Finance Committee on Feb. 24th, 2015

[Eric Lemieux]

I can give you one example.

As I already mentioned, I had an opportunity to accompany Premier Couillard on an economic mission with a number of entrepreneurs. I have a very simple and concrete example for you.

A company based in Drummondville, a small city in Quebec, manufactures tools used to verify and increase fibre-optic capacity. So we are talking about physical equipment. Since 2008, that company has obtained many contracts to sell its equipment in China. In a case like that, using the RMB would avoid having to go through a change in currency from Canadian to U.S. and then from U.S. to Chinese.

According to estimates, that would help business owners gain 1% and be protected in terms exchange rate, which would be simpler to do. That's an example of a specialized product that has helped China support its growth. A number of companies were in the same situation.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's encouraging, several. Can you give me some more? We're looking for really substantial improvements in the market in some places.

Anybody? Mr. Kingston?

[Janet Ecker]

Mr. Chair, if I may, if you look at the Prime Minister's trip last year, he signed some $2-billion worth of different trade agreements in aviation, nuclear technology, blueberries, actually, as well as our particular agreement.

Premier Wynne was over in China in October and she signed about a billion dollars' worth of deals in clean technologies such as in food safety, pollution control, those kinds of things. The Chinese are quite keen to learn from the expertise that Ontario brings to that. I think you're seeing a number of examples where we do have expertise or products and services that are of use to Chinese consumers. For example, when I was in China last year I noted that Ontario icewine is very popular with young Chinese women.

So I think there's a long list and I think with the renminbi deal that list is only going to get longer. It's not just about complicated financial transactions. Those are a part of it, those are important, but the exciting potential of this is that it's across the economy if we can take advantage of it. We have to step up to the plate, all of us, to make it happen.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Ecker.

Thank you, Mr. Van Kesteren.

We'll go to Mr. Adler for the final round.

[Mark Adler, Conservative, York Centre, ON]

Thank you very much, Chair.

Thank you to all the witnesses for being here this morning.

I do want to follow up on a number of things that were brought up and one in particular, talking about how we can best promote the hub. Now, just stepping back a bit, let me make a few statements and then what I want to know is...and perhaps Ms. Ecker could first answer this question.

First of all, the World Economic Forum has rated Canada's financial sector as the world's best for the seventh year in a row. We have created 1.2 million net new jobs since the end of the recession in July 2009. We will have the first balanced budget of any G-7 country, with the strongest economic fundamentals. How key are those factors in the decision by China to select Canada as an RMB hub?

[Janet Ecker]

I think that's certainly one of the major factors. They want counterparties, if I can use that phrase, in the financial industry that are safe, sound, reliable, and our Canadian financial institutions are that. Secondly, a number of our financial institutions have long-standing relationships in China. We've touched on this a few times here this morning about relationships, and when doing business in China it's not just an in-and-out quick trade mission, it has to be a long, steady working at that relationship, at both the government and the company level. I think the political environment, if you will, between Canada and China is a little stronger than, let's say, China and the United States.

I think the other thing, and it was touched on earlier, is our openness to doing business with other countries, with China. We talk about our multicultural, diverse population. This is where I think it actually provides a hard benefit in terms of the openness and the willingness to do trade agreements. I think the other thing is we are small country; we are a small economy when you measure against the world. They only way we will succeed is to be strong, competitive traders not only with China but with other emerging economies. I think the steps that the government has taken with increased trade agreements, with the global markets action plan, are again another important foundation to help us compete successfully around the world.

[Mark Adler, Conservative, York Centre, ON]

Okay, thank you very much. I'm glad you mentioned the quick in-and-out trade mission kind of philosophy because that kind of thing doesn't really establish a long-term relationship, a long-term plan.

The Liberal Party has indicated that they are not in favour of the FIPA. To the NDP's credit, they came out in support of the RMB trading hub. The Liberal Party has not indicated their support of the RMB trading hub as of yet. We're still awaiting that. The Liberal foreign investment policy seems to be “come to Canada and drink Canada Dry”. I'm just wondering how essential—and I just want to jump ahead a bit—was the relationship between the federal government and the RMB working group? How did that relationship work? How beneficial was it to have the two partners together like that? How key was the role of the federal government in securing the RMB hub for Canada? Could you talk a bit about that?

[Janet Ecker]

It was a critical piece of it. Both sides, as I said, both the financial industry and the government were needed to make this happen. The government wanted to make sure that the financial industry was interested, was prepared to take this forward, and had the capacity and the interest to drive it. But there was a market argument for doing this, and we had a number of our financial companies who were quite proactive and vocal behind the scenes with the federal government to say that this was a moment in time. To use the words of one of our CEOs, “This is an opportunity”. Government needed the financial industry to sort of weigh in on that. They did. They also needed the rest of the business community to indicate their interest and again, as you've seen, many organizations have done that. Then it was up to the government to pick up the puck in terms of the dialogue with China and the agreements between the two central banks at the officials level. They indeed did do that.

When you look at the history of some of these hubs and how they've developed around the world, it actually happened quite quickly here in Canada. It was less than two years, and we had the clearing bank named the day after the agreement was announced. I think that speaks to what I hope is a strengthening and growing relationship between Canada and China. It takes two to make these kinds of things happen and it was, I think, a very good partnership that we saw exhibited in this.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

Mr. Kingston, how many members are there in the council?

[Brian Kingston]

We have 150 members, $6 trillion.

[Mark Adler, Conservative, York Centre, ON]

And the number of employees?

[Brian Kingston]

There are 1.5 million.

[Mark Adler, Conservative, York Centre, ON]

Excellent.

The RMB trading hub has received wide support among all of your members, correct?

[Brian Kingston]

Absolutely.

[Mark Adler, Conservative, York Centre, ON]

Great.

How essential is it that we, as a selling feature—we talked about this and promoting it, we have about a three-to-five-year window of opportunity here—how important is it that we stay on the track to a low tax plan, to creating jobs, and having a prosperous economy as the best selling feature of an RMB hub here in Canada? How important is that?

[Brian Kingston]

It's very important. Canada needs to maintain its international attractiveness to not only attract investment but to make itself known on the international stage as key people to trade with and to incorporate into a supply chain.

[Mark Adler, Conservative, York Centre, ON]

You would say we've been very successful at doing that.

[Brian Kingston]

Absolutely. The government's trade agenda, in particular, has been highly successful. The CETA, you know, is the most important trade agreement we've seen since NAFTA, and will have huge benefits for the Canadian economy. Then the recently concluded agreement with Korea will also be hugely beneficial. So, yes, the government has been extremely successful.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you very much, Mr. Adler.

I'm just going to finish up. I have one question. I want to thank you all for your presentations. I think they were all very informative.

Mr. Kingston, talking about the benefit of having a currency chain rather than going through U.S. dollars, I think the point has been made very well, and you made that extremely well here today.

Mr. Lemieux, with respect to derivatives and Montreal's role, I think, as was mentioned, you had a very informative presentation.

Ms. Ecker, you talked about Canada's financial services' outward foreign direct investment. You talked about our banks, our insurance firms, and large pension funds, and I very much like that argument.

So, my question is more in terms of the Chinese being known as very good savers. It's a perception but, in fact, it's true. The question is with respect to, perhaps, fewer Chinese institutional ventures but more Chinese investors with respect to what Canada can expect as an inflow perhaps on Toronto's exchanges or Toronto companies.

What kind of an inflow can we expect as a result of the RMB trading centre?

[Janet Ecker]

Was that question for me, Mr. Rajotte?

[The Chair, Conservative, James Rajotte]

It's open to anyone, but let's start with you, Janet.

[Janet Ecker]

It's tough to put a number on it, but if this develops the way we would like and hope that it will, it will lead to not only the kinds of business-to-business deals we've been talking about but also opportunities for consumers to invest directly in Chinese financial products or the Chinese to invest here. We think there's a potential for that. It's a little bit down the road, but I think it's certainly one of the reasons we were interested in pursuing this. When you look at the 1.5 million Canadians of Chinese descent—and that population is growing here—there will be growing interest in Canada-China financial services products.

[The Chair, Conservative, James Rajotte]

Thank you.

Does anyone else want to address that point?

Mr. Kingston.

[Brian Kingston]

I don't have a specific figure for what it will mean in terms of inflows into Canada, but I would speculate that this will be beneficial just because it's another piece of the bilateral relationship, which is now improving after FIPA, RMB and, potentially, through further steps.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Lemieux.