Finance Committee on Feb. 24th, 2015

[Eric Lemieux]

No.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

You don't know what they are. I remember that our investments were rated AAA, and we lost a lot with those products.

I'd like to come back....

[Eric Lemieux]

Mr. Dionne Labelle, that's not a derivative.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

I thought commercial paper and derivatives were the same thing.

Mr. Kingston, you and your associates feel that free trade with mainland China should be established. What else is needed to implement a Canada-China free trade agreement that would be in line with trade rules, as well as social and economic rules? What's missing in that area?

[Brian Kingston]

What's missing in going ahead with the free trade agreement?

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

That's what I am asking you.

[Brian Kingston]

Well, I think the first step would be that we've already done a complementarity study, which scoped out how that would work. The next step would be that we would have some sort of a strategic dialogue, as I've said, so that would be engagement at the highest level between our two governments. Going from there, we would actually launch negotiations. That's typically been the format for this, or the path that Canada has taken. The objective there would be to get rid of tariff and investment barriers that exist right now and are problematic for trade.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

I have no further questions, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Côté, you're up. You have three minutes.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Ladies and gentlemen, thank you very much for joining us today.

Mr. Kingston, I read the message from your President and CEO, John Manley, in the 2014 report. I thought his observations were very insightful. He talked about a problem with the quality of education. In other words, Canada has dropped off in terms of various indicators used in global studies. I share that concern.

We are carrying out a study on the Canadian Renminbi Trading Centre. The fact is that the centre is universally supported. I am very happy to hear your testimony and your observations on the topic. Even so, we may wonder whether our companies and Canada are ready to meet the challenges involved. Last week, witnesses told us that our window of opportunity to use the Canadian Renminbi Trading Centre's competitive advantage was limited. I see that you agree with that.

Can you tell us about other areas of concern? What can the federal government do to ensure that we take full advantage of this business opportunity?

[Brian Kingston]

As I said earlier, large companies are ready for this. They're ready for the RMB hub and they're already very active in China. But to make sure that we really do take advantage of it, and that SMEs are aware of it and taking advantage of it, I do think that there is a role for government to play with associations such as the TFSA and the CCCE and other groups you've heard from, just to make sure that this is really being promoted and that the message is getting out there that this really is a short window. It's great that we have it, but if we don't use it quickly, we won't see any benefit from it. We definitely do need to act to promote it.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Do the other two witnesses have anything to add concerning my question for Mr. Kingston?

[The Chair, Conservative, James Rajotte]

Just a brief response, please.

Mr. Côté, another witness would like to answer.

[Janet Ecker]

Mr. Côté, I think that for some businesses this is unfamiliar. They haven't done it before, so we have a bit of.... I don't know whether inertia is the right word, but we have a bit of a hump to get everybody over so that they are familiar with it. I think you'll see, once that happens, much more ease in doing business in renminbi. I think we've all flagged that the education of business and learning how to do it, if I can simplify it like that, are immediate priorities for all of us.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Côté.

Mr. Cannan, please, for your round.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thanks to our witnesses.

I've been on the international trade committee since 2006, and I'm a new member on the finance committee, so I understand the importance of Canada's economic future in regard to our ability to be successful global traders. We rely on those one-in-five jobs, the 20% of our GDP, and the expanding of our markets. Minister Fast has been working out 38 new markets in trying to expand and to diversify outside the United States, even though the United States will continue to be our number one ally. This initiative with China and the RMB trading hub is definitely of great importance, as they are the world's number two trade economy right now.

I want to clarify one point before I go to Mr. Kingston for a question. Mr. Brison alluded to an article in The Wall Street Journal that stated the CIC may move its North American headquarters to New York from Toronto. I just wanted to say that it was an article from December 2013. Since then, the government has provided, as you mentioned, certainty with the FIPA and the predictability and the confidence that businesses require to have both bilateral trade and investment both ways.

Mr. Kingston, in your opening comments, you mentioned the need for “a strategic partnership”. Could you elaborate on what would be envisioned there from the perspective of the Canadian Council of Chief Executives?

[Brian Kingston]

I'll go back to the example of Australia, which set up such a partnership with China that includes an annual meeting at the PM level and then cabinet engagement. As you know, it eventually led to, or has been a factor in, Australia concluding a free trade agreement with China.

That's what I would see it doing. It would guarantee at the very minimum an annual leaders level meeting, and then going from there potentially into launching FTA negotiations.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, and I appreciate the comments about fair trade being a contribution made by your colleague, Ms. Campbell.

Mr. Lemieux, I appreciate your contribution this morning as well. You mentioned in your opening comments that this new chapter between China and Canada should increase commerce between the two countries. I'm just wondering if your organization has done any estimate as far as what impact this RMB trading hub would have on job creation, economic growth, etc.

[Eric Lemieux]

I want to stress the fact that government support is crucial if we want to increase trade with China. The Prime Minister's trade mission was mentioned earlier. I myself accompanied the Premier of Quebec, Mr. Couillard, when he led an economic mission to China too. Government support is key to further developing our relationship with China. Considering the way that country operates, it's very important to know that we have your support.

As for the question about how many jobs could be created, it's difficult for me to provide an exact answer. What I do know, however, is that, as my colleague pointed out, increasing our trade with China is extremely important.

China has transformed itself. It used to be a manufacturer and the world's factory, but it is now becoming a country of consumers. It needs raw materials and commodities. It is buying more and more. The country's middle class now consists of more than 200 million people, perhaps even more than 300 million. That's the population of the United States.

This is an important opportunity for us. If there is a place for our Canadian companies to grow, it is China. You will understand that it's difficult for me to quantify this, but China represents a wonderful opportunity for Canadian companies over the next 10, 15 and 20 years. We should pay close attention to this, while keeping in mind that business is done differently in China. That is why we need governments to provide us with significant support. I think the RMB's implementation is greasing the gears and helping us contribute to both countries' economic growth.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Turning to our friends in Toronto, Ms. Ecker and Ms. Kennedy, thank you for being in this morning, and the Toronto Financial Services Alliance, otherwise known as the great acronym of TFSA, which is something that's obviously a very memorable legacy for our former finance minister, bless his soul, Mr. Flaherty.

Coming from British Columbia—as Mr. Cullen and Mr. Saxton do—and the age of the Pacific gateway, we heard from a representative from British Columbia last week when we heard from the former finance minister on Thursday about AdvantageBC.

Can you perhaps expand a little bit on how this relationship with TFSA and AdvantageBC will work?

[Janet Ecker]

One of the things that is exciting for Canada is that we have four cities that are considered international financial centres on a global financial centres index that ranks and does this kind of thing: Vancouver, Calgary, Toronto, and Montreal. It's clearly showing the national reach of this industry.

You see from Mr. Lemieux's comments that derivative functionality is certainly happening in Montreal, energy deals are certainly happening in Calgary, and there is a lot of trade financing happening in Vancouver. The infrastructure for the industry in financing for a whole range of products is headquartered here in Toronto. There will definitely be an across-the-country benefit to this.

We're trying to make sure that among the financial regions, if you will, we are coordinating what we're doing. We're keeping each other in the loop in terms of what we're doing. We're sharing information. There's research and survey information we still have to get to meet the terms of the agreements.

We're making sure that we're sharing the information that we're getting. We're also looking at what kind of education needs to occur, as I mentioned earlier, for businesses to potentially do renminbi business. We have a bit of a steering committee between B.C. and Ontario, between AdvantageBC and TFSA. We actually just had a call yesterday to compare notes on what we're hearing, what we're seeing, and what we're doing.

So it's mostly collaboration, cooperation, and sharing of research and information.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Cannan.

Mr. Côté, over to you.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Ms. Ecker, I went over last week's testimony, where William Zhu said that Canada was a mid-sized country in terms of trade volume. Concerning the trade of commercial products and investments, he said he was worried our market would probably not be large enough to be attractive. He also said that Canada would be well advised to turn toward the rest of the Americas, especially the United States, to take advantage of that business opportunity.

What you think about that? Has a plan been developed? If not, have you and the members of your alliance implemented measures to encourage players from outside Canada to support this platform?

[Janet Ecker]

Ms. Kennedy is going to answer this question, Mr. Côté.

[Sheryl Kennedy, Chief Executive Officer, Promontory Financial Group Canada, Toronto Financial Services Alliance]

From the beginning, the financial services industry has been very interested in not looking just at the Canada market but at the Americas market. Canada is the first renminbi hub in the western hemisphere time zone. Canadian financial institutions have large operations in the United States and Central Latin America and so are very much interested in how they can serve their clients throughout the Americas and not limit the development here just with Canadian customers. It has been very much an interest to be a hub for the Americas. Of concern in our relationships and arrangements with the Chinese is that it not be limited to just customers here in Canada but to have the ability to provide financial services throughout the Americas. That clearly will mean more business, more volume, and more partnership between Canadian firms—not just the financial institutions—and their other relationships throughout the Americas.