We can address the situation of those specific products in a free trade agreement.

11:25 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

I would address them in the free trade agreement. Any part of that needs to be brought to the attention of the Department of Foreign Affairs and International Trade, the department that is responsible for negotiating tariffs. We are helping the Japanese economy by allowing these advanced health supplement ingredients, thinks like green tea extracts, or CoQ10. These are high quality, and they're backed by a lot of clinical trials done by the Japanese pharmaceutical industry, but they come in here tariff-free. We build them into products, and when we sell them there it's frustrating to be charged a 12.5% tariff. When we add on our warehousing costs and our distribution costs, it quickly creates a competitive disincentive.

11:30 a.m.

Conservative

Gerald Keddy South Shore—St. Margaret's, NS

That brings me to my second point. There are a couple of traditional industries in Japan that I've always had a certain amount of sympathy for, as I come from the east coast of Canada and the southwestern part of Nova Scotia. We have a huge traditional fishery. Japan still has a small whale fishery. They take a lot of international heat for that, when in reality they've been whaling for probably a millennium.

It's no different from Canadians, whether we come from Europe or whether we're indigenous to the country. I think we can get a lot of goodwill through some very tacit support for that industry and the fishery, and in return....

Are you selling omega-3 oils specifically from seal? Omega-3 oil is very high quality, very healthy. It's a great vitamin supplement that we should be marketing in Japan. If you're not, you should be.

11:30 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

Thank you.

Your remarks are dead-on. Yes, we are. We have a variety of omega-3 oil products from salmon, krill, and seal—

11:30 a.m.

Conservative

Gerald Keddy South Shore—St. Margaret's, NS

Good.

11:30 a.m.

Vice-President, International Business, Factors Group of Nutritional Companies Inc.

John Tak

—that we manufacture and export to Asia.

11:30 a.m.

Conservative

Gerald Keddy South Shore—St. Margaret's, NS

I know I'm running out of time, and I do want to get to the next witness, so I'll be quick.

Mr. Ilasz, that's a great story. The entrepreneurial spirit goes to show that you can start out in very modest ways and build an industry. I'm going to try your fruitcake, but I'm telling you, we all have great-grandmothers, all right?