International Trade Committee on March 29th, 2007

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Leon Benoit]

Order!

[David Emerson, Conservative, Vancouver Kingsway, BC]

On your question on the closure of missions, your numbers are correct. Those are the right numbers.

With respect to Export Development Canada, the government has signalled in the budget that it is looking at the regulations governing the approval process for Export Development Canada to make equity investments. We're looking at some streamlining and facilitation of their ability to make equity investments beyond the $10 million threshold.

I think it's useful to step back for a minute, because that is a good example of how one has to change the way you play the game. I have said often, and I know members of this committee have heard it from me and from others, that in the global economy in which we operate, global supply chains are where it's at. The key for Canada is to determine how we ensure that Canadian companies are driving global supply chains or are an intrinsic part, that they're involved directly, deeply, and securely in global supply chains.

That again comes back to the importance of the gateway and just-in-time transportation, and all the efficiencies around managing supply chains and value chains, which are all about a continuous movement of goods and services and a continuous creation of value. To do that requires not just investments here in Canada but investments abroad. We have to get our mind beyond always thinking that we have to get more investment into Canada.

Yes, we do have to get more investment into Canada, but at the same time we have to get more investment into foreign markets, because that's the way we build supply chains. That's the way we get access to global technologies that are not present here in Canada. That's how we become fundamentally strong and competitive, and EDC can play a very significant role, particularly with the smaller and medium-sized companies in terms of putting equity investments in, not necessarily us becoming the owner of the company but us getting in beside private investors, beside strategic partners, and sending the signal that this is a Canadian company, we believe in it. In many markets where governments have a tendency to mess with the market, having the government there is a very important signal to not mess with Canada.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

[The Chair, Conservative, Leon Benoit]

Mr. Allison.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you, Mr. Minister, for being here today.

I'm an SME owner, and I know one of the things listed in the studies was the large involvement they have. When we talked to EDC, over 90% of their business is conducted by SMEs. That's something I've always thought, but it was just confirmed.

I know the Conference Board of Canada talked about integrative trade—and once again, you've just talked about this—as being the key.

We've also been told numerous times that Canada needs to open up our foreign direct investment, and I think many companies take valuable imports, use them as part of the process, and then re-export them. I think there's this notion that only exports are good and imports are bad, and certainly my friend from the NDP will probably tell us how we shouldn't be taking in so many imports, that we should just be worried about some of these other things.

Given the sentiment that the solution to Canadian competitiveness exists with integrative trade, can you just comment a little bit more on the concept and how as Canadians we may need to refocus our thinking on how we can play a major part in that?

[David Emerson, Conservative, Vancouver Kingsway, BC]

It's a very good question.

As I mentioned in response to the previous question, when we look at what EDC is doing, it's clearly a major vehicle for support to Canadian companies to engage in “integrative trade”, as you call it, or global supply chains. But you can also look at the Business Development Bank of Canada as a domestic instrument of the Government of Canada to support Canadian companies that need equity and are trade focused.

We are combining the work of EDC, and we're ensuring that they work in collaboration with BDC. We're ensuring that the Canadian Commercial Corporation is working with them. We're ensuring that DFAIT, the department, is shaping its approach to trade and investment.

We are in effect becoming Canada Inc. Canada Inc. is not only out there banging on doors and trying to sell Canadian companies' goods and services. Canada Inc. is about helping them to become global competitors and global managers of supply chains, getting into strategic partnerships in a way that's going to be good for wealth creation here in Canada.

You can take the approach that all outsourcing and offshore are bad. But if you go too far down that slippery slope, you're going to find that if you discourage and don't support some amount of that, but not complete outsourcing and offshore, and if you don't have an optimum amount of offshore and the use of lower-cost production capacity from elsewhere, you will find that companies will start to die. I can tell you that I would rather have a company that has a good, strong, vibrant high end here in Canada, with growth prospects in the global economy, than one that's dead.

It's the kind of thing we're talking about. We're increasingly finding a small reversal in what was a fairly strong trend towards offshore. Companies are now starting to see that you need the balanced blend of North American presence—and I again underscore North American and not only Canadian—and offshore presence. When you put it together in that way, you can become very successful globally.

In small and medium-sized businesses, it's critical for them because they don't have the tens of thousands or the tens of millions of dollars that big corporations have for chief financial officers and all of the technical experts required to engage in commercial transactions in the international marketplace

Again, EDC and the government have to come in to support them when they don't have the capacity.

[The Chair, Conservative, Leon Benoit]

Thank you, Minister.

Mr. Julian, for seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

Thank you to all of you for coming forward today. We have the heavy hitters of International Trade.

We have a lot of questions to ask you.

Obviously, 40 minutes is not sufficient time to address all of the issues we're dealing with. I think we're accepting this 40 minutes as a down payment and hoping we will see you again in April. I think the committee will be looking to direct the chair in that way so that we can have you back for more extensive discussions.

I'd like to come back to you, Mr. Emerson, because you referenced the first softwood lumber committee in reply to a previous question. I'd like to ask you this. Is it true that at the meeting held a few weeks ago the Americans proposed a moratorium for all new program announcements in the forestry sector in Canadian provinces?

[David Emerson, Conservative, Vancouver Kingsway, BC]

I certainly received no brief to that effect. I'll ask my deputy or Mr. Gero if any such thing happened, but I was certainly not briefed that it happened.

The agreement is certainly structured in such a way that it does not call for a moratorium at all. It is simply a process whereby we keep each other informed.

The agreement in effect circumscribes to some degree the kinds of policy initiatives that can be put in place, which is the price we have paid in order to avoid countervailing and anti-dumping duties. If we didn't have this agreement today, we'd probably be looking at new cases and new duties in the 30% to 40% range.

The U.S. industry is of course a little agitated, but that's not a bad thing.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Inside U.S. Trade reports that John Melle, the deputy assistant U.S. trade representative, proposed a moratorium—and this is a quote—“for all new program announcements in the forestry sector in Canadian provinces”. What you are saying is that this did not happen.

[David Emerson, Conservative, Vancouver Kingsway, BC]

I'm saying that I wasn't present, but I have not been briefed that it happened, and my officials here are not aware that it happened.

What we will do is go further and ask others who were in attendance at meetings. It may be that something was said that didn't get to our level.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

It's out. It was reported in Inside U.S. Trade.

My supplementary questions would be, have all the Canadian provinces been informed of this American demand, and is this demand tabled as part of the discussions that will take place at the next meeting, which I believe is scheduled for May?

[David Emerson, Conservative, Vancouver Kingsway, BC]

The demand is irrelevant because we would never accede to it. So it's academic. There are lots of demands—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Emerson, in the softwood agreement all they have to do is allege non-compliance. This is something this minister discussed.

[The Chair, Conservative, Leon Benoit]

Let him respond first, please, and then we'll get to you again.

Go ahead, Minister, please.

[David Emerson, Conservative, Vancouver Kingsway, BC]

That's okay. He can—

[The Chair, Conservative, Leon Benoit]

Okay. Go ahead, Peter.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

If they allege non-compliance, they can simply.... As you know, the clause in the softwood lumber agreement is very clear; all they have to do is allege non-compliance.

I am concerned, if this is not being communicated. Either the reports are erroneous or there is a real problem in the chain of command here.

[David Emerson, Conservative, Vancouver Kingsway, BC]

All I can tell you is that if this was said, it is not something we would agree to, it's not going to happen, and the agreement right now and the relationships right now are working very constructively. And yes, there are always going to be areas where one side has a different view from the other, and there is always going to be a little bit of grinding around the edges on certain issues. But this agreement is working, and the dispute resolution process that is built into it will be far more effective, more definitive, and quicker than dealing with chapter 19 for softwood lumber.

I'm not saying that for all kinds of products this would be a better mechanism, but for softwood lumber it is going to prove to be a better mechanism.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

When is the next meeting scheduled?

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

I think it is in May or June, as you've suggested.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Are you aware, Mr. Minister, that the U.S. Coalition for Fair Lumber Imports has launched a formal complaint to the Bush administration, again on alleged non-compliance with the softwood lumber deal? This, of course, they're doing with the half-billion dollars of Canadian money that they now have in their pocket.

[David Emerson, Conservative, Vancouver Kingsway, BC]

As you know, the coalition has been constantly active in launching formal complaints over many years, so this is nothing new. The issue will be resolved at the government-to-government level, and when we hear—if we hear—from the U.S. government that they wish to start some formal dispute resolution proceeding, we'll deal with it. But right now we're exchanging information, and the discussions are constructive.

The agreement was designed to evolve; the agreement was not designed to stay static. It was designed so that we could explore exit ramps. It was designed so that we could explore how to deal with the log export issue, which I know is another bee in your bonnet and one we can talk about later, if you wish.

It's an evolutionary agreement, and it provides mechanisms for us to talk together, as opposed to getting into these dispute resolution panels and expensive litigation processes that characterize the use of chapter 19.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Minister, it sounds to me as though the agreement is in trouble. If we have new demands being made by the Americans to “put a moratorium on all new program announcements” in the very troubled forestry sector, if we have the U.S. Coalition for Fair Lumber Imports launching formal complaints now, with their war chest filled with Canadian money, and if we see the job losses we've had since October 12, this agreement is in difficulty.

I'll come back to the job loss. Has the ministry been tracking the loss of jobs in the softwood sector since October 12, 2006, since the agreement was put in place provisionally?