International Trade Committee on March 27th, 2013

[Ed Holder, Conservative, London West, ON]

Do you think that having the FIPA in place would give investors that much greater confidence to come back into those markets? Do you think there'd be a correlation there?

[Ailish Campbell]

The one-line answer is absolutely. The slightly longer answer would be that the Indian market is very complex, as is our own with both our federal and provincial jurisdictions, with our agreement on internal trade and federal law—which of course help to facilitate a common market in Canada across our fine provinces and territories.

India is an incredibly complex market. In addition to the FIPA, there is so much more work to be done on addressing a host of competitive issues, including non-tariff barriers and red tape, and also a whole host of completely legitimate but no less difficult time-consuming issues. It takes a significant investment of time for a business to make an investment in India given the number of jurisdictions at play, just like it does in Canada on a significant large investment.

So on the FIPA, absolutely, I agree. But there's more work to be done even after that stage.

[Ed Holder, Conservative, London West, ON]

I appreciate the clarity from you.

You might hear from members around the table that there's a difference in the balance of trade between Canada and India, with Canada having some $2.3 billion of merchandise trade and India has some $2.9 billion. Why would we want to make investments where we are in a deficit on an overall basis? Is that the whole story, or do you think that irrespective of Canada having a deficit versus any other country it still makes sense to have a trade deal? That certainly has been a point of contention by some members around this table. If I haven't explained it clearly enough, I can try again.

Do you have any thoughts about that?

[Ailish Campbell]

Merchandise trade is of course vital. Those statistics are very interesting. The OECD, however, has recently come out with a very interesting set of statistics that I would encourage this committee to look at, both for this particular study that you're conducting and on an ongoing basis. That's the OECD value-added trade data.

If this glass, for example, crosses a border, you would consider that an import from India to Canada. But it doesn't tell you about some of the inputs—some of the sand or various other inputs—that went into this. This is a very simple example, but you can imagine a computer.

So it doesn't actually decompose this investment in terms of where those other parts came from. Furthermore, we have very poor data on investment in services, which we know are very difficult to track, which I believe is one of the more dynamic areas. I think our value-added opportunity is absolutely in imports and exports, but also in being able to go to India....

For example, Dominic Barton, the global CEO of McKinsey, spoke at our Pacific Century conference. He spoke about the $33-billion worth of investment the Indians need to make in their infrastructure—energy, housing, municipal waste water, for example—over the next 20 years. These are huge opportunities for Canadian firms. They will never be measured in imports and exports, because what we're suggesting is for Canadian engineering, design, and construction firms to actually travel to India and provide the service there. You would never see that show up, for example, as an import-export situation.

So if you will allow me, I do think that somewhat looks at one important part but not certainly the full picture of assessment that we'd encourage this committee to examine as you look at Canada-India economic relations.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I'd like to thank my vice-chair for filling in for me for the first half-hour.

We'll now move to Mr. Easter for seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Yes, Ed is right: we will get into the fact that on trade we're not doing anywhere near as well as a country as was hoped under the trade agreements. The OECD value-added trade data will be interesting to look at.

I'm certainly of the opinion that signing trade agreements for the sake of signing trade agreements doesn't seem to be enough. We've had a fairly poor record in recent years in terms of trade surpluses and deficits.

Worse, or as bad, I think is the fact that the oil industry is doing reasonably well—even our oil price is discounted in Canada at the moment, though, for numerous reasons, mainly lack of market—but our manufacturing sector is not doing well at all. It is not doing anywhere near as well as it should be in terms of job creation and value added.

We need to be pursuing areas as a country—and I'll admit, I think the committee should be looking at these—from a policy perspective, both federally and provincially, to enhance our trade agreements. We support trade agreements, but what do we need to do to take advantage of the trade agreements to see that more advantage stays within Canada?

Do you have any suggestions on that, or am I off base?

[Ed Holder, Conservative, London West, ON]

[Inaudible--Editor]

[Wayne Easter, Liberal, Malpeque, PE]

Well, you'll say I'll off base, but I don't think I am, Ed.

[The Chair, Conservative, Rob Merrifield]

Who are you asking?

[An hon. member]

Are you asking me?

[Voices]

Oh, oh!

[Wayne Easter, Liberal, Malpeque, PE]

No, I'm asking Ms. Campbell.

[Ailish Campbell]

Thanks.

Again, I would just underscore some of the macro data about Canada's relative successes, of course, coming out of the global recession. As an economist, I would urge the committee to look not so much simply at the trade deficit situation but at our employment numbers, our growth, and the growth potential of our economy.

In fact I've spent 18 months looking at the manufacturing issue in quite some detail, and we at the Canadian Council of Chief Executives along with the Canadian Manufacturers and Exporters and others will continue our work on value-added manufacturing.

Just to specifically address your point, Vice-Chair Easter, I must disagree with you and say that the Canadian manufacturing sector is in fact doing very well. It has significant challenges, of course. We've seen businesses, our members, adjust their business strategies in light of the high Canadian dollar, but the high Canadian dollar is an opportunity to invest in machinery and equipment, our stock of that. It's an opportunity to look abroad for acquisitions and to grow our small and medium-sized Canadian firms into larger operations.

We've seen our auto parts sector—Magna, Linamar, Martinrea, and others—take advantage of that high dollar to in fact increase their global presence and serve other markets. So there are real opportunities despite the challenges, as long as we continue.

I would also encourage us not simply to look at manufacturing as the production process but also to look at the value-added parts of the manufacturing chain—the research and development, the engineering, the prototyping. Once one gets to mass manufacturing—which is often in our minds when we think of India and Asia, but in fact that's not completely true—we think of offshoring those jobs.

I believe we are seeing a real opportunity with some of the energy prices in Canada and North America coming down and new forms of energy coming online. Canada is blessed, as I believe no other country on the planet is, with all forms of energy as an input to the manufacturing process. I believe we will see those jobs stay if we can ensure that we remain internationally competitive.

But there is also the after-market servicing. So we produce the car, but then the mechanics who serve that car, along with all the value-added after-market products that come along with the car, are opportunities for the Canadian sector. We're doing very well in some of these high value-added components of the manufacturing value chain across this entire country. There are success stories from east to west and all the way north.

With regard to the Indian example, we know we have a labour shortage, a demographic pressure in Canada. We must do better about getting Canadians into those jobs and training Canadian workers. But where we have shortfalls and opportunities, we cannot allow Canadian growth to stumble when we have opportunities to use Indian or other service providers in literally a 24-hour market cycle where, for example, we have Canadian teams based in Calgary and others that then hand off at the end of their effective business day to Indian service providers to do work overnight creating these global teams. That can also mean importing Indian engineers, high-tech Indian talent for specific projects, learning from them, and then as I said, also taking advantage of the opportunities for Canadian engineers and Canadian construction firms and others to travel to India to provide value-added services in those markets.

I think it's a huge opportunity. So focusing on those trade-deficit numbers is important—I think we can do better—but it's not the full picture.

[Wayne Easter, Liberal, Malpeque, PE]

In terms of the work you're doing, you're saying you've been looking at the manufacturing sector for quite some time. Will there be a report at the end of your study on that issue that can be made available to this committee or that will be public?

[Ailish Campbell]

Absolutely. We've partnered with the Richard Ivey School of Business in London, Ontario, and we are producing a report that we hope will come out in the late fall of 2013. I'd certainly be happy to keep this committee posted on that study.

[Wayne Easter, Liberal, Malpeque, PE]

That would be appreciated.

Thank you, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much, Chair.

Thank you to our witnesses.

I have a basic question for the Council of Chief Executives. How many organizations do you represent?

[Ailish Campbell]

We represent 135.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Are they a diverse group of companies—small, medium, and large?

[Ailish Campbell]

You'll forgive me for not having provided a better introduction to the CCCE. Our CEO and president is the Honourable John Manley.

As I said, we represent approximately 135 of the largest firms in Canada. We are generally large firms, although we do have some entrepreneur members. We represent $2 trillion in assets, $850 billion in annual revenue, and our members employ over a million Canadians.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

You talked later in your discussion about the opportunity for Canadian businesses, but also the skills or professions that they have, whether it be engineering or design, or it may be medical or whatever it would take, to go to India to work in or around the infrastructure area. We tend to think about infrastructure as being roads and bridges. I suspect it also revolves around the medical sector, and that it maybe also the development of infrastructure for agriculture, processing, and development.

The organizations that you represent, then, are more of a large corporate size. Do they see the opportunity to get into the market? What we hear is that it is a complex country to deal with. Do many of them come with a background of already having dealt with some of the issues in India?

[Ailish Campbell]

Certainly our members are large firms. Many of them do have global presence. They are teams that have done work entering foreign markets and learn lessons and apply those to India.

Let me make it clear, though—and I hope in further appearances before this committee on other topics to bring you a better sense of the supply chains of our firms, which of course include small and medium-sized enterprises—that as a large firm enters the market, it is bringing its business partners and service providers with them. In some cases this includes tens, if not hundreds, of smaller service providers that are embedded perhaps in the larger product of the large firm.

In particular, though, I think we could also make mention of the vital importance of the trade commissioner service of Foreign Affairs and International Trade, which helps, not only large firms but also small and medium-sized firms.

I was very interested in Professor Zhan's remarks about niche manufacturers and finding dynamic areas, whether in specific aspects, for example, of value-added agriculture in the pulses, lentils area, or if that's further up the protein chain of various meat proteins.

You can be a very niche provider with a very important product and leverage that vital trade commissioner service in India to help you get off the ground. You can use India as your growth platform while using a Canadian product and being based in Canada.

I hope I've answered your question. If there's anything further about the firm size—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You actually do very well at answering the unasked questions. You already did that for a couple of them, which I very much appreciate. I'm serious in saying that—you did—because my next question would have been on how the small businesses actually benefit if it's mostly about the large corporates, and you touched on that.

What can we do? We just came through another budget and we continue to build on growth in Canada each year. What can we do, as a Canadian government, to help businesses as they look for foreign investment and exports into countries like India?

[Ailish Campbell]

We can do some things at a very high level. Some generally applicable things include the excellent work of Export Development Canada, the export financing component of that being critical; the trade commissioner service; our diplomatic representation; and the ongoing relationship-building that our diplomatic corps provide for us—the high-level visits of the Prime Minister and ministers, and the engagement of provinces with sub-federal entities in India. This ongoing relationship-building is absolutely vital, putting Canada on the map, if you will.

Canada is a geographically gigantic country, but very sparsely populated. It's hard sometimes for our Canadian imagination to see the reality of India, with multiple Montreals and Torontos springing up every day. But our imaginations, frankly, have to get bigger. This is a huge opportunity.

But then I think it's very important for this committee to perhaps pick some priority sectors it wishes to focus on, whether that's value-added agriculture or infrastructure or cultural industries or IT.

You deserve a more detailed answer to your question, but then I would quickly get into what the needs of the sectors are. They can be quite different. They might be marketing and branding. They might be work on specific non-tariff barriers, especially around agricultural products, which require health and safety standards and certification. There's also the understanding of the Indian consumer, for example, unpacking what might be some of the demands of the future in a very different market from our own.

Thanks.