Finance Committee on Feb. 26th, 2015

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

Do you currently have any in continental Europe, that is on the European continent?

[Nianbei Sun]

In the U.K.? I'm sorry, in Europe?

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

I'm talking about Europe, not the United Kingdom. I was talking about continental Europe, so on the European continent.

[Nianbei Sun]

Yes, continental Europe.

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

Okay.

The question that comes to mind is this.

Since we've been addressing this topic, we have spoken at length obviously about a competitive edge that our trading hub would have. How long will we keep this competitive edge if trading hubs like this are being opened around the world?

The three other witnesses—Mr. Curtis, Mr. Hansen and Mr. Osmar—could answer this question as well

You really stressed the competitive edge, but it won't last long.

[Colin Hansen]

I think first of all there's no indication that there would be a new settlement hub established anywhere in the Americas anytime in the near future. So we do have that advantage of being the first opportunity in the Americas, and we need to capitalize on that.

But I think that within time, whether it's five years or longer, when China gets to the point when they can fully open up and liberalize their currency to the point that it's not a controlled currency—which I think clearly is their objective—settlement hubs will no longer be as relevant. You'll be able to settle, really, from anywhere at any time to anywhere in the world, the same as we can currently do with the U.S. dollar, the euro, or any of the free-floating currencies.

But I think in the meantime Canada has an opportunity to take advantage of that competitive advantage and really entrench Canada as a place through which to do international financial transactions. That will have benefits for generations to come, regardless of what happens in the liberalization of the renminbi.

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

Mr. Curtis, would you like to add anything?

[John Curtis]

Just very quickly, the skills will be built up whether or not there are new human resources brought into the banks, for example. Our reputation will be somewhat larger.

But ultimately there's a very interesting question, which has been raised by Mr. Hansen in response to your point. Ultimately, over the long term, the Chinese currency will become like every other currency, a normal currency. It will be freely traded. But that will take changes in their interest rate policy and in the relationship between the bank of China and its banks. There will be any number of changes that will be required, taking many years, but I think the Chinese are clearly heading in that direction.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Curtis.

We'll go to Mr. Cannan, please, for five minutes.

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

Thank you, Mr. Chair, and thank you to our witnesses for being here today. Also, to fellow British Columbian and former premier, Mr. Hansen, I thank you as a British Columbian on a third balanced budget.

Premier Clark was just in my riding on Friday as one the MLAs I work with. I appreciate that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

All right, all right.

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

Well, I know he had a strong hand in providing that framework.

[An hon. member]

He was deputy premier.

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

No, he was leading the way.

I just wanted to follow up on one of your comments. We briefly chatted before the meeting about the importance of forestry, a big sector of our economy, but also LNG and the potential with this RMB trading hub. Do you think it will help facilitate further investment in both forestry and the LNG sector?

[Colin Hansen]

Yes, absolutely.

We already have some of our forest exporters who are exporting into China and who are piloting the use of renminbi direct currency exchange. It's in the early stages. We've been doing programs through AdvantageBC to help educate the private sector in British Columbia as to what they need to do to make that transition. Part of it is identifying what the cost-benefit would be. An HSBC study last year said that the price advantage to non-Chinese companies is anywhere from 3% to 5%. I think Canadian companies, particularly the exporters from British Columbia, need to know how to harvest their share of the savings that will be realized. We're working with resource companies to make sure that they understand how best to negotiate those savings.

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

I think the strategy of diversification.... Canada was doing about 85% of our trade with the U.S. Alberta is still in the high eighties, and we know the challenge that's facing. British Columbia is down about 50%, and almost 18% to 20% is with China.

I noticed one of your comments at the launch of the RMB was—actually in the fall of 2014 and prior to that Minister de Jong had met with some of us from British Columbia advocating for the RMB hub—there's an estimated impact of up to $480 million in additional Canada-China trade, including up to $120 million in additional B.C.-China trade.

Can you share with the committee how you came up with those dollar values?

[Colin Hansen]

Yes.

This was a study that AdvantageBC commissioned from MMK Consulting, based in their Vancouver office. It was looking basically at trade volumes and what would be the cost that companies would incur if they had to go through the U.S. dollar. They would have the cost of two currency exchanges plus the additional cost of hedging, if that's the route they take, plus the additional risk. When you start taking away that cost and giving that price advantage to a Canadian exporter, by that marginally lower cost, what would that increased export potential buy? That's where that number was derived from.

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

Thanks.

I'm going to shift over to Mr. Curtis as he's has been on the trade committee for nine years. You've testified several times as an expert witness. I appreciate your experience.

I was thinking back to that conversation your dad had in 1949 with you, your 35-plus years in the department, and that we have the Foreign Investment Promotion and Protection Agreement that's come into place to provide the stability and confidence for business.

Can you verify those numbers that Mr. Hansen indicated are the great potential of this deal, or is that realistic in your perspective?

[John Curtis]

I have not looked at the numbers themselves directly. Overall it sounds reasonable. It sounds within the realm of possibility.

I always think that we economists—I was taught this at graduate school—make astrologers look good. I'd be very careful in forecasting anything, and I always look a little skeptically at all numbers. I think what was stated sounds more or less correct. I think it's important for members to remember that ultimately most trade, particularly in the resource sector but in all areas, is in United States dollars. We're talking about settlement and it's a small portion of that. I think it sounds quite reasonable.

Thank you.

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

Thanks.

I think $480 million is more than “some”. My colleague asked you the question, and you said “some”. Half a billion is a pretty good impact.

I have a quick question for Ms. Sun.

We talked about how this RMB hub is one of the first in North America. How long do you think it will take before Canadian businesses will be able to take up this initiative?

[The Chair, Conservative, James Rajotte]

Give a brief response, please.

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

The opportunity is there for Canadian businesses. What are you doing and how long do you think it will take Canadian businesses to take advantage of this?

[Nianbei Sun]

I think if the trade volume between the two countries can be continually increased, Canada will continue to have an advantage.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Côté, pour cinq minutes.

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

Thank you, Mr. Chair.

I would like to thank all the witnesses for being here today.

Unfortunately, one of the witnesses has left. It's too bad because I had a question for him. Instead, I'll ask Ms. Sun my question.

Ms. Sun, tell me, what are the positive or negative effects we can anticipate by implementing the Canadian platform compared, for example, with the one in London, United Kingdom?

I imagine that trading, the transactions and the interactions will not be limited to North America. Will there be certain effects on transactions done in London and vice versa?