International Trade Committee on March 6th, 2012

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Thank you, Mr. Howatt. I'm sorry about the glitch in the communications, but I appreciate you visiting with us on video conference.

Mr. Bonaventure, thank you for coming in.

With that we'll suspend this portion of the meeting and set up for the next hour.

Thank you.

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting back to order.

First of all, we want to thank you, from the Asia-Pacific Foundation of Canada, Mr. Yuen Pau Woo—I hope I've pronounced that half right—president and chief executive officer. We thank you for joining us from British Columbia on video conference.

Can you hear us all right?

[Yuen Pau Woo, President and Chief Executive Officer, Asia-Pacific Foundation of Canada]

Very well, thank you.

[The Chair, Conservative, Rob Merrifield]

Very good.

You're coming through loud and clear here.

We have about 45 minutes, not quite, for this presentation. We'll allow you a few opening comments and then we'll get right into questions and answers.

The floor is yours, sir.

[Yuen Pau Woo]

Thank you, Chair.

Good afternoon, members of the Commons committee on international trade. It's a pleasure to be invited to give some comments on the Canadian trade commissioner service.

Let me start by saying a few words about the Asia-Pacific Foundation and how we interact with the trade commissioners around the world. The Asia-Pacific Foundation of Canada is a think tank on Canada's relations with Asia. We were set up by an act of Parliament in 1984. We function as an arm's-length agency to help promote stronger ties between Canada and Asia. Much of the focus, but not exclusively, is on the economic relationship. Hence, we spend a lot of time thinking about how Canada can improve its trade, investment, and financial connections with Asian countries.

We connect with the trade commissioner service in two ways. We connect with them in Canada and in the field. Of course, in our case, we're talking specifically about Asian countries. In Canada, the work of the foundation is very much tied to the international trade offices that are situated across the country. Our mission to help Canadians better appreciate the importance of Asia for Canada's prosperity means that we work with clientele similar to those that the trade commissioner service works with.

This afternoon I'm heading to Saskatchewan, where we will be holding events in Saskatoon and Regina, meeting with the business community, civil society organizations, and educators to talk about why Asia is vital to Saskatchewan's future. The province knows that already, and many businesses are looking to Asia for economic opportunities, but there will be some in the room who are not as familiar, and not yet selling to Asia. This is the clientele that is of great interest to the trade commissioner service.

In many respects we provide a feeder service to the trade commissioners through the regional trade offices across Canada. We also work with the trade commissioners in the field. In that situation, typically we go to them for their ideas and advice on market intelligence and economic prospects for whichever economy we are looking at. We also go to them for advice on key contacts in different sectors.

I should stress, though, that the foundation is not an industry organization and we're not a consulting firm. We don't charge for our services on a commercial basis, and we don't work on the nitty-gritty of marketing and sales. We are very much involved in the broader issue of Canada-Asia policy development, particularly on economic issues.

I have found the trade commissioners in the field to be a very good source of intelligence, knowledge, and a feel for the pulse of what's happening. That information helps us at the foundation to do our research, to come up with ideas on the Canada-Asia economic relationship, and to give advice on policy, strategy, and economic relations more broadly.

Let me conclude quickly with my impressions of the Canadian trade commissioner service, underscoring that our connection with the trade commissioners, as I've explained, is perhaps one step removed from the front-line work that they do. We're not direct clients of the trade commissioners; rather we are partners and interlocutors.

In my many dealings with trade commissioners throughout Asia and in Canada, I found them to be extremely professional. I think they provide very high-quality advice to their clients. I've met many businesses that would share this sentiment and would give credit to the trade commissioner service for the business they have developed in various markets.

I particularly like the modernization of the trade commissioner service that I've seen in recent years. First of all, the focus on sectors, so that they are not too dispersed in their activities, requires some degree of judgment and selection, but I think it's a useful way to try to focus their efforts and to try to target winners, if you will, in the Canadian export scene.

I'm also impressed by the attempt to broaden their range of outreach mechanisms, particularly the use of the world wide web. I am a subscriber to some of their products. The virtual trade commissioner service, I think, is a good product. It requires constant updating, and they seem to do that pretty well. The various market sector reports or industry sector reports—I have not looked at all of them, but the few I've looked at seem to be quite high quality.

So if I could sum up, the trade commissioner service as a partner for the foundation, as a source of intelligence and information, and as a downstream provider of services for the people we work with, I think is excellent value for the Canadian public. Trade commissioners are particularly helpful to the small and medium-sized enterprise community. I wish them well.

Thank you. Those are my very brief comments. I look forward to the discussion with the committee.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for that presentation.

We'll now start with questions and answers.

Madam Péclet.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Thank you very much, Mr. Chair.

Thank you very much to the witness for being here with us today.

My question will concern one of your articles talking about China's increasing need for natural resources to fuel its rapid urbanization. Is the trade commissioner service working both ways? I mean it helps Canadian companies to invest in China, but does it help Chinese companies to come to Canada? Have you ever heard of any situation like this?

[Yuen Pau Woo]

Yes, I believe they include inward investment, investment into Canada, as part of their broad coverage. But I believe there is a special unit within the Department of Foreign Affairs and International Trade that puts particular emphasis on investment attraction. Then when it comes to investment in particular sectors—say the mining sector, aerospace, or automotive parts—there are other groups within the Government of Canada, particularly Industry Canada, that have expertise to help inward investment.

The other agency I'm aware of that does a lot of work in attracting inward investment is Export Development Canada. Of course, it has some financing tools to help inward investment happen.

The key, of course, is that all these agencies work together. I've seen them in action and it looks like they do work together, and that's absolutely crucial because the investor not only will want to make sure about the raw commercial potential but also will want to know about the regulatory framework, and Industry Canada comes in there. They will want to know about financing mechanisms—and EDC might come in there—and other issues that other agencies of government need to weigh in on.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Okay.

You were talking about the capacity for first nations to interact with Chinese clients. Is this service provided by the trade commissioner service? Do you have that possibility through the consulates or this service?

[Yuen Pau Woo]

I really can't speak for the trade commissioners, but I'm sure they seek to serve all Canadians including first nations communities. Our work with the first nations suggests to me that they are very keen to develop economic opportunities with Asian countries, and they will spend more effort in the years ahead to seek out these opportunities.

It would not surprise me if they would go to the trade commissioners for help. I suspect the first nations groups will want to organize their own missions and activities, and they will need all the help they can get.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

You are a trade expert and have an amazing background. You've been pushing for a free trade agreement between Canada and China. You were talking about regulation and regulatory systems. We both know that Canada and China are not the same, so what will be the benefit for Canada to sign a free trade agreement with China?

We all know that most American companies are doing business in China, and you're going to be able to benefit from our oil and resources. What's going to be the benefit for Canada to sign that kind of agreement?

[Yuen Pau Woo]

I didn't come fully prepared to discuss a Canada-China free trade agreement, but let me give you a brief response.

I've actually been very cautious about advocating free trade with China and have, in the past, promoted more of a sectoral approach that focuses on the specific areas where Canada has expertise, and where China has obstacles to Canadian exports. But I was very surprised to find recently, when the Prime Minister was in China, that his counterparts from the very top, the president and the premier, offered to let Canada enter into free trade negotiations with the People's Republic of China.

That, to me, is a very extraordinary offer. The Chinese, as far as I know, have never offered free trade agreement negotiations with a western country, and they seem to have dropped all preconditions for the beginning of such talks. This is really an extraordinary offer that Canada should look at very seriously.

On the face of it, if we are able to achieve the removal of barriers on both sides, Canada has more to gain than China, simply because there are more barriers in China than there are in Canada. What we import from China—manufactured goods, consumer items, machinery and equipment—generally enters either tariff free or under very low tariffs. So there is not much we can give the Chinese anyway.

On the other hand, in the areas where Canada has great expertise—advanced manufacturing, services, education, distribution, supply chain management—all of these areas are growing very fast in China, and all of them have various levels of protection, either protection at the border or protection through regulations and administrative requirements that make it hard for Canadian businesses to succeed.

As I say, if in fact the Chinese are sincere about opening up their market and negotiating with Canada, and we can get concessions in these areas that are now so tightly controlled, we stand to benefit a lot more I think than the Chinese do.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thank you very much, Mr. Woo, and happy year of the dragon.

I have the honour of being the co-chair of the Canada-Taiwan Parliamentary Friendship Group, and we have another new year's party tonight. They just keep going on and on. They celebrate in great style and it's exciting, the opportunities that we have in Canada with our Asian partners.

As a member of Parliament for Kelowna—Lake Country, I think I had the chance to meet you once at one of the minister's regional events, and Minister Fast, as the Minister for the Asia-Pacific Gateway, is also the Minister of International Trade, as you're well aware. On his recent trip to China he was very cautiously optimistic about moving forward with trade with China. But maybe you could expand a little bit more about the Asia-Pacific partnership and the reason it's so important for Canada to expand our trading opportunities.

As you know, one in five jobs is based on trade, and maybe you could share with the committee the economic opportunities for Canada out of the Asia-Pacific Gateway.

[Yuen Pau Woo]

Thank you for your question. It's good to see you again, even if remotely.

Asia is vital for Canada's prosperity. We've known that for a long time, but we saw this really come to roost after the great recession of 2008. Many of you will be familiar with what happened right after our exports to the world fell dramatically. They fell to all of our traditional major markets, particularly the United States and the EU. They fell to Africa. They fell to Latin America and Central America, but they did not fall to China. In fact, in the case of China, I believe exports went up by something like 27% in 2009, when the rest of the world was in its doldrums.

That same upward trend continued through 2010-2011, to the point where Asia as a whole, and China in particular, has become a much more important source of demand for Canadian exports than I could have imagined five years ago. In British Columbia alone for the year 2011, Asia has exceeded the importance of the United States as a trading partner. That's extraordinary. I could not have dreamed this would be possible.

Now, this may not be permanent, because the U.S. is recovering—and we should all hope that the U.S. recovers quickly. But I think something fundamental has changed. You might say a tipping point has been reached, and Canadian companies across the country now understand that Asia is not simply a secondary, or peripheral, or some kind of buffer market. It's central to the corporate and the economic strategies, at the firm level, at the industry level, and as you say, at the country level.

In order for us to take advantage of these opportunities, we have to market very aggressively, of course, but the framework for our companies to market successfully comes from strong diplomatic, political, and trade relations. One way of developing these relations is by having trade agreements, economic agreements, investment agreements, investment protection agreements. There's a whole range of them. They can be summed up in the term “free trade agreements”, but you don't necessarily have to go the whole hog, if you will.

One of the most important agreements, which we are now seeking to enter and Minister Fast is working very hard to get us into, is the Trans-Pacific Partnership. It is a group of nine economies from around the Asia-Pacific region that are working toward a free trade agreement that covers the entire Asia-Pacific basin. The United States is part of that group, and Mexico and Japan want to join, along with Canada. It's vital that we put our best effort in getting in, because if we don't, we could be left out of what might amount to the premier Asia-Pacific trade agreement.

As it is, we have zero free trade agreements with Asian countries, so we have a lot of catching up to do.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you for that fulsome answer. I know that is very important in my riding with Kelowna Flightcraft, so from aviation to agriculture, whether it's cherries or ice wine getting through to various countries.... I know that blueberries for Minister Fast in British Columbia and other agricultural products are very important for the additional market.

We're talking about the trade commissioner service today, and you mentioned the great service they're providing in certain markets. Expanding on the TPP, the Trans-Pacific Partnership opportunities, do you feel that the trade commissioner services are located in the right countries, and are there any services that could be improved upon?

There are two questions there.

[Yuen Pau Woo]

I don't have a comment on location. I haven't studied it carefully enough.

It seems to me that everywhere I go, they are there, so I think coverage is strong. But it should not be static. As Canadian companies become more adventurous and successful, as they venture into other parts of, let's say, China, India, and southeast Asia, the government has to think about also expanding its presence into these new frontiers, if you will.

One of the big challenges for Canada is that we're latecomers when it comes to building markets in Asia. Being a latecomer means many of the good opportunities may be taken up already. It's very important that we always look for frontier markets and try to be at least on par, if not ahead, of the competition. There are many areas in southeast Asia, in particular, where we could try to be ahead of the game.

In terms of suggestions, I just want to throw one out for discussion. The trade commissioners probably are as close to industry as any branch of government. They have to be in order to be of service to industry. I think it would be of good value for the trade commissioner service to expand on interchanges with industry to, from time to time, embed trade commissioners into industry associations, maybe into companies for short stints, and then have them go back into the public service, so that they get a better understanding of the real challenges at the industry level. This kind of cross-fertilization could be very good both for the trade commissioners and for the private sector.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Excellent. Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

And thank you for your presentation.

While we're on the trade promotion side, from your perspective—and you've obviously been involved in this for a considerable length of time—where do you see the greatest trade, greatest potential markets in China, in terms of basically commodities, businesses, and industries?

[Yuen Pau Woo]

Thank you, Mr. Easter.

China is a huge market. It's hard to generalize. When it comes to natural resources and commodities, as you say, really the Chinese will buy as much as we have to supply, to put it very crudely. For us, the concern is the commodity prices rather than the amount of demand.

We have been in a super cycle, if you will, for a number of years now, which has been very good for many parts of the country and has brought great wealth to Canada. But commodity prices go up and down, and it's important that we not rely solely on the natural resource sector.

My view of the emerging opportunity in China is in the services sector, which I think is an area where Canada has great potential and great expertise.

Let me just back up a little bit to say that the big sector between commodities and services is, of course, manufacturing. Generally speaking, we haven't done very well in terms of manufacturing exports to China. Of course Bombardier is successful. We've had a bunch of telecom companies that sell equipment to China, but by and large we haven't had the success that the Europeans, even the Germans, the French, the Italians, or the Americans have.

Our auto parts and automotive sector has been absent from China until fairly recently because of the exclusive focus on the North American market. We just haven't had the kind of presence in China that other countries have had. That's partly because we don't have a large manufacturing sector to start with.

I believe that as the Chinese increasingly move towards more domestic demand-driven growth, if they try to improve the quality of life of their citizens, they are going to look towards an expansion of the services sector—retail, distribution, education, professional services, all the things that go into the quality of life. This is where I think we have great potential, and where I think that, if we are able to negotiate an agreement with China that gives us preferential access in some of these service areas, we can actually leapfrog over the competition.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

You are absolutely right on the size of the market. I did have an individual from China come to Prince Edward Island to look at the potato industry, which might be able to supply their dehydrated potato market. The problem was that at the end of the two-day series of meetings, the individual would require all of Prince Edward Island's potatoes, all of New Brunswick's, and all of Maine's. It was too big a market for us to service.

On the trade commissioner side, do we have enough trade commissioners in China, or do you believe we should expand that area? It is a big country. There are lots of opportunities there. In an area I see as a problem, where do you see we're going to be left in the Chinese grain market with the loss of the Canadian Wheat Board? I know the others on the other side will laugh at this, but the fact of the matter is the Canadian Wheat Board gave us a huge leg up in China in that it was the only agency that would provide credit to the Chinese following the revolution. Their importing agency swore by the Canadian Wheat Board in terms of supporting it, and it was a good agency to do business with.

Do see any consequences there as a result of the government's demise of the Canadian Wheat Board here as a single-desk selling agency? You are dealing with a single desk in China as well.

[Yuen Pau Woo]

On the question concerning trade commissioners, I don't have a strong view on whether there should be more, or where they should go. I think the department is in a much better position to assess the emerging needs. I already see they are using various ways of amplifying their presence by partnering with industry organizations on the ground. I think that's a very good strategy. I think more of that can be done.

The Chinese remember our wheat sales to them in the 1950s and 1960s, at a time when China was shunned by the world. That will, for a very long time, be an anchor of the relationship and a reason why China holds Canada in special regard. I think the demand for commodities, including cereals, will increase and Canada will be a preferred supplier for a long time to come.

It's not clear to me that domestic restructuring in Canada will change the way they look at Canadian supply. The Chinese are very careful to not want to interfere in the domestic affairs of other counties. They are very respectful and sensitive to what they would call internal issues. They will also be clear, I think, if they find that the trading arrangements are not suitable, or have changed and do not suit their interests. We in turn have to be sensitive to their needs.

The fundamental supply-and-demand equation is not changed. Their requirement for grain and other commodities is overwhelming. We have to organize ourselves so that we can meet that demand in a way that benefits Canadians.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. You are very astute at not wading into the political bait that was thrown there.

Mr. Keddy, it's your turn.