Evidence of meeting #28 for International Trade in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was exports.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ailish Campbell  Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
Pablo Heidrich  Senior Researcher, Governance of Natural Resources program, North-South Institute
Duncan Cameron  As an Individual
Jim Quick  President and Chief Executive Officer, Aerospace Industries Association of Canada

11:25 a.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. O'Toole.

11:25 a.m.

Conservative

Erin O'Toole Conservative Durham, ON

Thanks to both of our witnesses for appearing today. We appreciate your time and your perspective.

Mr. Heidrich, I'm going to concentrate my brief time with you, because I'm actually quite perplexed by your testimony. At one point you said we should keep a firewall—that was your term—between our economic interests, trade, and diplomacy. Yet I recall your appearance before this committee when we were discussing the Honduran trade deal, where you were talking about Canadian operators in that country and their impact in that country, and our development.

Your very testimony before this committee suggests there is no firewall. In fact, Canada is present in countries if our major trading and exporters are present. Would you not agree with that? We're there. Whether it's through diplomacy, development, or trade, Canada's brand—if you want to call it that—is there. How can we superimpose a firewall onto the global economy when it's already operating?

11:30 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

The firewall I was referring to is exclusively to how the Canadian state operates when it's abroad. There's one side, where you would be having political dialogue or having certain diplomatic exchanges, for example with Honduras—or you can take any other country. Take South Africa for example. There's a different part where you're going to be trying to strengthen the commercial relations.

What happens if you have a fallout with South Africa, for example, on the political side? I think it is good public policy that fallouts in political diplomatic relations do not affect Canadian businesses operating in South Africa. That's why a firewall is important. For that firewall to exist, it means that if there are issues that have to do with commercial matters, for example with South Africa or with Honduras, the political dialogue is not affected either.

For example, let's take Venezuela. There are Canadian companies operating in Venezuela. The Canadian government does not have good relations with the Venezuelan government for political reasons. I think that should be fine, but if you have all the diplomatic assets of Canada in Venezuela supporting our trade relations with Venezuela, then what? Do we have to say that we agree with whatever the Venezuelan government is doing towards its people and its human rights, and so on? I would say no. I would say that we could still remain critical to whatever the Venezuelan government is doing. At the same time, we're supporting our business. Then you need to have a separation between the diplomatic and the commercial sides.

May 13th, 2014 / 11:30 a.m.

Conservative

Erin O'Toole Conservative Durham, ON

I have to stop you there. So you're saying we could be critical; we have people on the ground. To use Venezuela, we're trading; we can be critical. We can, in some cases, build institution and actually help capacity in those countries. That's essentially economic diplomacy, sir. It's recognizing that you can trade, while also providing developmental assistance, while also trying to improve the governance within that country.

Honduras is a great case in point, because that was the last time you joined our committee. We heard from many witnesses—you included—about the crime and narco-trafficking in Honduras. As one of the largest donors to that country, we're an important development partner. We're building institutional capacity building within their justice system, that sort of thing. We're engaging politically and diplomatically. We're also trading. We're also recognizing that there are some Canadian exporters are on the ground there. That's economic diplomacy.

I don't see how we can sort of pick and choose from that tool kit of diplomatic statecraft to say in one country—Venezuela, for instance—we're only going to trade, but we cannot engage bilaterally; we cannot engage in developmental assistance. You're seeming to suggest that we should only do development, not trade.

11:30 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

No, not by any means. I'm sorry if I gave you that impression. It's not what I would say.

What I said was in the case of Honduras, to sign an FTA with a country like Honduras is not going to report any significant economic benefit. If you really wanted to help Honduras, you should put more emphasis on development.

A lot of things that are done in development do not have any commercial utility. To say that everything that a country does on the political and development side—any country does on any other—also has a commercial meaning, I would very much dispute that. Canada has done plenty of things, for example, in Haiti, and it is not really to advance Canadian commercial interests in Haiti. They have done it for other reasons, which are very good as well.

11:30 a.m.

Conservative

Erin O'Toole Conservative Durham, ON

That's a great case in point. In fact, Canada took the lead from the hemispheric perspective on response to the Haitian earthquake and recovery from that, but at the same time if we have assets on the ground, we have a significant presence. We have a cultural tie with the francophone communities. Would it not also make sense to expand trade opportunities? That can grow the GDP for Haitians and actually help them sustain. That's what we're talking about when it's economic diplomacy. It's actually, I would say, a pragmatic trade policy.

11:35 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

Reallocating resources from one part of diplomacy to the other is something that for me is overly risky. It doesn't correspond with international practice. Most countries do have a political side that's not necessarily commercial and they don't have any commercial concerns on their political agenda.

There are countries like China, for example, that have a policy that is very much commercially branded, but China has a totally different structure because most Chinese companies are state-owned, directly or indirectly.

11:35 a.m.

Conservative

Erin O'Toole Conservative Durham, ON

Speaking for the commercial side, though, again, for our main competitors, and I mean our competitors also being our allies and friends, the U.S., the U.K., France, countries like that do advance economic diplomacy. Are we not in many ways just catching up to doing what most of our major developed competitors and allies are doing with respect to their foreign policy?

11:35 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

I think you are very much at the same level in terms of trade diplomacy. What may be lacking in the case of the Canadian economy is there are maybe more domestic policies that need to be changed to support Canadian companies from Canada in a more effective way, but I don't see it that much on the trade side, on the trade diplomacy side, what you need it for.

11:35 a.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you.

Mr. Pacetti.

11:35 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Thank you to the witnesses.

My first question would be for you, Ms. Campbell.

Seventy-three per cent of our trade is with the U.S. You seem to be advocating, or for the better part of your presentation you were advocating, for more trade with the U.S. and less so with other countries. Is that what I understand?

11:35 a.m.

Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives

Dr. Ailish Campbell

No. My fundamental point is this: because of the primary relationship that our businesses have with U.S. customers, with the foreign affiliate presence and sales, with the investment that goes between our two countries, we have to get that relationship right. If that relationship is not functioning at its highest and most effective level, the global market action plan is not delivering on the opportunities that are available to Canadians.

My message is to grow trade with the entire world. My message is also about diversification, particularly, for example, in energy. As this committee well knows, diversification to additional markets for our energy products would be the top thing that we could do to increase not only our terms of trade, but also our total exports.

11:35 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

When it comes to the U.S. market, you want to perfect that relationship?

11:35 a.m.

Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives

11:35 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Yes. Okay.

When you talked about some of the countries that are non-TPP, for example, India, Indonesia, Hong Kong, China, is that also a priority for your group, or is TPP a priority? How do you rank it? How do you determine what is a preferential market?

Finding an agreement with China, I think, would be a huge challenge, whereas with TPP, given the fact that they've already undergone various rounds of negotiations, it would probably be easier to focus on some of the countries within the TPP. What's your viewpoint on that?

11:35 a.m.

Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives

Dr. Ailish Campbell

I think we have to do both. I think our trade negotiating teams are capable of doing both.

11:35 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

That's not a good answer.

11:35 a.m.

Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives

Dr. Ailish Campbell

Not only is it a good answer, I think it's an essential answer for the future prosperity of Canada.

TPP holds out an opportunity with Japan. It also holds out the opportunity to refresh our relationship with the U.S. and Mexico. As you know, we're not renegotiating NAFTA. It's going to increasingly be outpaced by new generation agreements like the Canada-EU deal.

If we look at our empirically driven trade statistics and where our businesses are trading and where we're establishing new markets, China is our third largest import and export relationship. In fact, it's our second largest source of imports, and the absence of a more sophisticated relationship is a huge gap in our trade policy.

It's hard, but our competitors have done it. Australia has a strategic dialogue with China that depoliticizes the leader's annual visit. It just becomes an annual piece of business. As the world moves more and more to if not a G-0 then a G-2 world where both China and the U.S. are incredibly important in their spheres of influence, having that regular relationship with China would be important.

New Zealand has seen its agricultural exports to China increase fivefold since its free trade agreement with China. So, it's hard, but we need to do it.

11:40 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Thank you.

I have a quick question, or maybe a few, for Mr. Heidrich.

I think you're dead-on with the competition problem in Canada. We've talked about it, whether it's a competition problem, a productivity problem. Are we focusing too much on the U.S.? Has it been too easy for us and all of a sudden it became difficult for us to change strategy, which countries to deal with? Did we suffer because of the U.S. being in a recession? Are all our eggs in the wrong basket, or in the correct basket?

11:40 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

Yes, the global geography of trade and economic power is changing in such a way that it may not return to what it was before. Yes, Canada is next to the U.S., and as such, it has had a very deep commercial relationship with the U.S., and as Ms. Campbell just explained, it remains a very significant relationship for Canadian exporters. However, if Canadian exporters are going to succeed, yes, Canada has to diversify its markets, particularly toward emerging economies that are the most dynamic and are most likely to remain the most dynamic in the future. That presents very much of a challenge to how Canadian businesses are structured. I observe a certain culture in Canada; it needs to become much more global.

11:40 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

I agree.

11:40 a.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

Certainly our embassies and our trade commissioners are doing a very good job, but to be more successful, I think there is a lot of experience to be learned from other countries.

11:40 a.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Is that my time?

11:40 a.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. Cannan, the floor is yours.

11:40 a.m.

Conservative

Ron Cannan Conservative Kelowna—Lake Country, BC

I've been on the committee for just over eight years. In 2006 we had trade agreements with five countries, and now we have 43 and we're continuing to expand. So we have been relying on the United States, and Prime Minister Harper and now Minister Fast have been aggressively pursuing other markets because of the need for diversification.

It would be appropriate to call you Dr. Campbell. You have an Oxford doctorate. Congratulations. I appreciate your being here again, both times as a witness to our committee.

Dr. Campbell, in your comments, you talked about four priority areas. You talked about the strong positive relationship with the United States, and my colleague Massimo just said it's 73% of our trade. It has gone down from about 85%, so we're diversifying there. We have continued to build initiatives as vice-chair of our Canada-U.S.... The chair of our committee has been working hard with the U.S. trying to break down some of these buy American and country of origin restrictions, the COOL projects the Americans have put in place. We have been working on implementing CETA. Was it number two, number three? You talked about the Asia-Pacific TPP, and of course the Korea agreement was just announced in March, and emerging markets.

One of the goals of GMAP is to align Canada's trade promotion resources to help Canadian companies take advantage of opportunities in high-growth emerging markets. Do you think this is a good approach?