International Trade Committee on Dec. 1st, 2011

[Don Stephenson]

Different states have different approaches to the regulation of business. It's important to note that a lot of decisions that are critical to establishing in the Indian market are made at state level, but the obligations we are negotiating with India--the central government of India--would apply to the states. The agreement would provide for a dispute settlement mechanism, as in our other trade negotiations, so that Canadian investors and exporters can pursue their rights.

I would certainly agree that in the area of agriculture the opportunity for partnership with the Indian market extends well beyond the export of agricultural commodities and very much into systems for food handling and food processing in the Indian market. The scale of that opportunity is so large, as is the scale of all opportunities in India, that a Canadian has a bit of difficulty imagining it. They talk about something in the order of 40% of food spoiling before it reaches a market in India.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

There are 28 states in India, right? Yes? I was just curious.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Don, for I think quite a thorough presentation. There's a lot of good information in this.

In beginning, though, I do have to say that while we welcome the negotiations with India and we hope they're fruitful, we do have concerns about the amount of focus around the world and because of that--either the travel or focus, we don't know which--the government seems to be losing sight of where we're currently trading. We've found the minister disappointed and surprised three times now on Buy American and on the new fee structures on sea and air going into the United States. We're concerned that the government tends to be focusing on the potential exports in the future while we're losing ground in some of our current markets.

We want to put on the record that the government needs not to lose ground in regard to where we currently are but to gain ground in new negotiations. It's the same with South Korea. People who have come before this committee are very concerned that the U.S. is going to have a negotiation and a trade agreement with South Korea done, and we're going to be out of that market, because we're not negotiating the way we ought to be. We could lose upwards of $1 billion worth of trade. This is especially important in the hog and beef industry. So I need to point that out in the beginning.

I want to follow up on Mr. Keddy's point about decisions being made at the state level. Do you know at this stage what the process will be on both sides? On the CEPA, we're concerned about our lack of involvement while the European Parliament is involved: what's the process here? What's the information flow to parliamentarians in both countries? What's the ratification process expected to be?

[Don Stephenson]

As I understand the constitutional arrangements in India, the central government can take binding obligations for their states.

As for the exact mechanism, I guess we would have to invite somebody from our treaty law division or something. Perhaps Luc has some advice he can give.

But we have inquired directly with the central government about their ability to impose obligations on their states and have been given those assurances.

With regard to how parliamentarians will be engaged in the process, I can only respond for the Canadian side, and it's opportunities such as this to engage with parliamentarians on these negotiations. It's also our plan to have a very wide consultation process involving business and civil society stakeholders so that there is a maximum of transparency in the negotiations. But on the Indian side, I'm uncertain about what their processes are for engaging directly with their Parliament and with their state-level governments.

[Wayne Easter, Liberal, Malpeque, PE]

Okay.

In a DFAIT publication, an overview of India, the following challenges were referenced, among others. One was “restrictive import and investment regulations”. The second was “limitations on foreign service providers”. The third was the “inadequate enforcement of intellectual property rights”. I think to us those issues would be fairly significant and I'm wondering if you've given any thought.... Obviously, DFAIT has given them some thought, because they've listed them as problematic areas, but at the end of the day, how do you expect to overcome them in the negotiations? What I'm concerned about is what's at risk from Canada's side, versus what we gain from the other side.

It's interesting about India--and I don't know if everybody knows this--that if you lose your baggage with Air Canada and you spend some time on the phone, the call centre you're dealing with is in India.

Don?

[Don Stephenson]

But that may be where your bag is.

[Some hon. members]

Oh, oh!

[Wayne Easter, Liberal, Malpeque, PE]

That's a good point, Don.

[Don Stephenson]

My apologies.

With respect to investment, first of all, as I noted in my opening remarks, we are hopeful we will be able to conclude a foreign investment promotion and protection agreement very soon with India. That would provide for its own dispute settlement system that involves independent commercial arbitration and so should provide greater certainty and a clear procedure and opportunity for Canadian investors to prosecute their rights.

[The Chair, Conservative, Rob Merrifield]

I don't want to interrupt, Don, but this is what you mentioned in your documentation. This is outside the general FTA. Is that right?

[Don Stephenson]

Yes.

Within the FTA negotiations, it's certainly in the area of services. One of the four modes of providing service is to invest in the other country: to establish a corporate presence in the other country to deliver the service. We are certainly hopeful that these negotiations will address questions of investment in services and that the dispute settlement system that applies to the FTA will then be available to service providers and investors in the Indian market.

With respect to services more generally, we expect services to be rather a cornerstone issue, a critically important issue in these negotiations and frankly on both sides. On the Indian side, it has already been made clear by their secretary of commerce, their deputy minister of commerce, if you will, that a priority in the negotiations on the Indian side will be the services sector. As you may know, the Indian economy and export model relies much more heavily on services than do those of other emerging economies.

Of course on the Canadian side we have our own services interests. I noted some of the more obvious ones: financial services, engineering, environmental services, and education services—a huge potential market in India. So we will be looking for reciprocal undertakings and obligations on the Indian side to those that we might contemplate on the Canadian.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Chair.

Also, thank you to the witnesses for being here to discuss this trade agreement...[Technical Difficulty--Editor]

[A voice]

Your mike is off.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Okay.

A few weeks back, I had an opportunity to travel with the minister to India. I just wanted to see the impact of the negotiations on both economies.

You were there also, Don.

While there, we met with many Canadian companies, and specifically I want to talk about that. We met with McCain Foods, Valiant Corporation, Magna International, and Bombardier, etc. I want you to share with the committee some of their comments. Were they receptive to our negotiations? Were they encouraged that the minister was there to talk to them and obtain their feedback? I want you to share all those things.

[Don Stephenson]

I guess as a general comment I would have to say that those Canadian companies active in the Indian market that the minister was able to meet with, including many in round table discussions, viewed the minister's interest and the Government of Canada's interest as extremely positive. They noted that in doing business in India, relationships matter, and government-to-government contacts matter in support of building business relationships.

There are clearly a number of challenges Canadian companies face in the Indian market that they are hopeful we will be able to address in negotiations. Sometimes they are straightforward issues like tariffs. Sometimes they are more complex issues: regulatory matters. There were concerns about the opaque nature of land acquisition, land title, and land registry services, and all varieties of other issues that we may or may not be able to successfully address in the negotiations.

The minister and of course you were extremely warmly received by the Canadian firms. They want those contacts to multiply if at all possible.

[Devinder Shory, Conservative, Calgary Northeast, AB]

You also mentioned--and I agree with you--that GDP growth in India averages 8.2% or so, which is very good...[Technical Difficulty--Editor]

[The Chair, Conservative, Rob Merrifield]

Your mike--

[Devinder Shory, Conservative, Calgary Northeast, AB]

Okay.

While there, Don, we explored opportunities to peek into it, to get some information about the technology sectors, etc., the sectors that our companies doing business there are already in, and how they are performing.

As a matter of fact, I want to come back to child labour for a minute, because that is definitely an issue. But I remember that when we visited McCain Foods, for example, they had hundreds of employees. I did not notice any signs of working kids.... Did you notice any...?

[A voice]

No...[Technical Difficulty--Editor]

[The Chair, Conservative, Rob Merrifield]

[Technical Difficulty--Editor...just go ahead.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Okay.

My next question is for all the witnesses. I want to expand on what we already know about India's large services sector and the opportunities for Canada, especially within the information and communications technology sector.

One of the advantages we have in trading with India, aside from the fact that its population is set to surpass that of China's in the next 15 years, is that it is as well part of the emerging economic powers, the so-called BRIC states. It is a country with a relatively well-educated population, which I can personally attest to, of course, as the product of Indian higher education many years ago. Also, it is very important for the committee to know--

[The Chair, Conservative, Rob Merrifield]

Do you have a question? That sounds like debate.

[Devinder Shory, Conservative, Calgary Northeast, AB]

I'm coming to it.

As a matter of fact, so that the committee knows, the widespread population of India uses the English language as their language. Do you think that is also a plus point when we negotiate and do business with India rather than with some other countries? Would that help Canada?

[Don Stephenson]

I'm going to let Michelle comment as well on the opportunities for Canada in services sectors.

But there's a couple that leap to mind, on the basis of the meetings I attended with the minister. The first would be with respect to education.

The minister responsible for education told Minister Fast that because of the very young Indian population, the demographics are the mirror image of Canada's. They are in need of something like.... It's a bit hard to imagine, but the figure that was used was that they need another 1,000 universities and 40,000 to 50,000 new colleges. It's hard to even compute those kinds of numbers.

This is just to say that if it's a half of that or a quarter of that, it's an extraordinary opportunity for providing educational services to the Indian market. I can tell you that there is an awful lot of activity by Canadian universities, Canadian colleges, and some Canadian private sector educational institutions, such as language schools, etc., to seek business in the Indian market.

It was striking.

The second opportunity is in all of the services related to infrastructure, where Canada is so strong, particularly in transportation infrastructure. Bombardier and SNC-Lavalin are leading the charge, but there's a lot of opportunity for smaller firms, particularly firms that can bring new technology to a partnership in India. They talk about the need to create 200 new cities. As people move from rural areas into cities, it can't be just the existing stock of cities. They are creating an industrial corridor from Delhi to Mumbai. I think the focus there is sort of 20 new cities focused on specific economic sectors. That kind of scale of opportunity for engineering, for architectural services, and for transportation services is kind of staggering.

Those are the two that leap to mind.

Michelle?