Evidence of meeting #31 for International Trade in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was going.
A recording is available from Parliament.
Conservative
The Chair Conservative Leon Benoit
You could well be right, Mr. LeBlanc. I appreciate that comment and we'll look at that. Maybe it can be done in that fashion. It's a good point and maybe we can deal with it like that.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
That's if they choose to come. As I say, I'd like to take that under advisement from some folks in my region.
Conservative
The Chair Conservative Leon Benoit
I'll let you know about that. I don't know enough about it specifically to know whether they really want to appear or just want their point dealt with. And it is a legal point.
I will let you know, Mr. Julian, if that's all right.
Is there any further discussion needed on that?
Yes, Mr. LeBlanc.
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
I just want to make sure, Mr. Chairman...is it your intention that on Tuesday the departmental officials will be here and then on Thursday the other four persons you identified will be here, or would they all be on the Tuesday?
Conservative
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
Okay. So the two meetings next week would focus on Bill C-24 in the order you described.
Conservative
The Chair Conservative Leon Benoit
Yes, and then we should be able to get to clause-by-clause the week after, if that's not the break week.
It isn't? Good.
Mr. Julian.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
Mr. Chair, the three witnesses whose names I have submitted are all folks with strong legal backgrounds and connections to the lumber industry. I'd like to suggest we have the same kind of extended time that we've had both Tuesday and Thursday of this week, making the meeting run from nine to noon next Thursday for those three witnesses. They will be bringing forward a lot of material, so it's better, I think, to provide for the additional time. If we feel we need less time, we can always scale it back, if everyone's questions have been answered, but my own preference would be that if we have all three of them together we have an extended sitting.
Conservative
The Chair Conservative Leon Benoit
Mr. Julian, I certainly agree with you that if more time is needed we should look at extended sittings, because there is a time sensitivity to this whole thing, as you know.
Can we come back to this? It's fine with me. Is there any objection to it, if we choose to go this way?
No objection? Okay.
Still not seeing lunch, let us just continue with the panel, then. It may be half an hour before lunch is here, so let's just go ahead.
Mr. Maloney, could you ask your questions again so that we can finish the answers to them?
Liberal
John Maloney Liberal Welland, ON
Are we concerned about too great a reliance on the United States? In the event of the U.S. stumbling, would we fall? The other was, strategically how do we get into the emerging markets—Brazil, India, China—especially in light of the decline in our trade now with China?
Fellow, C.D. Howe Institute
There are a few points I want to bring up.
I think there's a bit of a misconception about our reliance on the U.S. A lot of the trade statistics overstate our reliance on the U.S. There was a C.D. Howe report written recently that addresses this issue. I'll just raise the points that were made.
One is that we don't have good statistics on Canadian foreign affiliate operations in foreign countries. There's reason to believe these might be quite high in Europe and in non-U.S. countries, which would definitely mean that we're overstating our reliance on the U.S.
The second one is that we have difficulty measuring services trade. We don't know how this affects the Canada-U.S. data.
Finally, in our trade with the U.S. we have many intermediate inputs that go back and forth across the border several times and are counted each time. There have been efforts to fix this, but there are still things that get caught up, and this ends up overstating our trade relations with the U.S.
So we have to be careful when we're looking at the trade statistics and just looking at the number of exports going across our border.
Another point I wanted to make is that Canada has one of the lowest export market volatilities, even compared with a lot of European Union countries that have a quite diversified export market portfolio. So our reliance on the U.S. is actually a lot less volatile than we might think.
Conservative
The Chair Conservative Leon Benoit
Mr. Tomlin, could you just explain exactly what that is? I can guess, but I want to make sure I understand what you're saying.
Fellow, C.D. Howe Institute
Our measurement in terms of export market volatility is just standard deviation movements over the past ten years.
Fellow, C.D. Howe Institute
So the U.S. is a relatively stable market, which is important for us. In terms of looking forward to where our over-dependence on the U.S. can lead to, if the U.S. market stumbles then we stumble too. To rectify that, there are not too many options because the other stable markets we're looking to are the EU and China, with which we're already doing our best to make deals. There's not really any more we can do right now than what we're doing.
In terms of making deals with other, smaller countries, most of them are dependent on the U.S. economy as well, so if the U.S. falls, they fall, and we still have the same effect; we've wasted our time by making deals with other, small countries.
I simply wanted to put those points out there.
Conservative
The Chair Conservative Leon Benoit
Thank you very much.
Mr. Myers, forgive us the side discussions. We're dealing with some other things at the same time, but we are listening. We kind of learn to do it with each ear.
Go ahead, Mr. Myers.
Senior Vice-President and Chief Economist, Canadian Manufacturers and Exporters
It's a skill.
I want to agree with Mr. Tomlin. If the U.S. stumbles, the world stumbles, and it is a concern right now. I think the U.S. deficit, the U.S. debt, the financing of that debt, has to cause us all concern. Looking into next year and putting on an economist's hat, I think the U.S. economy is going to be near or in recession. I think the Canadian economy is going to be very close as well. So this has to be a concern.
I think it's not necessarily an issue of how we then diversify trade away from this--and Mr. Tomlin's correct. When I was in Sichuan in China a couple of years ago, I was hosted by the head of the China Automobile Industry Association, which has important offices and manufacturing in Sichuan province. He asked me if I knew that the biggest selling foreign car in western China is a Canadian car. I said I didn't know that. In fact, if you look at our trade stats, according to the statistics we don't export cars to China. But the biggest selling car in Sichuan is made in Brampton, the Chrysler 300-series. We export that to the United States and then it's reshipped into China through the United States. There are a lot of products like that, and we don't really have a good sense of where we do business around the world because our trade stats don't track that.
The services issues are extremely important as well. When we talk about services, I don't know any product that's shipped--talking about direct services exports--that isn't shipped on the basis of good service, good knowledge. I mean, if you talk about the difference between a knowledge economy and a manufacturing economy, manufacturing won't exist if manufacturing doesn't become a services economy and a knowledge economy as well. Some of these distinctions from a business point of view aren't really relevant, the way business goes on.
Keep in mind that 60% of all of our trade is intra-corporate trade, or linked into supply chains. Now, this is General Motors shipping to General Motors, and IBM shipping to IBM, through the supply chain. That degree of integration means that we're connected into a North American economy, whether we like it or not.
The number of individual companies that are actually doing business around the world is relatively small, and as Mike says, these are usually small to mid-sized companies. They're the Canadian companies that are growing and expanding very rapidly, and those are the companies that we really have to pay attention to.
If I had a choice between negotiating a free trade agreement with China and all of the delays and all of the uncertainties in that, or talking about how EDC can extend its export financing and business financing credits in China, I know which one I would choose if I were a business. It wouldn't be to enter into prolonged ten-year negotiations that are not likely to go anywhere. It would be to make sure we have the types of financing facilities, the types of business service facilities, that will enable my success in China or in any other market around the world.
I think that's where we need to talk about trade policy and focus on the negotiating part, but we really do need to take a strong look at what government agencies, crown corporations, and government departments do in order to build international business activity around the world.
Conservative
The Chair Conservative Leon Benoit
Thank you very much, Mr. Myers.
On that issue, too, I have Mr. Fitzpatrick.
There's only Mr. Fitzpatrick on the list, and I have a couple of questions. If there's anybody who wants to get back on, feel free to do that. If not, we'll go to the informal part. Hopefully, lunch will be here by about 11:30 a.m. I understand it was connected with the fire alarm, by the way.
Mr. Fitzpatrick.
October 19th, 2006 / 11:15 a.m.
Conservative
Brian Fitzpatrick Conservative Prince Albert, SK
A book that I read in the last couple of years that I found quite profound was The World is Flat by Tom Friedman. To me it's a wake-up call. I'd use the analogy of the convergence that took place with Japan, and the way I see it, with China and India we're on maybe a thirty-, forty-, or fifty-year convergence in absorbing the phenomenon there economically in the world. And for countries that aren't aware of that and aren't becoming competitive, it's literally true that not only will they eat your lunch, but they're going to take away your jobs, and so on.
In the section in his book where he said there were certain things the modern economy should be doing to get in line with this thing, the list of things that we should be dealing with, the negatives, I think he was more focused, from a public policy standpoint, on the United States. But I was just thinking of the list in Canada, and in my mind the list is extremely long on the negative side in this country. I don't really think there's a political appetite in this country to get real on these issues. But I happen to think this guy is onto something, this Tom Friedman, and we've literally got our heads stuck in the sand if we're not willing to take a good hard look at what we're doing internally.
I have a major labour shortage in my riding. People can't get people. This is in Saskatchewan. I have people in other parts of the country raising questions in question period about enhanced EI programs or something, and our employers in Saskatchewan need these people--and we have mobility rights in the country, and so on.
But I'd be interested in comments on some of the things that we have to address internally in this country if we're going to wake up to what I think is a reality in the world, that China is going to be a big factor, not only for the United States but for every country in the world. So is India.
Conservative