International Trade Committee on May 1st, 2013

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory, for seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and thank you, witnesses, for being here. It is always good to hear from the horse's mouth. The witnesses are on the ground and they know from their experience on the ground, and they can always enlighten the committee about the potential benefits or the challenges their businesses face on the ground so that we can address those issues in negotiations.

I'll start my questions with Mr. Pyun. Bombardier, as you said, is basically an exporting company. Bombardier has its operations in, I would say, approximately 40 countries or so. I specifically note in terms of this Pacific Alliance that Bombardier has its operation in Mexico.

My first question is, if the company has business operations in Mexico, why doesn't Bombardier have their operations in the rest of the countries? I'll ask multiple questions because the chair is very good at cutting me off.

[Some hon. members]

Oh, oh!

[Devinder Shory, Conservative, Calgary Northeast, AB]

My second question is, what is the likelihood, depending of course on the negotiations, that Bombardier would go ahead in these three countries: Peru, Chile, and Colombia?

My third question is, if we become a member, what are the barriers, if any, that we should overcome and which you would want the government to address during the negotiations?

[Pierre Seïn Pyun]

With regard to Colombia, Chile, and Peru, at this point in time we don't have a significant presence. We have people on the ground because we're looking at opportunities in rail and also aerospace. We have some prospective customers in those countries.

In rail, as I mentioned briefly in my opening remarks, we're looking at opportunities to supply signalling systems and train control technologies for the metro lines that they want to expand in Chile and Peru. For instance, Santiago has a number of metro line projects that we're currently looking at.

In Colombia, as I also mentioned, there are opportunities for metro and light-rail train projects, for which we may have an opportunity to be a supplier of either the rolling stock or of systems for these infrastructure projects. There are also refurbishment opportunities, existing cars that we can refurbish.

With respect to whether we could invest in those countries, we have invested in Mexico for a number of reasons. On the rail side, we acquired many years ago an existing company that manufactured rolling stock, and that is what we're doing. In aerospace, we invested in Mexico because we were, to put it simply, quite attracted by the investment environment and also by the aerospace cluster that they were ready to establish in Mexico, with support for training and for putting educational facilities in place as well to make sure that there's a supply of a specialized workforce able to grow and support our investment.

I would say that the business model is different between aerospace and rail. With rail, the projects tend to be longer term. When we get involved in a rail project, we become almost an investor, because we have to send engineers, often for a number of years, to work on projects. There might be requirements sometimes to localize, or some offset requirements.

If the size of the market justifies the investment, as in Brazil, and we see a good pipeline of projects going forward for the country—the market itself, but also the region—we may consider localizing production, to some extent.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Let me ask you one quick question.

If Canada becomes a PA member and there is harmonization, basically set-off rules, would Bombardier feel more comfortable than today?

[Pierre Seïn Pyun]

Do you mean, in those markets?

[Devinder Shory, Conservative, Calgary Northeast, AB]

Yes.

[Pierre Seïn Pyun]

When free trade agreements are in place, they provide more certainty and predictability for the company as a potential investor and for the companies that do business in those markets. That includes investment disciplines.

There's a fair amount of business mobility that would be involved in our projects, such as sending engineers not only from Canada but it could be from other countries as well. Anything to facilitate business mobility and intra-company transfers would be helpful.

[Devinder Shory, Conservative, Calgary Northeast, AB]

You have not touched on any specific barriers, if there are any.

[Pierre Seïn Pyun]

At this point in time we're not facing any specific barriers from within the Pacific Alliance membership.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Canada is focusing strongly on the Asia-Pacific region as an emerging market for trade and investment as well as for positive political linkages.

One of the goals that we note the Pacific Alliance has is basically to become a platform for political linkages, economic and trade integration, and extension to the world, with special emphasis on the Asia-Pacific region.

Should Canada support expanded membership in the Pacific Alliance to include Asian countries? If we do, should we emphasize certain countries or certain regions among Asia-Pacific countries, or should we give priority to some specific countries?

[Pierre Seïn Pyun]

Do you mean from Asia?

[Devinder Shory, Conservative, Calgary Northeast, AB]

Yes.

[Pierre Seïn Pyun]

On this, if I have any comment to offer, it is that I understand there is a large number of countries that are observers. If there's any opportunity to leverage the Pacific Alliance in relation to the Trans-Pacific Partnership negotiations, this is what we may wish to pursue.

With respect to whether any specific countries should be members, my comments were limited more to the current membership of the Pacific Alliance than to looking at expanding the alliance.

Insofar as expansion is being considered, the benefit of the alliance primarily would be, as I mentioned in my comments, more engagement from Canada in Latin America or a region of Latin America. That's where we see perhaps an opportunity for Canada for greater engagement.

The second point would be concerning potential linkages and synergies between the TPP and the Pacific Alliance.

I'll leave my comments at that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll probably get an answer from Mr. Wilson during the questioning of the next questioner, so we'll leave that to Mr. Easter. You have seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Chair, and thank you to both witnesses. It's a very interesting discussion.

I would say at the beginning that Bombardier needs to be congratulated for its business success. The success of that company is truly amazing.

I think Canadian Manufacturers & Exporters also should be congratulated for their client base and what they do for creating the economy within Canada.

In response to a question from Mr. Shory, Mr. Pyun, you said that the FTAs in place in fact give us more confidence. I've been grappling with this Pacific Alliance study since we started it, and in fact, the chair alluded to this at the beginning. What is the Pacific Alliance that we supposedly get into here and what is it going to do for us that the FTAs are not going to do?

I'm firmly of the opinion that we have only so many resources to go around as a country. We're talking about the TPP, about Japan, about India. I'm of the opinion that maybe our resources at DFAIT would be better spent looking at specific trade deals and specific strategies within Canada for us to take advantage of trade deals, rather than in our becoming a member of every little elite club that's going to have a wonderful discussion around the world. That's my concern about this particular deal.

So my question to you is what the Pacific Alliance is going to do that the FTAs already in place are not.

[Mathew Wilson]

Do you want me to start?

[Wayne Easter, Liberal, Malpeque, PE]

You've been well rested, Matthew.

[Mathew Wilson]

Exactly.

I think it does a couple of things. One is that the Pacific Alliance, with Canada's involvement, should go beyond the existing FTAs, especially in some of the areas around labour mobility that Pierre was talking about in his testimony and that we mentioned as well.

The other thing it does is it opens up new markets for us. Yes, we have the bilateral FTAs with the four countries, but the Pacific Alliance, with the additional countries that come into it over time, will open up new markets.

The third thing I'd say, concerning resources, is, first, let the folks at the Department of Foreign Affairs and International Trade determine specifically where the resources are spent. In Canada's trade agenda, clearly they're focused heavily on the TPP and on concluding the CETA negotiations. Japan and India are on the side of this right now.

What's unique about the Pacific Alliance, which is similar to the TPP, is that it targets countries that are high growth in developing markets, areas in which our exporters can find new market opportunities that don't really exist right now, especially if they grow beyond the original four. It looks as though they'll let a few more in this fall.

That's a different opportunity from what may exist in Europe for some companies. Europe is a great market for a lot of companies, and we're fully supportive of that, but it's a different type of market from what something in Central America might be.

That's why we think it's good to go beyond the existing bilaterals. It gives new opportunities for companies.

[Wayne Easter, Liberal, Malpeque, PE]

Pierre.

[Pierre Seïn Pyun]

I would go back to my comment about the benefit of having a regional arrangement rather than a web of bilateral arrangements. I think it's an opportunity to harmonize. I also mentioned that we have a presence in Mexico, so maybe there's an opportunity for us, in order to enhance our competitiveness, to have some input from our sites in Mexico to supply projects in which we may participate in other alliance member countries.

I would support the comments that Mathew made as well. It's an opportunity to open doors in emerging markets, especially if the Pacific Alliance is going to expand down the road.

One last comment would be that at this point in time Canada is an observer. I would repeat that realistically I'm not quite sure whether Canada can become a full member in the near term, but I think we have to get in early, rather than try to get in at a later stage when the rules and the arrangements are starting to be firmed up.

Our understanding is that they're looking at a number of options as to what kind of arrangements they may have in place, but they may go beyond the traditional free trade agreement. They're talking about doing trade promotion together in other countries, for instance, such as in Europe. To us that's interesting. It's new and different from the traditional free trade agreement approach.

[Wayne Easter, Liberal, Malpeque, PE]

This question is for both of you as well.

Mr. Pyun, you mentioned that government influence in the four countries would help, and Mr. Wilson, you talked about further supply chain strengthening.

What kind of things do we need to do in Canada itself? Signing a trade agreement, in my view, is not enough. What kind of things beyond the trade agreement itself, from a policy perspective, should the government be pursuing that would ensure that manufacturers can take greater advantage of the trade agreements we're in and those we are pursuing?

[Mathew Wilson]

I'll talk about this more from a small business perspective, because that's where most of our members are situated. The thing they struggle with, whether concerning these countries or others, is finding market intelligence about what is really going on.

For the support mechanisms around it—and rather than pure policy, it's more a question of the support mechanisms—we are always asked questions about such things, on the trade facilitation side, as to how Canadian companies can connect with local suppliers and local customers, how such things as the trade commissioner service out of DFAIT can be supportive, and what kind of market intelligence they can give them on what's emerging and where the good growth opportunities are, or how EDC functions in terms of promoting and supporting export insurance and finance activities that the companies need. Those are the questions that the smaller companies have. They are more around the business service side and not so much the policy side of the equation.

Frankly, the Canadian government through DFAIT has a pretty good network. The trade commissioner service is pretty good. Most companies, when they start working with the trade commissioner service, find that it benefits them.

Often it's a question of finding them in the first place. The companies don't know where to go for support and help. This is something we try to play a more active role in, to get them to go international.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.