International Trade Committee on Oct. 4th, 2011

[Peter McGovern]

Actually, our core mandate is to facilitate SMEs’ work. We understand that efficiency is very difficult to achieve when the person running the company and the CEO, who are responsible for the company's financing, are also responsible for its marketing.

We work closely with SMEs to ensure that, when a company attempts to penetrate a market, its efforts are not wasted. We work with our regional offices, throughout Canada, and with missions abroad. Before company representatives travel abroad, we contact them to ensure that their efforts are well-directed.

We do not do business ourselves, but we do facilitate it. We are always aware that there is a price to pay for a company’s efforts when trying to enter a market, especially a complicated one like in China or India, for instance.

[Peter MacArthur]

I would add to Mr. McGovern's comments that the department participates in the FITT program, the Forum for International Trade Training. We're on the board and we are trying to assist that organization—it's an NGO—to better train entrepreneurs for the international field.

We're also increasingly adopting an ecosystem approach whereby we're introducing very small companies to medium- to large-sized Canadian companies to create an ecosystem in which, together, they provide a single solution to a complex program. An example of that would be Internet protocol television or a connected vehicle in which little, niche players can basically fly into a market in a Canada goose formation, with the larger company at the head.

Those are some of the things we are currently doing to improve in this area. Another value of the trade commissioner service is that we can introduce these small companies to the right accountants, lawyers, bankers, and intermediaries, including marketing consultants, in the target market.

[The Chair, Conservative, Rob Merrifield]

Very good. We have very little time left.

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you Mr. Chair.

Thank you, Mr. McGovern, and Mr. MacArthur. I very much appreciate the professionalism you are bringing to what you're doing.

What strikes me, and maybe not just me, is that when we think of trade and its definition and what the expansion of that definition actually means, we think of a product going back and forth between two countries. But as you mentioned at the start of your presentation, it's about much more than that, including investments in technology and workers, and managing.

There's a whole package, which I'm so glad to hear you talk about, because in my riding of Lambton—Kent—Middlesex, I don't have large businesses. It's a small town and a rural riding, which has a lot of small and very few medium size businesses.

You talked about serving more than 13,000 Canadian firms, mostly SMEs, a 10% increase over last year. Can you talk to me a little bit about how that happened? Was there a voluntary sign-up, or did you go seeking them? And when you go seeking—there's a two-way street here—how do you know where to go, and how do you approach a company?

[Peter McGovern]

We begin with our regional offices. In many instances, the regional offices act as client generators. We use a number of mechanisms, such as the imbedded trade commissioners that Peter mentioned we have in various sector associations. A big element of the work that our people do is outside of their offices; it isn't all just focused on Toronto, Montreal, or Vancouver. We get people out. If, for instance, they read in a newspaper about a firm that looks interesting, we'll make contact with them.

We also have a web presence. One thing that is a constant challenge for us is ensuring that the new technologies are there. If someone is a small business person in your riding, for instance, and he or she types in the word “export”, the first thing we want to have appear is “Canadian Trade Commissioner Service” or “EDC”, so they immediately know there is a government organization they can turn to for the kind of basic information they need to guide the decisions they need to make.

In the first instance, almost universally, the market that small firms look at is the United States. Given the ease of access, the commonality of business culture, that is the situation. A number of years ago, about 85% of our commerce went south of the border. That has now dropped to a percentage in the 70s. We estimate that by the end of this decade, it will be around 60%, which means that even small firms now are thinking about China, Europe, Asia.

It's a constant battle that we wage to ensure that we have a profile such that, if you are a small firm and need decisions, we can be of assistance to you and are relevant in terms of the decision-making of firms.

[The Chair, Conservative, Rob Merrifield]

Peter wants to add something.

[Peter MacArthur]

In your riding, one of the reforms we've made is to put one-person trade commissioner offices and BDC offices in Windsor and in Waterloo. They travel the region in southwestern Ontario, and are basically linking to the big operations and consulates general in Buffalo and Detroit to do exactly that—and to Seattle on the west coast as well.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

This is just a quick question as I don't have much time.

We just came through a recession. Did the recessionary process actually expand people's thinking to consider finding out something about how they were going to survive? And was that maybe part of what happened to help?

[Peter McGovern]

As much as anything, what the recession has done for the firms that are exporters is to cause them to have a diversified vision of the world. The United States will always remain our most important market, but trade is not a zero-sum game. So you can look at the States, but where else are there opportunities?

If you look at Asia, for instance—and again I'm playing to my own strength here, being the ADM for Asia, and putting in a plug—Asian economies all grew through the recession. China grew. With the exception of Japan, most of the countries had positive growth rates. So if you're sitting at home and thinking, “Okay, I have a world-beating product here”, and you've been pretty comfortable dealing your product into the United States, you're going to think, “Well, to ensure my own prosperity and the livelihood of the people who work for me, to be able to grow my company, where am I going to have to go beyond that one market?” And that's what happening now: people are looking further afield, looking to Asia, looking to China.

[The Chair, Conservative, Rob Merrifield]

Okay, thank you very much.

Mr. Chisholm.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you.

Peter, as you just mentioned, your area of expertise is Asia. There has been talk, from this government initially and others of us recently, about concerns in dealing with China in respect of human rights.

I wonder if you could tell us what your officials on the ground are doing either to make way for those kinds of issues to get resolved on the ground, or begin to be resolved on the ground, or are they just left to the higher levels, the Prime Minister and Minister of Foreign Affairs?

[Peter McGovern]

The issue of human rights figures in all elements of our relationship with China, and it is raised by all senior officials when they visit China. It's raised in a respectful way, but it is always present and we talk about it.

As the chief trade commissioner, one of the things that strikes me about Canada and Canadian business people is that our business people are effectively ambassadors who have embedded values in them. That's one of the benefits of dealing with Canadians: you get a fair deal. And that's a very important element. When Canadian business people go to China, they're effectively ambassadors for the Canadian way, and they show that you can be honest and upright in your business dealings, the way Canadian firms are generally around the world.

So we have that embedded set of core of values that allows us to pursue our interests. I don't see a separation between the two, or a flight to the bottom. Not at all. It's one of the dimensions of the corporate social responsibility that we have, our expectation of there being a level of behaviour internationally. That figures in what we do and how we do it.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you for that—and I agree with you.

Likewise, when you talked about measures, is this also an area that you measure, that you keep track of in your dealings in China? And does that flow back to the head office here in Ottawa?

[Peter McGovern]

We don't have a measurement system per se on the political side of our operations. It's a little bit more difficult to measure how successful you are. It's something, though, that figures in all the dialogues that we have.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Let me ask you another question regarding the trans-Pacific partnership and Canada's involvement or lack thereof in it.

[Peter McGovern]

The Prime Minister and the government are on record as saying that the TPP is significant and that we're interested in it. With the Doha Round stalled, you can see quite clearly that countries, particularly in Asia, are looking either to bilateral arrangements or regional arrangements. I think that's one of the drivers behind the vision of our own minister, in the sense that we're now pursuing expanded trade liberalization with India; we're looking at Japan; we're looking at other areas. We would like very much to ensure that Canadian exporters are never at a disadvantage vis-à-vis the countries their competitors come from. It has to be a level playing field, because even a differential of 4% or 5% in a tariff rate can be a determining factor.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

One last thing: Is one of the reasons there's some considerable trepidation with respect to our participation in the trans-Pacific partnership our supply management programs and the fact they would be very much under threat?

[Peter McGovern]

Mr. Chair, in response to that question, unfortunately, I'm not a trade negotiator. I'm a trade promoter. I think you'd have to ask our negotiators about a detailed policy question like that. I know the approach to all our negotiations is that we put everything on the table and pursue our country's best interests.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair, and thank you to our guests for attending today.

I'd like to address this question to Peter, if I could. It has to do with the number of Canadian firms you've assisted in terms of exports. You mentioned a 10% increase year over year and some 13,000 Canadian firms that you've supported. What's the end game for you in terms of the number of businesses that you would deem appropriate to support, or that you could support? Are you at capacity? If it doubled, could you handle it? I'm trying to get a feel for exactly how that works.

[Peter McGovern]

We would certainly like to see the number of firms that we assist rise. It's an interesting statistic. About 2,000 firms do 80% of Canada's exporting. That is the latest statistic we have from StatsCan on this subject. What we want to do in terms of the services we provide—and there is no outer limit in terms of how many companies we could support—is to be in a position where we could see the very small firms that come onto the exporting scene grow, because, through their growth, they will in turn generate more prosperity. They will bring in other firms as well.

[Ed Holder, Conservative, London West, ON]

The reason I asked that, Mr. McGovern, is that there are some 1.4 million SMEs in Canada, according to my statistics. So right now you're servicing just under 1% of that market. But if 2,000 firms equal 80% of the export market and you're catching those 2,000, why do you need to do any more than that? I'm not trying to be stupid but simply asking why you wouldn't just focus on those 2,000, and then some that are comparable or like-minded that you could.... Why expend the kinds of resources that you do to find another 2,000 like the first 2,000? It's the 80-20 rule, literally, in this case. How do you determine that?

[Peter McGovern]

That is an element of what we want to do. We want to create the next major multinationals. We would like to be able to work with SMEs, or companies that are SMEs today and will turn into RIMs tomorrow.

An element of what happens is that—

[Ed Holder, Conservative, London West, ON]

Maybe not the RIM of today.

[Peter McGovern]

Well, yes, in terms of their stock price. But you know what I mean: it's in terms of being a major technology leader.

A lot of the bigger firms—which would capture those 2,000—don't really need our help. We'll see them when they have a problem; they'll come in and help us.

But it's a constant process on our part to move the interests of firms forward, because we keep growing. That's how one grows the economy, by bringing on as many firms as one can, getting them exporting, realizing as I mentioned before that 56% of our economy is export related.