Evidence of meeting #51 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 data.
A recording is available from Parliament.
11:30 a.m.
Conservative
11:30 a.m.
Bloc
Serge Cardin Bloc Sherbrooke, QC
Thank you, Mr. Chairman.
Good morning, gentlemen.
One can see, in the witness categories, that one does not go without the other, in the context of the examination of international trade policy. I think that you are all important players in this field. The department, of course, needs information in order to plan its policies, and it depends considerably on statistics. In order to guarantee the reliability of their statistics, statisticians must also depend on the agency.
In light of the problems you have identified and enumerated, are there what might be termed international statistical conventions to balance things out which would, for instance, make the Mexico-Canada table identical with regard to imports on the one hand, and exports on the other? Are there any international statistical conventions?
11:30 a.m.
Director, International Trade, Statistics Canada
There is the International Merchandise Trade Statistics: Compilers Manual, which we all try to follow, but there are different trade systems as well that can be applied. In Canada, we follow what's called the general trade system, which means that our customs boundary basically agrees with our physical border. In other countries, such as Mexico, they have the maquiladoras, and those are considered to be customs-free zones.
So there are different ways of compiling trade. To reconcile all of that, if you want to deal with one country, you have to do a bilateral reconciliation with that country to try to understand some of the issues that are there, come up with what would be a commonly agreed upon list of issues, and then maybe struggle to come up with a common series too. You have to go into that with a very clear set of objectives of what it is you're trying to accomplish.
11:30 a.m.
Bloc
Serge Cardin Bloc Sherbrooke, QC
For instance, each member-country of the World Trade Organization could at a given point have conditions imposed upon it. But would it be possible to do so? We all understand the importance of statistical data. They can affect the thrust of policies in certain countries, and that can be a good thing, but the reliability of statistics is important.
At the same time, if it were possible, I would ask you firstly if this could be applied within the WTO criteria. Secondly, how can you assess the reliability of the statistics you regularly compile?
11:35 a.m.
Director, Balance of Payments Branch, Statistics Canada
There are a number of cases where we try to do studies to compare the accuracy across the different agencies. The IMF, particularly through its balance of payments program, looks annually at trying to compare the data across a world level and tries to sum them up. So there's a whole series of processes there, which we try to bring together.
We're rewriting international manuals right now, as we speak, to try to bring the standards internationally closer together so that countries will have measures that are much closer. We're rewriting the international Balance of Payments Manual, and other efforts are being made to try to make sure those measures are as close as possible. That is in cooperation with other international operations such as the OECD and World Trade Organization, which are involved in specific aspects, but we are trying to do that at all levels, yes.
11:35 a.m.
Bloc
Serge Cardin Bloc Sherbrooke, QC
I asked you about assessing the reliability of statistics. At the Department of Foreign Affairs and International Trade, in certain files, statistics are often a tool.
How do you evaluate the statistics that are sent to you?
11:35 a.m.
Anthony Burger Chief Economist, Office of the Chief Economist, Department of Foreign Affairs and International Trade
Thank you, Mr. Chairman.
To answer the member's question, I would say that there is no problem with regard to data on physical products. The real problem involves trade in services and investments. If there is a difference between the statistics on imports prepared by Mexico and those on our exports, it is clear that the problem derives from the fact that some of our exports to the United States are destined for Mexico. We can rectify this inaccuracy with data on imports by Mexico.
As Mr. Ridgeway just said, it is quite clear that as regards products that are exported to Mexico, their statistics are more accurate than our statistics on exports. So we have a way of resolving that, and we know that this is a growing market for us. The trends are more important than the current statistics.
It's more important to know what the trend is than what the precise figure is. We know that our exports to Mexico are increasing and that our exports to Mexico are now not quite at the level of our imports from Mexico, but that gap has narrowed to some extent since NAFTA. So that's a useful piece of information. It helps us respond.
If I can just add a couple of thoughts, one thing that is true about Statistics Canada is that it does two things. It produces statistics that are mandated by law, and it also undertakes surveys and other work in cooperation with policy departments. There are a couple of projects that we are asking Statistics Canada to help us with at present. One is to map exporters to importers. In other words, as we see the new economy coming into place, and this responds to one of Mr. Bains' concerns, what is different? One of the things that's different is that the importer and exporter may be the same person. It's very important to know if a company is importing components and exporting, because then we can say it's almost more important for us to have a lower tariff on the import than to worry about somebody else's tariffs, because that business could move somewhere else if the company finds that we have high tariffs on parts.
A project that we're asking Statistics Canada to help us with is to see what exporters actually rely on imports in order to make their products competitive internationally, and how our trade policy can adjust to that. So Stats Canada does things like that.
Another thing we are asking Stats Canada to help us with is relating the impact of our trade commissioners abroad on the volume of trade with particular countries. Are there specific cases in which a company comes to the trade commissioner in a particular city and says, “How do I export to this market?”, and then follows up by increasing his or her exports to that market? So Stats Canada helps us to a great extent at a very micro level on these kinds of things, but they ask us to pay.
11:40 a.m.
Conservative
11:40 a.m.
Conservative
Dean Allison Conservative Niagara West—Glanbrook, ON
Thank you, Mr. Chair. Thank you, gentlemen, for being here today.
My questions are going to revolve a little bit around foreign direct investment and how those things are tracked. As someone who's involved with SMEs and doesn't have a whole lot of options in being able to worry about different tax jurisdictions--I mean, I pretty much have to pay my taxes here in Canada and I don't have much opportunity to invest in foreign countries.
My concern is this. When we look at tax haven investments, I think one of the things that always got my goat was CSL, and the fact that this was a Canadian company owned by a Canadian prime minister who was flying a flag of convenience for tax purposes, for how we deal with labour laws and getting around some of those things. How do we determine what are tax avoidance methods versus more tangible investments in companies? Obviously there are people investing in other countries for different issues, but there's certainly a huge issue when it comes to Canada, with people parking their corporations offshore just to avoid taxes. Do you have any comments on that?
11:40 a.m.
Some hon. members
Oh, oh!
11:40 a.m.
Director, Balance of Payments Branch, Statistics Canada
We measure where the investments go, but we have no other information on the whys or whenever they're doing that. No, I can't comment on that.
11:40 a.m.
Conservative
Dean Allison Conservative Niagara West—Glanbrook, ON
Is there any way...? This is certainly part of the whole equation, this money coming in and going out of the country. Is it possible to change the way we look at some of those things? Do you have any thoughts on the system we have now versus what it could be?
11:40 a.m.
Director, Balance of Payments Branch, Statistics Canada
Not particularly.
We try to show foreign direct investment and other portfolio investment flows by country whenever we can. We can try to give information to identify where those flows are, and others then may use that to do research. We try to give the most detailed information we possibly can to help with whatever research activities that may be out there.
Maybe I can report that the Canada Revenue Agency occasionally asks us for a special tabulation on how much investment is going to a list of countries that they specify as being potential havens...or something to that effect. I don't know what word they use. We do that for them. It's simply a special tabulation that provides them with some more information, but it tells them where investments are going in recent periods.
11:40 a.m.
Conservative
11:40 a.m.
Director, Balance of Payments Branch, Statistics Canada
We survey the firms and ask them where they're investing, where they own other companies, and where they own other financial assets—stocks, bonds, or whatever. If they own more than 10% of an entity outside Canada, then that's part of foreign direct investment. The criteria is 10%, but over 85% of foreign direct investment is in firms where there's a majority ownership situation. The Canadian or foreign firm coming in owns more than 50% of the voting power in the firm.
When you're looking at foreign direct investment data, you're mostly talking about ownership and control of a firm in another country. By dividing that out, you can see where there may be Canadian companies investing in an ownership and control sense in certain other countries, as opposed to just buying some stocks and bonds to invest in your retirement savings plan, or whatever. This helps to identify where that kind of ownership investment is happening.
11:40 a.m.
Conservative
Dean Allison Conservative Niagara West—Glanbrook, ON
What I'm assuming is that on the inbound and the outbound, it is strictly voluntary. Is that correct? On the outbound it is.
11:40 a.m.
Director, Balance of Payments Branch, Statistics Canada
The survey is obligatory. Under the law they must, or are supposed to, respond to the survey. What we really ask for is only the first point outside the country where you invested.
Occasionally we try to look through those financial centres—whether on an island in the Caribbean, in Luxembourg, or Holland—to get information about the destination of the final investment. But we don't always get that additional information; we try to perceive it.
That's an international issue, and right now we're trying internationally to find new methods. Many other countries would like to be able to see from the ultimate investor all the way through to the final destination of investment.
I'm working on a committee at the OECD that's trying to investigate how we might find measures to do that.
11:45 a.m.
Conservative
Dean Allison Conservative Niagara West—Glanbrook, ON
How confident do you feel that the data is given?
11:45 a.m.
Director, Balance of Payments Branch, Statistics Canada
We're quite confident that the general trends and the general level of data going to most countries is reasonably accurate. Certainly if there are some issues about very small companies that are hard to track, as I mentioned, we don't have independent indicators of who is investing overseas.
Because we don't want to overburden smaller companies with a lot of surveys, there may be some issues about which we don't have full coverage, and that's an issue. This is part of the trade-off in trying not to overburden people, but to come up with accurate measures.
For the very largest companies, where most of the value is, we are quite confident that we have good coverage.
11:45 a.m.
Conservative
Dean Allison Conservative Niagara West—Glanbrook, ON
Good. Okay.
How much time do I have, Mr. Chairman?
