Evidence of meeting #55 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 markets.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

John Gero  Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade (International Trade)

11:05 a.m.

Conservative

The Chair Conservative Leon Benoit

Good morning, everyone.

Today we have before us the Minister of International Trade, Minister Emerson, and we have departmental officials as well, including: Marie-Lucie Morin, deputy minister for International Trade; John Gero, assistant deputy minister, Trade Policy and Negotiations Branch; Stewart Beck, assistant deputy minister; Kathryn McCallion, senior advisor in International Trade; and Doreen Steidle, assistant deputy minister, Corporate Services. Thank you.

I won't take any more time. We will go directly to the minister. We want to hear from him. We want to leave as much time as possible for questioning, so let's get right to it.

Thank you very much, Minister, for accommodating our schedule and being here today. If you would, make your opening statement, and then we'll get right to the questioning.

11:05 a.m.

Vancouver Kingsway B.C.

Conservative

David Emerson ConservativeMinister of International Trade

Thanks very much, Mr. Chair. It's good to be back with the committee.

I will quickly read a statement so we can get on with a more interactive question-and-answer session.

Given Minister MacKay's testimony to the Standing Committee on Foreign Affairs and International Development last week on the department's main estimates, and given the expressed interest of this committee, I propose to talk in the first instance about the government's international trade agenda.

I think all of us here recognize that trade is absolutely fundamental to Canada's competitiveness and our economic well-being. It creates jobs, prosperity, and underpins our social programs and indeed our quality of life, which is why it's critical that Canada reach out to the markets of the world in a focused and strategic way.

Since becoming minister, I've underscored at every opportunity I could my concern that Canada has not adapted quickly enough or rigorously enough to this new global business environment. We're a country of 31.6 million people, and I think it is pretty obvious that we simply cannot afford to build our economy around serving a market of 31 million, 32 million people. Fundamentally, if we tried to do that, we would be an impoverished state, and nobody wants to go there.

But as I said, we're falling behind the competition, and for several years the warning signs have been there in places like Asia, for example. We're falling behind countries like Australia, which is negotiating free trade agreements at a rapid and aggressive pace. Here in North America, our share of U.S. merchandise imports has been falling since 1996, and the Americans have been signing trade agreements with mad abandon, covering some 15 countries since 2001, with 10 more negotiations under way—a clear sign that the Americans themselves, with a market of 300 million people, are not sitting back. They are looking for opportunities far from home.

We're not gaining access to new markets as quickly as our competitors. We're not attracting the level of international investment that we potentially should, and we're not attracting the level of attention or recognition our businesses deserve in global markets. We fundamentally need to create a more competitive Canada.

I can say this government is committed to creating a competitive Canadian economy. We laid out our economic plan in Advantage Canada and followed up with strong measures in the recent budget. We're creating the right economic frameworks on a number of fronts to make Canada more competitive. Being competitive means reaching out to the right global markets, and it means giving our businesses the tools and the access they need to be successful, which is why the budget included additional resources for our global commerce strategy—$60 million over two years and $50 million ongoing. It's a key investment in focused, targeted efforts to make our firms more competitive and to help Canada step up its trade and investment performance.

Our first focus is to expand our presence in emerging markets. Traditional marketplaces, like the United States and Europe, are contending with rising giants like China, India, and Brazil. The power and influence of these economies today and tomorrow cannot be ignored. It's going to be a fundamental fact of international commerce, and it will shape economies around the world. Our success depends on being there in the market for our businesses. We need to be armed with the right tools, support, and intelligence that our companies need. It also depends on our businesses being able to access the global pools of capital and talent they need to grow and diversify.

Through the global commerce strategy, we'll expand our presence in key regions, starting with China, India, and Latin America. We will hire sectoral business experts, both abroad and in Canada, to gather intelligence, analyze markets, and provide the tools and advice our firms need. We will work with Export Development Canada to make strategic equity investments that will help small and medium-sized Canadian firms capture opportunities in emerging markets, and we'll boost the number of EDC officers at our DFAIT offices abroad, especially in China and India. This will ensure that our businesses are supported in the right places, in the right ways, at the right times, to capture the opportunities they're looking for.

Our second focus is to bolster the foundation of our commercial success, which is, without a doubt, North America. Canada is not just a market of 31.6 million people. Canada is an entree into a North American market of 410 million people. It's essential that we strengthen our connections to the North American marketplace, and that is fundamentally what we mean when we're talking about the North American platform. We're talking integrated supply chains within North America, which give us a competitive leg-up in dealing with markets overseas.

With the softwood lumber dispute finally behind us, we're working with the United States to build on our long history as neighbours, as partners, and as friends, in order to foster a more comprehensive trade and investment relationship.

Looking ahead, we'll reinforce our presence in the U.S. through a number of initiatives. For example, we'll engage private sector experts to make connections between Canadian expertise, American demand, and capital pools. With Mexico, we'll expand the level of support to Canadian firms doing business there and continue supporting initiatives like the Canada-Mexico Partnership, which is bringing our nations' business closer together.

Through the Security and Prosperity Partnership, we've been working closely with our partners in the United States and Mexico to build a more sophisticated North American platform, one that can compete more effectively with similar platforms in the large markets of Asia and Europe. This means, among other things, bringing our regulations closer together and fostering a greater level of cross-border cooperation among different sectors. We need to eliminate the tyranny of small differences, and we can do that without any sacrifice. Indeed, we can probably enhance regulatory effectiveness and achievement of regulatory objectives.

This work will also pave the way to re-energize Canada's traditional trade and investment relationships with the countries of the Caribbean and Latin America. We are, in effect, expanding our neighbourhood. We're committed to strengthening our commercial presence in those markets, which are increasingly important to Canadian suppliers, to customers, and to investors.

Our third focus is a re-energized negotiations agenda. We remain committed to a successful Doha Round at the WTO. This will remain a top priority, but slow progress compels Canada to match our competitors' aggressive bilateral and regional market access efforts. We cannot allow Canada to become a disadvantaged spectator in the race for market access. We must expand our bilateral trade network and gain access to those markets that hold the most potential for our businesses and our investors.

We're currently negotiating free trade agreements with EFTA, with South Korea, and with Singapore. We're focusing on a range of foreign investment protection agreements, FIPAs, with countries like China, India, Indonesia, Vietnam, and others. We're looking at science and technology agreements, like the one I signed recently during my January visit to China.

We will accelerate our efforts on this front. We'll help Canadian firms, investors, and researchers, as well as the commercial users of technology, tap into exciting global opportunities.

We mustn't forget the many other initiatives included in the recent budget that will help Canada compete in the global context. I'm thinking primarily of the budget's infrastructure investments. I've spoken often of global supply chains being the drivers of international trade and commercial success. In this day of global supply chains, we all have to recognize the importance of smooth, effective transportation links for our trade performance. The budget delivers on this. It includes an additional $410 million for the Asia-Pacific gateway and corridor initiative, raising the total federal investment in the Asia-Pacific gateway and corridor initiative to $1 billion, another step towards creating more opportunities for improved trade with Asia. It also includes a financing strategy for our new Windsor-Detroit crossing, the most heavily used border crossing in the country, along with a $2.1 billion fund to support gateways and border crossings across this country.

These investments prove to international shippers, exporters, and importers, not to mention foreign investors, that Canada understands the importance of a smooth, efficient, and pan–Canadian transportation system that links the heartland of North America and Canada with the heartlands of markets in Asia and elsewhere. It proves we're making the right investments into our infrastructure to make Canada a hub of choice and, through our global commerce strategy, a partner of choice for global trade and investment for decades to come.

We're realigning our departmental activities to achieve greater results. Like all departments, we're faced with balancing expenditure restraints with our commitment to providing the best services we can to Canadian business. That's why we'll continue to examine closely our expenditures and allocate resources to high priorities. We're committed to putting resources in the right places in support of the best results for Canadians.

Canadians have come to expect a high level of service from my department, and we aim to continue meeting their expectations or exceeding them over the coming year--through our trade commissioners, for example, who are working around the world to connect Canadian expertise with global trade opportunities and investment capital; through our trade policy and negotiations group, which is fighting for the access our businesses and investors need to global markets and investment pools and defending our interests at the negotiating table; through our global operations group, which is working closely with businesses to develop targeted market plans for the most promising countries for Canadian businesses and investors around the world; and through our investment, innovation, and sectors team, which is attracting investment to Canada and building new science- and technology-based partnerships with other countries to help our researchers tap into the innovative work being done around the world.

In short, we're very proud of our many efforts to connect Canadians with opportunities beyond our borders. I can assure this committee that we'll continue providing the highest possible level of services to Canadians at the best possible value. I look forward to working closely with the business community and with parliamentarians from all sides to move our trade priorities forward in the time ahead. We need to make Canada more competitive, more prosperous, and more successful for future generations. We need a stable trade policy to do that. I look forward to working with you to develop the best possible trade policy for Canada, one that is not subject to partisan gyrations over time.

Thank you very much. I look forward to your questions.

11:15 a.m.

Conservative

The Chair Conservative Leon Benoit

Thank you very much, Mr. Minister, for your very broad statement of what your department is achieving on behalf of Canada. It's clear from your statement that you're hearing from the same people we're hearing from, or you're listening to what the committee is doing, or both, hopefully.

We'll get directly to questions, starting with the official opposition, Mr. Bains, for seven minutes.

11:15 a.m.

Liberal

Navdeep Bains Liberal Mississauga—Brampton South, ON

Thank you very much, Mr. Chair. I appreciate this.

Thank you very much, Minister, for coming out. I know you're very busy, and it's greatly appreciated that you come to committee.

I heard your opening remarks, and I have a slightly different viewpoint in terms of the feedback and response we've been getting with respect to some of the witnesses who have come before the committee with respect to Canada's trade policies. Many experts are unhappy with some of the initiatives--the Chamber of Commerce, business associations are disappointed. I'll talk about some of those disappointments. They feel that we are drifting, that there's a lack of action on this file, specifically with respect to some of the key emerging markets, and that some of the provincial governments are just a bit frustrated and they've taken steps to pursue trade when they feel the federal government hasn't done enough on this file.

You also alluded to the budget, and I do want to again share some concerns that I heard from many people in the business community who were disappointed with the CanTrade initiative being cut and replaced by the global commerce strategy. The funding was far less than the CanTrade initiative, which was millions and millions of dollars' worth more investment in promoting trade.

You're probably aware that we're focusing on, in this committee, emerging markets and looking at opportunities for how Canada can expand its trade abroad and how we can improve our trade with some of the key markets, to make sure that we can maintain a high quality of life and economic prosperity and so forth, as you alluded to in your opening remarks.

The focus of my questions will be on the closure of the consular offices. I'm having a difficult time understanding why this is taking place. You have a strong business background, so I'm looking forward to your analysis on the cost benefit of closing some of these consular offices. The first one I'd like to talk about is the consular office in Japan, in Osaka, which represents the Kansai region.

I just want to make sure that we bring forth some of the facts, and then I would like to hear the rationale. This region has a population base of 25.5 million people; it accounts for 19% of Japan's GDP; $1.2 trillion is generated in this region, similar to that of Canada. It represents 20% of Japan's foreign trade, and $2.2 billion worth of Canadian product is exported to the Kansai region annually. It's a very important market; it's a very key trading market. Why would we close the consular services in that region if we want to promote and maintain trade?

11:20 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

That's a very good question. Let me just say that my department, in its various forms over the last decade or so, has opened and closed literally dozens of offices, so this is not a new phenomenon and it was not particular to a Conservative government; Liberal governments were the administration through much of that timeframe. The reality is this: as economies develop and as markets develop, you change the way in which you service those markets with computer technology and the information economy, and with changes in the pattern of Canadian banks, for example, operating overseas, and the way our clusters are engaging in foreign markets. The way you serve or give a market has to adapt.

What we have decided in the case of Japan--and our professionals, not the politicians, have done this analysis--is that we will not reduce our resource commitment to Japan but will employ it a little differently. We have determined that the clusters of critical decision-makers who we need to influence in order for Canadian companies to be able to create wealth and create jobs can be more effectively achieved through consolidation into a smaller number of offices, but operating just a little bit differently. That's the kind of calculus that went into all of our offices. You'll see us opening new offices over the next couple of years. You'll probably see us closing more offices; we have no specific plans, but this is an ongoing process. And if you look at any international corporation or indeed a national corporation, you will see that they constantly evolve and change and open branches, close branches, reshape the way they're going after the marketplace, because the market is constantly shifting and moving, and the way you have to approach it changes.

11:20 a.m.

Liberal

Navdeep Bains Liberal Mississauga—Brampton South, ON

Okay. Let's use an example. You talked about the fact that some analysis was done. For instance, let's take the office in Milan, which has been active for 40 years and employs 21 people. The former consul general said the Milan consulate had indeed been so effective that the Department of Foreign Affairs and International Trade was in the process of centring all of Canada's commercial operations in Italy, including those at the Canadian embassy in Rome, in Milan, which is, after all, Italy's business capital.

This characterization is very similar to saying that Canada would like to have a consulate office in Toronto, in the hub of a business sector.

What's the rationale for closing that one? It acts as a portal to Europe. It is definitely the business capital of Italy. We have strong relations there. Why would we close that office?

11:25 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Again, we have an imperative to make the most of our resources in the department. The resources are not endless. We've been subject to some expenditure restraint initiatives. I believe a major reduction in the budget of the Department of International Trade came out of the Liberal's expenditure restraint initiative. We've had to do more with less, which means we can't look at markets like Milan in isolation. We have to look at them in relation to other markets and other deployments of resources. On assessing the other capabilities we have in Italy and the demands elsewhere, our professionals came to the conclusion that those resources could be better deployed elsewhere.

There are lots and lots of major cities around the world where we do not have a presence, and you can say that for every country.

11:25 a.m.

Conservative

The Chair Conservative Leon Benoit

Thank you, Mr. Bains.

I'm going to keep you to seven minutes. I think there will be a second round, if we get there.

Next up, from the Bloc, are Monsieur Cardin and, if there is time, Monsieur André.

Go ahead, please, for seven minutes.

11:25 a.m.

Bloc

Serge Cardin Bloc Sherbrooke, QC

Thank you, Mr. Chairman.

Madam, Minister, gentlemen, we do indeed like ministers who are well connected.

You stated in your presentation that now that the softwood lumber dispute was finally behind us, you were now working with the United States to take advantage of our long history as neighbours.

Recently, the binational committee established further to the Softwood Lumber Agreement met in Washington. Specifically, which Quebec programs are being challenged by the United States and what action to you intend to take in this matter?

11:25 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Thank you very much.

Recently, we had the first, if you like, organizational meetings of the binational committee, which is a government-to-government, state-to-state committee to oversee the implementation and the administration of the softwood lumber agreement and to deal with issues that arise under it.

A whole range of issues was talked about at that first meeting. Some of those issues were to be talked about further, like commitments made at the time of the agreement. We committed, for example, to beginning to have further discussions and consultations on the operating rules and the way we in fact operationalize the agreement. We also committed to looking at the log export issue, which was a big issue from a British Columbia perspective, so we struck a committee to look specifically at that.

In the time since we entered into the agreement, as you know, a couple of provinces—Quebec and Ontario in particular, although there are a few other little issues bubbling out there—put in place programs of initiative to support their lumber industry. We consulted or were consulted with by the provinces on the policies they were proposing to put in place. We had a very good discussion beforehand, and we gave some notice to the Americans that these policies were going to be put in place.

There are a number of areas where the United States has concerns that some of these policies go beyond what were agreed to be the permissible policies under the agreement, so there's discussion going on right now on a variety of policy initiatives put in place by Quebec and by Ontario, as well as on one or two other issues.

At this stage, it's really a matter of consulting, exchanging information, and trying to understand whether these policies constitute a specific circumvention of the agreement by, in effect, implementing a subsidy to the industry, which we have of course agreed we would not do under the agreement.

11:30 a.m.

Bloc

Serge Cardin Bloc Sherbrooke, QC

Let me interrupt you to quickly ask you another question before turning the floor over to my colleague.

With respect to the WTO, you maintain that you favour a positive resolution to the Doha Round and that you want to devote a considerable amount of energy to this endeavour. You'd also like to see Canada regain some credibility as far as the Doha Round of talks are concerned.

Can we expect you to protect supply management? You wouldn't go so far as to sacrifice supply management to ensure the successful resolution of the Doha Round.

11:30 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Parliament, as you know, has passed unanimously, by all parties, a resolution indicating that we would not make sacrifices or concessions in terms of our supply-managed sectors. We've taken that position into the negotiations. We've indicated that we're not going to make changes to supply-managed sectors either in the over-quota tariffs or the tariff rate quotas. We have adhered very rigidly to that position.

The reality is that the negotiations involve 149 countries, so discussions go on. Canada has made it clear that those are our particular sensitivities, and we will fight very hard to ensure that those sectors come out of these negotiations in a healthy and strong state.

So we continue to support supply management. We now are simply trying to manage our way through the negotiations to maximize our offensive gains while protecting our defensive interests, particularly on the supply-managed side of things.

11:30 a.m.

Bloc

Serge Cardin Bloc Sherbrooke, QC

Thank you.

11:30 a.m.

Conservative

The Chair Conservative Leon Benoit

You have a little over a minute left.

11:30 a.m.

Bloc

Guy André Bloc Berthier—Maskinongé, QC

Mr. Emerson, I'm pleased to have this opportunity to speak with you.

I'd like to hear your views on the manufacturing sector. As you know, the manufacturing sector in Quebec lost 100,000 jobs between 2003 and 2006. Another 35,000 manufacturing jobs have reportedly been lost since January and February. Quebec has gone from a trade surplus situation of $7 billion in 2003 to a trade deficit of $10 billion in 2007. Moreover, Canada wants to negotiate bilateral agreements with Asian nations, with China and other countries. Where are we going with this?

We're in the process of offering up the entire manufacturing sector as a sacrificial lamb. We're talking about the furniture and textile industries and about other economic sectors that contribute significantly to the survival of rural communities. Many Quebec regions, and mine in particular, are directly affected.

The government is pushing the boundaries of logic even further by wanting to increase the number of agreements. One such agreement with Korea is imminent. The impact on the automobile industry has been evaluated, but again, the impact of that agreement on the manufacturing sector has not been weighed.

11:30 a.m.

Conservative

The Chair Conservative Leon Benoit

Mr. André, your time is up.

11:30 a.m.

Bloc

Guy André Bloc Berthier—Maskinongé, QC

I'd like the Minister to answer the question.

11:30 a.m.

Conservative

The Chair Conservative Leon Benoit

I'll allow the minister a short response.

11:30 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Those are good and legitimate questions, and I would simply observe that the manufacturing sector, not just in Quebec but indeed in many parts of Canada and throughout North America and other major industrial countries, is going through some pretty tough times. You can trace the causes to a number of things: high energy prices have been a factor; exchange rate issues have been a factor. You can get into all kinds of causal issues. The reality is that those jobs are important. Manufacturing is important, I believe, and for precisely the reason that you point out: a lot of the well-paying, high-paying jobs in smaller communities are fundamentally manufacturing jobs, and you can't substitute tourism for manufacturing because the jobs are not qualitatively the same.

But I think if you look at what the government is doing in terms of trade policy, we're certainly looking at where, if there's a need to intervene in terms of trade actions, we're responsive when industries bring cases to the Canadian International Trade Tribunal. The accelerated capital cost allowance in the budget, I think, is going to be of fundamental significance and importance to the manufacturing sector.

In my opinion, a combination of investment in technology and upgrading of people's skills and human capital is going to be where manufacturing will find its niche and its salvation going forward, and I think the government is doing a pretty good job of putting investments into science and technology and into training and skills upgrading.

11:35 a.m.

Conservative

The Chair Conservative Leon Benoit

Thank you very much, Minister.

We'll go now to Mr. Menzies, and, if you leave time, Mr. Menzies, Mr. Allison. You have seven minutes.

11:35 a.m.

Conservative

Ted Menzies Conservative Macleod, AB

Thank you, Mr. Chair. I first want to acknowledge how good the minister has been about giving us his time at this committee. We do appreciate that. We sometimes think these committees squirrel away in these rooms and work below the radar, but we do hope that you, Minister, recognize our work, and obviously you do by gracing us with your presence here on many occasions. So we do appreciate that.

I have a couple of quick questions. I would just like a clarification. I've heard that from 1993 to 2006, we actually closed 31 consulates and opened up 43. In your answer later on, could you clarify if I'm right or wrong on that number? There is no relevance to the dates, of course.

We've heard a lot from EDC and CCC about their role in expanding trade opportunities, and I would just like your comments on this $10 million cap raised or removed in Budget 2007. Do you see that as a positive thing? When I was in India two weeks ago, as you're very aware, EDC had put a permanent position in Mumbai. Is EDC doing it effectively? Can we help them more? What can we do?

11:35 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Thank you very much, Mr. Menzies.

I do want to say to this committee that Ted has been just a great parliamentary secretary. He has a tremendous amount of background in trade, and when I got sick and could not go to India recently, he was required, under very short notice, to take on a very big load, and he did it incredibly well. I just want to acknowledge that to the committee and say thank you, Mr. Menzies. You did a great job. You'll be a great minister one day—according to these guys, hopefully soon.

11:35 a.m.

Some hon. members

Oh, oh!

11:35 a.m.

An hon. member

Are you going to change sides?

11:35 a.m.

Conservative

David Emerson Conservative Vancouver Kingsway, BC

Yes. I'm going to go to the NDP, if Peter will have me.