International Trade Committee on Feb. 28th, 2012

[The Chair, Conservative, Rob Merrifield]

I call the meeting to order.

This is a continuation of our trade commission service study. We want to thank our witnesses for being here.

In the first hour we have Glen Hodgson, from the Conference Board of Canada. He is the senior vice-president and chief economist. We also have Murad Al-Katib, from the Small and Medium-Sized Enterprises Advisory Board, via video conference.

We'll start with Mr. Hodgson and then we'll go on to Mr. Al-Katib.

The floor is yours, Mr. Hodgson.

[Glen Hodgson, Senior Vice-President and Chief Economist, Conference Board of Canada]

Thank you very much, Mr. Chairman.

Good morning, members of the committee.

I want to make four key points, based on my own experience. I was at Finance Canada and I spent 10 years at Export Development Canada, where I was the VP of policy. I've been with the Conference Board for eight years.

We have a centre at the Conference Board that does pretty deep original research around Canada's fit into globalization. It's called the International Trade and Investment Centre. We've not studied the Trade Commissioner Service per se, but I've had experiences along the way and I thought I would share that with you this morning.

Point number one is that it's really important that Foreign Affairs and International Trade, and the Trade Commissioner Service in particular, have the right conceptual model for what trade is today. If you're going to do trade promotion, you have to know what you're promoting.

I had an idea that I developed with my colleagues at EDC, including Stephen Poloz, who I understand may be coming later today, and with other colleagues there. I came up with a brand for modern trade called “integrative trade”. You may not have heard of it, but it's now being actively used within EDC and foreign affairs as a foundational model.

What integrative trade means is that modern trade is built around what are called global value chains, which means you take apart components of production within a firm and reposition those elements of production around the world to where it makes the most sense to make you as profitable and competitive as possible. You do that through foreign direct investment.

I know this is a complex concept, but one the key points is global value chains. Firms can now take apart their production processes—and I'll give you a couple of examples—and then use foreign investment, both in Canada but also abroad, as a way of building the strongest possible model for this integrative trade.

One example of a global value chain might be that people have taken apart...well, the BlackBerry is one example, or the iPhone.

In terms of the iPhone, for example, half the value is created in the United States through intellectual property—development of the ideas, the marketing, the finance. A lot of the key components are made in Japan and Korea, probably another 45%, and the final 3% to 5% is the assembly in China. When we buy the iPhone or iPad, it says “Made in China” on the box, so we think it's a Chinese product, but in fact most of the wealth is actually made within North America and other industrial countries. That's one example.

You can do the same thing in the auto industry. An automobile manufactured in Canada probably has about 30% Canadian content. Most of the contents of the car, or the value of the car, comes through value chains from imported goods from the U.S. or elsewhere around the world.

These are examples of how the whole nature of trade has changed today. We still find core products, and a lot of the resources that Canada exports have very high Canadian content; oil from the oil sands, for example, would probably have 80% Canadian content, but the more you get into sophisticated goods and services, the more you see that value is dispersed, because firms are really engaged in global trade to make an end product or a service.

I'll mention one other piece of research we've just released. Unfortunately I didn't bring a copy this morning, Mr. Chairman, so I apologize for that omission, but it's on our website.

We are developing a concept of value-added trade, of measuring Canada's trade in value-added terms. We've released the first of three studies. The importance of this is that if you take out the duplication of trade numbers, let's say auto parts that cross the border to the U.S. get turned into something else, and then come back.... We know that an average car actually gets traded across the border seven times before the end product is made. If you take out the double counting, the things that go back and forth many times, you discover that the U.S. share falls. It's not a sharp fall, but it falls from about 70% of trade measured in conventional terms to about 63% in value-added terms. Of course, this means the share goes up for a lot of other countries in the world. It goes up for China, Japan, Europe. That gives you, again, a very different model.

The content, as well, of products and services changes, and the service share becomes much more important. It's not just services that are tradable, because a lot of services today.... You can send a document to western Africa overnight, for example, and have it translated into French and sent back. Thanks to the Internet and interconnectedness, you can trade services that historically were not tradable before, and also services that support trade, such as legal services, shipping services, and transportation.

I commend that paper to you. We'll be doing two more papers, drilling into it in much more detail to really take apart Canadian trade in value-added terms.

That was all by way of ensuring that the TCS, when it goes out there and tries to sell Canada to the world, is operating with the right model—not operating with the conventional trade model with the data from StatsCan that you can download from Strategis, but with a much more penetrating view built around integrative trade and global value chains.

On the second point, we have to ensure that the TCS is in the right places and that their model is in constant evolution. When I was at EDC, there was an effort back 10 or 12 years ago to open up many more offices in the United States, to go much deeper into the U.S., and probably sacrifice representation in other parts of the world. Based upon our analysis on things like value-added trade, we have to be opening up our minds to having trade commissioners more in emerging markets where the high growth potential is for our trade.

We still have to have a strong presence in the U.S. and have people doing the engagement region by region there. I've known a lot of trade commissioners on the ground; they're doing an excellent job. This is more a question of resource allocation around the world, ensuring that we are going places in order to be on the cutting edge of Canadian trade, getting there as the exporters and investors are reaching out, and looking at the Middle East, Africa, and certainly at the Asia-Pacific areas. There's a deeper examination required there about whether we have the commissioners in the right places to maximize the benefit to Canada.

On the third point, and this is based upon many engagements with trade commissioners but also on my experience at EDC, we need to take a Team Canada approach when we go abroad. This doesn't mean we all have to be in the same place or automatically have to be co-located, but EDC has people abroad, CCC has people abroad, BDC is either seeking the power or has acquired it to go offshore and support Canadian companies as international investors, and of course there is the Trade Commissioner Service itself.

We have to find a way to ensure that we offer as seamless a service as possible, so that if somebody goes to a Canadian trade representative for assistance and the representative is not the expert, they know exactly where to go to go to build an integrated whole around that.

Lastly, flowing from that thought, is understanding that relationships on the ground are the real value-added aspect from the Trade Commissioner Service. It's knowing who to talk to, who decision-makers are, and how to get things done.

With the Internet and the incredible search engines that are available now, information is easy to find. I'm astounded by the information I can gather with two or three clicks of a mouse while I'm sitting in my office, but that's not the issue; the issue is relationships—knowing who to get to, how decisions are made, how deals are put together. Clearly that area has become a core skill set and a core responsibility of the Trade Commissioner Service, and it should be incented. We should be ensuring that we have the right objectives for people in the field. We should be able to evaluate and measure people's ability to build relationships and maximize value for the client, which is the Canadian economy and Canadian businesses.

I'll stop there, Mr. Chairman, but thank you for the chance to address the committee.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. There were some great ideas and suggestions that I'm sure we'll have some questions on when we get into that part of the meeting.

Now we have Murad Al-Katib.

The floor is yours, sir.

[Murad Al-Katib, Chair, Small and Medium-Sized Enterprises Advisory Board]

Thank you very much for tying me in from Regina today.

To start off, Mr. Chair, what I would like to do is give a little bit of a background to committee members on my background and my perspective on what I'd like to talk about today.

I am sitting here as the chair of the SME advisory council for the international trade minister and the Department of Foreign Affairs and International Trade. What I'd really like to talk about is my experience and perspective as an SME growing my global business over the last decade.

If I take a step backwards, I'm actually an entrepreneur. My first job out of university was with the Trade Commissioner Service. I spent a short-term assignment at the Canadian embassy in Washington and then spent eight years on the international trade promotion side of the Saskatchewan government prior to starting my own company in 2001.

I'm going to come with a unique perspective as someone who has been involved with international trade promotion from a government service perspective, but also as someone who has been very actively involved in building a global business.

My company today, Alliance Grain Traders, is headquartered in Regina. We started in 2001 with a blank sheet of paper and a business plan to build a global value-added processor of lentils, peas, chickpeas, and beans.

We built a processing plant in Regina, Saskatchewan, which we commissioned in 2003. Since 2003, in the last eight years we've expanded that one processing plant to 29 processing plants located in five continents around the world. We are now an exporter to 108 countries around the world, exporting value-added peas, lentils, chickpeas, beans, durum wheat products, pasta products, rice, and other value-added food items.

What I want to start with is a little bit of a perspective. The world is now an open market to SMEs. When we look at the openness of the world market, we look at the advent of communication technologies, which has really opened up the perspective and access of SMEs to emerging markets around the world. We have the Internet. We have communication, email, and all types of mobile devices that allow us to be connected with our customers around the world.

However, when we look at the Canadian economy, it's very striking that we continue to see a strong reliance on the U.S. market in terms of a total percentage of our exports, which of course isn't a surprising scenario with the large market that's our neighbour right to the south.

However, it's very apparent that as we continue to expand our global reach around the world, emerging markets and new market opportunities must be a focus of the Canadian economy to be able to achieve the growth and prosperity agenda that we've set forward for the coming decades.

Net export revenue international customers are really what create value for our economy and for SMEs. When we look at that value creation, we have to examine how to access markets. When we look at how to access markets, we see a number of key critical elements. When we look at the governmental agenda today, we see many aspects of this. One is the bilateral free trade agenda, including market access, both on a tariff and non-tariff trade barrier side, and taking control of that agenda from a Canadian perspective. Driving market priorities out to different markets is, I think, a very key part of accessing markets for our SMEs.

When we look at the openness and the vastness of the global market, support services to SMEs, as they go into non-traditional markets, are a very critical element of success for Canadian businesses abroad. When we look at what we expect to have for SMEs, we see that really need to continue to build those road maps to qualified buyers, qualified projects, qualified partners, and qualified opportunities and markets around the world.

When we look at another element of market access and how to access markets, we see that regulatory issues in emerging markets are a big and complex issue that may be beyond the resources of any individual SME, although collectively, when we look at tackling those issues, we have a lot of strength in terms of a Canadian approach to looking at those things. Then, of course, we have the very critical elements of dispute resolution and problem resolution in markets that are very far away.

When I look at it overall, the Trade Commissioner Service, to our business, is really an extension of our sales and marketing force around the world.

For any one SME, to have salespeople and marketing people who understand the local economy, the regulatory environment, and the players in each individual market and each region of the world is not something we can do all on our own. A collective approach, a Canadian approach, in these markets gives us a significant market access advantage over our competitors.

My company, Alliance Grain, with processing plants throughout the northern-tier states of the U.S. as well as a plant in China, four plants in Australia, South Africa, Turkey, and four plants and operations in Europe, has access to many different trade promotion agencies and support services. I can tell you that when I travel 180 days a year into emerging markets, my only stop is the Canadian high commissions and consulates and embassies abroad. We have built a network and a system whereby we are really head and shoulders above our market competition in the world in terms of the services we offer.

We do have our challenges, though, in terms of the Trade Commissioner Service. I think the consistency of service from embassy to embassy abroad is something that we definitely need to work on. We need to look at the interaction of Canada-based officers and locally engaged staff to ensure that we have the proper mix of local knowledge and Canadian economy knowledge to get results.

I'm very much a results-based management person, as many private business people are. We are everywhere today. As Glen mentioned in his presentation earlier, I think there's certainly a lot of room to look at resources: where they're allocated today, where they need to be expanded, where we're going to get the biggest bang for our buck. When we look at the market access priorities, the emerging markets of the world—the BRIC countries of Brazil, Russia, India, and China—and then we look at emerging regional economic powers, we see the world is changing over the last decade. Countries on our radar screen today are countries like Turkey. That country is now achieving very different prominence post-Arab Spring. As a financial and economic centre in a region of relative instability, it's become a very stable force to allow us market access in that region.

There are also countries like the United Arab Emirates and Dubai—the transformational story of the UAE as a logistics, finance, and transportation centre for the GCC countries and for the Middle East region. These are the types of economic realities that are emerging, along with a large opportunity for Canadian businesses.

In relation to the free trade agenda, one of the things we continue to communicate to the department is the need to ensure that we are commercializing the FTAs. It's one thing to sign them; it's another thing to actually bring the benefits home. In terms of the ability to commercialize the free trade agreements and the bilateral agenda, we need to ensure that we have commercialization frameworks that can be developed and replicated to ensure that we're bringing home the economic advantage of those particular agreements around the world.

Glen mentioned the integrative trade model. One of the things we continue at our committee to be very vocal on is the need and the requirement to recognize that Canadian direct investment abroad is a very important aspect of the competitiveness agenda of Canadian exporters. When I started trade promotion 17 years ago, say, in government it was all about export and it was all about import. Well, today it's about value chains, as Glen mentioned. It's about establishing those types of partnerships and investments abroad that make us very competitive.

To further the competitiveness agenda, the Trade Commissioner Service is an essential element of the economic agenda of this country. An opportunity exists with the global footprint we've established; if we refine it and tune it and put it into action, it can certainly be a very critical part of delivering the economic agenda.

The Trade Commissioner Service at EDC is of tremendous advantage to exporters and international businesses in this country. If we couple the footprint that we've developed, the recognition of the integrative model, and the support services to our exporters today with the EDC support on the credit insurance and financing side of things, we again are in a position where we don't have competition on that basis.

It's a great benefit that EDC and the others are commercially self-sustaining, meaning we don't need taxpayer dollars to subsidize it. We look at that advantage. It's real, it's created, and it can continue to be expanded.

An aggressive FTA, the free trade agenda, is certainly an element of competitiveness. In terms of the multilateral negotiations that we continue to be part of, we have to achieve consensus with many other countries to drive an agenda. We're only one voice in that, but in a bilateral free trade agenda, we get to pick our spots. We get to drive the agenda. If we commercialize it, we get to bring those benefits home. As a businessperson, I am very supportive of that type of initiative.

The focus on international partnerships in research and development, manufacturing, distribution, and value-added economic activity is an essential part of what the Trade Commissioner Service does for us. They are the eyes and ears out there in the world.

As a wrap-up, I want to give you a couple of other quick perspectives.

We went from being an exporter that did our first $10,000 of revenue in 2003 on the export side to around $800 million of export in 2011. It was very quick growth in a short nine years of history. We even got to a point where we thought we were big enough to not need the Trade Commissioner Service as we were growing up, but it has become very apparent to me that as we get bigger, our problems are just more complex.

I'll give you a very good example. We export a large amount of product to Algeria. It's a very big consumption market for Canadian green lentils. We recently—let's say two years ago—had a problem. A very small shipment of lentils ended up in a customs problem on the import side when an importer actually went bankrupt. As a result of customs rules, we couldn't free that cargo from the grasp of the Algerian customs. We worked for over 13 months to resolve a small problem. Finally, with some advice from our colleagues at Foreign Affairs, we contacted our embassy in Algiers, and within 13 days—not 13 months—our containers were released, our problem was solved, and we were able to continue on with our business.

It continued to illustrate to me the breadth and depth of the local contacts of some of our offices to allow us to solve problems.

I think, Mr. Chair, I'm going to leave it there. I would be happy to answer questions from any of the committee members.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for that input.

We will now turn to the question and answer portion of the meeting. We will start with Mr. Côté.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

My first question is for Mr. Al-Katib.

Congratulations on your success. The progress your company has made is most impressive. I must admit that I was somewhat surprised when I saw the initial figures for Alliance Grain Traders Inc.

Your testimony was very interesting for a few reasons. As you stated clearly, it is all very well to sign a free trade agreement, but marketing has to be supported as well. I think your point of view is particularly relevant.

The products you supply are basic agricultural products. If I understand correctly—and perhaps Mr. Hodgson will also be able to address this—we constantly wonder to what extent Canada's international transactions with its partners are profitable under a free-trade agreement. This is a concern to us. I am my party's critic on small enterprise and tourism. We are concerned about the value added to products, which nevertheless creates jobs. This may also be lucrative financially and secure us a competitive position.

Could you please speak a little more about this? Obviously, I don't know how much you can say about the value added to your products.

[Murad Al-Katib]

I certainly could give you a perspective. In our company, our whole founding, as with many SMEs today, was on a basis of origin-based processing.

When we look at the creation of value in our sector and in many other sectors, we're really looking at how we differentiate our products to take them higher up the value chain and create wealth and jobs and opportunity here. When I was a young trade officer in the Saskatchewan government, lentils were a crop that was growing in acreage in western Canada. In Canada we were only cleaning the sticks, stones, dirt, and dust from this product and shipping all of the value to other markets, where they were splitting, processing, and making food products out of them. Our vision was about how we could build processing plants at the origin and how we could brand our products to take advantage of the high-quality reputation and the food safety that we can deliver from the Canadian marketplace.

When I look at the overall value-creation proposition, I think we all have to recognize one thing: we are an economy that is heavily weighted to commodities today. The opportunity that exists is all about creating products and finding market niches within the large number of emerging markets in the world where people will pay an economic value that makes it viable for us to do it here.

I just returned last week from India. India is the largest consumption market in the world for pulse crops—lentils, peas, chickpeas. In terms of the quality standards in these emerging markets, as incomes rise, the quality standards are going higher. This is playing directly into what I consider to be a Canadian competitive advantage, in that we are able to be very competitive because our raw materials are of very high quality and we have very strong technology. We have developed highly mechanized systems for creating safe food products that are put into tamper-proof containers and shipped to 108 countries around the world. We see these types of opportunities existing in manufactured goods, we see them in the agricultural value-added sector, and we see them in all other types of sectors.

On the free trade agreement side, though, as you say, it's well and good to sign agreements, but we want a commercialization framework to identify sectors of the economy that can benefit from enhanced market access and tariff-level playing fields that have been created as a result of that.

In our committee we have been urging DFAIT to develop a framework. It could be revised agreement by agreement, but it would be at least a general framework of awareness of the agreement and provide identification of key sectors of opportunity. A road map for commercialization success is a critical element in showing that benefit, not only to the large companies but also to companies that are creating jobs in regions all over this country.

We see ourselves as a company that others can look to, a company that has done it. We're an example.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I would ask that the questions and answers be a little tighter. We'll get more of them in.

We'll now move to Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair. Thank you to our guests for being here today.

I'll start with Mr. Al-Katib because of the comment he just made, and then I'll go to Mr. Hodgson.

A couple of times, first in your formal comments and then in responding to Mr. Côté's question about the extent to which these free trade agreements are profitable, you came back to the point that what we need is a commercialization framework. You said that could be done agreement by agreement. I guess that depends on what country we're dealing with and what products and services we have that might interest them. I appreciate that focus.

As a broad comment, without trying to sound trite about this, do you generally support the approach we've taken in terms of opening up more markets through the free trade agreements? We've had a pretty aggressive free trade strategy; do you think that makes a lot of sense for your business and for business in Canada?

[Murad Al-Katib]

There is no way to allow SMEs to access a level playing field without taking an influence or a control position on our bilateral relations, so I can say unequivocally that free trade agreements will create economic advantage for SMEs.

The commercialization framework comment was that we cannot put it into a box. Not every agreement can be commercialized in the same way, and we need to recognize the distinct opportunities in each one. However, I think the general framework of how to commercialize and the use of the Trade Commissioner Service as a key element are a very important parts of the strategy.

[Ed Holder, Conservative, London West, ON]

I appreciate that, because I wanted to give more clarity to Mr. Côté's good question. I think you've helped us better understand that importance. I may come back if time allows.

Mr. Hodgson, you spent some time talking about integrative trade, which is, I must admit, not a term I've heard before, but I certainly understand global value chains. I get that. You made reference particularly to products that go back and forth the way they do in the auto industry, and you talked about value-added trade.

You said that our trade commissioners need to be in emerging markets and markets with high potential. How are we doing in that, aside from saying just generally, “Oh, we're doing great”? From what I heard Mr. Al-Katib saying about his products and services, I got a sense there wasn't always consistency among our trade commissioners.

In your opinion, since you are the Conference Board guru, how are we doing, and how would you improve it if you could?

[Glen Hodgson]

Mr. Holder, I don't get called a guru very often, so thank you very much. It think it was a compliment.

We haven't done deep research on the TCS itself, but I have a general sense that we're still very much wedded to the traditional markets. That's where the big volumes are. There is a bit of a debate between volumes and growth potential, and clearly the growth potential is in emerging markets.

As we develop the positioning of trade commissioners around the world, whether it's just moving people around or increasing their numbers, I would like to see a bias in favour of emerging markets. I would like to see more and more people who actually develop deep knowledge of how to do business in the Middle East, in South Asia, in Africa, and in Southeast Asia, because that's where the high-growth potential is. China is a market of 1.4 billion people; imagine how many offices we could have in cities of more than five million people in China, because here's a plethora of those.

Historically Canada has been served very well by our trade with the Americans, with the Europeans, and to a lesser extent with Japan, but now we see the balance shifting more and more towards emerging markets. I think there should be a bias in favour of resource reallocation towards those places with high growth potential.

[Ed Holder, Conservative, London West, ON]

You also made a comment that we don't do debriefings with our trade commissioners. Can you expand on that? I'm wondering why we don't, if we have such a valuable service. I've heard from Mr. Al-Katib how it matters to his business, and I can tell you on behalf of businesses in my city of London, Ontario, that what they do matters out in the world. How do we evaluate their role? Do you have any sense of that at all?

[Glen Hodgson]

Everybody has objectives, whether they're within governments or private organizations or on their own. We all have objectives. I would like to see those objectives standardized across the whole service, and I would like us to find different tools to actually share the information.

Knowledge capture is one of the great challenges of the modern age, isn't it? How do we actually take the knowledge that people have on-site and share it across the whole system? I don't think you can ever overinvest in good communication, in such things as the sharing of ideas, sensitization of practice, or evaluation of people's engagement skills or negotiation skills. Knowledge of markets is not the only thing that matters anymore; it's actually knowledge of people and how to get things done that matters, and ensuring that there is that standardized practice within the Trade Commissioner Service.

[Ed Holder, Conservative, London West, ON]

What you've said is valuable, and I appreciate that.

Mr. Al-Katib, you're the chair of the SME Advisory Board, so that makes you a fairly important person. It strikes me that if there's a challenge regarding how to take advantage of trade agreements, it's really probably greater for small and medium-sized enterprises because they may not have the same resources that a larger firm has.

Frankly, I'm not sure I understand the organization really well, and maybe someone else will get to that as a question, but you're the chair of this thing, so how do you communicate the role of the trade commissioner and how the TCS can help small and medium-sized businesses, not just in the fine city of Regina but right across the country?

[Murad Al-Katib]

We talk about the global footprint, but I think one of the things we have to recognize is that along with the global footprint is a footprint of regional offices across Canada, which are now a part of the Trade Commissioner Service. These local offices are very important to communicating with the great city of London, in your constituency.

We've continued to push the department for enhanced communication mechanisms to filter and to properly target information back to the regional offices to actually touch SMEs.

One of the initiatives of the department is to have a sector-based approach and sector practice teams to be able to develop expertise that actually gets to specific clusters and groups within different regions of Canada. These are very important parts of the whole commercialization framework for the FTAs that I mentioned earlier.

When I look at the other initiatives—let's say China and India, which have been mentioned—there have actually been specific SME-focused initiatives. For instance, an SME initiative focused on protection of intellectual property in China is one that has been heralded as a model to be replicated in other particular key issues targeting SMEs.

It's a long road, but I think progress is certainly being made.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Go ahead, Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you. Being new, Mr. Chairman, I thank you.

[The Chair, Conservative, Rob Merrifield]

You're not new.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I'm not new, but I'm new on this committee. I've been recycled.

[The Chair, Conservative, Rob Merrifield]

I would say you're new and improved.

[Voices]

Oh, oh!

[Lawrence MacAulay, Liberal, Cardigan, PE]

Anyhow, Mr. Al-Katib, you mentioned the Trade Commissioner Service. Do we have adequate trade commissioner services in China and India? I would also like you to elaborate on your talk about the trade deals, which are so important, and the framework that follows them. What do we need to do to help the small and medium-sized businesses obtain markets in these countries?

You also mentioned the collective approach. I'm not sure I understand exactly what you mean. Is that from here?

In addition, you mentioned partnerships abroad. I'd like you to elaborate on that if you could.

[Murad Al-Katib]

Let me start with whether our footprint is adequate.

We're talking about constrained resources within the public sector. We're talking about resource reallocations, budgets being under pressure, so we need to look at doing more with less. We need to look at whether we need to have fully staffed Canadian positions in certain countries in West Africa. I'm not picking on West Africa, but we need to compare that with the possibility of applying more resources in China, India, Brazil, and regional centres like the Emirates and Turkey, as well as other places where we have that bang-for-our-buck opportunity. A centralized, regional approach has been looked at and needs to be looked at further. We can't be everywhere. We have to figure out where to be to get that return on our investment.

When I look at the SME side, looking at partnerships and global value chains, it's about Canadian businesses invested in processing or assembly plants. It's about having partnerships on research and development where we, as SMEs, aren't replicating what others are already doing. We have to be able to use these things to our commercial advantage.

The Trade Commissioner Service is an important sounding board and an important qualifier of partnership opportunities. When you walk into a country where you don't speak the language and where there is a complex regulatory environment, you don't even know where to start. The TCS gives you a starting point. It doesn't make decisions for SMEs, but it gives them the information to help them make their decisions. That's how we make sure that prosperity comes back to regional locations in the country.

[Lawrence MacAulay, Liberal, Cardigan, PE]

You mentioned dispute settlement mechanisms. I'm from Prince Edward Island, which is big in potatoes and fish, and sometimes we have trouble with one of the biggest deals we've ever had with the U.S. Are the dispute settlement mechanisms put in place the way they should be? Are there any suggestions you could give to government that would make it easier for companies? If it's canned or packaged, it can last, but with potatoes or tulips—we even export tulips from Prince Edward Island—we can have great difficulty with these dispute settlement mechanisms.

Is it as good as it can be? Do you think the government should take a look at setting that up in a different way?

We get criticism on the Canada-U.S. dispute settlement mechanism. It's the giant and the mouse. There can be a bit of that too.

I'd like your comments on it.