International Trade Committee on March 6th, 2012

[The Chair, Conservative, Rob Merrifield]

I'm going to call the meeting to order. This is the last meeting in our study of the trade commissioner service. After this, we have legislation that has passed the House; the Jordan free trade agreement will be taken up on Thursday.

Today we have two blocks. In the first hour, we have two witnesses before us. In the second hour, we'll have one witness. We'll leave some time for an in camera session to give direction on the report in the last 15 minutes.

First of all are the two witnesses before us. We have before us Jacques Bonaventure.

Thank you very much for coming in.

By video conference, we have Brent Howatt.

Can you hear us all right, Brent?

[Brent Howatt, Director of Sales, Koss Aerospace]

Yes, I can hear you.

[The Chair, Conservative, Rob Merrifield]

Very good. You're coming through loud and clear as well.

Thank you for participating in the committee's work on this. We look forward to your testimony.

We'll start with the presentations and then go on to questions and answers.

We'll start with Mr. Bonaventure.

The floor is yours, sir.

[Jacques Bonaventure, Director Business Development, Centra Industries Inc.]

Thank you very much.

I offer my thanks to the committee for inviting me to meet with you. For just a couple of minutes, I'll provide some background on who I am.

I'm Jacques Bonaventure, director of business development for Centra Industries. We're an aerospace manufacturer based in Cambridge, Ontario. We are currently on our 19th consecutive year-over-year of profitable sales growth, a unique feat in manufacturing in Canada. We're very proud of that success.

Obviously, as an aerospace company we're an export-oriented company. I've been in this business for 35 years. To put things in perspective, I'm biased in the sense that I am an ex-Industry, Trade and Commerce person. I was part of the department in 1982 when there was a divorce, and trade went to External Affairs. Before that time, trade was with Industry Canada. I was almost a de facto trade commissioner, so I have a soft spot for the service.

As I said, I have been in this business for 30-some years, involved in manufacturing with various companies in Quebec, Ontario, and British Columbia, and I have lived in Belgium. I was in the aerospace sector, making extensive use of the trade commissioner service over the years. Some of these people have become friends of mine. They've been very supportive.

I'm basically here to state that for manufacturers in Canada, these people are doing a great job. I guess you'll be asking questions, but as you know, there are locally hired and rotational trade commissioners, who are professional DFAIT employees. I have opinions on both.

Those are my remarks for now. If you have any questions....

To provide some more background, I'm a professional accountant and I went through military college at RMC in Saint-Jean, Quebec.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Now we have by video conference, the director of sales for Koss Aerospace, Brent Howatt.

The floor is yours, sir.

[Brent Howatt]

I've just prepared a few words.

Good morning. My name is Brent Howatt. I'm pleased to be able to speak to you about the role the trade commissioner service plays relative to the success of our business, Koss Aerospace.

I'd like to begin by explaining what Koss Aerospace is. As our name suggests, Koss Aerospace is an aerospace company. It's located just minutes away from Pearson airport in Mississauga, Ontario. We are a fully integrated lean manufacturer of aerospace components and sub-assemblies. As a result of our owner's extensive investment in the latest technology and equipment, as well as training of our staff, we have maintained and advanced Koss Aerospace to keep up to date with the ever-advancing requirements of being an aerospace supplier.

Despite the fact that we currently have in the range of $10 million to $20 million in sales, we are relatively small in comparison to the customer base we serve. These customers include the likes of Boeing, EADS, Bombardier, Gulfstream, and numerous others. To remain viable and competitive means we must grow to afford the structure required to remain eligible on our suppliers' approved vendors list, and to compete internationally.

In the past our customer base has primarily been within the borders of Canada. However, both our customers and the market demand that we now do business internationally in order to succeed. In doing so, we have encountered numerous challenges, as would any other business at our stage of development. These challenges include difficulties connecting with key international customers, having the opportunity to present our abilities, understanding cultural differences, and getting access to accurate industry and customer information. Luckily we have had the trade commissioner service to support these activities. We have found that the trade commissioner service has provided us with valuable resources to support our global development efforts.

To date, as a direct result of working with the trade commissioners, we have obtained several million dollars worth of sales that are currently in production. This has supported our facility during the recent downturn in the economy and has allowed us to continue to add equipment and employees, so that we are prepared to be able to support our customers and potential customers upcoming new opportunities.

In addition, it has allowed us to retain our skilled employees. Not only is this key to the success of our business, it is also key to the success of the community of which we are a part. As a direct result of the efforts working with the trade commissioners, we currently have approximately $100 million worth of quotations and potential opportunities with new and potential customers that have been identified and are in various stages of development. These opportunities are allowing us not only to grow our existing and new customer base, but also afford us the means to invest in the latest technology and equipment, which is paramount for us to remain competitive.

The trade commissioner service is a key in our arsenal of tools, making us a success in the aerospace industry. We at Koss Aerospace have been pleased with the efforts and support the trade commissioner service has provided to us. In addition to the first-rate events and the ability to bring real opportunities to Canadian manufacturers like ours, they've also established valuable and lasting international relationships that we benefit from on an ongoing basis.

On behalf of the Koss Aerospace team, I'd personally like to thank the trade commissioner service for their hard work and effort that has directly contributed to the many successes we are now experiencing.

I'll turn to my background. I have approximately 15 years in the aerospace industry. Prior to joining the Koss Aerospace team, I worked for Alcoa in various capacities, including in an aerospace capacity as well. Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll move now to the question and answer portion of the meeting. We'll start with Mr. Masse for seven minutes. The floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Thank you. To both of our guests here, thank you for appearing before the committee.

If the Canadian trade commissioner service had some expansion of service, what would be the top two things you would like to see, or you would support? What would be the things to focus on to improve services?

Mr. Bonaventure, maybe you can answer, and after that, Mr. Howatt.

[Jacques Bonaventure]

I am certainly looking, as I said in my remarks, at the locally hired staff. What I have found over the years is that these people are passionate. They're in the country. They know their market. They want to help and they want to be engaged. One of the challenges they're having is how to actually engage their community.

As you've figured out, I'm in the same business as Brent, and we've been fortunate that the trade commissioner service has dedicated and focused resources on the aerospace side. In many countries there are full-time, locally hired staff—in China and Japan, to name a few, and Belgium, France, or the U.K., as well—who are solely focused on the aerospace side.

Obviously I have known these people for a number of years, but where they should try to do more, where the service can do more, is to get them a better understanding of who is doing what in Canada. If you're in the trade commissioner service, you know Bell Helicopter, Bombardier, Pratt & Whitney, CAE, and when they're doing their in-country visit or their outreach call back to Canada, the natural tendency is to focus on the larger company. The business model in our industry is that those large companies are doing less in Canada. They're more globalized, and doing more and more on the manufacturing side outside of Canada.

What they could do is actually get a better understanding of who's out there in Canada and who's their client.

For me the trade commissioner service is.... I'm biased. I'm working for an SME with 400 employees, and they are there to serve us. I'm not sure how much value they do have for the Bombardiers of this world and the larger multinationals in our sector. At the end of the day, these large companies do have the resources and the capability to do what they need to do in the export market.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Mr. Howatt.

[Brent Howatt]

I would have to agree with Jacques. Internationally, it's been an excellent arrangement, and the fact that there are dedicated individuals specific to aerospace has been very advantageous for us. On the international floor, I think that's been phenomenal.

However, to improve that, we've actually worked with our regional trade commissioner service to help coordinate with the international offices. That's provided us with a lot of value. We've created another step at Koss Aerospace, but it's provided us with additional value and the feedback and information we need to be successful.

To Jacques' point on getting coverage in Canada and taking advantage of opportunities within Canada, as the current structure stands it's hard to have that accomplished.

[Brian Masse, NDP, Windsor West, ON]

Do either of you take advantage of Export Development Canada as well?

[Jacques Bonaventure]

In our case, we do, but it's not on the export financing or market development, but more on the financing side. They're part of our banking syndicate. In terms of using their services, our customers are the Boeings of this world—Gulfstream, Cessna, Bombardier, EADS. They're large multinationals that are well financed.

We don't have receivables issues. We don't have any bad debts. There are no collection issues in our business because we're dealing with very large foreign corporations.

We deliver the product. It's a short-cycle product. It's a manufactured product. It doesn't take years, so there's no need for work-in-progress financing, at least with our product.

[Brian Masse, NDP, Windsor West, ON]

Okay, so you don't have a problem with access to capital then?

Mr. Howatt.

[Jacques Bonaventure]

Excuse me, Brent. I guess in our case we've been a fortunate story on financing. We're in our 19th consecutive year of year-over-year sales growth, so obviously when you're talking to bankers you're showing a success.

In December, 2010—and you know how bad things were in Canada in terms of the financial crisis—we were able to renew our banking agreement at a lower cost and expand our financing by $20 million.

[The Chair, Conservative, Rob Merrifield]

Mr. Howatt, go ahead.

[Brent Howatt]

I would have to agree with Jacques. As far as the financing goes, that doesn't seem to be an issue. Customers pay well. That's not really an issue at all, so we have no issue in that regard.

[The Chair, Conservative, Rob Merrifield]

Very good.

Go ahead, Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses.

I want to pick up a little bit where Mr. Masse left off, but from another angle. I think most of us here on the trade committee have been associated with the trade commissioner service, both here in Canada and overseas. I think I can speak for the committee that most of us have a lot of respect for the ability of that service, the expertise that's involved there, and the corporate memory that a number of these individuals have. It's extremely important when you're looking to expand in foreign markets.

However, at the same time we are looking at program review in various departments. I take note of your suggestion that they could do a better job with SMEs versus the large corporations that need less help, quite frankly. But what other areas would you see that could be changed that could actually be cost savings?

[Jacques Bonaventure]

Obviously at one point the government has to decide which sector it will prioritize. As I said, in our sector we've been fortunate. There are a number of focused individuals who are looking at our sector. I certainly wouldn't recommend that we look at that, but at the end of the day in some of the countries one can't be all things to all people, and then it becomes which priority sector the government wants to push forward.

Certainly it would maybe weed out some of the less-needed sectors, and as Canada evolves as a country, obviously in some of our historical sectors where we had strength, there may no longer be a natural competitive advantage for Canada. Therefore, maybe this is where there is less service needed and less coverage.

I have to agree with you, sir, on the corporate memory. For me, this is critical. We don't want to let individuals be stuck in their jobs forever, but at the same time it has proven valuable for us in terms of having people who have been there for six or seven years.

Just as a couple of examples, China and Japan are obviously far, foreign lands with cultural barriers where one needs to know the people. As people rotate in those companies, we need somebody on site who keeps the pulse on what's happening and what has been done before. So I think it's critical that those resources be kept in their jobs.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Howatt.

[Brent Howatt]

I'd have to agree with Jacques. The trade commissioners with whom we've had the most success have a history with the actual customers we're dealing with. I actually find it a bit of a detriment when there is a change, because getting a new trade commissioner up to speed, where they visit the customers and where they have the relationships with the customers and the trust, is a long process. So if they're constantly rotating, one gets a huge disconnect.

A good example of this would be Japan. The trade commissioners in Japan have an excellent relationship with the customers. That's a situation where there is cultural bias. They do business differently from they way we do in North America, so having that cultural understanding and established relationship gives us credibility.

I would definitely support that we support trade commissioners in priority sectors for extended periods of time and make that happen.

The only area I would see where there could be an improvement is to have a matrix where there is a performance return on investment in an area. Something like that could prove to be value added. But I believe in the key areas there is a definite case for the return the trade commissioners are providing.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

In all honesty, there's no reason why trade commissioners in areas like China and Japan, where relationships matter and it takes sometimes decades to build those relationships, couldn't have a longer rotation period than in other parts of the world.

I have one more question that I would—

Yes, very quickly, please.

[Jacques Bonaventure]

I just want to add, going back on your question, sir, that we talked obviously about regions of the world and priority sectors, but I would certainly talk about priority markets. What I found over the years is that there are some aerospace resources focused in Africa.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Okay.

My final question is.... I've always been intrigued. As a member from government, I've attended a number of trade missions and I've always questioned how useful and productive they are. Some seem to be very productive, some not so much. I'm wondering, from your own experience, expecting that most companies that attend these are paying their own dime to get there.... They are facilitated when they get there by our trade commissioner service and our trade commissioners or ambassadors are usually in the countries that are visited, and there is an agenda set out to try to hit priority markets.

In your experience, how have you found them over the years? Are they a very productive avenue and venue to find customers and expand your business, or are they more of a networking opportunity?